Target Slows Pace of PFresh Remodels

MINNEAPOLIS — Target Corp. [3] here said that it would slow the pace of its PFresh remodeling program in 2012, with only 230 stores scheduled to receive the revamp that includes a greatly expanded grocery offering.

That number is down from almost 400 PFresh remodels in 2011, the company said during its fourth-quarter earnings call with investors.

Gregg Steinhafel [4], chairman, president and chief executive officer, explained that the company launched the remodeling effort in its higher-volume stores in urban and suburban locations, and is now moving onto lower-volume stores.

“Over time as we completed and we [fill in] those [high-volume] markets, we believe that this cadence is a more appropriate cadence as we go forward,” he said. “Secondly, we’re working on a lower cost investment on some of these, and so we’re just looking at extending out the program a little bit.”

He said the company “never was really all that specific in terms of how long it was going to take to complete this program. We just feel with everything else that’s going on, it’s the appropriate number for 2012.”

The company said the expansion of its grocery offering is driving sales gains and that early remodels are “meeting expectations” in year two.

“Among need-based categories, grocery continues to lead the way with double-digit comps as we continue to add square footage in our remodeled stores and our general merchandise guests increasingly associate Target with food,” said Kathryn A. Tesija, executive vice president, merchandising.

As previously reported, overall comparable-store sales were up 2.2% in the fourth quarter as the company said it chose not to be overly promotional during the holiday season. The company said net income was down 5.2% to $981 million for the three-month fourth quarter, which ended Jan. 28. For the full year, net income rose 0.3%, to $2.93 billion, on a 3.7% increase in revenues, to $69.9 billion.

Target also said it plans to open 20 to 25 stores in 2012, including 15 to 20 that will be incremental locations, net of relocations and closures.

Included in the new-store plans are five CityTarget stores, which Target said will begin will begin opening in July. Reports indicate the smaller-format stores will debut in New York,  Chicago and Los Angeles.

“While these slightly smaller urban stores will incorporate the Target brand and store experience, we’ll tailor our assortment to meet the needs of the trade area and adapt our operating routines to work in smaller spaces with higher traffic,” Steinhafel explained. “We plan to take time to learn from these stores before we determine the appropriate pace of investment and number of additional City-Target stores we will open over the next few years.”

Target projects about $3.3 billion in capital expenditures in 2012, including about $2.5 billion in U.S. retail — essentially flat with year-ago spending. Cap-ex plans for Canada, where the company is set to begin converting Zellers locations this summer, are projected at $800 million.