Target Fashions a Comeback from Recession with Carlos Falchi, Jean Paul Gaultier

Despite the expansion of food operations in its latest generation discount stores, Target has continued to promote fashion and, as sales trends improve, the company could style something positive out of the recession.

Target lately has managed to convince a number of fashion designers to step back from department and specialty stores and produce limited edition product lines that it sells in a set time frame. In a way, it’s a refinement of a long-standing Target strategy that put fashion names in its stores and kept them there just as long as they remained popular. When sales slipped in the store, the labels slipped out of the store.

In the latest turn on the strategy, Target has set its sites on well-established designers who, in the recession, are receptive to working with the discounter, at least within carefully defined parameters of product, price and time. The latest is Carlos Falchi who put together the handbag collection Carlos Falchi for Target. It launches at most Target stores nationwide and at Target.com beginning Nov. 1 and will remain available through the holidays, closing out Dec. 27.

Falchi already is known for handbags, and his designs normally sell through stores such as Neiman-Marcus and BergdorfGoodman. At those outlets a gathered shoulder bag in python skin can cost over $2,200, and some Falchi accessories fetch $4,000. At Target, where synthetics replace the exotic materials for which Falchi is known, his handbags will range from $19.99 to $49.99. The limited edition collection thus makes Falchi styles accessible to a wider audience without creating a permanent, and potentially price eroding, alternative to his traditional multi-thousand dollar goods.

Target’s designer strategy keeps evolving. Reports are that Jean Paul Gaultier will be the next major designer with a collection in the store. Designer Anna Sui crafted a limited-edition handbag collection for Target, which was at stores in September, and Anna Sheffield assembled a limited-edition jewelry collection. It all shows that Target has used the recession, a period when high fashion has taken a hit and designers have been looking for some greener pastures, to make the cheap chic part of its proposition that much more chic.

Sales have been trending better for Target recently. Its September comparable stores sales, those at stores open for at least a year, were down just under two percent, which compares favorably with a four percent decline for the full year and a three percent decline in September 2008.

Food has gotten feet through Target doors during the recession, but it’s still a work in progress. The company doesn’t even operate its own food distribution, a function rival Walmart mastered long ago, to its advantage. Fashion, though, is something Target has a handle on and is central to its reputation. In drawing in the stylish names it has, the company is making it more acceptable for haute designers to work with mass-market retailers. And what’s true now also will be when the recession ends and frugal consumers become a bit more disposed to spending money on fashion, particularly at Target prices. So, while food isn’t going away, fashion is making a comeback. Considering that for much of the past decade, Target’s comparable store sales grew at a better rate than those for Walmart, management’s nurturing of the style business should pay off.

In discussing fashion initiatives during an August conference call, as transcribed by SeekingAlpha, Kathryn Tesija, Target’s executive vice president of merchandising, said:

As we make plans for the next few quarters, we know that even though our sales in discretionary categories are soft at the moment, they are key to our long-term success because of the value they bring to our guests, our brand, and our profitability.