Target's Comeback Plan on Track

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August 10, 2010

Target’s turnaround plan to lure customers back to its stores who switch to lower price discounters during the recession, is working with the help of its high quality store brand lines.

The company’s overall turnaround plan is playing well on Wall Street and among consumers, yielded a 2 percent rise in same-store sales in July, an economically sluggish month overall, according to a Barron’s cover story this week.

Last year, Target reenergized its commitment to its "Expect More, Pay Less" tagline, matching competitors' prices and refocusing on its higher profits private label lines – up & up, Archer Farms and Market Pantry –– which now account for more than 20 percent of all food products sold, up from 18 percent in 2007, according to analysts estimates.

The company also increased gross margins from 30.8 percent a year ago to 31.3 percent, another sign of improvement and effective expense controls, according to the report.

"Consumers do not appear to be returning to their bunker of late 2008 and early 2009," Adrianne Shapira, a retailing analyst at Goldman Sachs, wrote in a recent report, noting that the company has "unique top-line drivers that aren't dependent on a macro recovery," such as PFresh, the roll out of fresh groceries at many of Target’s 1,743 stores.

Some Wall Street analysts, however, are not as bullish on PFresh, citing it as expensive and unlikely to attract the shopper traffic necessary.

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