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Target Sees Growth Abroad Within the Next 10 Years

Target Stores plans to expand into fast-growing overseas markets such as India and China within a decade, but sees no advantage to being first, chairman and chief executive officer Robert Ulrich said Wednesday.

Target Stores plans to expand into fast-growing overseas markets such as India and China within a decade, but sees no advantage to being first, chairman and chief executive officer Robert Ulrich said Wednesday.

Speaking at a presentation to financial analysts in Minneapolis, Ulrich said “it makes sense” to enter major areas like India or China “five to 10 years down the road, when [the marketplace] will be more affluent and better educated, and will be more in synch with our strategy.”

Target, which now has about 1,500 U.S. stores and $59 billion in annual revenue, expects to operate 2,000 stores that generate $100 billion by 2011, Ulrich said, adding that having the Minneapolis retailer’s entire management team focused on the U.S. had been a “strategic advantage.”

Ulrich said Target had considered expanding into Canada for about a decade, but probably would not move unless a significant block of stores became available.

Target’s strong comparable sales growth relative to rival Wal-Mart Stores Inc., and its ability to convince upscale consumers to purchase high-margin apparel, decor and electronics have made Target a Wall Street favorite. Wal-Mart, the world’s largest retailer, has struggled to persuade customers to buy higher-priced apparel.

Target’s March sales in stores open at least a year rose 12 percent, in line with analysts’ expectations and driven by an early Easter holiday. However, the retailer expects April comps to be off 2 percent to 4 percent because of the loss of the holiday in the reporting period.

Apparel and soft goods account for 22 percent of annual sales, or about $13 billion, chief financial officer Douglas Scovanner said.

Target has been growing high-margin sales of apparel and electronics at roughly 4 percent per year, he said. Commodity sales have been gaining at twice that rate, leading some analysts to question Target executives about how they intend to maintain overall gross margin rate.

“Whether it’s ladies’ apparel or intimate apparel, we’re going to push the envelope slowly but surely to bring our customer along into better goods,” company president Gregg Steinhafel said.

The retailer will launch an exclusive handbag collection by designer Devi Kroell this year. In May, Paco Rabanne designer Patrick Robinson will be Go International’s featured designer. Target also showed the debut of a television spot featuring Robinson talking about his Greek-inspired collection.

This story first appeared in the April 12, 2007 issue of WWD.  Subscribe Today.

Target recently shaved seven weeks off its apparel lead time as part of an overhaul of its sourcing, merchandising and design processes. The company expects similar benefits from applying these new processes to its men’s, kids’ and intimate apparel programs during the coming months.