Target expects more from better home brands

Retail Editor 1, February 23, 2012

Minneapolis - Target's fourth quarter profit exceeded expectations, but same-store sales in home were down slightly for the quarter, consistent with third quarter results.
The department's strongest categories were housewares and seasonal.

Higher costs impacted the soft home side of the business, but Target offset this by managing costs and, "when necessary. raising retail prices," said Kathryn Tesija, evp, merchandising, during this morning's quarterly call with analysts.

More recently, costs have begun to level off, she said, and Target expects to see a better balance this year in soft home goods' pricing structure.

Target is already "definitely starting to see some movement" in sales in its higher-bracket soft home brands - including Fieldcrest and Smith & Hawken, she said - "and that is definitely one our objectives in 2012. We'd like to see increasing [sales] strength in our better and best brands."

She added that overall, "home has been improving, and I would say that it will be at least flat if not up coming into the new year. We've made some improvements and are already seeing stronger results. We will capitalize on that particularly on the kitchen side with our P-Fresh remodels, and we're working to [improve] our discretionary domestics-dec home, increasing value in our brands and with the success of, like Fieldcrest, our better brands."

Other efforts thaty should further support home this year include a new spring campaign with a fresh color story and the launch on May 6 of the new Shops at Target, offering Target-priced products from specialty shops.

"This campaign supports our discretionary apparel, home and beauty categories with a simple, upbeat theme," she said.

The Shops at Target event is designed to "create a sense of discovery with surprising finds across a variety of departments," she said, including home.

Target's quarterly net earnings fell 5.2% to $981 million, or $1.45 per share.

Sales in the fourth quarter increased 3.3% to $20.9 billion from $20.3 billion a year ago, due to a 2.2% increase in comps and the contribution from new stores.

Full-year net earnings rose 31% to $2.9 billion, or $4.28 per share. Fiscal 2011 sales increased 4.1% to $68.5 billion due to a 3.0% increase in comps and the contribution from new stores.

The full-year comp of 3.0% marked Target's strongest annual same-store sales growth since 2007.

Target executives said the company is on track to reach $100 billion or more in sales in North America and $8.00 or more in earnings per share by 2017.

The company will open its first "CityTarget" locations in July and its first Canadian Target stores in early 2013.



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