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Target: Home Improves in Spots but Spending still off

Target echoed several other retailers in late May in saying that its home department is stabilizing, but it made clear — as have many other retailers — that stable doesn't mean healthy.

Same-store sales in home and other hard-hit discretionary categories like apparel were "not nearly as negative" as in 2008, particularly the third and fourth quarters, ceo Gregg Steinhafel told analysts during the morning's quarterly conference call.

"Daily sales variability is less dramatic and geographic sales variability is less dramatic than in the past," he said.

Fieldcrest and Dwell Studio are out-performing the category, according to Kathy Tesija, evp merchandising. Replenishment items such as towels, sheets and pillowcases are outselling merchandise related to redecorating and room décor, Steinhafel added.

But overall, consumers are sticking closely to their shopping lists and continue to cut back on discretionary purchases, executives said. They're also shifting from better/best merchandise to items in the good tier.

Customer count rose over the first quarter, but the typical shopper "might buy an accessory rather than a whole outfit," Tesija said.

But Target is not backing off its cheap chic strategy and will have as many designer lines — if not more — in the store this year, she said. Next month, it will launch a limited edition collection from designer Dror Benshetrit of 30 skus that will include reversible bedding, stationery and accessories. Tesjia described the items as multi-functional.

In other company news:

  • Target's expanded food department format test — intended to boost traffic — will roll out to 40 new stores and 60 remodels this year, for a total of 100 doors. The mix: dry, daily and frozen foods along with high-frequency perishables.

  • Also in test, a local lowest-price matching program. In place in Denver, Orlando and select Minneapolis stores.

  • Majority of cost savings from deflationary material prices will be plowed back into the product.

  • House brands in health and beauty care will be consolidated into a new brand called Up & Up priced 30% below national brands. Launched in March in sun care, it will expand to 40 products.

  • New broadcast advertising campaign features real mothers talking about Target.

During the first quarter ended May 2, profit fell 13.4% to $522 million, or 69 cents per share. That beat Wall Street expectations of 60 cents per share.

Retail sales rose 0.4% to $14.4 billion, with comps down 3.7%.

Credit card revenues fell 5.7% to $452 million. Total corporate revenues were up 0.2% to $14.8 billion.

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