Target, in a bid to help reverse declining sales, will launch a dozen proprietary brands during the next two years in striving for a merchandise mix that separates the chain from its competitors, COO John Mulligan told investors.
Target didn’t release details on the new brands, but their addition could “touch $10 billion of current volume” across apparel, home products, and other categories, Mulligan said. How the new strategy will affect a sizeable licensing business done through Target wasn’t clear. A Target spokeswoman declined to comment. But Target this week launched a Disney Beauty and the Beast direct-to-retail (DTR) children’s apparel collection in advance of the release of the new live action film on March 17. The 20-piece line features girl’s dresses, t-shirts and tops and bottoms and other apparel.
Under its own brands, Target launched Pillowfort (furniture) and Cat & Jack (children’s clothing, footwear and swimsuits) in 2016, with the latter expected to post $1 billion in sales in its first year of availability ending in July, Mulligan said. Cat & Jack replaced Cherokee in children’s apparel, a brand Target previously licensed from Cherokee Global Brands. Target and Cherokee part ways on a licensing agreement in 2015.
The effort behind the new brands began several years ago, but accelerated with the hiring of new Chief Merchandising Officer Mark Tritton last year, Target CEO Brian Cornell said. Cat & Jack was given prime placement in the children’s department, with outfits displayed on mannequins.
The push for proprietary brands follows Target’s posting a 42.7% decline in net income to $817 million in Q4 ended Jan. 28 as revenue fell 4.3% to $20.7 billion on a 1.5% decline in same-store sales. Target suffered “unexpected softness” in store sales in Q4, while revenue from its e-commerce business jumped 32% to end the year at $3.4 billion,
In the face of shrinking gross margins, Target will move to be “clearly and competitively priced every day.” While the new strategy will put a crimp in Target’s revenue – sales are expected to decline by a low single-digit percent in Q1 – “the changes will best position” Target for the long term, Cornell said.
The chain will continue to expand its small format 45,000-square-foot stores, adding another 30 locations this year with a goal of having more than 100 in place by 2018. Many will be in urban markets such as the three that opened in New York City. Target also will remodel another 250 locations this year, building on the 55 locations that were revamped last year in Los Angeles (25) and Dallas (30).
D. Landstrom Associates works very closely with Target on many different retail programs from national branded product lines to private label product lines. If you are interested in speaking with one of our Manufacturer Representatives please call (952) 941-9400 or emails us at [email protected] One of our Manufacturer Representatives would be happy to discuss your product, brand or opportunity to sell into the 1800 Target stores and on Target.com.