Grocery sales in Target's LA25 test stores are 2-3% higher, reveals CEO

By Elaine Watson contact

- Last updated on GMT

Grocery sales in Target's LA25 test stores +2-3%

Related tags: Chief executive officer, Gluten-free diet

Target has seen meaningful uplifts in grocery sales in ‘LA25’ stores where it is testing new merchandising concepts, but has had a challenging quarter owing to deflationary pressures, chairman and CEO Brian Cornell told analysts this week.

Speaking on the firm’s second quarter earnings call, Cornell said he was disappointed to see a “small comp sales decline​” in grocery during the quarter and would be “revisiting our second half grocery efforts from presentation to assortment to promotion to improve our competitive position​.”

However, changes made to the food area in the LA25 test stores – a group of 25 stores in the Los Angeles areas where Target is testing out new concepts –  had “really resonated with guests​,” he revealed.

“Grocery sales in these stores are trending two to three percentage points higher than the comparison stores. Relative performance in produce is even stronger, driving perishable comps that are more than five percentage points higher than the comparison stores.

“Guests have told us the new food area now feels more intimate and separate from the rest of the store, providing a distinct grocery shopping experience they prefer… we are seeing performance in those 25 test stores that are clearly, clearly really encouraging from a food standpoint.”

More organic, more natural, more gluten free, more local

However, the food offer in every store had changed significantly over the past few months, he said: “You are seeing more organic, more natural, more gluten free, more local items that are on trend…

“We have added thousands of new items. We have worked with our vendor partners to make sure we are bringing the right innovation, category by category. Our team is absolutely going literally item by item, commodity by commodity to look at how we source and how we flow product to improve freshness and the quality we present to our guests.”

 Walmart: We added grocery pickup to 30 more markets this quarter

Wal-Mart-store-interior-FOP

Walmart CEO Doug McMillon also discussed food deflationary pressures in the second quarter during the retailer's Q2 earnings call, but said the US grocery business had “showed improvement from the first quarter with positive comp sales and traffic, despite the ongoing deflationary impacts in food.”

The online grocery pickup service was also expanding, he said: “We added grocery pickup to 30 more markets this quarter bringing our total to more than 60 markets and nearly 400 locations.”

He added: “The distinctions that we talk about today between stores, apps, pick-up, delivery and sites are continuing to blur into the background for customers. For them, it’s just Walmart.”

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