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Instant Analysis: Target Corp. Bets Big on Small Stores

By Rich Duprey - Jan 4, 2016 at 1:30PM

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The retailer has announced plans to open virtually nothing but small-footprint stores over the next two years.

What happened?
Target (TGT 2.76%) released its list of store openings for the coming year and 2017, and all but one were of the sort it had previously branded as CityTarget or Target Express but rebranded under the corporate Target banner.

Does it matter?
One of the biggest trends in retailing today is the reduction in size of store footprints, arguably led by Wal-Mart (WMT 0.21%), which has accelerated the number of small-format stores it will open compared to the number of supercenters.

But Target has also experiment with these smaller concepts, though unlike its larger rival, which gathered its test stores under the Neighborhood Markets banner, it opted to rebrand all of its stores as Target, no matter their size or what they're selling.

The benefit of these pocket-sized stores, which range between 19,000 and 45,000 square feet, is they can fit into spaces the larger stores, which can run upwards of 160,000 square feet, can't. Of the 14 stores small-format stores Target is opening over the next two years, all of them will be in urban areas. The one large-format store scheduled to open this year will be in Allentown, Penn. and weigh in at 122,000 square feet.

There is risk for Target, though, since by branding all of its stores as Targets, consumers may be disappointed to find they're the scaled-down version and don't carry all of the products they've come to expect. On the other hand, urban dwellers might not have need for broad product selection because they have limited storage space. It also gives Target the opportunity to target niche markets since they're drawing on a more narrow geographic location.

It was expected that Target would accelerate its small-footprint concept, and the store opening list for 2016 and 2017 indicates it is indeed full-speed ahead.

Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$128.58 (0.21%) $0.27
Target Corporation Stock Quote
Target Corporation
$169.67 (2.76%) $4.55

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