Cooler but still well above normal this week

MPR News helps you turn down the noise and build shared understanding. Turn up your support for this public resource and keep trusted journalism accessible to all. 

Turn Up Your Support


      MINNEAPOLIS (AP) - Minneapolis-based Target Corp. plans to
remodel about 400 of its general merchandise stores across the
nation in 2011, building upon the discounter's latest strategy to
bulk up its grocery offerings.


      That's on top of the 350 general merchandise stores in the
nation that Target remodeled last year in rolling out its "P
Fresh" concept, which typically increased its grocery offerings by
40 percent.


      At the same time, Target, which has about 1,750 stores in the
nation, has scaled back new-store construction. The company was to
open about a dozen new stores last year and anticipates opening 21
new stores in 2011, including one SuperTarget.


      Target has about 50 stores in the Twin Cities area, including 23
SuperTargets and 27 general merchandise stores. The company
remodeled most of its Twin Cities-area general merchandise stores
in 2010, bringing to an end a two-year process in carrying out the
work in this market, Target spokeswoman Amy Reilly.


      Minneapolis-based Ryan Cos., whose business ties with Target go
back 60 years, has headed up a significant number of the
store-remodeling projects. In 2010, Ryan was the general contractor
on 31 Target remodeling projects across the nation, including eight
in the Twin Cities, according to a Ryan representative.


      This year, Ryan Cos. expects to oversee remodeling of 29 Target
general merchandise stores, including three in Minnesota (one each
in Virginia, Brainerd and Moorhead).


      A key challenge for Ryan Cos. is to do the work with as little
disruption to shoppers as possible, because Target keeps its stores
open during the renovation. A Ryan official said company
construction crews undertake the noisy work during late night hours
and the lighter, quieter work during the main shopping hours.


      The cost to remodel each Target store averages from $2 million
to $4 million and takes about 15 weeks to complete.


      Industry observers have said that Target's focusing of its
capital spending mostly on grocery expansion makes sense because it
can remodel several general merchandise stores for the same price
as building a SuperTarget.


      In earmarking about $2 billion on capital renovation for the
store remodeling over two years, Target is hoping for increased
customer traffic, more frequent shopper visits and bigger basket
purchases per visit, Reilly said.


      So far, early results are encouraging: Target's same-store sales
in stores with the expanded food offerings are up 6 percent to 10
percent, Reilly said. That range includes the boost Target is
getting from a new reward program the company launched this past
fall, she said. The reward program gives Target debit and credit
card holders a 5 percent discount on purchases.


      "Specifically, the 5 percent program is expected to add about
one percentage point to same-store sales in Q4 and between 1 and 2
percent to same-store sales in 2011," according to a recent Value
Expectations report from the Chicago-based Applied Finance Group.


      Meanwhile, Target is also gaining a bigger piece of the Twin
Cities' grocery pie. With its P Fresh initiative and several
SuperTarget stores, which have full-scale grocery departments, the
company now commands more than 10 percent of the market and is
probably No. 2 behind leader Cub Foods, said David Livingston, a
grocery analyst in Waukesha, Wis. (Livingston estimates Cub has
about 22 percent of the Twin Cities' grocery market, with Target's
ranking probably second now only to market leader Cub Foods.)


      By expanding its array of groceries to about 34 sides of the
aisles from the previous eight to 12, Target has strengthened its
standing as a "one-stop shop" for consumers, Reilly said.


      John Dean, a Twin Cities grocery analyst, said Target's P Fresh
conversions now give the retailer the space of about a
30,000-square-foot grocery store within the confines of its typical
general merchandise store, which is about 126,000 square feet.

      "It (the P Fresh program) makes it more convenient," Reilly
said, adding that shoppers can now get most of their groceries at a
regular Target store.


      Livingston said Target's P Fresh initiative has raised its
profile with shoppers as a go-to place for groceries. P Fresh
includes fresh produce, meats, deli, dairy, frozen foods and dry
staples at its general merchandise stores.


      "They (Target) are getting stronger on price reputation,"
Livingston said. "They are closer to being on par with Wal-Mart
with pricing," he added, noting that Target's credit and debit
card reward program has made the price of its groceries more
competitive.


      Target's gains in grocery sales in the metro area are coming at
a time when sales in that sector are flat but competition keeps on
rising, said Dave Brennan, co-director of the Institute for
Retailing Excellence at the University of St. Thomas in St. Paul.


      Dean agrees. The gains made by Target and rival Wal-Mart, which
also has been expanding grocery sections in its regular merchandise
store, are coming at the expense of traditional and upscale
grocers. Dollar stores also have joined the fray, with about 25
percent of their sales now coming from grocery products, Dean said.


      Target initially tested P Fresh in a few stores in late 2008 and
then implemented the program at 35 stores in the Philadelphia
market in fall 2009 before rolling out the initiative across the
nation this year.


      Meanwhile, Target has used the P Fresh remodeling as a chance to
update a few other departments, including beauty, home, electronics
and shoes. Changes include the installation of LED lighting, as
well as lowered shelves and widened aisles, Reilly said. For the
most part, Target has improved design efficiency rather than
downsized any departments, she said.


      But whether any departments get downsized "varies from store to
store" and market demands, Reilly said.

Gallery

Target disappointed with December sales

Business and Economic News

Minneapolis-based Target Corp. plans to
remodel about 400 of its general merchandise stores across the
nation in 2011, building upon the discounter's latest strategy to
bulk up its grocery offerings.

Target to expand its grocery offerings

Go Deeper.

Like this?

News you can use in your inbox