Target CEO says small-format stores twice as productive as traditional

Sales per square foot at Target Corp’s 44 small-format stores are “easily double” that at traditional stores, Target Chief Executive Brian Cornell said on Thursday, after the retailer announced 11 new small-format stores opening this week.

Target said it recorded an average of $300 in sales per square foot across its stores, compared with at least $600 in sales per square foot from its small-format stores.

In a turnaround bid announced in February, the retailer vowed to double the number of small-format centers, remodel its stores, invest heavily in e-commerce, aggressively promote its products and keep grocery prices low to compete with Wal-Mart, Amazon  and supermarket chain Kroger Co.

Target’s more than 70 newly remodeled stores have seen an average 2-4 percent increase in sales since being renovated, Cornell said at a news briefing on Thursday to launch the latest small-format store opposite the Macy’s Inc headquarters in Manhattan, New York.

He added, however, that the unexpected success of the small-format and renovated stores would not affect previously announced full-year expected adjusted earnings of $4.34-$4.54 a share, saying these stores still represented a small percentage of overall sales.

Cornell said Target aims to operate 130 small-format stores by the end of 2019.

Like other retailers, Target has struggled in recent years to boost traffic amid changing consumer habits and competition from e-commerce giant Amazon.com Inc.

Still, Target shares have surged more than 10 percent since August, when it reported an increase in second-quarter comparable-store sales after four straight negative quarters, driven by improved online traffic and demand across all businesses except groceries.

The retailer has since slashed prices on thousands of items, from cereal to baby formula, and pledged to increase its minimum hourly wage this year by a dollar to $11.

“The fact that we’re investing while others are backing away, it’s hard to put into a forecast, but I know it’s improving team engagement,” Cornell said.

Retailers, including Sears Holdings Inc and Macy‘s, have announced plans this year to close hundreds of stores as they struggle with increasing competition from Amazon.com and fast-fashion retailers such as Forever 21.