Target: Food may come, execs may go, but Target stays Target

BY MIKE DUFF

Target is in the process of significant
change but, in a way, it may be change
for the sake of staying the same.
While Target continually refines itself, so far,
it has remained constant in its ability to present
a particular image to consumers, one that
emphasizes a clean, pleasant and stylish shopping
experience. Executives may depart and
food may become a bigger part of the operational
equation, but Target remains commited
to maintaining that shopping experience.
Although the departure of Bob Ulrich and
the promotion of Gregg Steinhafel to ceo represents
a changing of the guard, little evidence
yet exists that significant changes will
result initially.
Where Target faces the most immediate
change is in its merchandise mix. Its decision to
expand pantry operations in its discount stores,
along with its ongoing effort to add more supercenters,
including eight in the most recent quarter,
is making Target a more and more significant
food retailer. It is the second largest supercenter
operator by stores today and poised to become
the second largest operator by volume. In
its food expansion, it will open its first self-operated
perishables DC—with distribution partner
Supervalu—in Lake City, Fla., this fall.
While Wal-Mart operates many times more
supercenters, Target is expanding rapidly in
food by the standards of virtually any other
food retailer, and that has its own consequences.
The expansion of food has margin consequences,
but the growth of private label in edibles
and the opening of the Target perishables
DC should mitigate margin pressure, Steinhafel
has noted.
Steinhafel pointed out in a recent conference
call that Target’s expanded food operations
have demonstrated an advantage lately. While
the company’s results may have trailed Wal-
Mart’s, with earnings and comparable-store
sales down slightly in the most recent quarter,
Target has held pretty much steady, Steinhafel
noted, compared with major retailers who don’t
sell food and who have taken larger comps and
earnings hits in the current economy.
Target also has minimized risk in its credit
card operation by selling a 47% share to JPMorgan
Chase while increasing corporate liquidity.
Thus, for the foreseeable future, Target
can continue to expand its store base and its
major initiatives toward a strategic plan that
seems based on more of the same thing it has
been doing.

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