With the promise of “Expect more. Pay less.” Target Corporation is an American discount retailer on a mission to make Target the “preferred shopping destination in all channels by delivering value, continuous innovation and exceptional guest experiences.”
In an effort to continue its initiative of offering great designs that “don’t have to cost a fortune” and appeal to a diverse audience of consumers, Target has established partnerships with well-known and emerging designers like Isaac Mizrahi.
Introducing the biggest retail collaboration to-date!
On October 16, 2012, Target Corp. announced its collaboration with Neiman Marcus to produce an “unprecedented holiday collection” that featured “24 of America’s preeminent designers” and more than 50 products. The initiative was hailed as “the ultimate designer collaboration” and was highly anticipated by consumers, bloggers, and analysts.
On November 1, 2012, Target shared its October sales report with its shareholders. It stated that the quarter-to-date sales were $16,601 million in sales and its third quarter earnings report provided shareholders with a fourth quarter earnings guidance that said, “the company expects adjusted ESP of $1.64 to $1.74 and GAAP ESP of $1.45 to $1.55.”
Target’s expectations for the Target-Neiman Marcus holiday collection were discussed in greater detail during Target’s 2012 Third Quarter Earnings Conference Call on November 15. This included members of the media, financial analysts from well respected institutions such as Citigroup, JPMorgan Chase & Co, as well as Target Chairman, President, CEO Gregg Steinhafel; EVP of Merchandising and Supply Chain, Kathee Tesija; and EVP, CFO, John Mulligan.
During the Q3 call, Steinhafel stated that the Neiman Marcus collaboration was at the “top of the list” for merchandising and marketing plans in the fourth quarter. Steinhafel confidently shared that, “With more than two billion media impressions…this event is clearly creating a lot of excitement.” Tesija supported Steinhafel’s positive outlook and Target’s expectations for the line when she said, “Like any limited time offer, we expect these items to sell quickly, particularly given the amazing media attention that they’ve already received.”
Steinhafel closed the conference call with an excited tone and positive remarks by telling shareholders, “We’ve got a great plan. Our stores are read. Our teams are ready. We’ve got a great value offering, and some really inspiring merchandise. So we believe we’ll profitably take market share this holiday season.”
With prices starting at $7.99 and peaking at $499.99, the holiday line included items that both retailers identified as “great value at affordable price points” and launched on Saturday, December 1, 2012.
Products and prices that don’t meet customer expectations
In her article for Business Insider, Margaret Bogenrief called the venture “an inflexible ‘fashion experiment’…with massively mismatched price points for consumers with pinched pockets” and criticized the 2012 collection for its inability to assign the correct mix of product variety and price points. The collection was not well-received by shoppers or bloggers alike, and on January 1, 2013, Neiman Marcus and Target slashed the prices of the entire Target-Neiman Marcus Holiday Collection up to 70 percent off the limited-edition retail price.
Target spokesman Joshua Thomas told Forbes, “Taking risks means being ready to accept the things that work, and the things that don’t work” and admitted that even though the items were of a high quality (made from real silk, hand-blown glass and 18k gold), “maybe it was [priced] a little too high” for Target shoppers since customer satisfaction and interest in the line was low. The Target spokesman also shares that Target believed that the performance of the line had been affected by the timing of the holiday collection’s release and stated that, “We believe we created a price barrier. This is clear given the strong uptick in sales once the collection went on sale at 50 percent off.”
According to fashion blogger Becca Alexander, the success of retail collaborations “is based on a lot of factors like the designer chosen, price point, quality and availability of the collection online.” In Alexander’s opinion consumers need to feel like they’re not only “getting a great designer piece, but that it’s priced right,” which was a constant complaint shared by consumers and bloggers online.
Although she believes the customer experience shouldn’t suffer, Alexander admits that, “Collaborations are becoming more about the marketing opportunities, less about the sales. Large brands like H&M and Target need the ‘street cred’ that comes with working with respected and up-and-coming designers” and that the collaborations are “more about the attention these collaborations draw.”
How did Target’s Q4 end?
In a January 3, 2013 financial news release, Target reported that net retail sales for the five weeks ended on December 29, 2012 were $10,214 million and that the fourth quarter-to-date sales were $16,397 million—$204 million less than the quarterly sales reported in October. Although Target’s stock (NYSE: TGT) was considerably low on December 29, 2012 (at $58.57), it has since risen to $61.17 per share (as of January 30, 2012).
CEO Gregg Steinhafel told investors that, “December sales were slightly below our expectations, as strong results late in the month did not completely offset softness in the first three weeks,” and that, as a result, “we expect Target’s fourth quarter 2012 earnings per share will meet or somewhat exceed the low end of our prior guidance.”
Steinhafel defended Target’s fourth quarter performance by placing a continued focus on non-financial factors like customer satisfaction, customer service, and the company’s brand strength as a retailer that provides affordable and fashionable clothing during Target’s report of December 2012′s sales. Steinhafel told shareholders that, “Profitability for December benefited from our continued focus on achieving an appropriate balance between price investments and driving sales,” but, “Target will continue to focus on profitably growing Target’s market share by combining unique merchandise, convenience, value and an unbeatable guest experience’ in 2013.
While many analysts label the Target-Neiman Marcus Holiday Collaboration a failure, retail analyst Carol Spieckerman considers the holiday line an overall win for Target. Spieckerman says that even though much of the product didn’t sell, the Target-Neiman Marcus collection “created impressions, drove traffic to the stores, and created more brand impressions.”
Target Corporation just held its Q4 conference call on February 7 and expects to release more financial information concerning its fourth quarter of 2012 on February 27, 2013.
How do you think the Target-Neiman Marcus Holiday Collection performed?
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