Can Target get its ‘swagger’ back?

0:02Good morning from the Financial Times. Today is Thursday, August 21st. And this is your FT News Briefing. China is holding a grudge against the U.S. Commerce Secretary, and investors are not happy with the direction Target is headed. Plus, battery swapping might be the future of electric cars, but is China ready for it? I'm Mark Filippino, and here's the news you need to start your day.

0:36For years now, Chinese tech companies complained that the U.S. restricted selling artificial intelligence chips to China. And for a moment, it looked like they might get their wish for more processors. U.S. officials announced they plan to lift some of those restrictions this month. But Chinese regulators are now looking to clamp down on the imports on their end. The problem? They are offended by comments U.S. Commerce Secretary Howard Lutnick made last month. Lutnick said that the chips going to China would be, quote, not our second best, not even third best. The U.S. limits AI processor sales to China for national security reasons.

1:16The recent loosening of the rules only cover NVIDIA's older H20 processors. They also require NVIDIA to pay a cut of the sales to the U.S. government.

1:32big box retailer target has a new incoming ceo michael fidelke has worked at the company for 20 years and needs to engineer a turnaround target has been struggling lately after its revenue peaked in 2022 but investors aren't too optimistic shares in the company fell as much as 10 % after the announcement that Fidelke would be taking over. Here to unpack this is the FT's U.S. consumer editor, Greg Meyer. Hey, Greg. Hey, Mark. So tell me a little bit about Fidelke and his plans for Target. Michael Fidelke is a Target veteran. He's been there for 20 years, and he has worn many hats, including chief financial officer and most recently chief operating officer.

2:17And on Wednesday, on an earnings call with analysts, Fidelke laid out his plans. I know we're not realizing our full potential right now. And so I'm stepping into the role with a clear and urgent commitment to build new momentum in the business. There are three major parts. One is rehabilitating Target's reputation as a place where you can buy affordable but stylish merchandise. We must reestablish our merchandising authority in a way that is distinctly Target. And in a call, in a conversation with reporters, he said that a word that comes to mind for him is swagger, that when we're leading with swagger, we're setting a trend for retail.

2:55A second is fixing up at stores. Shoppers have complained in recent years of finding empty shelves, finding shelves that are locked up to deter theft, messiness. And third, he says he really wants to invest more heavily in technology. To improve our speed, guest experience, and efficiency throughout the business. Give us a little bit of background here, Greg. Why does Target need this turnaround in the first place? Target's revenues, along with many other retailers, boomed in the pandemic as consumers in the U.S. had a lot of cash to spend and they wanted to spend it in one place if they could just to avoid contagion.

3:32But in the past few years, Target's sales have been flat to declining, even as other retailers have continued to grow and grow market share. It's also entangled itself in the culture wars. A couple years ago, it offered an array of merchandise for Pride Month that turned off some of its consumers. And then earlier this year, it retreated from its DEIs, diversity, equity, and inclusion policies, which turned off other consumers who boycotted the business. And then on top of that, they import a lot of what they sell, And many of those imports now have higher costs due to Donald Trump's tariffs. So a bit of an uphill battle.

4:12But I want to go back to Fidelke's plan to recapture Target's swagger, as he puts it. Why aren't investors and analysts excited about it? So Target's share price was already down this year, and it fell even further after Fidelke's appointment was announced. I think investors and analysts view Fidelke as an experienced hand. He's worked all around the business, but that means he's also been involved in these decisions that haven't really panned out in the past few years. So, Greg, then what would need to happen for Target to, you know, get its swagger back? Some of what needs to happen is outside of what I think he was referring to when he was talking about swagger, which is back office things.

4:53But it also, as Fidelky acknowledged, it needs to invest in design, in style, in selling high-quality products that feel a little bit special but don't cost a heck of a lot more. That is an increasingly daunting challenge because some of its biggest competitors have been investing heavily in offering their own varieties of stylish goods. Walmart has made partnerships with famous designers to sell its own private label apparel. Costco has a whole Kirkland Signature line of private label that may not be super stylish, but they seem to be drawing in a lot of consumers. So the world has changed somewhat from decades ago when customers lovingly called Target Target for being a chic retailer at a cheap price.

