Target's holiday sales could get a boost from Chip and Joanna Gaines' new collection

Key Points
  • Last year, Target's poor holiday sales helped the company reevaluate its strategy.
  • This year, the discount retailer is relying on a line of home decor from Chip and Joanna Gaines to draw shoppers and boost sales.
  • "Gift Now" is another option for shoppers to consider when they are not sure what to for someone.
  • Target expects its comparable store sales to be in line with the performance of the first and second quarter, or about negative 1.3 percent to positive 1.3 percent.

Last holiday season marked a turning point for Target.

After several quarters of choppy performance, sales and profit fell in the holiday quarter, forcing the retailer to take a deeper look at its operations. The result: it launched a new strategy to spend $7 billion over three years to build new stores and remodel existing ones, and improve both its digital and in-store experience.

"We are going into the fourth quarter with a lot of optimism and a lot of confidence," said Rick Gomez, Target's chief marketing officer. His tone is upbeat compared to the retailer's most recent guidance for the key fourth quarter. Target expects the quarter's comparable sales to be in line with the performance of the first and second quarter, or a range of negative 1.3 percent to positive 1.3 percent.

The retailer needs the holiday to be a bullseye, as it gets about 30 percent of its annual sales in the fourth quarter, and it's hinging hope on Chip and Joanna Gaines.

The founders of the Magnolia company certainly seem to draw a crowd to their hit HGTV show "Fixer Upper" and their Silos market in Waco, Texas. The lovable home-renovation-and-design couple's exclusive Target "Hearth & Hand" collection launches Nov. 5.

Target Chief Merchandising Officer Mark Tritton expects "Hearth & Hand" will prompt additional shopping trips and boost traffic to both the stores and website.

"The initial response has been exponential," Tritton said. He characterized site visits to the web page built to announce the collection as "off the charts. Two to three times traffic for anything else we have done."

In fact, Target is building a new physical space to house the brand's tabletop, home decor, and "giftable" items, like a dollhouse and toy workbench, in 550 stores, and configuring a smaller, slightly different set-up in the others.

"Hearth & Hand" is one of the eight Target brands that will be available for the first time this holiday season. Big exclusive brands are key components for Target's success. One example is the 15-month-brand Cat & Jack. The children's apparel brand is already worth $2.1 billion, said CEO Brian Cornell.

The big box retailer is again getting rid of its $35 minimum for free shipping, though for a slightly shorter period of time. This year, free shipping runs from Nov. 1 until Dec. 23, while last year it ran from Oct. 25 until Jan. 1.

Helping shoppers with gifts is high on Target's priority list this year, with offers like the new "GiftNow" option online. Mike McNamara, Target's chief information and digital officer said that it's perfect when you aren't sure exactly what to get, but you want to at least try to pick something. Shoppers give an "electronic gift box" and then the recipient can choose to accept the selected gift, or change the color or size for instance, before it's shipped.

The retailer also has 1,700 gift ideas for consumers, most under $15, and most unique to Target.

Target has also increased the number of stores fulfilling online orders this holiday season to 1,400 from 1,100 last year. That means nearly three-quarters of its stores are able to ship products with the goal of getting goods to shoppers faster and more efficiently.

McNamara is trying to capture that "Tar-jay" magic online for the holidays and beyond. "If we can focus on just 'being Target' online, I know we can win in fourth quarter and the year."

While Target had 10 Days of Deals each of the last two holiday seasons, interest waned in 2016 over the year prior. So this year, the retailer is going to offer Weekend Deals starting in mid-November, but it was mum on specifics other than to say it would vary from "household essentials to holiday must-haves."

Toys are a key part of Target's holiday plan, with half of the retailer's total annual toy sales coming in the fourth quarter. The big box retailer will have more than 1,400 new and exclusive toys — down from 1,800 last year — and 70-plus board games shoppers can only get at Target like Bob Ross: The Art of Chill, Netflix "Stranger Things" toys and lots of Star Wars products.

Family pajama sets have been a hit for Target, thanks in part to the desire to share photos on social media. In 2016, holiday pajama sales grew double-digits over the year prior. This year, Target's expanding the family options to include matching pjs for the family dog and children's dolls.

Correction: This story was revised to state that Target's free shipping offer runs from Nov. 1 to Dec. 23.