Target To Replace “Target Home” With Threshold

This past Wednesday, May 16, 2012 Minneapolis based retailer Target held its 2012 First Quarter Earnings Conference Call and discussed their evolving Private Brand portfolio. The call included Target executives: Gregg Steinhafel, Chairman, President and Chief Executive Officer; Kathy Tesija, Executive Vice President, Merchandising; and John Mulligan, Executive Vice President and Chief Financial Officer.

Adjusted earnings per share, a measure reflecting the performance of U.S. businesses, increased 11.5% from a year ago as outstanding performance in the U.S. Retail segment more than offset a year-over-year decline in credit card segment profitability. GAAP earnings per share, which includes the impact of our Canadian segment investments and unique tax items, increased 5% over first quarter 2011.

The retailer experienced the largest increase 5.3% in comparable store sales since the third quarter of 2005 and more than 1% point stronger than was expected going into the quarter.

Kathy Tesija, Executive Vice President, Merchandising followed Gregg Steinhafel’s opening with a discussion of design differentiation and exclusive brands and Private Brands.

For more than a decade, Target’s design partnerships have played a key role in differentiating our stores and merchandise assortments, offering our guests something they can’t find anywhere else and making the previously inaccessible accessible for all. The Shops at Target is the latest innovation in our partnership strategy. Rather than working with a usual designer, this program highlights items from small, distinctive specialty stores, hidden gems which up until now have only been accessible to those lucky enough to live nearby. Last week, we launched the first flight of The Shops at Target, providing guests across the country the opportunity to see what makes these shops so special, and the response has been quite favorable. With surprising finds across a variety of departments, the shops offer unique products in Beauty, Apparel, pets, Home and Candy. Our second flight of the shops will set in early September with products in men’s apparel, women’s apparel and Home.

Beyond this new strategy, we continue to work with designers and brands to create Target exclusive collections. With the help of Todd Oldham, Target is letting kids be kids with our new and exclusive collection, Kid Made Modern. This collection of art supplies and activity kits gives kids and parents fun yet affordable creative design tools to inspire through art. Look for Kid Made Modern in stores and online next week.

In swimwear, we continue to build on our industry-leading market share position by growing in our owned and exclusive brands. This spring, we’re very pleased with early results from the rollout of ASSETS by the makers of SPANX, featuring one-piece suits and fashion tankinis. We’ve also seen strong increases in young contemporary swimwear with signature print tankinis from Converse. And in Mossimo Black, we’ve seen — we have created a fashion solid mix-and-match destination.

In July, we’ll roll out a new series of fits in men’s apparel in both Merona and Mossimo to better match our guests’ more modern tastes. We’re also reorganizing the floor pad by types of apparel rather than brand to make it easier for our guests to find what they’re looking for.

Perhaps the biggest Private Brand surprise of the call followed when she announced that the last remaining brand to carry the “bullesye” would be eliminated in favor of the recently announced new Private Brand Threshold.

Looking beyond the second quarter, we’re very excited about our recently announced plans to rebrand our Target Home brand as Threshold, beginning this fall. Target Home is already our largest owned brand, but we saw an opportunity to better clarify its positioning and point of view, so we undertook the biggest rebranding effort in our history. Everything was on the table in this effort: product, quality, packaging and positioning within our brand portfolio. We engaged in a similar effort to redefine our Room Essentials brand a couple of years ago, and we’ve been very pleased with the results. We believe this is an opportune time to rebrand Target Home as the economy continues to improve and more guests are beginning to feel comfortable trading up from good to better brands.

We’ll debut Threshold with an assortment of entertaining essentials, accents and decorative accessories and plan to extend the brand across our entire home assortment in 2013. We’ll have more information to share on this brand launch in future conference calls.

In response to a question from analyst Deborah L. Weinswig of Citigroup Inc, Research Division about Private Brands, Gregg Steinhafel, Chairman, President and Chief Executive Officer painted a picture of a retailer that is focused on building a portfolio of Brand assets.

We now have 10 owned brands or signature national brands that do over $1 billion in retail. We continue to invest in our owned brands. We treat them as national brands. We position them as such. And they’re a key part of our strategy. So we’re — you’re going to see us continue to focus on these very important parts of our merchandising strategy, including, as Kathy mentioned, the relabeling or the rebranding of our Home brand into Threshold later this fall and as we transition into spring and summer of 2013.

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Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.