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Target general overview
Target Corporation September Sales From Continuing
Operations Up 12.5
Percent
Target Corporation reported that its net retail sales
from continuing operations (principally Target Stores)
for the five weeks ended October 2, 2004 increased 12.5
percent to $3.866 billion from $3.437 billion for the five-week
period ended October 4, 2003. On this same basis, comparable-store
sales increased 5.6 percent from fiscal September 2003.
"Sales at Target Stores were above plan for the month
of September," said Bob Ulrich, chairman and chief
executive officer of Target Corporation. According to Ulrich,
the top performing merchandise categories included sporting
goods, pharmacy and electronics. The poorest sales performance
for the month occured in intimate/hosiery, home decor,
toys and children’s apparel. Target’s strongest
markets during September were on the West Coast while the
markets in the midwest were weaker. Looking forward to
October, Target Stores is on plan to increase comparable
store sales in the range of 4-6%.
Target joins food fight: SuperTargets
emerge as low-price leaders for groceries, tapping into
the one-stop-shopping
market.
BY SCOTT CARLSON Pioneer Press
Bright, colorful signs dangle from the ceiling of the
Shoreview SuperTarget store. "Surprising brands, incredible
prices," one says. " Eat well, pay less," touts
another. In the rising battle for consumers' food dollars,
the new in-store marketing campaign emphasizing low grocery
prices is crucial for SuperTarget, whose parent company
Target Corp. is better known for its trendy cachet.
The Minneapolis-based discounter recently began hyping,
through its in-store promotions and in television ads,
what price surveys in the Twin Cities have shown but many
shoppers don't realize: SuperTarget, which combines full-fledged
supermarkets with general merchandise, is a low-price leader
for groceries, according to media and analyst surveys. " We
are never given as much credit as we deserve," said
Greg Duppler, a Target Corp. senior vice president, explaining
Target's recent move to raise consumer awareness of SuperTarget's
competitive grocery prices.
Launched in 1995 and just 3 years old in the Twin Cities
market, SuperTarget boasts mega-stores of 175,000 square
feet, offering up to 40 percent more selling space than
the regular Target discount stores. Analysts said one of
Target's challenges with its super centers is to bring
the same passion and excitement to food that it has generated
with its general merchandise. The super centers carry about
80,000 general merchandise items and 13,000 grocery offerings.
Although the grocery industry has razor-thin profits,
Target is betting on food to drive consumers into its stores
more often and, once there, to also increase their buying
of higher-margin general merchandise. " What they
(Target) are trying to accomplish is getting rub-off sales
from items that have higher margins," said Steve Baumgarten,
an analyst at Parker/Hunter.
WATCHING WAL-MART
Just how successful Target has been with SuperTarget is
a matter of perspective. Pat Liska former president of
Rainbow Foods, considers SuperTarget a retail winner. "They
(Target) have put together a very chic presentation," said
Liska, now chief executive of RPL Consulting in Eden Prairie.
Target has extended the warm, colorful and easy shopping
ambience of its general merchandise stores to the grocery
side with such things as Starbucks Coffee, D'Amico & Sons
deli and Wuollet Bakery, he added.
Duppler said SuperTarget offers fresh grocery items and
dry goods in a range of prices and quality. "We are
trying to play across a broad spectrum," said Duppler,
who first joined Target in 1982 as an assistant buyer/distributor.
Through the years, Duppler has moved up Target's corporate
ladder. He was promoted five years ago to help lead expansion
of the company's super center concept.
SuperTarget's format seems to be connecting with shoppers.
Target wouldn't divulge sales figures for SuperTargets.
But the company has previously said that Target customers
visit SuperTargets an average of 4.5 times per month, about
twice the frequency of shoppers at regular Target stores.
With 11 super centers in the Twin Cities today and at least
two more scheduled to open next year, SuperTarget could
account for as much as 10 percent of the area's grocery
market in the future, Liska predicted. "In this market,
Target is a force to be reckoned with" for traditional
grocers, he said. (Currently, Cub Foods is the Twin Cities'
No. 1 grocer with Rainbow Foods No. 2. Those traditional
grocers combined account for nearly two-thirds of the metro
area's market share, according to industry sources.)
Some question whether SuperTarget has given Target Corp.
nearly the same lift as rival Wal-Mart Stores Inc. has
enjoyed from its mega-stores, which retail observers expect
some day to hit the Twin Cities. Wal-Mart isn't saying
when. "The best SuperTarget would perform far below
the average Wal-Mart super center," contended David
Livingston, a Milwaukee grocery consultant for more than
20 years. Based on his market research and store visits
across the nation, Livingston said SuperTarget grocery
departments average sales of $6 per customer accessible
square foot while Wal-Mart's figure is $12 to $15. Bottom
line: The average SuperTarget grocery department produces
$200,000 to $300,000 per week in sales while those at Wal-Mart
generate about $650,000 to $700,000 per week, Livingston
said.
Livingston said SuperTarget does better in the Twin Cities,
where there is a higher density of stores, with the super
centers generating weekly grocery-related sales of up to
$550,000 at some locations. But "outside of the Twin
Cities, it (SuperTarget) is a disaster as far as grocery
sales," said Livingston, who has visited stores across
the country and conducted market research. Target executives
have maintained that their super centers are meeting expectations.
Livingston's sales statistics " are not credible,''
a Target spokeswoman insisted.
MORE TO COME
From Target's perspective, the success of SuperTarget
is reflected in the company's continuing commitment to
the concept. Duppler said Target Corp. intends to increase
its SuperTarget penetration in existing markets such as
Denver, Dallas, Chicago, Florida and the Twin Cities. Target
opened 10 more super centers this month and has projected
it will operate about 200 of them by the end of the decade.
