Target Shifts Focus to Small-Format To Improve Traffic

targetTarget CEO Brian Cornell said, on Wednesday, that he is now “increasingly confident” about the next few months as the company plans to open “hundreds” (as he says) of small-format stores. The effort will, of course, serve to reshape the big-box retail chain’s image as well as their real estate footprint.

He says, “We think we have the opportunity to enter many, many new neighborhoods.”  So far, Target is already operating approximately 30 of these “small-format” locations; this includes a 45,000 sq ft store in the hip Manhattan neighborhood of Tribeca.  Of course, Target hopes to learn from this store, in particular, and what it can do with future operations.

Indeed, this model could prove essential for the company’s growth.  On Wednesday, fourth-quarter sales at stores open under a year are registering between down one percent and up one percent.

Currently, the company is operating 1,800 stores.

But Target is focusing on opening more of these small-format stores in dense, urban locations and college towns.  As a matter of fact, 14 of the 15 stores the company plans to open this year are of these “small-format” locations.  The most recent openings include Philadelphia, PA and Cupertino, CA.

Cornell goes on to say that the company is now building “back-end capabilities” that will serve to accelerate its entry into that small-format space.  This includes, of course, supply chains and product selection.  The company’s strategy is to tailor the product line of each of these stores to cater to the local area. This can range from men’s and women’s apparel, convenient foods, baby products, home goods, and other household essentials.

He continues, “We’re still learning. We’re very pleased with the feedback,” adding, “While we have much more work to do, this quarter we saw meaningful progress in our effort to improve our traffic and sales.”

Sure enough, shares of the Minneapolis-based retailer jumped up 8 percent, to $77.21, in early trading on Wednesday.   The outlook on same store sales is far less positive—down 0.2 percent during the period ending Oct 29—but the company advises that the decline could have been much worse.

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