MINNEAPOLIS — Canned peaches, criminal records and political contributions were among the top shareholder concerns expressed at Target’s annual meeting on Wednesday afternoon.
The meeting, held inside a soon-to-open CityTarget store in downtown Chicago, lasted less than an hour and featured a brief recap of the company’s 2011 performance from chairman, CEO and president Gregg Steinhafel. He touched on previously disclosed details regarding some of the company’s key strategic initiatives, such as the 5% REDcard Rewards program and the PFresh store remodeling program. Both are key drivers of Target’s improved financial performance and enabled the company to produce a first quarter same-store sales increase that was the strongest in six years.
Last year target set a record and remodeled 400 stores to its PFresh format which features expanded food and consumables. The program, now in more than 1,000 of the company’s former general merchandise stores, has begun to decelerate with 230 remodels planned for this year while new store growth ticks up to between 20 and 25 stores.
The REDcard program, which offers a 5% discount to those who pay with a Target debit or credit products, doubled its penetration rate last year to account for 9.3% of purchases. Steinhafel thinks that figure could go higher as the penetration rate in Kansas City, where the program was first tested, is now at 16%. Another key highlight mentioned by Steinhafel is that Target now has 10 proprietary brands that generate annual sales in excess of $1 billion.
He also alluded to the growth potential of the CityTarget format, noting that the Chicago location where the meeting was held with be one of three (Los Angles and Seattle are the others) locations to open next month. They will be followed by October openings in San Francisco and a second Los Angeles location. A third Los Angeles location will open in 2013 along with a location in Portland.
Despite the improvements highlighted by Steinhafel, when he opened the floor for questions shareholders took the meeting in a direction unrelated to the company’s growth prospects or ability to execute key initiatives.
Instead, what executives got were questions about political contribution policies, some of which related to a now two-year-old issue that arose after Target gave money to a candidate opposed by the gay and lesbian community. Another speaker took exception to Target selling gay and lesbian pride T-shirts on its website and felt the company had been pressured into doing so. Another speaker questioned the need for Target to be involved in the Retail Industry Leaders Association trade group.
Steinhafel defended the company’s involvement, noting that while there is a risking related to involvement in politics, legislative and regulatory matters, the bigger risk is not participating.
“We focus our energies around two things; swipe fee reform and efairness,” Steinhafel said. “It is important for us to have a seat at the table because we want a level playing field.”
Another shareholder took exception to Target’s efforts in the area of sustainability and seemed concerned that the company’s environmental efforts were resulting in higher prices. He encouraged the company to produce a report showing how much its efforts were adding to the cost of goods. Another shareholder appearing on behalf of a person who was denied unemployment wanted Target to reform its hiring practices.
And then there was a gentleman from California concerned that Target’s canned peaches are sourced from China and cost more than those sold at Walmart that are sourced from California.
EVP merchandising Kathee Tesjia vowed to look into the matter and apologized because the company is relatively new to the food business but looking to beef up its local sourcing efforts. Steinhafel took it a step further and said, “There is no excuse for us to ever be higher priced that our competitors on a similar item.”
The meeting ended with a long-time shareholder lamenting that no one ever talks about all the good stuff Target does.
“The board is doing a fantastic job and the stock is way up. Thank you,” he said.