The retail industry has faced more than its fair share of challenges over the past year. Investors are eager for the economic environment to improve because they know that Target (TGT 0.64%) and other leading retailers are likely to see their profits improve along with it.

But you might want to consider buying Target's shares now, before the next bull market takes hold. Here's why.

1. Target's omnichannel investments are paying off

Back in 2017, Target acquired Shipt, a leading same-day delivery platform, for $550 million. In the years that followed, the retail chain continued to invest heavily in its e-commerce fulfillment capabilities.

Those decisions proved prescient. COVID-19 and related safety measures drove many people to shop online during the pandemic. Target's delivery and curbside pickup offerings, in turn, experienced torrid growth. The company's same-day services have grown nearly fivefold since 2019 and now account for over $7 billion in incremental sales. 

Yet Target decided to place its stores at the heart of its online fulfillment network that was perhaps its smartest move. With nearly 2,000 locations, Target's well-situated store base allows it to process its e-commerce sales more efficiently and cost-effectively than many of its online-only and traditional retail rivals. 

Better still, by having its stores fulfill 95% of its total sales, Target is making the most of its physical assets. Since 2019, the retail leader's sales per square foot are up by a whopping 37%, fueled by a roughly threefold increase in digital transactions. 

2. Partnerships are bolstering Target's allure among consumers

Target struck some smart deals to further maximize its retail space. Unique partnerships with Ulta Beauty (ULTA -1.20%), Starbucks, Walt Disney, and Apple are all helping to bring more shoppers to the retailer's stores. 

Target's alliance with Ulta is particularly valuable. The cosmetics chain has successfully opened 350 shops inside Target's stores. The two companies plan to increase that figure to at least 800 locations in the coming years. 

Chief Growth Officer Christina Hennington credits Ulta with boosting Target's ability to offer higher-end cosmetics products and a top-notch customer experience. That, in turn, is helping Target win market share in the lucrative beauty segment.

"Last year's sales from Ulta Beauty at Target were more than four times higher than in 2021, and this growth was almost entirely incremental," Hennington said during the company's fourth-quarter earnings call in February. 

3. Investors can expect more dividend increases

Together, Target's omnichannel investments and brand partnerships should help to drive its sales higher in the coming years. This revenue growth, combined with improving consumer trends, is set to power a sharp rebound in the retailer's profit margins.

Stubbornly high inflation and fears of a potential recession have driven many consumers to pare back their discretionary purchases over the past year. That's taken a toll on Target's profits, as discretionary categories typically carry higher margins for retailers than groceries and other household essentials.

Fortunately, these trends are slowly improving, and Target expects consumers' shopping behavior to eventually return to historical norms. Thus, management sees the company's operating margin rebound to 6% as early as next year, up from 3.6% in fiscal 2022. 

Higher profits should mean larger dividends for investors. Remarkably, Target has raised its cash payout to its shareholders for more than 50 straight years. And with its projected earnings per share of $7.75 to $8.75 in fiscal 2023 set to exceed its annual payout of $4.32 per share by roughly 80% or more, Target has plenty of room to continue boosting its dividend in the years ahead.