It would have been tempting to do so.
Target managing director Stuart Machin says green shoots are emerging but the retailer has much more to do. Photo: Wayne Taylor
When former Coles executive Stuart Machintook the reins at the struggling Target chain two years ago, colleagues suggested he copy Guy Russo's successful model at Kmart.
It would have been tempting to do so. Kmart has been one of the star performers in the Wesfarmers stable, lifting earnings by 146 per cent between 2009 and 2012 and by 296 per cent over the last five years.
Kmart's success has come at the cost of its sibling.
Target's earnings had fallen 32 per cent in the two years before Mr Machin left Coles to oversee the turnaround at the 90-year-old chain and profits have fallen another 63 per cent since then.
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Mr Machin, a veteran of the UK retail scene, took a different tack, differentiating the mid-market retailer from its rivalsand taking on global fast-fashion chains with a more on-trend clothing and homewares range while reducing its reliance on discounting and moving into the 21st century with an integrated online and bricks and mortar offer.
The strategy finally appears to be paying off.
Target's same-store sales rose 3.2 per cent in the three months ending September, the first positive quarterly same-store sales growth since 2013, and it didn't come from discounting or inventory clearance.
Target is now selling 80 per cent of product at first price, up from 30 per cent two years ago, after cutting prices by an average 20 per cent across the board, culling its range by 30 per cent, and revamping marketing to focus squarely on its target market, mothers.
Affordable fashion opportunity
"There's still lots to do and I wouldn't get too carried away by one quarter," Mr Machin told Fairfax Media.
"But we have started to really work out we can do affordable fashion, we can differentiate on quality and we want to do that even more," he said.
"We want to be down to earth, we want to offer affordable fashion ��� mums are at the heart of the brand. We don't sell fishing rods but we do well at selling $39 dresses. We won't do everything in camping but we do brilliantly in kids wear."
Mr Machin has high hopes for a new store format which further differentiates Target from its peers by offering personal styling, in-store clothing alterations, T-shirt printing, a wider range of specialty foods, better visual merchandising and coffee shops to encourage customers to linger.
The first new format store opened at Chadstone, the second opens this week at the new Eastland Centre in Melbourne and three are due to open next year in Sydney, in the Macquarie Centre at North Ryde, Miranda and Chatswood.
"Our new format is one way of showing innovation but also our new format has demonstrated we can be different in that discount department store space," Mr Machin said.
"We are seeing an uplift in margins and sales ��� what we need to do is be confident we can get return on capital and so far we can," he said.
Macquarie Bank analyst Bryan Raymond says trial stores are outperforming the network "considerably" and expects Target to accelerate the rollout of a new format to boost sales.
However, Mr Machin wants to take a cautious approach until he is certain the new format is the answer. "Let's be slow but stick to it," he said.
While Kmart's new online store is a work-in-progress, Target's online store is already profitable and the retailer is set to complement its successful click and collect service with free click and collect, and home delivery when online customers spend more than $39.
Target's green shoots are emerging just as the Australian department store market becomes even more competitive, with Myer and David Jones embarking on new strategies to take market share and BIG W intent on reversing a four-year slide in sales and profits.
Last week, UK retailer Debenham unveiled plans to enter Australiain a concession deal with Harris Scarfe and Marks & Spenceris slated to open its first store in mid 2016.
"Yes there is a lot of competition and it's more competitive than ever with ever increasing international online and bricks and mortar stores, but we are Australian owned and always have been and we employ 20,000 people," Mr Machin said.
"We have our own buyers and designers of product and after 90 years we are determined to keep improving our service and product so Target increases its importance and remains a part of the Australian retail landscape."
His biggest challenge now is getting the message across to consumers that Target has changed.
"Our volume is growing but not enough ��� we need to drive volume more to pay for the lower prices," he said.
"I'm confident people will see a difference. We lost quite a few customers 4 to 5 years ago, we are finding a few more every week coming back ��� if that happens and they're happy we should have a good Christmas."