Target Keeps Home Fresh

James Mammarella, June 2, 2008

Three new soft home initiatives featured in the presentation at the soon-to-open supercenter here two weeks ago as Target's newly elevated ceo Gregg Steinhafel steered his first annual shareholder meeting; the intros include the chain's first certified organic cotton bedding program and exclusive designer collections from Sami Hayek and DwellStudio.

HTT reviewed each of these programs in local Las Vegas stores. The certified organic line, offered under Target's private Home label, is a 250-count sheet set made with eco-friendly dyes, packaged in its own drawstring fabric bag, priced at $49.99 queen — the same price as a 250-count non-organic cotton/modal blend nearby.

The Sami Hayek program, seen in a stepped endcap display, also presented reusable fabric packaging, some as tote bags, others zippered. Dec pillows, comforter and coverlet sets filled out the 220-count sheet set line, which offers a youthful, contemporary ambiance in botanical and geometric themes and strong colors.

Price points in the moderately positioned Sami Hayek line include $14.99 for a dec pillow, $19.99 for a throw/bedspread, $39.99 for the queen sheet set, $59.99 for a comforter set, and $69.99 for coverlet set.

DwellStudio for Target was another modern all-cotton program, with $49.99 queen sheet sets augmented by two styles of comforter sets, $89.99 queen; three looks in duvet sets, $79.99 queen; and three dec pillows at $24.99.

DwellStudio also scored its own all-cotton kitchen and table linen endcap, with four patterns of reversible placemats, $3.99, and coordinating napkins, $2.99; plus two patterns each of table runners, $12.99 for 14-inch-by-72-inch; oblong table cloths, $12.99 for 60-inch-by-80-inch; kitchen towels, $4.99; and potholders/over mitts, $5.99.

The Target soft home strategy for winning consumer hearts and minds — and turning store visits into impulse shopping occasions — is to keep its offerings changing and its color and style palettes better defined than other mass players. The are core programs have a commodity feel — but there tends to be a wealth of fresh looks and smartly merchandised surprises.

Two important niche brands in the Target soft home exclusives lineup — beyond the keystone Thomas O'Brien program — are Woolrich and Waverly.

Woolrich is a 250-thread-count program, moderately priced, and with a grouping also offered in the toddler room décor aisle, situated apart from soft home in between consumer electronics and home improvement. Items range from a red-and-black plaid fabric-covered bedside lamp, $34.29, to a Woolrich plush bear. Opposite this boy-friendly showing is a Simply Shabby Chic collection of pastel rose patterned goods for feminine toddlers, including a set of soft letters for wall display that spell out "D-R-E-A-M," $29.99.

The main Waverly line, a 300-thread-count program, features the "better" range of prices, $44.99 for a queen bedskirt, $59.99 for a queen sheet set, and $119.99 for a queen comforter set.

At the shareholder meeting, Steinhafel said that Target is pleased with the chain's current performance. 2007 sales grew 6.5% to $63.4 billion, and diluted EPS was up 3.9% to $3.33.

Steinhafel told HTT, "Shoppers are cherry-picking sale items in home, but they are still buying high-end products."

And while the company in its annual report cited a year-end inventory increase of $525 million, or 8.4%, Steinhafel said he is "very comfortable" with inventory levels at the 1,614-store chain — which plans this year to open 116 new stores (95 net of closings and relocations) along with two new distribution centers.

Steinhafel emphasized that Target does not share the philosophy of Wal-Mart, where the idea of growing inventory at half the rate of sales growth has been an accepted general rule. "We grow inventory in line with sales," he said.

Doug Scovanner, cfo, acknowledged Target is carrying a high-than-ever debt load, but pointed out to HTT that both its long-term notes and short-term commercial paper have achieved the highest ratings. "We worked very hard to achieve that," he said.

During the Q&A portion of the proceedings, annual meeting fixture and individual shareholder Aaron Epstein handed out his own home-baked cookies, with Steinhafel graciously accepting what he called "good cookie karma."

Only two other shareholders spoke — one on a PETA issue regarding pest-control products, another on HDTV item pricing.

Chairman Bob Ulrich briefly spoke to open the meeting, and declared Steinhafel "a Target veteran of nearly 30 years," ideally prepared and primed to take the company forward.

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