Target preps cross-border, urban moves

Target is branching out.

Buoyed by surging profits and customer satisfaction scores, the Minneapolis-based giant is reaching into Canada, preparing a new small-store format for urban areas and going after a bigger share of the nation’s grocery dollar. Target also is spending billions on store renovations, aggressively leveraging a new loyalty card program and growing its commitment to health at its pharmacies and in-store clinics.

Target executives have been energized by the company’s ability to navigate the Great Recession and maintain consumer loyalty. Behind their optimism: a 21% jump in per-share net earnings in fiscal 2010, ended Jan. 30, 2011, along with a respectable 2.1% increase in same-store sales. For the year, net income surged 17.4% to $2.92 billion, with sales up 3.7% to $65.8 billion. 

In early April, the company received more affirmation when consumers, for the second year in a row, named Target the nation’s top value retailer in the 2011 Harris Poll “Equi­Trend” survey.

Target chairman, president and CEO Gregg 
Steinhafel laid out bold plans for the Minneapolis-based chain. “In 2011, we will continue to focus on driving sales and traffic and providing an enhanced shopping experience through key strategic initiatives that include our ambitious remodel program, 5% REDcard Rewards and the launch of our new 
platform,” he said. “Beyond 2011, we plan to expand our store footprint in new ways, opening our first CityTarget stores in 2012 and opening 100 to 150 Canadian Target stores in 2013 and 2014.”

The CityTarget stores will be roughly half the size of the company’s 110,000-sq.-ft. prototype and reportedly will carry a large offering of fresh foods and a more limited assortment of apparel and general merchandise geared to in-town living. Target recently unveiled plans to open “small-format locations” in urban markets across the United States, beginning with the first CityTarget store in Chicago at the intersection of Madison and South State streets in the historic Sullivan Center, site of the former Carson Pirie Scott department store. 

Target announced early this year its move into Canada, through the purchase for US$1.91 billion of Zellers, a subsidiary of Hudson’s Bay, which operates big-box discount stores, many with pharmacies. The purchase of as many as 220 Zellers store locations “will allow us to open 100 to 150 Target stores in Canada, primarily in 2013,” the company reported. Target officials predicted they would spend roughly US$1.05 billion to renovate the stores and expected the stores will generate as much as $6 billion by 2017, CFO Douglas Scovanner told analysts in May.

Target also will spend $2.5 billion in the United States this year alone, “driven primarily by a larger remodel program.” Remodeled units feature an expanded “PFresh” fresh food layout, wider aisles and a beauty department that offers what the company said is “a more engaging shopping experience.”

Target now operates 1,755 stores in 49 states, including more than 250 SuperTarget centers, some 1,565 stores with pharmacies and more than 460 units with its expanded “PFresh” assortment of fresh foods. The addition of PFresh boosted per-store sales an average of 6% to 10%, according to reports, and Target has made fresh foods a priority growth initiative. This year, roughly 400 more stores will feature the sections, according to the company.

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