What is in this article?:
- Target Predicts Higher Comps in Grocery, Strong Q4
- City Target, Former Zeller's
“We think the majority of what we saw in October was cycling over what was by far our largest PFresh remodel program in one cycle last year.”
— John J. Mulligan, EVP and CFO, Target
MINNEAPOLIS — Target Corp. here said it is projecting comparable-store sales increases in the mid- to high-single digits after posting what analysts described as relatively soft sales gains in those categories in October.
“We think the majority of what we saw in October was cycling over what was by far our largest PFresh remodel program in one cycle last year,” said John J. Mulligan, executive vice president and chief financial officer, Target, in a conference call discussing third-quarter results. “As we think about grocery going forward, mid to high comps seem reasonable for us for a run rate as we look ahead here.”
Target has rolled out its PFresh remodels, which include more space allocated to consumables, in 1,130 locations.
The company said its October comparable-store sales were up 2.4%, which was “near the low end” of its expected range, said Gregg Steinhafel, chairman, president and chief executive officer.
Overall third-quarter comps were up 2.9% over results from the year-ago period. The recent third-quarter gains were primarily driven by an increase in the average ticket, the company said, with a 0.5% increase in traffic. The company said the impact of inflation was not significant.
“As expected, comps were strongest in less discretionary categories, with particular strength in food and health and beauty,” said Kathryn Tesija, executive vice president of merchandising.
“Our research with guests indicates they are continuing to shop with discipline, focusing on lists and budgets and occasionally splurging on more discretionary items,” she said. “Notably in the third quarter, we saw an increase in trips focused only on need-based items. This guest feedback corresponds to overall consumer sentiment data showing that while consumers have increased confidence about their near-term prospects and personal finances, they have a high level of uncertainty about the longer term health of the economy and intend to continue saving and paying down debt.”
The company is rolling out several promotional programs for the holiday season, including a design partnership with Neiman Marcus, a holiday price match program, its REDCard loyalty program and other initiatives.
Mark Wiltamuth, an analyst with Morgan Stanley, said he expects Target to adhere to its promotional plan. “While we expect aggressiveness out of Wal-Mart and others, we suspect Target will stick to its planned promotions and may not chase discounting by others.”