Why Target Is Betting Big On Babies

0:00 It's no secret that target's been struggling since its pandemic highs.

0:04 At its peak in July 2021, target's market cap shot up to about $129 billion.

0:11 Since then, it has lost customers,

0:13 store traffic and its reputation among some as a trendy and fun place to shop.

0:18 At its recent investor day, target's chief merchant Cara Sylvester,

0:22 said the company had lost the clarity and discipline

0:24 that once made it a go to shopping destination.

0:27 I cover Target for CNBC and have

0:30 been following the company's turnaround efforts.

0:32 Its plan to win back shoppers, particularly busy families,

0:35 starts right here in the baby department.

0:38 We're at a store in Clifton, New Jersey,

0:40 where Target has rolled out one of its baby boutiques.

0:42 That's what it's calling the concept.

0:44 Target is adding nearly 2000 new items

0:47 and higher-end specialty baby brands to its stores,

0:49 including a coveted Uppababy stroller that can cost about $1,000.

0:55 It's also stocking everyday essentials like diapers, onesies,

0:58 and snacks to make this a one-stop shop for parents.

1:01 These are some good and gather yogurt bites, a little baby snack right there.

1:06 The boutiques are designed so shoppers can compare things like car seats,

1:09 highchairs and strollers in person and see them outside of cardboard boxes.

1:13 These are good examples of the way that people might test out strollers.

1:17 A lot of people look for the weight of the stroller,

1:20 how easily it folds, how easily it pushes.

1:24 If it fits in an overhead compartment,

1:25 which are all things that I've considered during the shopping process.

1:29 As a soon to be mom who's also in the market for baby gear,

1:32 I found it's hard to find stores where you can test and touch a lot of products,

1:37 from strollers to highchairs to car seats and targets,

1:41 hoping to fill that void that was

1:43 created when many specialty baby stores closed.

1:45 Buybuy Baby, which was owned by Bed, Bath and Beyond,

1:48 shut stores across the country when it went

1:50 bankrupt in 2023 and now only offers online shopping.

1:54 Babies R us closed in 2018,

1:56 though the brand has returned through pop up shops in Kohl's stores.

2:01 Target has launched its baby boutiques in 200 locations starting in March,

2:06 roughly 10% of its national footprint.

2:08 The company has said more are coming but hasn't yet shared a timeline.

2:12 Though US birth rates are falling,

2:14 target still considers the category worth the investment.

2:17 I spoke with Chief Merchant Kara Sylvester,

2:20 and she said the category is a good way to build

2:22 trust with shoppers and win a critical customer base, she told me.

2:26 Target outperforms the market with families,

2:28 with kids five and under, spending two times more,

2:31 and families with kids visiting stores two times more than the average customer.

2:35 Plus, she said as families have children, they tend to shop at fewer retailers,

2:39 which means if target can attract those shoppers with its baby items,

2:43 it can also sell them things like groceries and clothing,

2:46 along with strollers and diapers.

2:48 Clothes for babies and growing kids are necessities for families.

2:51 Even when gas prices are high or inflation is causing them to be cost conscious.

2:56 Target is also making changes beyond the baby department,

2:59 revamping merchandise across home apparel and beauty categories.

3:03 Those investments are why Target's CEO Michael Fiddelke,

3:06 who stepped into the role in February,

3:07 said the company's three year sales slump will come to an end in March.

3:12 Target said it expects net sales for fiscal year

3:15 2026 to grow about 2% compared to the year prior.

3:18 It also expects net sales to grow every quarter, but challenges remain,

3:23 especially pressure from bigger competitors Amazon

3:25 and Walmart on price and convenience.

3:28 Many of target's recent announcements are

3:31 focused on fixing the in-store experience,

3:33 while Walmart and Amazon continue to dominate delivery.

3:37 There's also competition from second hand markets like Facebook Marketplace

3:41 that sell items like strollers or baby clothes at a deep discount.

3:44 I've even bought a few items from my new baby on platforms like that.

3:48 But if families decide to splurge on a stroller, even at a high price point,

3:53 those second-hand markets sometimes help justify the cost,

3:56 since they know that item will still have value

3:58 when they sell it a year or two later.

4:00 Target is also trying to recover from customer boycotts,

4:03 including the threat of a new one

4:05 from a major teachers union for back to school season,

4:07 and the risk of higher gas prices from the war

4:10 in Iran could make shoppers pull back on their spending.

4:13 Still, as target tries to raise

4:15 the bar with its merchandise and customer experience,

4:18 it could retain and even attract higher

4:20 income consumers who drive about half of U.S.

4:23 spending.

4:24 And it could take a page from the book of competitor Walmart,

4:26 which has wooed more of those shoppers recently.

4:29 In a retail environment where convenience often wins,

4:32 target is trying to prove that store experience still matters.