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Target will slash prices after latest results reveal new struggles

After appearing to turn the corner after the doldrums of the data leak, Target is facing challenges again.
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Things are about to get cheaper at Target.

After appearing to turn the corner from the doldrums of the data breach, Target is facing challenges again after revealing a bleak trading outlook for the coming year.

Shares in the Minneapolis retailer plunged 12 percent in premarket trading Tuesday after it confirmed fourth-quarter sales dropped 1.5 percent over the holiday period.

This was the worst case scenario considering Target had estimated a 1-1.5 percent fourth-quarter sales drop last month.

In response, CEO Brian Cornell announced the company will "invest in lower gross margins" – in other words, slash prices – to ensure it is competitive against rivals, as well as launching 12 new brands expected to generated $10 billion of sales over the next two years.

He admits that the switch will hit its sales and profits in the short term, but says he's confident it will put Target in a stronger position in the long term.

The drop in sales experienced over the Christmas period is expected to continue this year, with Target saying it expects a low single-digit decline in comparable sales.

Profits for the fourth-quarter fell 43 percent to $817 million, down from $1.4 billion a year ago, with falling in-store sales only partially offset by an encouraging 34 percent increase in online purchases.

Cornell called the poor in-store sales "unexpected" but a reflection of "rapidly-changing consumer behavior" as more customers head online.

The Star Tribune reports Target's disappointing performance comes as its main rival, Walmart, reported a 1.8 percent increase in store sales during the fourth quarter.

Facelifts for hundreds of stores planned

Target is hoping to boost business in its Twin Cities by improving the layout and design of its stores, announcing earlier this month that the Nicollet Mall store is among three getting a multi-million dollar makeover, with 22 others getting smaller upgrades during 2017.

And it looks like that could be the start of a major upgrade for hundreds of stores across the country, according to Target executives who revealed a much broader plan during an earnings call Tuesday morning.

And there's also good news for those who use the Target or the Cartwheel coupon apps – they will be combined into one later this year, according to the Star Tribune's Kavita Kumar.

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