The company expects SuperTarget to account for 25 to 35
percent of the chain's overall growth in net square footage.
Whatever the sales figures, there is no question that
Wal-Mart dominates Target in the super center grocery business
because of its ubiquitous presence. The Arkansas-based
retailer operates nearly 1,700 U.S. super centers, 12 times
the number of SuperTargets and more than Target's entire
1,300-store chain. Earlier this month, Wal-Mart said it
plans to add as many as 240 super centers next year through
either expansion of existing stores or new construction.
On another measure, customer frequency, Wal-Mart may also
have an edge over Target in the super center battle. Retail
Forward found in a recent survey that half of Wal-Mart's
shoppers who had visited a super center in the last six
month patronized those stores on a weekly basis. In contrast,
20 percent of Target shoppers who have visited a SuperTarget
in the last six months went there on a weekly basis, the
Ohio-based market research consulting firm said. Nevertheless,
analysts are not bothered by Wal-Mart's super center dominance,
thinking there is plenty of upside potential for SuperTarget. "SuperTarget
is relatively new at this point and not in a lot of areas
of the country, so it (Target) doesn't have the perception
of being a food retailer," Baumgarten said. "It
will take time for consumers to feel comfortable shopping
at Target for food."
ONE-STOP AND CHEAP
Amy Nentwig, a Roseville homemaker, is among those consumers
already at ease shopping SuperTarget. She makes at least
one major grocery trip a week to the Shoreview SuperTarget,
then visits the store two or three other times a week for
smaller spending forays. "I can do all of my shopping
here," Nentwig said of the "one-stop shopping" that
Target promotes as a feature of SuperTarget. Nentwig no
longer regularly shops Cub or Rainbow Foods supermarkets
since Target converted its Shoreview Target Greatland into
a super center in 2001. Even when a Cub supermarket opened
down the street from the SuperTarget, she has stuck with
the discounter. A major reason: Target's competitive prices.
In a market basket survey last year of about 150 grocery
items, Twin Cities Consumers Checkbook found SuperTarget's
Apple Valley store rang in at $82, about 11 percent lower
than average prices at three surveyed Cub Foods supermarkets.
And in a Dallas market basket price survey in 2002, DSNRetailing
Today found that SuperTarget offered a better total value
on 39 typical grocery items than traditional grocers such
as Albertson's and Kroger's. Only Wal-Mart's Neighborhood
Market had a lower total basket price than SuperTarget,
the industry trade publication reported.
Liska said Target's low grocery prices are partly due
to lower labor costs (the retailer is non-union compared
with most Twin Cities grocers who have organized work forces)
and its ability to buy commodities in huge quantities.
Target's advantage of lower labor costs, however, will
be challenged when Wal-Mart, which is also non-union, eventually
hits the Twin Cities with its super centers.
Target is also selective about stocking its shelves: Rather
than carrying several sizes of the same product, whether
laundry detergent or canned vegetables, the discounter
usually offers only the top two or three best-selling sizes.
PRIVATE LABEL STRATEGY
As the in-store campaign gathers steam across Target's
136 super centers, the discounter is also repackaging and
expanding its own private label brands, Market Pantry and
Archer Farms. Target's move to beef up its two private
grocery labels should increase profits, analysts said.
Profits on private label groceries generally are higher
because they don't have the added costs of advertising
that go into national brands, they said. Market Pantry
is Target's lower-priced alternative to similar national
brands in staples, dry goods, dairy and frozen foods while
Archer Farms is its premium brand. Target has made over
its Market Pantry packaging, abandoning what Duppler described
as an "ugly" green. It has also doubled its assortment
of Market Pantry items to about 1,000 items, Gregg Steinhafel,
president of Target Stores, recently told analysts.
And in August, Target began rolling out the repackaging
of its Archer Farms brand, a makeover it expects to complete
by January. By the end of the year, Target expects to have
50 percent more Archer Farms products on its shelves, increasing
the assortment to about 1,900 items, Steinhafel said. So
far, Target has seen a better than 10 percent increase
in sales of its private label groceries with the repackaging,
Duppler said. Toddler and infant department
overview
Target’s mini department is doing an enviable
job by sticking to the brands that work and by offering
the coordinated looks that make shopping easier for this
size range. Genuine Kids, Cherokee and Levi’s each
offered up fully coordinating looks with Cherokee at the
opening price point and Levi’s and Genuine at a premium.
Each grouping included an outerwear piece, a knit and woven
bottom, an overall and both woven and knit tops to pull
the whole story together. At this age, this type of closed
merchandising is making sense because the parents are often
in a hurry with their kids on their arm while they are
shopping. Sets are still the domain of the licensed characters
with Bob the Builder, Dora, Pooh, Strawberry Shortcake
and Miffy still the most popular characters. Opportunities in the infant's
and toddler's department
The Mini department is looking better than ever
with cute coordinates, must have sets and plenty of clever
little impulse items with Holiday themes. Target is also
on top of the must have basic item of each season as well.
The current ‘need’ is for warm pajamas and
outerwear. They have the pajamas covered with great 2 for
1 price deals in knit two piece set and one piece synthetic
knit jumpers in all sizes. The outerwear issue is a bit
more tricky. Target has great fashion jackets and even
a few great heavy jackets with zip out liners but they
have very little in the way of functional and fashionable
outerwear that is geared towards specific regions of the
country. For example in California, there is a need for
heavy rain gear that is not puffy or furry but that offers
zip out features, hoods, polar fleece liners and some fashion
touches like quilting or fun trims. Puffy vests are great
for all regions so we would like to see more of that and
we would also like to see some hats and mitts to coordinate
with outerwear for added value and mixability.
A look into the department:
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