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With Wal-Mart Stores carrying the day on price and value on one side, and Kohl’s Corp. and J.C. Penney Co. providing more upscale price and brand pressure on the other, Target came through what has been roundly described as one of the rockiest holiday seasons in memory far from unscathed. Comparable-store sales dipped 5.7 percent at its discount stores in November and managed only a 1 percent rise in December, below the 3 to 5 percent uptick initially expected by the firm. At one point during the month, Target singled out men’s and women’s apparel as among its weakest product categories.
Hardly robust, Wal-Mart Stores, Target’s archrival and the industry’s most dangerous competitor, eked out discount-store comp increases of 3.3 percent in December and 2.8 percent in November.
Through their ability to differentiate, popularly priced quasi-luxury and designer names have accounted for much of Target’s success. Target’s designer apparel offerings include Mossimo, Cherokee, Stephen Sprouse and, more recently, Liz Lange with a maternity collection. Designer-cum-talk-show-host Isaac Mizrahi is also set to come out with a line. Additionally, Todd Oldham, Philippe Starck and Michael Graves lend their names to the firm’s home offerings, joining other labels such as Eddie Bauer and Woolrich. There is also a new collection of home products called Swell from Cynthia Rowley.
In that strength, though, may also lie a weakness.
The head winds facing the firm are growing as Target’s own success has placed it squarely in the crosshairs of the competition. In the months and years to come, Target will be under increasing pressure from Wall Street to sustain its growth, a harder task now since its numbers have grown from really, really big to enormous. Accordingly, missteps in merchandising, the likelihood of which increase as the firm strives to be differentiated and its competitors attempt to keep pace, could hurt more in the future than they have in the past.
Wal-Mart’s move to greater fashion content, as evidenced by its growing George apparel program, could also blunt Target’s recent fashion edge.