Even though Americans are entering the all-important holiday season still skittish, Target Corp. doesn’t want to follow the pack with steep markdowns.
The "ultra-competitive nature" of the Black Friday and Christmas shopping crush means that competitors such as Wal-Mart probably will aggressively slash prices to lure consumers, said John J. Mulligan, Target’s chief financial officer, at this week’s Goldman Sachs Global Retailing Conference.
And with good reason: Shoppers are still cautious and disciplined about how they spend, especially with the uncertainty caused by a looming election and fiscal cliff, Mulligan said.
“We think the environment looks a whole lot similar today to what it did six months ago, honestly, to what it looked like a year ago,” he said. “Certainly, for our guests, it looks very similar.”
But that doesn’t mean Target plans to be “focused so much on the lowest price of a 44-inch television.”
“We’ve planned our business pretty conservatively and we’re not interested in driving sales for the sake of sales,” Mulligan said. “So if people are going to do what they did last year and more, you might see us lag competitors again as it relates to comp sales increases.”
Come January, however, Mulligan is betting that Target will be more “appropriately priced” for its customers and will become a more attractive draw at a time when retailers usually experience a slump.
And Target is hoping that its other efforts will make up for its dearth of discounts. Starting Dec. 1, Target's collaboration with Neiman Marcus and 24 top designers such as Carolina Herrera and Oscar de la Renta hits stores. The retailer recently offered exclusive “Hunger Games” merchandise, including a $999 mockingjay pin.
The company is also looking into building out its smaller urban-format stores, known as City Targets.
“If we could get all the land we wanted, could we open up 100, 200?” Mulligan asked. “Sure, maybe, if things go like we think they might.”
The new model will force Target out of its comfort zone with a different supply chain and product mix, he said.
“Segmenting stores has not been a strength for us,” he said. “We're working hard on it.”
Across the industry, retailers posted a 3.6% sales increase in August compared with the same month a year earlier, beating analyst estimates. Mulligan said Wal-Mart and Costco are “performing really well,” but companies such as Best Buy and JCPenney “are struggling right now a little bit.”
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