Lead story – Target profits drop 90% – what are the implications?
Target has been an omni-example for some years now. So, when this kind of earnings report comes in, we must ask: is this a signal of broader economic turmoil? Or did Target miss something in its omni-mix? Stuart’s on the case in Target profits drop 90% as retailer tackles supply chain and inventory issues to restore omni-channel balance.
One crucial point: Target’s profits may be down, but revenue is healthy, hitting the $26 billion mark, up from $25.1 billion a year ago. No digital weakness either: digital sales were up nine percent year-on-year. That points to internal issues. Stuart:
Target CEO Brian Cornell was defiant on the post-earnings analyst call, insisting that the firm’s decision to make “a bold effort” to “rightsize” the retailer’s inventory issues had been a short term pain, but necessary to restore the balance.
Stuart quotes Target CEO Brian Cornell:
Consider the alternative – we could have held on to excess inventory and attempted to deal with it slowly over multiple quarters or even years. While that might have reduced the near-term financial impact, it would have held back our business over time. Of course, this decision would have driven incremental costs to store and manage the excess inventory over a longer period. But much more importantly, it would have degraded the guest experience. It would have cluttered our sales force and hampered our ability to present new, fresh and fashionable items, the ones our guests expect from Target.
Inventory is a sneaky big issue in omni-retail. Too many firms are hedging against supply chain uncertainty by stockpiling. Reverting from just-in-time to just-in-case, however, will get you dinged by investors. Reading between the lines of Target’s quotes, this isn’t just a case of clearing out stock. Target also had supply chain visibility issues. As per their COO:
Going forward these improvements will enable our merchandising and supply chain teams to maintain enhanced real-time communication, particularly with respect to categories where we faced the highest inventory risk, allowing us to respond to changes with more speed and agility.
Target has clearly taken the right call to address its supply chain and inventory issues quickly and surgically, even if the price has been that headline-grabbing profit drop.
From where I type, it doesn’t appear that Target’s profit hit is indicative of grave retail concerns. Maybe 75 percent of this is internal logistics. That remaining 25 percent seems to be about supply chain volatility rather than consumer behavior – though Target’s leaders did indicate that the retail environment is “highly unfavorable” compared to pre-pandemic conditions. Seatbelts on…
Diginomica picks – my top stories on diginomica this week
Vendor analysis, diginomica style. Here’s my three top choices from our vendor coverage:
- FinancialForce rolls out Services-as-a-Business features to help service orgs adapt to XaaS – Phil on FinancialForce’s XaaSy moves: “It’s much easier to conceptualize how you might add an app and some digital connections to a physical product than it is to digitally instrument a service experience. It’s welcome therefore to see FinancialForce provide tools and mentoring to help its customers navigate this journey.”
- Change is in the air for cloud ERP vendor Rootstock – here’s why – Brian on cloud manufacturing SaaS vendor Rootstock: “Rootstock’s best targets might be manufacturers who want to implement advanced technologies. These firms are creating factories of the future. They are implementing additional sensors, meters, etc. to better understand the environmental impact of their products, production methods, etc.”
- ServiceMax aims to join up data across the extended service chain – Phil updates on ServiceMax’s FSM (Field Service Management) enhancements: “While a lot of the buzz in the industry is around new technology trends, such as applying Artificial Intelligence (AI) to field service data, or using Augmented Reality (AR) in field service settings, Dutta says those are not necessarily a priority for customers at the moment. What’s important is putting the right data foundation in place to enable those future capabilities.”
Jon’s grab bag – RaaS will rise again, but the macro-economic crisis puts another obstacle in the way of platform provider thredUp. RaaS, you ask? That’s “re-sale as a service,” explains Stuart – and here’s why it’s relevant. Neil dissects the strange (recent) days in quantum computing in The unpredictable rise of quantum computing – have recent breakthroughs accelerated the timeline? I made my case for a different view of productivity, including my “five rules for harmonious asynchronous productivity” – Productivity 2022 – time to weigh in on the asynchronous work debate. Is Slack asychronous?
Best of the enterprise web
My top seven
- TikTok’s in-app browser has code that could be used to track data like passwords and credit card numbers — and Apple should ramp up security to prevent it, a researcher says – TikTok keeps the use of their app interesting, gotta give ’em that.
- Agile alertness: 6 principles to help your software design process succeed – Joe McKendrick uses his agile decoder ring: “Agile development is a step in the right direction, but for a continuous architecture, software designers and developers need to take it a step further.“
- 7 Reasons Why Employees Leave During a Digital Transformation – Newsfeed readers like this practical ditty from Third Stage Consulting – “feeling skills and experience are no longer valued” is a good one.
- Navigating The River of Demand – Lora Cecere continues her hot streak of meaty supply chain riffs; important point on companies making poor use of outside-in data.
- Deep Learning Alone Isn’t Getting Us To Human-Like AI – Interesting shifts in AI as deep learning hits a wall (of sorts): “Historians of artificial intelligence should in fact see the Noema essay as a major turning point, in which one of the three pioneers of deep learning first directly acknowledges the inevitability of hybrid AI. Significantly, two other well-known deep learning leaders also signaled support for hybrids earlier this year. Andrew Ng signaled support for such systems in March.”
- What’s wrong with Google’s new robot project – Another one from the prolific AI expert Gary Marcus: “Building a robot on top of language system that has such little comprehension of the world can’t be a recipe for success. But that precisely what Google’s new system is, a stitching-together of superficial and incorrigible language understanders with powerful and potentially dangerous humanoid robots. And as the old saying goes, garbage in, garbage out.“
- The Consulting Journey – Some thoughts for people who are just starting their career – IBM’s Vijay Vijayasankar dispenses mentorly consulting wisdom, such as deep expertise versus leadership skills.
Meta’s new chatbot is having some issues:
Mark Zuckerberg, according to the Meta chatbot, is ‘very creepy and manipulative’ https://t.co/WLSLjy2yBP
-> maybe this chatbot is better designed than I thought 🙂
— Jon Reed (@jonerp) August 21, 2022
Or, maybe it’s working just fine… Meanwhile, TikTok gave us a strange lesson in PR tactics:
TikTok’s in-app browser has code that could be used to track data like passwords and credit card numbers — https://t.co/OQlREd18Zx
“TikTok denies collecting this data but seemed to confirm it has the ability to track keystrokes.”
-> oh, ok, no problem then lol
— Jon Reed (@jonerp) August 20, 2022
Finally, tech headline of the week was really no contest: Should we be trying to create a circular urine economy? It may be hard to top that next week also, but let’s try. See you then…
If you find an #ensw piece that qualifies for hits and misses – in a good or bad way – let me know in the comments as Clive (almost) always does. Most Enterprise hits and misses articles are selected from my curated @jonerpnewsfeed.