Target Corporation (NYSE:TGT) announced today that beginning this fall guests will receive 5 percent off at check-out every day when they use a REDcard at any Target store or on Target.com. Target’s REDcards include the Target Credit Card, Target Visa Credit Card and Target Check Card debit product.
“We’re excited to offer this outstanding value to our REDcard holders across the country,” said Gregg Steinhafel, chairman, president and chief executive officer of Target Corporation. “We believe guests will appreciate the simplicity and compelling value of this program, which will lead them to choose to shop more often at Target. As a result, we expect this new program to drive profitable incremental sales, which will more than offset the cost of providing this everyday discount to our cardholders.”
Target has tested this program in Kansas City since October 2009 and guest response has been overwhelmingly favorable, leading to meaningful incremental sales and profits. The response has been particularly strong among our existing better and best retail guests. Sales lifts have been relatively consistent across merchandise categories and stable throughout the test period. For Target’s 2010 fourth quarter, the program is expected to add approximately one percentage point to comparable-store sales and have little to no impact on consolidated earnings. The program is expected to add between one and two percentage points to Target’s comparable-store sales and to be accretive to consolidated earnings in 2011.
This program is expected to increase the portion of Target’s sales made on Target credit and debit cards. Incremental accounts receivable resulting from this program are expected to reduce the current rate of decline in Target’s receivables balances, allowing gross receivables to stabilize in the range of $5 billion to $6 billion over the next few years. For reference, Target’s gross receivables were approximately $7.3 billion at the end of first quarter 2010.
This new Rewards program will replace the current Rewards program in which new account holders receive an initial 10-percent-off coupon and existing cardholders earn coupons for 10 percent off a future day of shopping. Guests participating in the current program will continue to earn points until the new program begins.
Target today also announced a change to its Pharmacy Rewards program. Beginning this fall, guests will receive a coupon good for 5 percent off a future day of shopping every time they fill five prescriptions at a Target pharmacy with a Target REDcard. Guests in the program currently receive a coupon good for 10 percent off a future day of shopping every time they fill 10 prescriptions at a Target pharmacy with a Target REDcard.
The statements on expected incremental sales, receivables growth and profitability are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the company’s actual results to differ materially. In addition to the risks and uncertainties described in item 1A of the company’s form 10-K for the fiscal year ended January 30, 2010, the statements are subject to the risk that the results experienced in the Kansas City test are not representative of the guest behavior that will be experienced in other markets or remain constant over longer time periods.
Target Corporation’s retail segment includes large general merchandise and food discount stores and Target.com, a fully integrated on-line business. In addition, the company operates a credit card segment that offers branded proprietary credit card products. The company currently operates 1,740 Target stores in 49 states. Target Corporation news releases are available at www.target.com.
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