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Target Upbeat on Home Department

Target is "optimistic" about re-energizing its lagging home textiles business, president Gregg Steinhafel said during the 1,487-unit chain's fourth-quarter and year-end earnings call.

"As we rebalanced and re-merchandised our home assortment during the past year, we have experienced improving performance in these categories," he said. "And we are encouraged that the changes we have implemented will generate increased sales in the home area throughout 2007."

Those changes were centered on new good-better-best price bracketing, coupled with "better color and the right kind of assortment so that we have an 'expect more, pay less' differentiation but a compelling assortment," Steinhafel noted.

The ethnic-inspired Global Bazaar program, which this year marked its third anniversary, also bounced back after soft results and sluggish customer reception in 2006. "We're very pleased with its overall performance," he said. "We made some changes to this year's assortment and presentation, focusing more on color, classification dominance, and affordability. And the combination of those factors led to us delivering sales and margin on plan."

Steinhafel noted the importance of food, pharmacy, and other consumables in the plan for 2007. He also pointed to Target's persistent and expanding global sourcing initiative.

"We continue to improve our operation performance and speed through innovation and investment in our infrastructure, supply chain, and technology," he said. "In particular, we continue to strengthen and expand our global sourcing capability, enabling us to shorten lead times and reduce costs while producing outstanding quality merchandise."

Target reported fourth-quarter earnings per diluted share up 21.7% to $1.29 per share from $1.06 per share in the same period a year ago. For the full fiscal year 2006, earnings were $2.79 billion, or $3.21 per diluted share, up 18.5% from $2.41 billion, or $2.71 per share a year ago.

Sales in 2006 rose 13.1% to $59.49 billion from $52.62 billion; comps rose 4.8%.

The retailer plans to open 120 new stores this year and 100 net new stores as well as two new distribution centers. Last year, Target opened 113 total new stores in 36 states — 72 general merchandise stores and 19 Super Target stores.

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