retail news in context, analysis with attitude

CNBC has a piece about Target's continuing problems, which were reflected yesterday in Q2 results that showed a 2.2 percent drop in customer traffic, which CFO Cathy Smith said was the company's "number one challenge." (Sales are a strong number two - they were down more than seven percent.)

The core issue facing Target is the difficult it is having in balancing the two sides of its "expect more, pay less" value equation. Not only is it having trouble attracting customers into the stores to shop in its grocery and pharmacy departments, but there also was a double-digit drop in traffic and sales in its electronics departments. And, CNBC writes, "The company once again struggled to bring in shoppers for smaller "fill-in" trips during the quarter, a trend it called out in the prior three-month period."

The story notes that "changes in its grocery business, including having more products in stock, upping its organics selection and keeping food fresher, have yet to materialize into sales, management said. Target has been testing changes to its food assortment and presentation in a set of California stores. Results have been promising, but it's too early to know how these changes would play out across the broader chain, said CEO Brian Cornell." At the same time, analysts are saying that "Target is not moving fast enough in deploying these types of changes."
KC's View:
It seems to me that one of the things that Target needs to continue to do is move forward with expansion of its small-store/urban concept, which tends to be more productive than larger stores. I've always liked this concept, though I do have some concerns about them being a little too vanilla and cookie-cutter, with not enough local emphasis.

On National Public Radio (NPR), Marketplace reported that Target is trying to distinguish and differentiate its grocery offering by "strengthening its three private-label food brands." Amanda Irish, vice president of Owned Brand Food and Essentials for Target, tells Marketplace that "her team is trying to offer private-label products that are special — not just knock-offs of the name brands." I also agree with that - it is a pretty good rule of thumb to focus on the differentiated products that other people don't have rather than the items that everybody sells. (Though you still have to get people into the stores.)

Coverage of Target's results yesterday also noted that it will be taking on a new $20 million expense in coming months - the installation, chain-wide (in stores that do not already have one), of single-stall bathrooms that will reside next to traditional male and female restrooms. These are being put in as a way of assuaging customers who were concerned about Target's announced policy of allowing customers to use restrooms that correspond to their gender identities. This was a policy designed to be inclusive, but the company did get some pushback in certain markets, which led it to take on the new expense. Target said that it was difficult to ascertain if the pushback on its inclusivity policy hurt it in terms of customer traffic and sales.