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Associated Press Featured Article

September 27, 2010

Target to open first small urban store in Seattle

MINNEAPOLIS (AP) — Target Corp. plans to open its first store in a new, smaller format in Seattle in 2012, with plans to expand to 10 other markets in such cities as San Francisco and Baltimore in the next few years.

"We've never been a cookie–cutter retailer, but we are increasingly realizing that one size doesn't fit all," said John Griffith, executive vice president of property management at Target.

The new store will be about 90,000 square feet. The new urban prototype will range anywhere from 60,000 to 100,000 square feet. A typical Target store ranges in size from 125,000 to 180,000 square feet.

Company officials made the announcement Friday at a rare media conference at Target Field, the Minneapolis ballpark.

Target is no newcomer to cities. It opened its first urban store in Chicago in 1994 and now operates about 150 stores in cities with more than 100,000 people within two miles.

In July, it opened its first store in New York's Manhattan, though the size was in line with the regular stores.

The new format represents Target's new approach to urban markets. Now, as Griffith noted, the company is making the store fit the site, not the "site fit the store." The new prototype will be in essence a mini–Target, offering a broad array of merchandise from fashion to home furnishings but it will focus on daily essentials.

Friday's event featured presentations from a series of executives, including CEO and Chairman Gregg Steinhafel and Chief Financial Officer Doug Scovanner, as well as a slew of merchandising executives who offered details of holiday plans, advertising strategies and other initiatives.

Like many retailers Target faces tough challenges as shoppers deal with unemployment that's still stuck at almost 10 percent

While Target saw revenue rise in the latest quarter, the chain didn't generate enough business this spring to get back to 2008 levels on a per–store basis. But company officials reiterated that they are counting on driving traffic this holiday season and beyond with two key initiatives: a 5 percent discount for its credit card holders which will be rolled out Oct. 17 and heavier emphasis on food.

Company officials said Friday that they have noticed that the expanded food areas have brought shoppers into the store, and they are then shopping across the aisles, picking up fashions and home furnishings.

Steinhafel told journalists during the store tour of a newly remodeled store that Target is seeing an instantaneous increase of 6 percent in total sales; over three years, he expects a 10 percent lift in total sales for the remodeled stores.

In April, Target began rolling out a new format in its existing stores that not only includes the new food concept, which was launched last year, but also better video game displays, more shelf lighting in the beauty department and a revamped shoe and fashion department.

As for the credit offer, Target saw that in its test in Kansas City, Mo., the most loyal shoppers were shopping 50 percent more than they had previously. Both initiatives are expected to add a total of 2 percentage points to revenue at stores open at least a year for the critical fourth quarter.

"This will drive traffic. It's a tough world out there, but we're not sitting around," Scovanner said.

As a way to drive traffic to stores this holiday, Target also announced it would begin carrying six models of Apple (News - Alert) Inc.'s iPad, starting $499, starting Oct. 3.

Target will be the largest retail chain to carry the iPad. Its shares rose $1.20, or 2.2 percent, to $54.97.

The models include 16–, 32–, and 64–gigabyte versions of both the Wi–Fi and Wi–Fi + 3G models.

The company also unveiled some of its holiday ads. Their theme is "Give jolly, save merrily."

Kathee Tesija, executive vice president, said consumers remain cautious and business remains volatile but she believes Target is more prepared this year than last as it has a broader array of options to better fit shopper needs.

She added that Target is monitoring sales closely and it is still taking a cautious approach to inventory.

Target comes into the holiday period with advantages over chief rival Wal–Mart Stores Inc., which has suffered through five straight quarters of declines in revenue at stores open at least a year.

Wal–Mart had benefited at the beginning of the Great Recession as shoppers traded down to cheaper stores, but Wal–Mart's more blue–collar customers have had a harder time making from paycheck to paycheck. Target has benefited from sweeping changes it made in stores and emphasis on low prices in its ad campaigns. Furthermore, its target customers also have more money than Wal–Mart's.

The new clarity on Target's urban strategy comes as Wal–Mart is expected to unveil more details on its urban strategy at its annual analyst meeting in Bentonville, Ark.

Real estate executives say Wal–Mart is looking to aggressively roll out a small format of about 20,000 square feet.

Target generated annual revenue of $65.4 billion in its latest fiscal year, little less than one quarter of Wal–Mart's business. Target operates more than 1,700 stores, including 240 Super Targets.



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