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Target to Update Fieldcrest, Chase 'Better' in Home

A "reinvention" of its exclusive Fieldcrest brand program in home textiles is being prepared for style-driven discounter Target in 2008, the retailer said as it reported full fiscal year 2007 earnings of $2.85 billion, up 2.2% from $2.79 billion the year prior.

Total revenues for the year ended Feb. 2 grew 6.5% to $63.4 million, as 1,591-unit Target notched a respectable 3.0% comp store sales gain in a relatively tough economic environment and against a 4.8% comp gain the year prior.

But home textiles was in the company of toys, jewelry and accessories, shoes and men's apparel during 2007: all admittedly weak performing categories.

"We will continue to make tactical adjustments in our content and pricing to address the significant near-term challenges presented by the current economic environment, particularly in discretionary home and apparel categories," said Gregg Steinhafel, president, speaking to analysts.

Home has already started to see a facelift with the recent introduction of the exclusive Dwell Studio for Target line, which currently comprises modern bedding, tabletop and infant furnishings.

Another recent plus in home was a successful Global Bazaar program in January through late February, which "did very well for us," Steinhafel said. "We are pleased with the performance this year. We met our sales goals and our profit goals and our sell-throughs were excellent."

More broadly he added, "Our composition is excellent right now. We had been transitioning to all fresh and current assortments in apparel, home and other hardlines categories so we felt really good about where we are into the first month of the fiscal year."

Coming soon in the home pipeline is the "reinvention" of Target's Fieldcrest program via "increasing the value proposition through upgraded quality, fabric and exceptional prices," explained Steinhafel. Despite the "upgrade" comment, he later specifically noted that the program will incorporate some lower price points.

Target has been running its Fieldcrest offering as a two-tier program with significant presence in bed and bath.

Speaking about the merchandising mix across the store, Steinhafel said, "We're seeing very strong results in the 'good' category and surprisingly strong results in the 'best' category, and there are some parts in the middle where we are seeing weakness…We're slightly surprised that the best is doing as well as it is and that some of the 'better' parts of our assortment are showing the weaknesses."

The initial cycle of 2008 store openings, scheduled this month, includes 18 general merchandise stores and eight SuperTargets. The year will see about 116 store openings total, adding about 95 new locations net of relocations.

In late 2008/early 2009 Target will begin rolling out its '09 store prototype, which Steinhafel described as having "a slightly enhanced food presentation, some architectural element changes and visual element changes, but overall I will just basically tell you it will be a better version of our existing formats that you see today."

"We update our existing prototypes on an ongoing basis," he said. "We have evolutionary change in virtually every cycle of new stores, and then about every fifth year we have a more substantive change, and the last major prototype initiative was in 2004. So we've been focused on a prototype evolution for end of this year and early '09."

Target Corporation

Qtr. 2/2 (millions) 2007 2006 % change
(loss)
a.Sales and earnings for 13-week fourth quarter in fiscal 2007 compared to 14-week fourth quarter in fiscal 2006.
b. Gross margin and SG&A as percentage of sales less credit card revenues.
c. Sales and earnings for 52-week fiscal 2007 compared to 53-week fiscal 2006.
Sales $19,872a $19,710a 0.8%a
Oper. Income (EBIT) 1,846 1,960 (5.8)
Net income 1,028.0 1,119.0 (8.1)
Per share (diluted) 1.23 1.29 (4.7)
Average gross margin 30.2%b 30.7%b --
SG&A expenses 20.0%b 19.7%b --
Full Year
Sales $63,367c $59,490c 6.5%c
Oper. Income (EBIT) 5,272 5,069 4.0
Net income 2,849 2,787 2.2
Per share (diluted) 3.33 3.21 3.9
Average gross margin 31.8%b 31.9%b --
SG&A expenses 22.3%b 22.1%b --


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