Grocery continues to drive growth at Target

Get used to that headline. Increased sales of food during the coming year are expected to contribute 1.5% to Target’s same-store sales growth as the company continues it aggressive PFresh remodeling program.

Same-store sales in February advanced 1.8%, and the strongest performance came in the grocery category, where comps increased in the low teens while health care, beauty and other household essentials experienced gains in the mid-to-upper single-digit range. Also showing strength was the apparel category where comps increased in the low-to-mid single-digit range.

“Target’s February comparable-store sales were in line with our expectations, as our REDcard Rewards and PFresh remodel programs continue to drive meaningful incremental sales and traffic in our stores,” said Target chairman, president and CEO Gregg Steinhafel.

The gain was respectable and impressive as the increase came on top of a prior year comp of 2.4% and the number of stores in the PFresh concept number about 500 at year end out of a total store base of 1,750 units. Target remodeled 341 stores to the PFresh concept during 2010 and 380 stores are due to be remodeled during the current year, which means by the end of 2011 the company will be well past the halfway mark and close to its goal of completing an entire chain conversion by 2013.

Stores in the PFresh format feature fresh foods and an expanded offering of grocery and consumables products, but during the past year other departments also received an upgrade as part of the process. The addition of food is the biggest change for shoppers and the effect post-PFresh for shoppers is they can satisfy many of the same food shopping needs as they do at a SuperTarget.

PFresh is having a powerful impact on Target’s operations and should continue to do so for the remainder of the year, but that’s not to say that all is right with the company’s business. February results again demonstrated that business conditions remain challenging for many categories. For example, Target reported weakness in such areas as hardlines where comps decreased in the upper single-digit range and comps in the home category, a traditional strength of Target, declined in the low-to-mid single-digit range.

Despite weakness in those categories, the opportunity at least exists to grow sales in those areas as customer traffic continues to grow. Target said more than half of its February same store sales growth was driven by an increase in transactions, continuing a trend that has been evident since a meaningful number of stores in the PFresh format entered the base of stores used in comp calculations.