Target’s Grocery Troubles

Getting back to its cheap chic root is shaping up to be harder than Target anticipates, especially with its grocery business flagging.

The key difficulty Target is tackling at present is spoilage, as consumers aren’t buying the perishables fast enough, which is a drag on margins all around. Spoilage — and the fact that food runs bad after a few days — is among the reasons grocery stores are known for being foot-traffic generators wherever they turn up. Recent shopping trends at Target has consumers making more large fill-up trips, but skipping the smaller inter-week trips to top off their supplies.

Difficulties aside, however, Target is ready to fight the good grocery fight. Last year Target hired Anne Dament, a former Safeway exec.

“Short term, it certainly has an impact on our performance in grocery and food,” noted CEO Brian Cornell of Target’s grocery revamp. “But, as we’ve made the changes, the response we’re seeing from the guest is very encouraging. They’re recognizing the new assortment, the new brands, more local items, the fact that we have more organic and gluten-free items on our shelves.”

Walmart has also faced some grocery hassles of late as mega-player Kroger and European addition Aldi are routinely able to outmatch Big Blue on price.

To put it simply, the grocers are “eating [Walmart’s] lunch” noted Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates Inc.