Target Sees the Changing Demographic Landscape
January 27, 2010
Target announced last week that they intend to test stores that will have 50 percent fewer items, as part of a new five- to ten-year plan. We believe this is a positive sign that the company is acknowledging that the consumer landscape is about to change over the next decade with the emerging consumer power of Generation Y.
We have commented before that the consumer traits of Gen. Y will be very different than that of the Boomers. Investors seemed to be voting with their pocket pocket: Target is up over 57 percent over the year versus nearly 11 percent for Wall Mart.
Source: Google Finance
Wall Street Journal: Target Corp. (TGT) said it would spend about $1 billion this year to remodel stores as part of a plan that outlines major initiatives for the next five to 10 years.
The discount retailer also said it plans to build fewer than 10 net new locations in 2010, develop and test a smaller store format for urban areas, and expand outside the U.S. Nearly 60 new stores were opened in the year through October. But Chairman and Chief Executive Gregg Steinhafel said ahead of a meeting with analysts that Target will apply "the same rigorous financial discipline" in the reforms that have ensured strong returns and prudent use of capital in the past.
In November, the company had warned it could have difficulty meetings analysts' fiscal fourth-quarter earnings expectations, which were for $1.12 a share at the time. Its third-quarter earnings rose 18%, snapping a streak of eight quarterly declines, as the discount retailer saw profitability improve in both its retail and credit-card operations.
The remodeling, which is meant to boost growth in same-store sales, will include more grocery selections and changes in layout and new merchandise. The exact number and pace of new store openings beyond this year will depend on factors such as the state of the economy and real estate, as well as internal operational performance. As for the urban format, it hopes to test the concept in the next few years.
Target said its international push would most likely occur in Canada, Mexico or Latin America beyond a three- to five-year time horizon.
