Soft Home Slumps at Target
June 5, 2006,
Minneapolis — Soft home was soft indeed in Target Corp.'s first quarter, when the retailer suffered continued slack sales performance and too many markdowns in the category, particularly in its core offerings of bedding and decorative accessories.
Mistakes in last quarter's Global Bazaar — a two-year-old program — included efforts to upscale the assortment “too far at this point in time,” he said.
For next year's Global Bazaar, the retailer will “bring those price points down, focus more on some classification dominance, and make the kind of changes that will stimulate impulse buying and people not wanting or waiting for the assortment to go on sale,” Steinhafel said.
Already in the first quarter, Target began refining its home assortment within each of its five lifestyle preferences to better meet shoppers' needs. It rebalanced its good-better-best mix to include more quality offerings, introduced Target Casual and Contemporary Home, and re-launched the Waverly brand. It also enhanced its in-store presentation with the addition of an endcap display of larger furniture pieces, introducing Room Essentials and upholstered seating. And it presented its designer spring home catalog to shoppers.
Steinhafel dismissed Wal-Mart's rollout of the Luxury concept in home textiles product and packaging — for now. “We have not really seen an impact from Wal-Mart in its efforts to upscale,” he said. “We've seen a limited amount of upscale in home and a slight amount in apparel, but not of any meaningful scale at this point.”
First-quarter profits at Target Corp. did climb higher by 12.0%, to $554 million from $494 million last year, as proceeds from its growing creditcard business helped to offset thinning margins and higher costs. Quarterly sales improved by 11.8%, to $12.5 billion from $11.2 billion last year. Same-store sales were up a robust 5.1%.
At its annual meeting, held in a new — and still veiled — supercenter prototype in metro Atlanta, Target chairman and ceo Bob Ulrich said the retailer will take steps to further leverage its Internet and credit-card businesses to promote more frequent traffic in its stores and higher tickets. He added that Target plans to open more than 110 new stores in 2006.