He makes it sound so simple
Target ended last year with sales of $67.4 billion and earnings per share of $4, but company chairman, president and CEO Gregg Steinhafel believes sales will hit $100 billion and earnings will double to $8 a share within six or seven years.
While those sound like some audacious goals, especially given current economic headwinds, you would never know it from the matter-of-fact manner in which Steinhafel spelled out the key initiatives that will drive those results when he presided over the company annual meeting of shareholders last week at a soon-to-open store in downtown Pittsburgh.
The venue was a fitting one given that a key element of Target’s ability to grow involves tapping into the consumer spending power that resides in urban markets with smaller format stores known at City Target. While the Pittsburgh store where the meeting was held is a conventional discount store with an expanded fresh area, the first City Targets are scheduled to open next year in Los Angeles, San Francisco, Chicago and Seattle.
Other elements of the growth plan detailed by Steinhafel during the one hour meeting included a continuation of the ambitious store remodeling program known as PFresh, entry into Canada, increased penetration of the 5% REDcard Rewards program that launched last fall and the upcoming relaunch of Target.com this fall.
“As we progress through this recovery, we continue to focus on what matters most to our guests; a highly competitive value proposition, an unbeatable combination of national and owned brands, a continuous pipeline of new merchandise that surprises and delights and a consistently superior shopping experience, both in our stores and on line,” Steinhafel said. “This differentiated combination delivered with disciplined execution on in-stocks and thoughtful expense control is s key to profitable market share growth and sustaining our strong results.”
Most recently, the key driver of those results has been the rollout of the PFresh format, which involves adding fresh food to the company’s traditional discount stores, expanding the offering of consumables and upgrading product assortments and presentations in such departments as electronics, shoes and housewares. Target remodeled 341 stores last year and now has 462 stores in the PFresh format with another 350 units due to be remodeled this year. The conversions are helping the company attract new customers while getting existing customers to shop stores more regularly.
In addition to those remodels, Target added its new rewards program in October which offers shoppers a 5% discount and according to Steinhafel, enables the company to deepen its relationship with its best customers. In a similar vein, Steinhafel said the company will achieve a much deeper level of customer engagement when its e-commerce site relaunches later this year along with some industry leading mobile applications.
Longer term, the entry into Canada with the reopening of the recently acquired Zellers stores in 2013 will allow the company to establish an immediate presence with 100 to 150 stores. Canadians already know Target quite well as research by the company shows 70% of those surveyed are already familiar with Target while another 11% have already shopped its stores.