Target is focusing on "strategic growth" in 2010. This is how public relations puts a positive spin on an otherwise negative issue. In fact, Target has slowed new store growth and is looking to existing stores to push through to next year when the economy may improve.
The retailer held a conference call this morning to discuss plans. Product suppliers have been buzzing for months now that Target was shutting down store growth for next year and today, managements announced it would open no more than 10 new locations in 2010. Most of those have likely been in the works for some time and difficult to table without substantial penalties.
Instead, Target plans to spend about $1 billion to renovate some 340 stores. The choice to be prudent in the face of a bad economy is par for the course at Target Corp., a very conservative company even during flush times.
Target hasn't fared as well as its direct competition during the recession. Walmart always benefits during bad times when budgets are tighter and savings more critical to consumers. Target spent so much time and money building the "expect more" portion of its slogan that the "pay less" part is often lost on shoppers. Even as Target comes much closer to matching Walmart prices than ever before.
Economic recessions provide loads of opportunity for retailers to woo new customers, invest and expand in a weak real estate market, and knock of weaker competition. Chains that don't fold during bad times use recessions to set up for better positioning when the economy recovers.
Walmart is growing stores, implementing green initiatives to lower operational expenses and expanding Internationally. Kmart is winning by promoting layaway and aggressively rolling out sales nearly every week. Target's plan to renovate 340 of its 1,744 stores and to test a smaller store concept suitable for urban areas doesn't belie a retailer aggressively setting up for the future. A conservative and prudent one perhaps, but it will be interesting to see how Target fares against its competition this time next year.
Take the first steps to building your portfolio.View Course »