Deflation to continue at Target

By Cecile B. Corral -- Home Textiles Today, 2/23/2004 8:00:00 AM

Minneapolis — Target whacked retail pricing by $1.5 billion during the past fiscal year, and it expects to see additional price deflation in 2004, executives said during the company's quarterly conference call last week.

"There is virtually no meaningful category across the store that did not experience some rate of price deflation," said Doug Scovanner executive vice president and chief financial officer . Although Target had expected the rate of deflation to slow in 2003, "the reality was that it was every bit as significant as in '02, perhaps even a little more significant," he said. Scovanner added, however, that he does expect the rate of deflation to ease this year.

At the same time, Target will continue to step up its direct import program and has made the conversion of indirect importers to direct importing as one of its key goals for the year.

"The more we can move to direct imports, the more benefits can flow through our financial equation — and ultimately, to our guests," Scovanner said.

Target Stores is going forward with the rollout of a new prototype that, among other things, places a greater emphasis on the home décor area.

Target already has opened a limited number of test stores that customers responded to favorably, the company said. The official rollout comprises 95 new locations, with the first cycle of openings — totaling 25 new units — slated for March and July.

"The (new prototype) stores will offer assortments in which key categories have been expanded or edited to incorporate our guests' preferences," said Gregg Steinhafel, president, Target Stores.

Some of the departments being expanded include: food and consumables, which will have about 50 percent more space than existing Target stores; entertainment-related products – movies, music, books, toys and sporting goods; mother and baby goods; and home décor, a department which Steinhafel said will be given "increased availability."

In addition to new units, Target Stores expects to remodel about 130 units in the coming year, 80 of those to be fully remodeled and the remaining to be updated in specific shopping areas. "We've devised an economic approach to update some existing stores that are not candidates for full remodeling," Steinhafel said.

The chain is also testing its "One Spot" concept, a section of $1 items.