Target prepares for next phase of 'grocery evolution'

by Monica Watrous
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Target grocery
Target's grocery segment registered a “small decline” as a result of deflation and a competitive environment.

MINNEAPOLIS — Target Corp. is making “very good progress” in efforts to improve its grocery business but has more work to do, said Brian Cornell, chairman and chief executive officer. In the recent quarter, the grocery segment registered a “small decline” as a result of deflation and a competitive environment.

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

“Despite these near-term challenges, we are focused on delivering stronger growth over time,” Mr. Cornell said during a Nov. 16 earnings call with financial analysts.

Net earnings in the three months ended Oct. 29 were $608 million, equal to $1.07 per share on the common stock, up nearly 11% from $549 million, or 88c per share, in the prior-year quarter. Sales declined nearly 7% to $16,441 million from $17,613 million, with same-store sales down 0.2%.

Overall during the third quarter, comparable transactions decreased 1.2%, marking a 1 percentage point improvement from the second quarter, and average ticket increased 1%.

Target Simply Balanced line
Target has added thousands of new products to its food selection, including more organic and natural items.

In the grocery department, Target has added thousands of new products to its food selection, including more organic and natural, gluten-free and local, on-trend items, Mr. Cornell said. The company also has made changes to its supply chain to improve the freshness of its perishable offerings. Despite these efforts, the segment’s comparable sales have declined for three straight quarters.

In early November, it was announced Anne Dament, senior vice-president of grocery, planned to leave the company after 18 months. Mark Tritton, who recently joined Target as chief merchandising officer, will assume her responsibilities until a replacement is named.

Mark Tritton, Target
 Mark Tritton will assume the senior vice-president of grocery responsibilities until a replacement is named.

“Mark and I are working closely on the next phase of our grocery evolution, to make sure that we continue to provide the right assortment, the right value, the right quality our guest expects from Target, while they’re shopping our store,” Mr. Cornell said. “So you’ll see a lot more of that … but we recognize that’s an area that we’ve got to continue to drive progress in.”

Added Mr. Tritton, “We have an opportunity to more clearly convey and resonate value for our guests in this important category. This is being done through our end cap presentations, enhancing our use of local pricing, and making changes to our promotional cadence, and we expect to see the full benefit from these changes in the fourth quarter.” 
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