ATLANTA, GA. -- Target showed off its SuperTarget format, unveiled new merchandising initiatives, outlined operational improvements and discussed future growth last month when it hosted its annual analysts meeting.

Eleven days later on Oct. 8, the company grand-opened 40 new stores in 19 states, including seven in Alabama, Colorado, Iowa, Texas and Wisconsin. The retailer now operates 30 supercenters--double that of a year ago--and plans to kick expansion into high gear.

"Next year (2001), we plan to double again, adding about 30 additional SuperTarget stores in key markets, including Colorado, Florida, Georgia, Indiana, Minnesota and Texas," said Jerry Storch, president of Target financial services and new businesses. The company restated its previous goals of having 200 stores by 2010, upping the figure to 200 to 300, by the end of the decade.

But analyst Jeffrey Feiner believes that store count could be dramatically higher. "We more aggressively project that there will be 400 to 500 stores in 10 years," he wrote in a report following the meeting.

According to Storch, sales at SuperT stores are 60% to 80% higher than a discount store at the same location, consumers frequent the format 50% more often than they shop a regular Target store, and 40% of these customers consider the format their primary grocery store.

This marks the first time management has shared specific numbers with analysts regarding the SuperT concept, and most were glad to get a look at both the unit and its returns. "I have a higher degree of confidence this company will utilize the SuperT format to extend growth opportunities in the United States," said Mark Miller, analyst with William Blair in Chicago. "SuperTarget represents half of all new square footage being added in 2001."

The company is also in the process of retrofitting programs such as Starbuck's and Krispy Kreme into existing stores. It will also add new specialty products, including LaBrea breads, Fannie Mae premium chocolates and Phillippe Starck organic foods, currently available only in Europe, said Storch.

The company is building its upscale merchandise assortment and will carry additional products from Starck in the next 15 to l8 months. "His exclusive collection for Target will literally run the gamut from Kleenex boxes to baby clothes to organic foods," said Gregg Steinhafel, president of Target Stores.

The previously announced apparel line by Mossimo will hit stores on Jan. 1, 2001 with a Mossimo Black Label line replacing Target's own Merona brand, and Red Label will target young men and juniors while complementing the existing Utility and Xhilaration lines.

A bigger coup for the chain, according to analysts, is the announcement that it will be the first mass retailer to carry the Carters brand under the Baby Tykes name. Emme Kozloff of Sanford Bernstein noted the brand is "an excellent addition to Target's kids business and strong baby registry."

Eddie Bauer products will launch in Target stores in spring 2001. "This upscale assortment of tents, sleeping bags, backpacks, camp furniture and more will give guests a full selection of the kind of merchandise they find at REI, but at prices they'll only find at Target," said Steinhafel.

Although typically dwelling on its unique merchandising initiatives and upscale assortment, the company has continuously faced criticism for its inability to maintain in-stock levels. To this end, Steinhafel outlined a new supply-chain initiative with three major components: item segmentation, new capabilities and capacity management.

"About 94% of our assortment sells at a rate of less than three pieces per store per week, regardless of store volume, seasonality or ad lift," he said. Subsequently, management believes that stock on these slower moving items can be shifted to a flow-through mode of transportation, therefore bypassing warehouse inventory, lengthening lead times and lowering handling and carrying costs.

"The balance of our assortment is fast movers, accounting for about 6% of all items and 20% of our sales volume," said Steinhafel. "To ensure our supply for these items is predictable there will be allocated pool stock space that is now occupied by slower-selling merchandise. We will also speed up the replenishment process, increasing service level to next day delivery."

Management has also embarked on a vendor management program, and last month instituted a charge-back program, fining vendors who don't ship on time and complete. Additionally, said Steinhafel, "We've reduced our vendor base from 11,500 to 7,000, 50 we can be more important to fewer vendors."

Target will be adding two import warehouses on the West Coast in the next 15 to 18 months and five new regional distribution centers (RDCs) in the next four years, adding two million square feet. The company is also implementing a real-time management control process to help implement next-day delivery and more rapidly detect processing delays.

NEW TO TARGET

*Phillippe Starck, from chairs to organic food

*Carters Baby Tykes

*LaBrea Breads

*Fannie Mae, premium chocolates

*Eddie Bauer, sporting goods

*Mossimo, black and red label apparel lines

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