Target Promises More Deals, Fewer New Stores

The company, which operates 1,685 stores in most states including, just this month, two in Alaska, will pare down average new store openings from about 100 a year to a net 70 for 2009. In comparison, the retailer opened 118 new stores in 2007 and has opened 104 this year, including 45 stores on Oct. 12. The firm still plans to enter the Hawaii market next year. "We've chosen to delay construction on some projects, such as where our co-tenants' development plans have stalled, or where updated site specific sales estimates no longer justify the investment, at least in the near term," said a company development official at the meeting. "We'd prefer to have new store growth, but by thoughtfully executing this strategy we think we can meet our fiduciary relationships."

The red-bullseye-logo chain has struggled against competitors Wal-Mart and Costco, partly because Target is known, with a tongue-in-cheek emphasis on the "French" pronunciation, for having higher quality items, products that are proving harder to move off the shelves. Where other competitors posted gains, Target had a 3% same-store loss in the second quarter. To turn around this trend, the company plans on offering more basic items, such as perishable food. "We want to show the customer that we're a one-stop shop," the official said. The firm is also going to launch a massive marketing campaign, to ramp up right before Christmas, that emphasizes bargains, including pitch phrases that include the word "less."

Analysts have been concerned about the company's credit card receivables and write-downs. The executives pledged that the company is going to be more stringent about who gets a Target credit card or a credit limit increase, and to crack down on delinquencies. However, the issue may take care of itself, as the company noted that card use is way down.

Other savings methods are being tried, said CEO Gregg Steinhafel, such as sustainable building design and having about 1,800 employees in India for back-room operations. "We're not happy with the current pace of sales," Steinhafel said during the meeting. "We are experiencing one of the most challenging economic environments most of us have ever seen. With these guardrails and a strong team in place, we will continue to fuel top-line growth and shareholder value."