Target CEO Feeling All Merry About Holiday Prospects
Target, like many other retailers, has had a tough go since
the economy first hit the skids back in 2007. And while the usually conservative
retailer is not ready to go marching around to “Happy Days Are Here Again,” the
company’s CEO is feeling positive about its prospects for the holiday season
and beyond.
Gregg Steinhafel, chairman, president and chief executive officer
of Target, said in a conference call that the retailer is looking for an increase
of between two and four percent in same-store sales for the fourth quarter.
“We’ve built our holiday season plans to create excitement and provide
our guests unbeatable value,” said Mr. Steinhafel, in a press release. “In
addition, our guests can save more than ever with our new five percent REDcard
rewards program. Based on our merchandising and marketing plans, combined with
the expected impact of REDcard rewards and our newly completed remodel program,
we expect Target’s fourth quarter comparable-store performance will be the best
of any quarter in the last three years.” (Target would have to achieve same-store
growth above 2.8 percent to achieve this goal.)
Target is looking for its REDcard
program to boost fourth quarter sales by one percent. The chain believes it
can get a two percent boost from the program in 2011. REDcard holders get five
percent off every purchase made in the company’s stores and on target.com.
David
Heupel, a senior equity portfolio manager with Thrivent Financial, said Target’s
REDcard program is unique in retail and will be a draw for the chain this holiday
season.
“When you look at the [third] quarter, there’s not a whole lot that was
exciting,” Mr. Heupel told the Star Tribune. “So they’re saying,
‘Hey, we’re going to throw a big fourth quarter at you.’ And, let’s face it,
it’s the money quarter. It’s what matters when it comes to these stocks.”
Target
is also benefiting from its Pfresh concept where it has added fresh foods and
expanded grocery sections in its traditional discount stores. A category director
with a top-10 grocery chain recently told RetailWire that its
stores in markets where Target has introduced the concept have seen some slippage.
Discussion Questions: What is your assessment of Target heading into the
holiday season? Will the “unique” REDcard program build incremental
sales? Where do you see opportunities for growth and what are the main challenges
it faces?
I’m finding Target is getting much more aggressive on price with Walmart. This is gaining them credibility. Their 5% instant rebate on the REDcard is catching on. Consumers are finally realizing that Target sells groceries.
Target is heading into the holiday season with some new wind at their back. They have their REDcard program, expanded grocery sections, excellent non-foods merchandise, and a good assortment of fresh foods. Whether or not “happy days are here again” is a foreseeable reality it would seem that CEO Gregg Steinhafel believes it is and he has stuck his neck out on that happening. Let’s hope Gregg is right.
In my opinion, Target’s CEO Gregg Steinhafel might be optimistic looking at an increase of between two and four percent in same-store sales for the fourth quarter, however I suspect that such numbers are achievable this year, in particular, at Target. This would pretty much put this holiday season back to an almost pre-recession level and I think that is realistic given the energy being put into this season, the online space, and the slightly improved psychology of the consumer base.
Target is in a position to have a successful fourth quarter. It has the wind at its back in terms of a slowly recovering economy and evidence that the consumer is willing to spend on more discretionary products than during the past couple of years. This plays right into Target’s hands and is also making life tougher for Walmart than they expected.
At the same time, there are still plenty of execution challenges that Target needs to face, even if macroeconomic and competitive factors favor a good outcome. The apparel offering (especially in women’s) needs more clarity of offer and presentation, and stockouts continue to plague basic areas–at least in the high-volume stores that I visit regularly.
That’s good, but how much better could it be? That’s the thought that always runs through my mind whenever Target’s numbers go on the uptick. Once Target woke up and smelled the recession, they did a great job of swinging back to “Pay less” after months of stubbornly sticking to “Expect more,” and the P-fresh rollout and renewed focus on consumer electronics are encouraging signs that Target is no longer resting on its designer laurels.
That said, it all feels like a well-played game of catch-up to me. If you haven’t noticed, Target isn’t defining anything right now. Designer capsules? Everywhere. Pop-up stores? Ditto. Groovy ads? Dime a dozen. Grocery rollouts? C’mon.
When will Target get back on the bleeding edge of something?
Target appears to have been successfully taking away some of Wal-Mart’s discount market share for much of the past year. This is largely due to branding and marketing, as the product offerings are similar, although Target’s apparel is generally of slightly higher quality. Hats off to the marketing folks at “Tar-ZHAY” who have managed to promote themselves as a more upscale means of shopping at a serious discount.
While I expect Target’s numbers to be better this holiday season (like most every other mass-market retailer) I still see Target caught in a narrowing space between Walmart below and Kohl’s above them.
Walmart simply owns the low-end. Their prices are sharper and their assortments better (although their in-store execution has left something to be desired lately). Target may want to be able to pick off some of that business, but their opportunity at the low-end is very limited.
Meanwhile, Kohl’s has continued to get sharper, in my judgment, throughout the last couple of years. I feel that they offer better value at prices not that far above Target. It’s simply a more fashion-driven retailer.
Combine that with the fact that Target’s typical footprint is far too large, and you get stores with little impact or buzz. Target’s challenges, in my opinion, aren’t cyclical, they are far more structural, and significant.
Target’s forecast is like wishing and throwing the coin in the fountain. I do hope they are right. It would mean a lot to the retailers to have a leader meet or exceed their forecast. I do think this will be a better shopping season even with it being separated by weeks between Hanukkah and Christmas this year. Hanukkah being so early will mean more of an emphasis on Black Friday’s sales numbers.
Back to Target. The emphatic push to gain more sales needs to be sent to the stores and the staff of each store. Shopping in Target is bland. You rarely get any request to assist from the floor staff. Too often I sense I am an interruption to their day rather than the meaning that they are there.
REDcard has been huge for Target, not only increasing sales but also attracting the demographic they are most interested in. Expect a ho-ho-holiday season!
Sounds like a lot of banking on increased share of wallet over the holidays from Target shoppers who use the REDcard rebate program. I should know this–but are Target’s same store sales reported gross or net of the REDcard rebates?
Target will do only as well as Walmart lets them…wait! That’s someone else’s line, isn’t it?
They’ll do well enough (but someone will find reason to be “alarmed” anyway.) As for the grocery part of it, I actually have some input on that: the Target I regularly patronize was recently upgraded…signs announced “fresh fruits and vegetables coming!” It all seemed rather exciting; then they arrived…and I don’t get it: bagged lettuce, bunches of bananas artfully arrayed, oranges in nicely wrapped 8-paks… as A MOMA exhibit, it was great; but as an attempt at creating a real grocery store, it was thoroughly underwhelming. If the folks back on Nicolet Ave think a produce department that offers an eclectic mix (and is small enough that it could practically fit in a side-by-side) will keep them in the race, then I disagree.
Am I the only person wondering why Target stores (and some of the major drug stores) are devoting more floor space to the low-margin/low-retail grocery category?
It will be interesting to see the year end results for comp sales and margin dollars/per square ft for these stores.
Unlike other contributors here, I found Steinhafel’s predictions conservative. He’s sandbagging. Target has a lot of marketing arrows in their quiver and clearly has strategized to create a perfect confluence of programs, product offerings, remodels, and pricing for this quarter. The execution of their preparation for Q4, while not flawless, was nevertheless very good. Now it’s time for the in-store teams to shine, and I have every confidence that they will.