MINNEAPOLIS — Target, riding high on a stellar first quarter, highlighted successes against rival Wal-Mart as chairman and chief executive officer Robert Ulrich said at its annual shareholders meeting Wednesday that the company has the potential to more than double the number of stores in the U.S. over the next decade.
Ulrich said during the session at the Minneapolis Art Institute, which lasted about 15 minutes, that he was bullish on growth prospects and possibly tripling sales volume by 2015. However, he sought to quash speculation about international expansion.
"We have a great deal of growth in our future and no interest in expanding overseas" in the near-term, he said.
The retailer plans to grow 8 to 10 percent annually from its existing 1,330 stores, with a goal of 2,000 stores by 2010. It may step up openings this year if consolidation from the Federated-May and Sears-Kmart mergers opens up prime real estate.
Chief financial officer Douglas Scovanner said that factoring in analyst consensus of $2.55 to $2.60 earnings per share this fiscal year, Target should end the year with a "somewhat higher P/E ratio than Wal-Mart for the first time in the 11 years I've been with the company."
Transactions were up 2 to 3 percent in stores open at least a year, another high point of the past decade, Scovanner said during a news conference after the meeting.
Wal-Mart has struggled with lagging same-store sales during the past 12 months, citing economic pressures on its customers. The retailer recently missed its quarterly earnings for the second time in its history. In contrast, Target exceeded earnings by 2 cents, posting a 14.4 percent rise in net income to $494 million, or 55 cents, from $432 million, or 47 cents, a year ago. Target shares closed at $52.02 Wednesday, while Wal-Mart shares were near a two-year low, closing at $47.58.
Regarding apparel, president Gregg Steinhafel said the company was "very pleased" with performance, but had no plans to increase floor space because "it's at a level that's appropriate for the revenues it delivers."
Isaac Mizrahi's home collection launch is exceeding expectations, he said. The retailer has also expanded junior apparel brand Mossimo into plus sizes.Target appears to be trying to avoid damage to its reputation such as what has caused Wal-Mart to launch a public relations campaign. The $46.5 billion Minneapolis-based retailer issued its first corporate responsibility report, detailing positions on subjects from unions (like Wal-Mart, Target opposes them) to its plans for reducing greenhouse gas emissions.
"We strive to build on our track record of corporate responsibility," Ulrich said during brief opening remarks. In a letter to shareholders, he called community outreach, in particular the company's support of education and the arts, "integral to our continuing success."
Nevertheless, a small contingent from the Union of Food and Commercial Workers local 789 protested outside, wearing red shirts reading "Target Organizing Project."
Company executives fielded a disproportionate number of questions related to wages, benefits and its position on unions. Target defended its salaries, saying they were competitive with their competitors. A representative from the Central Labor Relations Board, which owns 150,000 Target shares, interrupted the meeting to protest the company's policy of taking shareholder questions only on written cards.
Target is also seeking to widen the gap between itself and Wal-Mart in specific operational areas. The retailer is focused on speed of service, including faster checkouts and quicker help at the jewelry and electronics counters, according to the annual report. Wal-Mart, criticized for slow checkouts and dirty stores, said in April it is working to improve those areas.
Executives also made these points:
SuperTarget will represent 25 percent of the company's growth going forward. It operates 141 of the 175,000-square-foot general merchandise plus food formats.
Food sales and men's wear sales have been strong, while home merchandise sales have lagged overall store sales.
Target continues to test Radio Frequency Identification/Electronic Product Code technology, although vice chairman Jerry Storch said the technology isn't ready to roll out on a large scale.
According to the annual report, target.com continues to flourish. It has been expanded to 70,000 items, and fast-track sourcing practices have been initiated for Red Hot Spot, a popular online "boutique" of trendy items. The retailer can identify and bring to market Red Hot Spot goods in as little as three days.
Gift card sales rose 30 percent to almost $1 billion in 2004, boosted by centralized displays at registers and a broader array of occasion-specific designs, the annual report said.
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