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Target seeks better mix and presentation in home textiles

Minneapolis – Target Stores admitted to feeling some price resistance in its home textiles department during the fourth quarter, a problem company execs partly ascribe to packaging.

During its earnings call today, Gregg Steinhafel, president, said Target has “periodically” felt price resistance in this area, because the customer “can’t touch or feel or see the product as well as she can when it’s out of package.”

But the problem is on the mend, he said, through efforts to "do a better job of communicating the value and the intrinsic benefits of those products that aren’t as tactile as some of the other things we have in the store."

Target reported fourth quarter earnings of $939 million, up 13.8% from a year ago, and annual 2005 earnings of $2.4 billion, up 27.7% from 2004. Retail sales were up 11.4% in the quarter, to $14.8 billion, and up 12.2% for the year, to $51.3 billion.

While price resistance was not an issue for Global Bazaar -- which included furniture pieces in the $300 to $400 range that sold well -- this second year for the program has been somewhat disappointing.

“It is not meeting our planned projections for this year,” Steinhafel said. This comes in lieu of the retailer's “fairly modest expectations” to increase sell-through from its first run a year ago, and its upgraded assortment that had been slightly edited down in SKU count from the previous year.

Part of Target Stores’ goal for 2006 includes trying to get its home business “back on track” after soft results over the second half of 2005. In progress are several initiatives – “a lot of refinement of presentation and content, and good-better-best rebalancing that we’re doing,” Steinhafel said.

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