Target making progress in food 'reinvention'

by Monica Watrous
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Target healthy options, better for you aisle
Target has updated its food assortment to align with local preferences and highlight health and wellness.

MINNEAPOLIS — Target Corp. in April took an important step in “the reinvention of our grocery business,” said Brian Cornell, chairman and chief executive officer of the Minneapolis-based retailer. The company updated its food assortment to align with local preferences and highlight health and wellness.

Brian Cornell, Target
Brian Cornell, chairman and c.e.o. of Target

“In total, we added about 1,000 new items with this reset, including 55 new better-for-you brands across 25 categories, and we’ve incorporated our Simply Balanced brand into an additional 30 categories,” Mr. Cornell said during a May 18 earnings call with financial analysts. “Following the reset, we received very positive guest feedback, and the subsequent results have been better than expected.”

The reset, however, had a negative short-term impact on Target’s grocery performance. Comparable sales for the segment declined slightly from the year-ago quarter, reflecting an increase in perishables that was offset by a decline in center-store grocery.

“Despite the disruption, this effort better positions us for success over the longer term, as we’ve implemented changes to assortment, presentation, and category adjacencies,” Mr. Cornell said. “…as we’ve made the changes, the response we’re seeing from the guest is very encouraging. They’re recognizing the new assortment, the new brands, more local items, the fact that we have more organic and gluten-free items on our shelves. And in many of these categories — like the significant change we made in bars — we’re seeing very strong sales results coming out of the reset.

Target Simply Balanced brand
During the quarter, Target incorporated its Simply Balanced brand into an additional 30 categories.

“So, it was an investment we had to make, in both labor and in disruption, to make sure we continue to move forward in the reinvention of food. So, short term, it had a meaningful impact on our food sales. But we certainly expect to see the recovery over the balance of this year as we provide a more relevant assortment to our Target grocery shopper.”

Net earnings for the first quarter ended April 30 were $632 million, equal to $1.06 per share on the common stock, down slightly from $635 million, or 99c per share, in the prior-year period. Sales declined 5.4% to $16,196 million from year-ago sales of $17,119 million. The decline reflected the negative impact of Target’s sale of its pharmacy and clinic businesses.

“As we look ahead, we’re approaching our business with appropriate caution, as sales trends at Target and many of our key competitors weakened and became more volatile in the first quarter,” Mr. Cornell said. “We’ll continue to work to enhance our food offering, to become more fresh and local, with more natural and clean label offerings.” 
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