Target Sees Gains from P-Fresh Additions

ELLIOT ZWIEBACH

PHILADELPHIA — Expanded food assortments at Target stores have lifted shopper frequency “as never before,” Doug Scovanner, executive vice president and chief financial officer, told an investors conference here Thursday.

In remodeled stores with the new, expanded P-fresh food departments, sales and traffic are up an average of 6% 12 months after the remodelings, he said, which translates into 1,000 extra trips per store per week, or gains of $4.5 million at minimum per year.

Minneapolis-based Target said it expects to remodel approximately 340 stores this year, which could boost comparable sales by 1%, Scovanner said in his presentation. At stores with the expanded food sections, gross margins are running at a rate of 18% of sales, he noted, while EBITDA margins increase about 7% the first year, rising about 1.5% a year in the second and third years to 10%.

According to Scovanner, remodeling a store that's between 5 and 8 years old that has never been remodeled might cost $3 million, with 60% of the cost going to merchandising innovations like P-fresh.

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