Setting the bar high

The best comp performance in three years is how Target chairman, president and CEO Gregg Steinhafel described the company’s fourth-quarter outlook during last week’s third quarter earnings call. The pronouncement, while it appears bold, is hardly in nosebleed territory and implies that Target will produce at least a 2.8% increase. That is the comp the company generated during the first quarter of 2010. However, the company’s guidance range of 2% to 4% leaves some room on the downside. Steinhafel’s reason for optimism stems from several highly publicized initiatives that are producing results for the company even as the core business responds favorably to a somewhat improved consumer climate and sales in higher margin categories.

“Our store base has never been in better condition and we’ve got two game changing strategies, PFresh and 5% Rewards, that will drive our performance in the fourth quarter and for years to come,” Steinhafel said. “I’m more confident than ever that these strategies will deliver incremental sales while maintaining our current healthy retail operating margin.”

The rewards program launched in mid-October is being enthusiastically embraced by customers, according to Steinhafel, resulting in a benefit to customer traffic and average transaction sizes. Also benefitting customer traffic is the fact that Target now operates 462 of its 1,752 stores in the PFresh format whose most notable features are the addition of fresh food and an expanded offering of dry grocery and consumable products. Next year, another 400 PFresh units will join the store base as Target opens 20 new stores and embarks on an ambitious remodeling program involving 380 units.