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Target going to the source

Minneapolis — Target Corp. sounded alarms to U.S. suppliers when it said it intends to intensify and accelerate direct sourcing from offshore producers, said Gregg Steinhafel, president of Target Stores, at the company’s annual shareholders meeting last week.

Product directly sourced from overseas accounts for 'more than 15 percent' of the assortment and is expected to reach 30 percent within several years, he added. In its annual report, the company states it is implementing a system specifically for imported product that speeds up the process of getting the goods to the stores and onto shelves more efficiently. Part of this updated system includes the recent addition of three import warehouses to its supply chain.

Sending a second warning shot to suppliers, the company also said it is taking a no-prisoners stance on auctions — keeping the practice as a permanent buying process, 'even if some of our vendors don’t like it,' added Steinhafel. 'We see auctions as fair and reasonable. They allow us to offer lower prices to our customers, they keep the vendor community sharp and force vendors to earn the business, instead of it being an entitlement.'

Regarding Mervyn’s and Marshall Field’s, Robert Ulrich, chairman and CEO of Target Corp., said, 'We hope, within the next 60 to 90 days, to reach a milestone. We have a number of people interested in these businesses.'

Pressed by the media to be more specific, he refused to offer details about what exactly the 'milestone' would be — only to say that within the next three months, 'We’ll have something to talk about.' Should the two stores be sold, Ulrich said the proceeds could result in a share repurchase or a reduction in debt.

In the meantime, Ulrich said, it’s business as usual at Mervyn’s and Marshall Field’s. 'We’re not letting up a bit,' he said. 'We’re purchasing fall merchandise and doing holiday planning.'

In contrast, Ulrich said, Target Stores has been the bright spot for the company. Last year, it accounted for 86 percent of total revenues of $48.2 million, versus Mervyn’s and Marshall Field’s, which respectively accounted for 7 and 5 percent of total Target Corp. revenues.

Target Stores, he said, expects to double its number of units and triple square footage within the next decade. For this year, Target Stores noted it expects to add 95 to 100 new stores, or about 80 to 85 new stores net of closings and relocations, all reflecting the company’s new T-2004 prototype.

Target Stores is also 'trying,' Ulrich said, to expand the number of units it opens in the downtowns of major U.S. cities, where 'it has been challenging to get sites at reasonable real estate prices.' Its core unit, Ulrich went on, is here at headquarters in downtown Minneapolis — and moving in that direction, Target Stores in July is opening another store in Brooklyn and one in Chicago’s South Loop area.

The company recently reported that its T-2004 prototype stores, which opened in March, exceeded sales projections by 20 percent. And while the home category has been strong over the past two years at Target Stores, it now 'is performing slightly less than we’d like,' said Steinhafel. 'It hasn’t grown at the same rate' as the rest of Target Stores’ other departments.

He said Swell is doing 'fine,' while Simply Shabby Chic is doing 'exceptionally well' and will soon be expanded into more coordinate home products, including frames and mirrors.

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