MINNEAPOLIS — Target Corp. here said it planning more market-wide promotions of its grocery offering as it builds density with its P-fresh remodels, the company said last week in a conference call with analysts discussing third-quarter results.
“As we add more and more stores, when we get market density we're able to market more broadly to the market rather than just geo-targeting the marketing around the stores that are opening,” said Gregg Steinhafel, chairman, president and chief executive officer, Target Corp., noting that the company was “continuing to see good results” in the second years of the P-fresh rollout. “So now that we have good density, you're going to see more broad marketing campaigns market by market.”
The company remodeled 133 stores during the third quarter, which ended Oct. 29, leaving it with 875 total Target general-merchandise stores that have an expanded food offering, including fresh food. The expanded sections include a combination of national and store brands — the natural and organic Archer Farms line and the price-leading Market Pantry — as well as pre-packed meats, baked goods and perishables in an open-market-style layout.
“Three years ago, this format was only a concept we were testing in two Minnesota stores,” Steinhafel noted. “And in a very short timeframe, it has become our core format, incorporating a more relevant assortment in a completely transformed environment that's visually compelling and easy to shop.”
Deborah Weinswig, an analyst with Citigroup, New York, noted that the P-fresh remodels, along with the company's 5% discount REDcard rewards program, have been driving traffic at Target while other retailers have seen declines.
“Across the chain, Target has experienced consistently strong sales in food, driven primarily by its P-fresh expanded food format,” she said, noting that the new format is now in 57.8% of Target's discount-store locations. “Sales were also strong in beauty, health care, and household essentials, as customers have responded favorably to Target's low prices and one-stop shopping environment.”
Target reported a 3.7% increase in net income for the third quarter, to $555 million, on a sales increase of 5.4% to $16.1 billion. Comp-store sales were up 4.3%. Through three quarters, Target said net income was up 3.4%, to $1.95 billion, on a sales gain of 4.4% to $47.53 billion.
“Target's customer research continues to reflect the impact of a slow and uneven economic recovery within the different income groups,” Weinswig noted. “High-income consumers are shopping more often and are spending more at Target, while the vast majority of consumers are cutting trips and spending less.”
