Target's "Volatile" 4Q Hurt in Part by Softness in Home

MINNEAPOLIS - Target Corp.'s still-lagging home business only added to the retailer's woes in the fourth quarter when the holiday selling season proved "more volatile" than anticipated.
     Sales in home as well as in hard-lines were "more difficult" than other categories in the period, said Kathryn Tesija, evp, merchandising. The fourth quarter overall had ups and downs, with "times of surprising strength but also times of softness."
    Home "has been a mixed bag," she continued. "We've seen some strength in house-wares and in certain stationary and holiday categories, but we are still having some difficulty in domestics and part of the decorative home business."
     The few recent highlights lately in home have been on the opposite extremes of the pricing sphere - "good" and "best" areas. Tesija singled out "great results in our ‘good' products, our opening price points, like our Room Essentials [line]," and also "a fantastic response in ‘best' items," - mostly KitchenAid and Calphalon-branded wares, she said.
     Hardest hit within home has been the "better" station, "like our home brand," which hits the middle price point mark. There, business has been "a bit softer," Tesija explained.
     More recently, the 1,750- unit Target is "seeing action" again in home again, but Tesija warned "it is still underperforming the rest of the company."
     To correct this, "some of the things we are doing," she continued, include: improving on the message it sends consumers about the benefits and special features justifying the "better" price point; and a stronger trend and color statement across the various categories within the home segment.
      This spring the discounter is launching a new blue-and-white fashion story across home to show shoppers "our new innovations in color, the way it is infused" and translated in prints and patterns for a complete and season-right decorating story.
     Additionally, home will continue to be part of the retailer's larger effort to remodel units via a "transformational strategy" that has been in place for the past few years. After completing 341 "P-Fresh" renovations in 2010, the retailer is on plan to convert another 380 stores this year. "Consistent with last year's," said Gregg Steinhafel, chairman, president and ceo, the new P-Fresh sites will feature an expanded food assortment as well as "reinvented" areas for home and other discretionary categories to help improve sales and traffic.
     For the fourth quarter, ended January 29, net earnings grew 10.6% to $1.035 billion, with earnings per share up 17.0% to $1.45.
     Sales rose 2.8% to $20.3 billion, and comps increased 2.4%.
     For the fiscal year, EPS rose 21.4% to $4.00. Sales increased 3.7% to $65.8 billion, with comps up 2.1%.

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