REDcard Loyalty Lifts Target’s Spirits

Target’s first-quarter results across-the-board were less than stellar – including decreased profits, lower-than-anticipated sales, and a dip in same-store sales for the first time since 2009. But, during their May 22 earnings call company officials pointed to the very promising trends revolving around their REDcard Rewards program.

John J. Mulligan, Target’s EVP and CFO, said during the call that the penetration of the REDcard Rewards program reached 17.1% in the first quarter – up from 11.6% a year ago at the same time. The REDcard Rewards program offers shoppers 5% off most store products.

“While discounts from this program continue to put pressure on our gross margin rate, this investment pays back through the benefit of increased loyalty and sales,” Mulligan said during the call. “We continue to see households increased their spending more than 50% on average when they began using the REDcard, and in Kansas City, which is a year ahead of the rest of the country, penetration is above 20%, and the rate of increase has shown no sign of slowing down.”

Gregg W. Steinhafel, Target’s President and CEO, said the company opened 24 Canadian stores during the quarter and plans call for a total of 124 to open in Canada by year’s end. As they are in the U.S., Steinhafel said REDcard Rewards will be a key differentiator for Target in Canada and “we are encouraged that REDcard penetration of sales in our Canadian segment was ahead of plan in the first quarter.”

Steinhafel said Target plans to invest to drive adoption of the 5% REDcard Rewards and Pharmacy Rewards loyalty program, “which have proven to be unique and powerful differentiators and sales drivers. Both of these programs offer guests the opportunity for even greater savings, leading them to shop more merchandise categories more often.”

Kathryn A. Tesija, Target’s EVP, Merchandising and Supply Chain, said during the call that the company realizes the value of segmentation of stores and assortments based on store location and demographics that, ultimately, provide a superior customer experience. Target wants to continue to allow guests to choose their own offers and further integrate their experience into their social networks.

“We’re focused on providing a deeper presence of locally relevant products and brands across the store, including categories like food, beauty, home, and entertainment,” Tesija said.

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