Target upping soft home prices by double digits on some items

Retail Editor 4, May 18, 2011

Minneapolis - As pricing inflation on fabrics and raw materials increases and oil costs continue to escalate, Target Corp. told its investors and analysts today that soft home in particular has experienced double-digit price increases on some items and will continue to follow suit on a broader assortment come fall.

Kathryn Tesija, evp, merchandising, explained during the discount chain's earnings call this morning Target is actively attempting "to drive down costs through product design, fabric standardization, and optimization of pricing promotions and sizing. However, in some cases, we've had to increase retail prices to offset higher costs, and we see others in the marketplace do the same."

For this spring, Target increased prices in the low- to mid-single digit range in some of its apparel categories, while "increases have been in the double digits [on] some items in soft home."

For fall merchandise, Tesija said Target expects price increases to move into the double digits in both apparel and home, which will " affect a greater portion of these assortments than in the spring."

Answering an analyst's question about shoppers' reaction to the recent price increases in apparel and home, Tesija said, "We are encouraged by the experience so far this spring."

She said the response by shoppers has been "neutral to slightly positive on the sales line. So obviously, as we enter the fall season and the increases continue to grow in number of categories as well the size, we need to continue to be very thoughtful and strategic in where we take those retail increases. But so far, based on spring results, I am encouraged."

She also said, "Importantly, when we anticipate retail price increases, we are diligent in adjusting units to ensure that our inventory position remains appropriate."

A look at Target's overall first quarter results showed softness, as sales and comp growth.

"Our first quarter financial performance was the result of stronger-than-expected profitability in our credit card Segment, which offset the impact of weaker-than-anticipated sales in our retail segment," said Gregg Steinhafel, chairman, president and ceo.

Earnings per share increased 9.8% to 99 cents from 90 cents in the same period a year ago.

Sales in the 13-week period, ended April 30, increased 2.8% to $15.6 billion, with comps up 2.0.


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