Target Talks Growth, Groceries and Gay Pride at Annual Meeting

Target Grocery Stores
Target Grocery Stores

Target (TGT) will further penetrate America's cities, roll out full grocery departments to more stores, invest in its REDcard savings rewards programs, and nurture its trendy-discounter edge with hip new merchandising programs like the Shops at Target, its executives told investors this week.

At the company's annual meeting, the management team also addressed shareholder complaints; among them, that Target was taking sides in the "culture wars" by selling gay pride T-shirts.

Although a "slow and uneven economic recovery" has challenged low- and moderate-income shoppers, the cheap-chic discounter, which celebrated its 50th anniversary last month, generated "the largest comp-store sales increase in more than six years" during the first quarter, CEO Gregg Steinhafel told shareholders. And its 3% comp-store sales growth in fiscal 2011 was its "strongest annual performance since 2007," he said.

Target Gay Pride
Target Gay Pride

The $69 billion chain has set its sights on growing to $100 billion in sales by 2017, and it's evolving on several tracks to reach that goal:

  • Target is opening 20 to 25 new stores this year and expanding grocery departments to more units. In March, Target completed the remodels of 100 stores, bringing to 900 the number of Target stores currently offer the expanded food department, which includes fresh produce, fresh packaged meat and pre-packaged baked goods, as well as dry and frozen offerings. The retailer expects to remodel about 200 more stores this year with the fresh food layout.

  • The retailer is also counting on converting more shoppers to Target REDcard holders. The card offers users a 5% discount on all purchases. "This year, penetration [of cardholders] jumped to 11.6% ... mostly coming from debit-card holders, which increased spending with us 50% once they received their cards," Steinhafel said.

  • Target is wooing urban shoppers with the expansion of its CityTarget format to cities such as Los Angeles, San Francisco and Seattle.

  • And it's taking its brand overseas for the first time with the first Target Canada next spring.

  • Beyond store expansion, the company will continue to put the Tar-zhay in Target, building on its trendy, proprietary designer partnerships, such as the Missoni fashion line -- demand for which crashed its websitelast year.

The Shops at Target, for one, which launched last month, reflects the company's partnership with independent specialty stores to offer affordable versions of those boutiques' products.

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The series of revolving shops -- one if Target's biggest merchandising programs in years -- currently includes five chosen for their uniqueness, design-acumen or tony sheen -- from The Webster, a Miami-based boutique that sells luxury apparel, footwear and jewelry, to Boston's Polka Dog Barkery, a canine accessories shop. A new set of featured shops will take their place in September.

Today, Target's "10 owned and exclusive brands generate $1 billion each, and are a reason why guests shop at Target," Steinhafel said.

But the retailer will continue to employ "thoughtful risk taking" to grow its business, Steinhafel said. It's an approach one shareholder took issue with at the meeting, accusing the chain of joining the "culture wars" by selling gay pride T-shirts. The shirts raised money for a group working to defeat a gay marriage ban in Minnesota.

Target would better serve the interest of shareholders by "not getting involved in the hot button, cultural issues," the shareholder said.

%Gallery-153999%Executives disagreed, and Steinhafel fired back: "I can assure you that this board has our shareholders in mind... [You're taking] an unfair shot at a team that works so hard to deliver a great guest [shopper] experience."

Kathee Tesija, executive vice president of merchandising, said Target was just giving shoppers what they wanted. "We were asked by our team members and our guests to carry pride merchandise. This year, we decided to carry a limited assortment online [of gay pride T-shirts] only to address that request."

Target's website now says those T-shirts, marketed to recognize June as Gay Pride Month, had sold out, and that the inventory would not be replenished.

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