5:43And it's going to have to work really hard to come up with attractive products and then market them really well to set itself apart. I totally forgot about Tarjay. Me and my friends would call it Tarjay all the time. Thanks for that trip down memory lane. Greg Meyer is the FT's U.S. consumer editor. Thanks, Greg. Thanks for having me.

6:10UK inflation jumped unexpectedly high to 3.8 % last month. The figure was released yesterday, and it was the highest since January 2024. And now the inflation gap between the UK and the Eurozone is the widest it has been in nearly two years. July's increase was driven by a rise in airfares and motor fuel costs, as well as food and beverages. And services, inflation jumped too. It's a key measure for Bank of England rate setters who are dealing with a resurgence of inflation and a slowdown in economic growth. Earlier this month, the BOE was divided on what to do with interest rates. It ultimately chose to cut them, but the vote was extremely close.

7:01China is making a big push for vehicle battery swapping. The technology has so far been deployed by smaller companies, but now CATL is following their lead. It's the world's largest battery maker, and it says it plans to build 1 ,000 swapping stations around the country this year alone. The FT's Edward White has been following this for us from Shanghai. Hi, Ed. Hi. Okay, so first of all, this is a technology that many people may not have heard of before. What is battery swapping and how prevalent is it in China? So battery swapping is not completely dissimilar to going into a petrol station to fill up your car.

7:43However, the swapping technology that I personally experienced involves going to a sort of container like structure telling your car or the AI assistant in your car to please swap my battery. The car is then controlled by the computer. It is driven into this little container and within a few minutes you have a depleted battery swapped out for a fully charged battery. This has mostly been done by one company. This is NIO, a Chinese company which is actually listed in the US. And in total, I think they have over 3 ,000 swapping stations in China. And they've been the kind of the main company leading this push.

8:23Right. And that's set to expand with this new investment from CATL. Ed, what do their expansion plans look like? So this is a really important change. So CATL has announced plans to build 1 ,000 swapping stations for passenger vehicles this year in China. And they're going to then expand that out to a network of around 10 ,000 by 2028. so in about three years' time. They estimate that ultimately you will probably need about $30 ,000, so another three times the initial investment, to really serve the entire country. That would eventually move to replace around 100 ,000 petrol stations that exist in China today.

9:02Just out of curiosity, why does CATL think China needs battery swapping? So the initial wave of the electric vehicle boom in China has been mostly concentrated into the more affluent Chinese cities. And so in those places, a lot of people live in apartment buildings, they may have access to a charging point near their building, perhaps inside their own car park. But as the growth of this industry continues, and it starts to move out to the outskirts of cities, to less affluent cities, all of a sudden, the charging infrastructure needs a lot of investment. And what I think CATL has probably identified here is that swapping is something that will work for a lot of people who don't have immediate access to a charging point, a standalone charging point.

9:48And just remember that at the moment, EV sales in China are just starting to overtake traditional internal combustion engine cars for the first time. So more than half of all the cars sold in China this year will actually be EVs. So this is a wave that is only really just getting underway. Ed, overall, what does this tell you about China's efforts to electrify its economy? Right now in China, there's a really vicious price war across the EV industry. No one's really making very much money, even though the sales figures continue to expand. Now, while all of that is happening, what we're seeing is that companies still try and make these technological leaps.

10:27And I think that's where you start to see China start to move at a slightly different pace than the rest of the world, because the government is supporting this industry at a holistic level. The broader picture here is that no matter how much pressure there is on these companies in the short term, actually the technology continues to progress in China. Edward White is the FT's China correspondent. Thanks so much, Ed. Thank you.

10:56Before we go, do you have questions about U.S. politics and the economy? Send your questions about the biggest political stories of the week to my email. It's in the show notes. And I'll get some answers for you on the Swamp Notes podcast that I host. Make sure to include your name and where you're from. And if you send us a voice memo, which we absolutely love, by the way, we might even play it on the show.

11:19This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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