Target ups dividend; shareholders talk politics
Thursday, June 9, 2011
NEW YORK (AP) — Target Corp. raised its quarterly dividend Wednesday by 5 cents to 30 cents as it sought to placate investors after a 22 percent decline in its stock price this year.
The 20 percent dividend increase came the same day the retailer’s executives faced shareholders at its annual meeting Wednesday, held at a store in Pittsburgh set to open next month.
Target’s shares have declined as the discounter now sees most of its shoppers skipping the home decor and clothing aisles and just sticking to food and other staples.
Chairman, President and CEO Gregg Steinhafel reiterated during the meeting that lingering economic pressures have shoppers still focusing on “value.”
“They’re still very thoughtful about spending,” he said.
“Target’s primary focus has been expanding its super centers and food business and trying to increase traffic,” said Ken Perkins, president of research firm RetailMetrics LLC. “But they have taken their eye off the ball in apparel and home goods. The merchandise doesn’t seem to be as fresh.”
Investors have punished Target’s shares, which touched a 52-week low Wednesday at $46.86. The Dow Jones U.S. Retail Index has risen 18 percent from a year ago and 12 percent from the beginning of the year.
A year ago, Target was reaping the benefits from moves it made to cater to shoppers focused on necessities like paper towels and milk. During the depths of the Great Recession in 2009, Target had started expanding food sections and advertising low prices, a departure from the “cheap chic” image it had long cultivated that set it apart from competitors.
Target also hoped to get a boost from a 5 percent discount for its debit card and credit card holders, started last October.
Target has promised investors that revenue at stores opened at least a year would increase between 4 percent and 5 percent this year. Last year, the increase was just 2.1 percent. But an uneven economic recovery and some merchandising missteps by Target have resulted in disappointing sales gains so far this year.
Higher-income shoppers, feeling better about their fortunes, are returning to department stores like Macy’s. Low-income shoppers are under more financial stress because of higher gas and food prices. They’re being drawn more to dollar stores, which have added more name-brand food and are more conveniently located.
But Target isn’t just a victim of circumstances, analysts say. They say its newfound emphasis on necessities may have gone too far, turning off shoppers who had been going there for small luxuries like dresses or home accessories. In addition, competitors like J.C. Penney Co. and Kohl’s Corp. have added more exclusive, affordable lines from fashion designers. That could be stealing middle-income customers from Target. In home furnishings, Bed, Bath & Beyond is becoming an increasing threat.
Groceries also typically have lower profit margins than other merchandise in Target stores.
The 5 percent cardholder discount has helped get Target’s highest-income shoppers to spend more, analysts say, but that’s only a marginal benefit when the rest of its customers are sticking to basics.
The shareholders’ question period during the meeting, however, wasn’t about performance, but about politics.
Steinhafel was confronted with critics seeking transparency on future political spending after a donation last August of $150,000 to a political group backing Minnesota Republican candidate Tom Emmer, an opponent of gay marriage who lost last year’s governor’s race. Target later apologized and tried to repair its image by creating a committee to scrutinize donation decisions.
The controversy led to singer Lady Gaga cancelling a deal to sell a special edition of an upcoming album.
“We learned a lot last year. We took the feedback seriously,” Steinhafel told shareholders. “We now have a better process in place. ... We do not want to take a role on social issues. ... We are a retail store. We welcome everybody.”
But Steinhafel stopped short of committing to full disclosure of all political activities in a testy question-and answer session, disappointing some in the audience.
“Target has a chance to turn back from its mistakes. We don’t see that response yet,” said Bill de Blasio, New York City Public Advocate & Trustee of New York Employees Retirement System, which holds $50 million in Target shares and is pressing the issue, said during a press call on Tuesday.
Target, based in Minneapolis, operates 1,752 stores in 49 states.
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