XM does not provide services to residents of the United States of America.

Target's grocery discounts prove surprise boost for clothes, beauty sales



<html xmlns="http://www.w3.org/1999/xhtml"><head><title>Target's grocery discounts prove surprise boost for clothes, beauty sales</title></head><body>

By Savyata Mishra

Aug 22 (Reuters) -Target's TGT.N price cuts on groceries are finally paying off.

The Minneapolis-based company has returned tocomparable sales growth after several sluggish quartersas shoppers who visited the big box retailer's stores for its discountedfood and daily household items ended up browsing through other aisles as well.

"Yes, (customers are) budget conscious. And yes, they're hunting for deals and everyday value. But they're also willing to shop when they find that right combination of fashion and newness at the right price," TargetChief Operating Officer Rick Gomez told analysts on a post-earnings call on Wednesday.

Target's sales in the grocery aisles have typically made up a much smaller part of its sales mix than rivalWalmart's WMT.N, withapparel, electronics and home goods taking up more shelf space - a combination thathas hurt sales over the last two years as inflation-wearyconsumers reined in discretionary spending.

In an attempt to win over more price-sensitive shoppers, Target cut prices on over 5,000 popular items this year, including on bread, soda, paper towels, and pet food. It also launched a private-label basics line called "dealworthy" with nearly 400 items such asiPhone chargers and toiletries below $10.

The strategy makes sense. Rivals including Walmart, Costco COST.O and Amazon.com AMZN.O have all said shoppers are hunting for bargains.

"It's sort of an age-old strategy: you don't make a profit on the essentials, milk, eggs and bread, but you use low prices on those essentials to get people into the store and then hopefully they end up buying some of the higher-marginitems," said Blake Droesch, an analyst with Emarketer.

Higher foot traffic was the best way to drive incremental sales through impulse buying, he said.

Target shares closed 11% higher on Wednesday, a sharp contrast to three months ago, when the stock tumbled 8% after the company posted disappointing first-quarter earnings.

Apparel sales also reversed from several quarters of declines to rise 3% in the second quarter, led by demand for Target's private-label "All In Motion" and "Wild Fable" lines. Beauty was another standoutsegment, with sales growing 9%.

The retailer has more than 45 private labels, which generate more than $30 billion in sales each year. Target has been expanding its own brands afterits "cheap chic" strategy of offering trendy, affordable designer home goods and clothing failed to bring in loyal customers.

On Wednesday, Target's executives touted new launches of toys including its own brand, Gigglescape, and demand for Target-themed plush bullseye dogs and Target-branded Fisher-Price Little People.

But Morningstar analyst Erin Lash said she was skeptical how long the benefits would hold "given Target's undifferentiated product assortment and lack of a clear cost advantage relative to other discount retailers."




Reporting by Savyata Mishra in Bengaluru; Editing by Sayantani Ghosh and Devika Syamnath

</body></html>

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.