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Target Canada rollout to be bigger than any annual U.S. rollout to date

2/27/2013

MINNEAPOLIS — Target is planning a rollout in Canada that will be bigger than any single year's worth of its store openings in the United States ever, executives of the company said Wednesday morning in a call with Wall Street analysts to discuss the mass merchandise retailer's fourth-quarter and full-year 2012 results.


The company plans to open its first 24 Canadian stores in April and have a total of 124 stores in Canada opened this year. A smaller but still significant rollout also is planned for the United States, with plans to open 15 to 20 new stores, including three new City Target stores, for a total of 10 to 15 net new stores when accounting for closings, as well as remodeling more than 100 stores. Chairman, president and CEO Gregg Steinhafel said the five existing City Target stores already had experienced "robust" traffic.


"We expect to open many more new stores this year than in any year in our history," Steinhafel said in the call.


Significant investment also is planned for multichannel retail, as EVP and CFO John Mulligan said the company would invest $2.3 billion in the company's U.S. retail segment in 2013, with investments in supply chain and technology — including multichannel — set to equal investments in stores.


Currently, mobile purchases constitute more than 7% of sales, with mobile traffic constituting more than 25% of overall digital traffic, as visits to Target's website accounted for most among mobile users taking advantage of in-store wireless internet. The company also is testing pilot programs in such cities as San Francisco that allow customers to pay online and pick up at the store, or pay at one store and pick up at another.


Another driver of loyalty has been the company's REDcard and Pharmacy Rewards programs, as REDcard members shopped almost two times more per month than nonmembers and spent two and a half times more. Meanwhile, Pharmacy Rewards members were even more valuable, the executives said, shopping 50% more than nonmembers. Customers participating in the REDcard and Pharmacy Rewards programs shopped more often than those participating in just one of those programs, and the company is planning to extend them and find new ways to drive engagement and sales. The REDcard offers 5% savings on purchases made at Target stores and on the company's website, while the Pharmacy Rewards program offers 5% off a day of Target shopping after customers fill five eligible prescriptions.


Overall, the company had sales of $22.4 billion, a 6.8% increase over fourth quarter 2011's $20.9 billion. Sales for fiscal year 2012 were $72 billion, compared with $68.5 billion in 2011. Profits were $961 million for the quarter and nearly $3 billion for the year, with same-store sales of 0.4% for the quarter and 2.7% for the year. The company expects total sales in 2013 to grow 2% and comps to grow 2.7%. The company currently operates 1,778 stores.

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