Target Shelves Rapid Store Expansion to Focus on Remodeling

Target won’t resume rapid-fire store expansion for “a long time” as it focuses on remodeling existing locations, CEO Gregg Steinhafel said in an earnings call. The chain plans to open 10 net new stores this year, down from 60 a year ago and remodel 336, company officials said.

While Target has the capital -- it had $1.5 billion in cash and equivalents as of May 1 -- to expand “much faster,” the chain will tend to its existing locations and develop “more flexible” prototypes, Steinhafel said. Among those will be smaller, 60,000-100,000-square-foot outlets, one of which will open in New York City’s Spanish Harlem in July, company officials said. The average Target store is 125,000 square feet.

There are more than 1,000 “trade areas” in the U.S. that could accommodate a Target store, Steinhafel said. But with “large scale” retail development at “almost zero” in the U.S., Target slowed its pace, he said. Target had 1,740 stores as of May 1.

As part of the remodeling, Target appears to have sped up renovations in the CE department. Earlier this year (CED Jan 22 p4), Target said it would spend $1 billion to enhance CE and videogames layouts at 340 locations this year. But it now expects to have the renovated CE section in all of its U.S. stores by late June. CE Department renovations moved ahead those being done in groceries, beauty and other categories because they are “less disruptive” to store operations, a Target spokesman said. Target also is expected to expanded its Bullseye Mobile Solutions cellphone kiosks it developed with RadioShack to 800 locations from a 100-store test, company officials have said.

The CE facelift includes a new flat-panel TV wall with better viewing angles and displays, company officials said. The videogames section also was overhauled to give the category another 3,000 square feet. Videogames also will be tethered to consoles to allow customers to try out the titles. Consoles and games will be merchandised by brand colors and genre, company officials have said. In the toys department, separate “boutiques” have been created to merchandise movie-related products like videogames, toys and clothing together around a film’s release date, said Kathy Tesija, executive vice president of merchandising. Among the first boutiques were those for Iron Man 2 and Toy Story 3, company officials said.

Target’s Q1 profit rose to $671 million from $522 million as revenue rose to $15.5 billion from $14.8 billion, the company said. Gross profit improved to 31.3 percent from 30.8 percent. Retail sales increased to $15.1 billion from $14.3 billion as same-store sales rose 2.8 percent vs. a 3.7 percent decline a year ago. The retail segment’s earnings before interest, taxes, depreciation and amortization increased to $1.62 billion from $1.43 billion.