Word: targetted
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...onset of the recession, however, Target and Walmart saw their fortunes flip. Target's same-store sales have fallen for eight straight months; Walmart's have risen for 22 straight months. Target's 2008 same-store sales fell 2.6%, while Walmart's rose 3.3%. More recently, Target's February sales dropped 4.1%, while Walmart enjoyed a 5.1% jump. (See the best business deals...
...More important, Target's profits last year dropped a stunning 22.3%, to $2.2 billion. That figure includes a 40.7% earnings collapse in the fourth quarter. Walmart's 2008 bottom line rose 5.9%, to $13.5 billion. Now Target is getting trounced...
...Davidowitz notes that a "double whammy" is driving Target down. First, the retailer's product mix is not ideal in this economy. According to Davidowitz, Target devotes some 40% of its shelf space to home and apparel items, which are struggling, while setting aside less than 20% for consumables like food, health items and beauty products. Walmart sets aside 45% of its space for consumables. "Walmart sells what you need to have," says Davidowitz, "as opposed to what you want to have." Not only does Walmart sell more of the grocery items you need - the company is the world...
...second whammy on Target's performance is its credit business. Target is one of the last major retailers to own a part of its credit-card portfolio. When consumers are drowning in mortgage and other credit-card debt, they often ignore retail-card obligations. Rising defaults and delinquencies have dragged earnings. In 2008 credit-card profits dropped 80.5%, to $155 million, and the company incurred a $135 million pre-tax loss on its credit segment in the fourth quarter. "The company did great with its credit business when the economy was up, but now that it's down, carrying your...
...Target responding to the malaise? The credit distress is hard to control, but the company has promised to tighten lending standards and increase collections. On the product side, the company knows it must offer more essentials. "We continue to invest in our food offering in recognition of its importance in driving greater frequency, increasing guest loyalty and making Target a preferred shopping destination," CEO Gregg Steinhafel said during Target's fourth-quarter earnings call. For example, last year the company opened its first distribution center for perishable goods like fruits, vegetables and meats in Lake City, Fla. Target is slated...