Target Talks Cheap as Black Friday Battle Beckons

After its second quarter, Target (TGT) emphasized chic in a conference call with analysts but, as the third quarter ended and holidays loomed, the retailer was talking cheap.

Faced with a hypercompetitive pre-holiday season — after being forced to match Walmart (WMT) on toy, book and DVD prices — Target seems to believe it must shore up its price reputation to keep consumers and investors interested.

In Target’s second quarter conference call, Kathryn Tesija, its executive vp of merchandising, spent a lot of time discussing all the great designers that have been developing styles for the retailer. At the close of the third quarter, she emphasized the price statement Target intended. She did so adamantly enough to suggest some corporate anxiety about getting the message across. The retailer appears ready to do a little more preaching to a consumer congregation that might waver.

In the conference call, as transcribed by SeekingAlpha, Tesija said:

Let me describe some of the ways we continue to reinforce our expect more, pay less brand promise in the current environment. Even though we’ve always delivered exceptional value to our guests, we have not always gotten credit for our outstanding prices. As a result, in the past year, we’ve taken steps to underscore the value in our merchandise assortment and strengthen our price messaging.

Specifically, Tesija said Target has:

• Enhanced its in-store signing to communicate price.
• Expanded the number of items included in its “competitive shop process,” one designed to ensure that it is priced competitively on a range of items across the store.
• Instituted a low price promise to match local competitors’ advertised prices.
• Reworked the weekly circular to feature more commodities and frequency-driving merchandise and to incorporate bigger pictures, bolder price points and showcase attention-grabbing value headlines.
• Launched new, brand-oriented broadcast advertising campaigns that reinforce Target’s price messages.
• Allocated more space to non-discretionary categories such as food and household commodities in new and remodeled stores.
• Displayed bargains more dramatically with fewer, bigger items and stronger value message signs including notices on main aisle end caps that focus on a single price and item.

Now, that’s a heck of a list, but Tesija said Target can do even more. To that end, the company has revisited its jewelry operation and started displaying merchandise on tables rather then under glass, with all product priced under $50.

In electronics, Target is testing a full-line cell phone service in about 100 stores, a TV delivery and installation service in about 180 stores and an iPod trade-in for Target Gift Cards deal on Target.com.

Target’s price focus isn’t fixated on the holidays strictly. Tesija pointed to the retailer’s roll out of up & up, a private label that replaces its value-oriented Target brand in commodities such as soap, as evidence that the company is addressing both big and small spending occasions as it meets consumer value concerns. Recently launched with 800 products initially, up & up adds 100 more in 2010.

For the Black Friday weekend, Target plans to open its doors an hour earlier this year than last, which means 5:00 a.m., to provide access to a wide range of door-buster discounts. An hour early for Black Friday, Target plans to be three days early for Cyber Monday with an online only promotional event planned for Thanksgiving Day. For the actual Cyber Monday, it will offer free shipping on more then 100,000 items.

While it touted cheap, Target couldn’t completely resist at least a suggestion of chic, as Tesija noted:

To help our guests get in the holiday spirit, we’re offering a dress collection that features a variety of versatile styles and dressier options designed to appeal to a broad range of guests, all for the incredible price of $39.99.

So, in the end, Target could pair fashion and savings. But will it be enough? The range of savings its rivals are planning and previous acknowledgement that the fourth quarter would be tough, not to mention Walmart’s forcing it to play catch up on competitive promotions, suggest that Target expects the next few weeks to be fairly brutal. Some analysts have suggested that retail efforts to lower inventories would help them avoid some of last year’s deep price cuts. And some retailers have lately done better selling things at lesser discounts. Still, Target seems to see a battle in front of it. Considering it is in the trenches, the company’s preparations suggest the coming struggle will be deep and, to use a word bandied about in last year’s horrendous holiday season, dismal.