Target CFO: We're Sitting Out the Low-Price Wars This Holiday Season

Target Store shopping
Target Store shopping

Don't expect crazy markdown sales at Target (TGT) when you shop for gifts this holiday.

The trendy discounter will opt out of the price wars during the biggest shopping season of the year. And if that means it loses sales to rival chains, that's OK by Target.

"We're not interested in driving sales for the sake of sales, [so] you might see us lag competitors in terms of comp-store sales increases," said John Mulligan, executive vice president and chief financial officer of Target, during Goldman Sachs' Global Retailing Conference on Wednesday.

Instead, Target is playing up the first half of its "expect more, pay less," promise this gift-giving season, and its raison d'etre: upscale and trendy exclusive collections, most notably a new fashion and home line it co-created with tony Neiman Marcus department stores.

When it came time to plot its strategy for the holiday, a make-or-break period for retailers, Target management pondered, "How do we compete effectively our way?" Mulligan said. "The Neiman Marcus [co-branded collection] brings something that's about fashion and differentiation, which is how we compete in the marketplace, and not focus so much on the lowest price of a 44-inch television."

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But even with that buzz-generating product line, Target's business for the remainder of the year will be challenging, he said.

Indeed, sales for the rest of 2012 will trail those from the first half of the year, due in part "to the ultra competitive nature of that [holiday] season, as it relates to driving sales," Mulligan said.

The macroeconomic picture is also dimming the chain's outlook.

Factors ranging from a "very cautious consumer" to the impending fiscal cliff and the presidential election "creates [even] more uncertainty, and uncertainty we don't think is good for retailers," he said.

In turn, the chain has planned its inventory levels conservatively in case shoppers are hesitant to buy. "We have not built in a lot of good news about the economy" into the business plan, Mulligan said.

"We're seeing what the consumer does. Our business will be planned appropriately, given what's going on in the world."


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