Looking ahead to ‘09

Not that it will do Target any good during the fourth quarter, but eventually the company is positioned to benefit from the demise of operators such as Linens ‘N Things, Circuit City and its former subsidiary, Mervyn’s.

Linen’s ‘N Things and Mervyn’s are conducting going out of business sales while Circuit City is liquidating merchandise at 155 stores it plans to close that will leave it with 566 stores. Heavy markdowns will attract customers and siphon off sales that might otherwise have occurred at full margin in the months ahead, presenting Target with another holiday headwind it hardly needs in an already challenging competitive environment.

However, Target along with other operators such as Wal-Mart, Bed, Bath and Beyond and Best Buy, are well positioned to withstand an economic downturn and emerge even stronger in the years ahead, as the failure of weaker operators removes retail capacity from the marketplace.