In a conference call with investors to discuss the new plans, Kathee Tesija, executive vice president of merchandising for Target, says one change is that the company is relaunching its Target-branded products under the name "Up &Up."
In an interview with Reuters, she says the new brand will even ditch Target's famous bull's-eye logo in favor of a more visible arrow design. The launch started back in March with suncare products, and will continue through the summer with a big marketing push and eventually include 40 product categories, she said in the conference call. The Target brand is one of the chain's fastest-growing, with 25% growth in the last five years. "The brand typically helps our guests pay less, about 30% compared to national brands," she says.
The company also says it is shifting its marketing with a new broadcast campaign, which will focus on "real moms and stories about how they save at Target. This is a more genuine approach, with real people telling personal stories, and will strengthen the emotional bond we have with our guests."
The moves come at a time when Target is under pressure from Pershing Square, an activist investor group that's got it locked in a contentious proxy fight -- and when it is consistently being outgunned by rival Wal-Mart, which recently unveiled a major upgrade of its private-label brands, and yes, features a real-mom theme in many of its ads.
These changes represent some "big, bold moves for Target, but it also takes them into some potentially dangerous territory," says Hayes Roth, CMO of Landor Associates, a branding consultancy. "Redesigning private-label lines to look less like store brands is smart."
The company has long since ditched the bull's-eye logo on such private-label lines as Archer Farms and Choxie, he points out, "and they all look good. They don't have that copy-cat look that so many store brands do -- they look like real brands and are very much in keeping with the brand's promise of good design at good prices."
But while the company -- which has built its reputation in recent years as a hip discounter -- "has to respond to what's happening in the economy, it's got to do so without breaking its core brand promise. If they start turning themselves into a Walmart wanna-be, that's a problem. That would put them in a tough place when the economy picks up again."
Still, the company also says its plans to expand deeper into grocery - as Walmart has -- are going well, and that it will continue to evaluate results through 2009, with an eye to eventually expanding the new format to all new and remodeled stores. And in yet another step toward rock-bottom prices, the company says that in some Denver, Orlando and Minneapolis stores, it is now testing a price-matching promise, which allows managers to lower prices for customers if they can find the item cheaper somewhere else. "So far, guests have requested very few price adjustments," says Tesija.
For the quarter, Target says its first-quarter earnings came in at $522 million, down from $602 million a year ago -- somewhat better than forecast. And sales eked out a small gain, rising 0.4% to $14.4 billion in 2009 from $14.3 billion. On a same-store basis, sales declined 3.7%, but in the conference call, executives explained that in grocery sales, comparable-store results were "strongly positive."