Your local Target store could look pretty different as early as April, when the first stores targeted in a $1 billion remodeling project get their makeovers. Expect changes in the beauty, home, electronics and shoe departments. Also on tap are more fancy designers and lots of groceries.Target Corp. (TGT) announced its $1 billion renovation program at an investors meeting in Philadelphia. The move is expected to drive its planning for the next decade. It includes tweaking existing stores, opening smaller stores in urban areas and opening stores abroad.
Only 10 New Stores In 2010
Store openings in the U.S. will be slow -- only 10 new stores in 2010 -- after factoring in store closings. But the domestic stores will get a larger selection of grocery items and new home, electronics, shoe, beauty and video-game departments. The changes will begin at 343 stores this year. If they prove successful, a similar number could be reset annually to eventually redo all of Target's existing stores, said Target CEO Gregg Steinhafel.
The newly renovated stores will have nearly 5,000 square feet of grocery space, including more fresh items. The stores will make room by eliminating some of less successful items in other departments and reducing stock keeping units there, said Steinhafel. Overall, the focus on the low-margin grocery items will drag down margins, but it will be offset by sales increases that could reach 10% over the first three years after the store remodel, said CFO Doug Scovanner.
Other departments will also get face lifts, including lower shelves, better lighting and bolder signage to make them more customer-friendly, said Kathee Tesija, chief merchandising officer.
Destination Beauty To Expand
Target has been testing a revamped department called Destination Beauty with improved lighting, testers and other shopping tools in 40 stores. It will be rolled out to all stores this year, as well as a better-organized home department with improved packaging that gives shoppers more access to touch the products.
A remodeled shoe department will begin rolling out in the fall, Tesija said. In the remodeled electronics department, Target will roll out Bullseye Mobile, a self-serve cellphone sales area it had piloted in 100 stores last October. And this spring, it will launch a new video-game department with displays organized by type of game and video game trial stations.
The cheap-chic discounter will also continue its tradition of partnering with designers and celebrities. It just launched a line of cookware and gourmet food products with chef Giada de Laurentiis. And more product launches are coming in March. The Food Network star will appear as a Target spokesperson, promoting both her line and Target's fresh groceries, said Tesija.
Bonjour, Jean Paul Gaultier
Other lines coming in March include a 50-piece fashion collection from designer Jean Paul Gaultier, priced at $18 to $200, which will be in limited distribution for five weeks at 400 stores and online at Target.com. There's also a line of 300 home and apparel products from fabric house Liberty of London, for nine weeks starting Mar. 14. In April, it will launch limited-time collections of women's fashions from designer Zac Posen, shoes from Cynthia Vincent and hats by Eugenia Kim.
The changes "demonstrate that Target's merchandise Mojo is bigger and better than ever," said Tesija.
Despite adjusting to the recession by focusing on low prices and necessities such food, Target is not ready to surrender its position in discretionary departments such as apparel and home, said Steinhafel.
'Reached The Tipping Point'
"I think we're reached the tipping point in terms of taking a very defensive posture in the discretionary categories," he said. "When we're able to bring all these to all of our stores, as well as adding food, we think that's going to be a home run."
But Target is also looking at new markets, such as urban areas where it hasn't been able to get more locations because of real estate constraints. So the retailer also has plans to test a new concept for dense urban markets featuring smaller stores -- about 60,000 to 100,000 square feet -- with a reduced selection of products. Steinhafel said the initial test will be in three existing Target markets and will borrow from what Target has learned opening in urban markets such as Brooklyn, Chicago and Minneapolis.
Meanwhile, the company plans to expand stores outside the U.S. Management estimates international growth will begin in the next three to five years just over the border in Canada, Mexico or other parts of Latin America. Steinhafel said the company has learned some lessons about merchandising and other challenges of long-distance management from store openings in Alaska and Hawaii.
Scovanner said the company will give more details and a full forecast for the year when it reports its fiscal year 2009 results in February.
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