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Target Gets P-Fresh in Philadelphia

Target plans to convert 28 Philadelphia-area stores to its food-oriented P-Fresh format by October and add two new stores that incorporate the produce, meat and additional refrigerated cases that make the new concept distinct, bringing the total in operation across the country to over 70.

In a conference call discussing second quarter results held earlier this week, Target also said it would add more new stores next year than it previously announced.

Despite the incremental store opening plans, Doug Scovanner, Target's CFO, suggested that the company's capital spending would be arranged to keep the P-Fresh roll out advancing, although dollars spent will remain about the same year over year. Target will open as many as 75 new stores this year. Across the Philadelphia metropolitan area, Target added one new P-Fresh store, in Warrington, Pa., during its July opening event. Target concentrates is store openings into three multi-unit debuts, one each in spring, summer and autumn. The final new store roll out occurs in October, and most of the P-Fresh debuts in the market will occur between now and then. "For September and October, all but one of the stores is a remodel," Target spokesperson Jill Hornbacher told Bnet, "but there is a new store opening in Springfield, Pa. in October, and that will include the expanded food format."

Many of the new P-Fresh stores have been and will be opening in the Northeast where the company has no supercenter presence. A new Target that opened in the New York City borough of The Bronx in July, at 127,000 square feet, was a new, slightly smaller version of the format developed for locations where the full 135,000 square foot version wouldn't fit.

In the conference call, as transcribed by SeekingAlpha, Kathryn Tesija, executive vice president of merchandising noted, "Even while we're experiencing price deflation on some food items, the grocery category continues to see positive comps overall, benefiting from increased space and emphasis in our general merchandise stores and continued development of new products in our own brands, which now account for more than 20 percent of our food sales.

The move into Philadelphia is the next step in a long-term process that is transforming how Target positions its business. "We intend to incorporate this expanded food offering into a substantial portion of our chain over the next three years, dramatically improving our ability to deliver the convenience of a one-stop shopping experience for our guests," Tesija said.

Gregg Steinhafel, Target's CEO, said that the P-Fresh stores, although they've been opened in a variety of selling environments, have garnered a positive response everywhere. The better selling of the two original test locations in the company's home town of Minneapolis provides an example of the revenue gains the company can hope to achieve from stores operating the format. He said:

We continue to be pleased with the results on an overall portfolio basis. Some have been exceptionally strong, in the double-digit range like we've experienced in one of our Minneapolis stores, others have been in the high single-digits, others have been in the mid single-digits.
On the new store front, Target has upped its store opening plans from five net of relocations and closings to 12, meaning that its actual store count in 2010 looks to increase by a dozen. Scovanner said:
Certainly we are being very careful in this environment to approve stores that meet one of two fundamental criteria. They either are stores in which we have great confidence in achieving very strong returns, which gives us a margin for error if we've misjudged the sales equation. Or, in the alternative, stores that are in impossible to replicate locations deals, if you will, that we've been working on for many, many years, that to turn them down now would be to turn down the only opportunity in individual trade areas for many, many years to come.
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