Target To Acquire Shipt To Augment Online Delivery Services

With the objective of capitalizing on the booming online shopping, Target Corporation (NYSE:TGT) has announced its intention to buy Shipt, Inc., a same-day delivery platform. The value of the deal, which is pegged at $550 million, is likely to be concluded by the end of this calendar year. Following, the news the company’s shares gained nearly 3% yesterday.

With the help of this acquisition, Target will start providing same-day delivery services from nearly half of its stores by early 2018 and the services will be available from most of the stores in major markets by the beginning of 2018 holiday season. Initially, the company will provide same-day delivery services of groceries, essentials, home, electronics as well as other products before expanding it to all major products by the end of 2019.

The retail landscape has been undergoing a fundamental change. With digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers, including big-box, are struggling to compete with e-commerce channels and are being forced to trim store count to focus more on an online model. We believe, the company’s decision to bring same-day delivery services is likely to lure more customers and in turn will drive the top line higher. The acquisition will also aid the company to compete with e-commerce biggie Amazon.com, Inc. (NASDAQ:AMZN) , Wal-Mart Stores, Inc. (NYSE:WMT) and Best Buy Co., Inc. (NYSE:BBY) .

Other Initiatives

Currently, the company has Restock program, which allows customers to restock their shipping box with essential items online and get them delivered at door steps by the next business day for a nominal charge. Further, in order to improve supply chain and expand delivery capabilities, the company had acquired Grand Junction. This transportation technology company provides a platform that allows retailers, distributors and third-party logistics providers to manage local deliveries through a network of over 700 carriers.

In October, the company had launched curbside pickup program, at 50 Twin Cities stores. This program gives customers an option to get ordered items without leaving the comfort of their cars. To avail the service the customers need to place orders via the latest version of Target’s app and then select “Drive Up”. Target will inform the customers when the order is ready for delivery. Once the shopper arrives to the chosen parking spot outside the Target store, an employee will bring the order to the vehicle.

The company’s initiatives such as the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores bode well for the stock. The shares of Target have outpaced the industry in a month. The stock has advanced 15.7%, outperforming the industry’s growth of 12%.

Target currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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