Seeking newly frugal shoppers, Target to open 27 new stores on Sunday
Kohl's (KSS), another big discounter, plans to open 55 new stores in 2009. Retail sales may be plummeting -- most big chains announced their February results yesterday and they weren't pretty -- but that's not stopping these companies from trying to seize market share.
Of course, both Target and Kohls are still chasing Wal-Mart (WMT), the world's biggest retail chain and the undisputed king of discount stores, which posted a whopping 5.1 percent increase in same-store sales last month. Meanwhile, sales at Kohl's fell 1.6 percent and Target fell 4.1 percent. Wal-Mart has been more profitable, too.
It's little surprise, then, that Target and Kohl's are also trailing Wal-Mart in the stock market. Over the past year, Wal-Mart's shares have declined just 2.25 percent, despite a souring economy that has sapped consumers' ability to spend. Meanwhile, Kohl's has fallen about 21 percent and Target has dropped just over 50 percent.
Of course, everything is relative. Compared to Wal-Mart, the other discount chains' performance may not look too spectacular. But compared with department stores like Macy's (M), where sales fell 8.5 percent in February and shares are down 71 percent over the last 12 months, or Saks (SKS), which saw its sales wither an astonishing 26 percent last month and has lost more than 80 percent of its market capitalization in the past year, they're superstars.
By expanding now, Target and Kohl's are betting they can benefit from the same "trading down" by shoppers to less expensive stores that's helping Wal-Mart, hurting Macy's and Saks, and bankrupting Fortunoff and Boscov's. One of Target's new stores is even just a few miles from Wal-Mart's hometown of Bentonville, Ark.
And they're not the only ones trying this strategy. Dollar General announced last month that it would open 400 new stores this year. Watch out, Wal-Mart.