By and  on May 30, 2006

BOSTON — On a recent evening, the hip Los Angeles boutique Intuition arranged giant red lamps and billowing white curtains into a bull's-eye, turning the nightclub Social Hollywood into a replica of Target Stores' logo for the Targét Couture launch party.

The pricey line of studded jeans, quilted leather satchels and $3,000 diamond pendants riffing on the bull's-eye won't be sold in any of the $52.6 billion Minneapolis retailer's stores. It is the idea and exclusive property of Intuition owner Jaye Hersh, who got rare permission to use the logo for free.

The mere existence of Targét Couture — and the starlets partying and being photographed in it — is testament to how much fashion credibility the retailer commands. Through groundbreaking designer partnerships, smartly executed house brands and limited-edition "luxury" offerings, Target has set the pace in mass market apparel.

And it shows in the bottom line. The company, reporting results for the categories for the first time in memory, said apparel and accessories pulled in $11.6 billion, or about 22 percent of sales in fiscal 2005.

However, being the leader invites competitive scrutiny. In the last 18 months, Wal-Mart, J.C. Penney and Kohl's have begun copying Target's best practices and capitalizing on niches — such as urban fashions — the retailer has not focused on. Even Old Navy, a mall-based specialty player, has seen its market share clipped by Target and has been taking copious notes on its rival, said an Old Navy executive who asked not to be identified.

Some research suggests that the competition's moves are beginning to squeeze Target. The big question — one that has already trimmed Target's stock price in recent months — is how Wal-Mart's improving ability to sell more stylish apparel and other high-margin goods might affect its main rival.

Still, some see continued smooth sailing for Target. Goldman Sachs analyst Adrianne Shapira believes the retailer has carved out a "highly differentiated and defensible niche" as the "new accessible department store, combining upscale trends and image with discount-store productivity and growth."

In an April research note, she noted that Wal-Mart's and Target's stock prices historically rise on the same tide. "It is not a zero-sum game," she wrote. "Proprietary data shows both gaining share in home and apparel concurrently."

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