More Evidence of Target Shoppers Leaving for Wal-Mart


For those folks who think "Target (NYSE:TGT) is fine just the way it is"

Some data first. From Marketing Charts.


"US consumers are growing increasingly stingy with their money and are becoming more and more likely to base their retail purchase decisions on price, according to a study from The Gordman Group, which reports that Wal-Mart (NYSE:WMT) stands to benefit most from this phenomenon.

According to Retailer Daily, The Gordman Group’s Spring “Retail Trend Tracker Survey,” reveals that 90% of respondents say the economy has affected how much they spend, and 80% say the economy has affected where they shop. In the last three months, 45% of respondents have spent less, and 31% expect to spend less in the next three months. More than half, 59%, believe the economy is getting worse, and almost half, 49%, say the economy has affected them directly."

So what you say? It sounds like everyone will suffer. Read on....

Here is the blow to the folks who think "we don't need any of Bill Ackman's changes"


"More than half of respondents (54%) in the study plan to spend a larger share of their budget at Wal-Mart (WMT) in 2009 than they did in 2008. The next-most-popular response to this question, internet stores, was only selected by 27% of respondents as a destination where they will spend more money this year. Only 25% of respondents say they will spend more money in 2009 at chief Wal-Mart rival Target, the Gordman Group found."

So, it is clear that there has been a fundamental shift in consumer behavior. In my recent conversation with AutoNation (NYSE:AN) CEO Mike Jackson he said to me that he thought "the consumer is scarred and their behavior has been fundamentally altered, perhaps permanantly". Jackson gets that and is changing his business to meet the new reality. Execs at Wal-Mart get it and are pounding their value message home to consumers. Even media whipping boy Sears Holdings (NASDAQ:SHLD) gets it as they have been very aggressive proving to consumers their appliance prices are the best (and it is working).

Now, Target management has responded to Ackman saying:


"For more than a decade, Target’s Board and management have been guided by our brand promise to our guests — to “Expect More. Pay Less.” — and this approach has produced outstanding results and a best-in-class retailer.

· Over the past 10 years, Target has grown its revenues at a compound annual rate of 11%, expanded its EBITDA margins by 200 basis points and grown EPS at a 14% average annual rate.

· Target has built a track record of disciplined management across all areas of its business including expense management, inventory control and use of capital.

· Target also has a history of returning cash to its shareholders through dividends (which have been paid every quarter since 1967, when we first went public) and a share repurchase program, all while maintaining a prudent capital structure as evidenced by its strong investment-grade credit rating, which we firmly believe is important to maintain.

Target’s Board and management are working to address the challenges of a deeply recessionary economy and remain firmly committed to the values and strategies that have driven Target’s success for nearly 50 years. By working as a team, delivering outstanding value, offering continuous innovation and an exceptional guest experience, Target believes it will enhance its position as a leading, world-class retailer and emerge from the current economic environment an even stronger company. Target’s future success depends on its ability to continue adapting to changes in the environment while fulfilling its “Expect More. Pay Less.” brand promise with passion and discipline, and delivering outstanding value for its guests, team members, shareholders and communities."

OK....but all evidence for the past year now ought to tell everyone that the "Expect more.Pay Less" motto just ain't getting through to folks. When I see the question "what are you doing NOW to address problems" and I hear "For the past 10 years........" I hear nothing after that because I think there is no new plan. Whenever I read anything from Target I see a laundry list of reasons they think everything Ackman proposes and everyone Ackman nominates just isn't right for the company. What don't I ever read?


How about "this is what we are going to do to stop the sales free fall". Why is that missing? As a consumer I am not seeing anything out of Target I have not seen for the past 5 years or more. It is old and stale and the competition is adapting.

Food. Ackman's food argument is 100% true. People are heading to Wal-Mar for cheap staples. Target is know for chic fashion. People clearly do not want fashion right now as they hunker down. While they are in Wal-Mart for staples they are picking up other things and saving another trip. Target needs to become a place to go for staples or something. Anything other than trying to sell affordable work clothes to women now out of a job or worried about losing one.

If I were a Target shareholder, I would have a hard time not voting for the guy at least with a plan versus "the last decades plan is the plan for the next one"

The landscape has changed...

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