Target Corp. said Monday it has signed a lease to open a 43,000-square-foot small-format store at 112 West 34th Street and Broadway — right in Macy’s backyard.
Scheduled to bow in October, the Herald Square store is Target’s third small-format unit in Manhattan, following launches in Harlem and TriBeCa. The retailer has revealed plans to open other small-format locations in Manhattan, including sites in the East Village, slated to bow in the summer of 2018, and Hell’s Kitchen, expected to launch in 2019. Target is also branching out in Brooklyn, with stores scheduled to open in the Bensonhurst and Midwood sections, in October and 2018, respectively.
Target will pack the West 34th Street store with categories aimed squarely at Macy’s Inc., including apparel, home and an expanded array of beauty with brands such as Pixi, Fig + Yarrow and K-beauty offerings.
Other retailers have chipped away at Macy’s vulnerabilities. Urban Outfitters Inc., which appeals to younger shoppers — an audience that’s eluded Macy’s — in 2014 unveiled its biggest store on Broadway, one block north of the department store. H&M in 2015 unveiled a 65,000-square-foot flagship in Herald Square.
Of course, Macy’s, which saw net income in 2016 plummet 43 percent to $611 million, from $1.07 billion, is not alone in its struggle to be relevant to consumers. Urban Outfitters’ fourth-quarter profits fell 11.8 percent to $64.3 million, or 55 cents a share, on a 1.7 percent decline in sales, to $1.03 billion. H&M reported disappointing 2016 sales and profits.
Target’s small-format stores are a bright spot for the retailer, which had a disappointing holiday, or as chairman and chief executive officer Brian Cornell admitted at the company’s recent meeting for the investment community, “2016 was not our best year.”
Target’s net earnings for the fourth quarter ended Jan. 28 dropped 42.7 percent to $817 million, or $1.45 a diluted share, from $1.4 billion, or $2.32, a year earlier. Sales for the three months declined 4.3 percent to $20.69 billion. That left the company with an earnings drop of 18.6 percent for the full year, to $2.74 billion, on a sales decline of 5.4 percent, to $20.6 billion. Comp-store sales decreased 1.5 percent in the quarter. While digital sales jumped 34 percent jump in the fourth quarter, it wasn’t enough to offset the soft trend in stores.
Cornell at the investment community meeting said the retailer plans to spend $7 billion over the next three years on a capital investment program and sacrifice $1 billion in annual operating profit this year to grow sales faster and capture market share against better-performing rivals such as Wal-Mart Stores Inc. as well as off-pricers such as T.J. Maxx.
In addition to growing its online and digital capabilities, Target is focused on opening small-format stores in dense urban neighborhoods, with New York being a priority market for the company’s growth. Target’s flexible store design allows stores to fit into smaller locations with assortments that are tailored to meet the needs of local consumers.
The 32 small-format stores now operating are a success, according to Cornell, who said the units’ sales per square foot are higher than average. Target is ramping up the rollout with 30 new units this year, including the Herald Square store, with a goal of 100 set for 2020.
The two-level Herald Square location will have two entrances, one on 34th Street and another on 33rd Street. The store will feature modern décor elements, including concrete floors, wood plank walls and ceilings, pendant and LED lighting and elevated merchandise assortment displays.
Apparel and accessories will be highlighted near the 34th Street entrance. There will be apparel for men, women, kids and baby elsewhere in the store. Convenient grab-and-go food and beverages will anchor the 33rd Street entrance with additional grocery items, including a robust, fresh assortment on the store’s lower level. Other categories will include stationery, home items designed for small living spaces, health, gift items and portable tech accessories. A CVS pharmacy and order pickup will be among the services.
“The addition of the Herald Square store location is exciting for Target as we expand our footprint with small-format stores in Manhattan,” said Mark Schindele, senior vice president, properties. “Not only will we be able to serve the thousands of working professionals that travel through Herald Square each day, but we’ll have the opportunity to showcase Target’s exclusive brands and compelling offers for the many tourists from around the world who shop in this vibrant neighborhood in Manhattan.”
“Target’s 34th Street location concludes Empire State Realty Trust’s plans for the successful redevelopment of 90,000 square feet of retail space,” said Thomas P. Durels, executive vice president and director of leasing and operations for ESRT. “Target joins Sephora and Foot Locker on the 34th Street retail corridor, which spans from the Empire State Building to Seventh Avenue. We’ re delighted to partner with Target and deliver once again to ESRT shareholders the bottom line results of our embedded growth.”
Another Macy’s competitor that opened a store in the neighborhood is J.C. Penney Co. Inc., which operates a store in the Manhattan Mall on 32nd Street.
Cornell on Monday revealed at the ShopTalk conference in Las Vegas details of the first fully reimagined Target, set to open in a Houston suburb. The new design will provide a blueprint for the 500 reimagined stores planned for 2018 and 2019. The design features glazed, large glass windows, stenciled concrete floors and interesting lighting. Like the Herald Square small-format store, the new design has two entrances, each with a different shopper in mind: the aspirational consumer with inspiring displays of exclusive brands, and for the time-pressed, easy pickup of online orders and groceries. Products will be cross merchandised with department store-style tables, fixtures and curved, more circular center aisles with displays to engage customers.