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Target plans massive store closures, aims to be next Uniqlo

Target will close 20 per cent of its stores, and refocus on fashion.

Target will close 20 per cent of its stores, and refocus on fashion. Photo: AAP

Department store Target will close 20 per cent of its “store space” in the next five years, in an effort to offload its huge number of unprofitable stores.

This shrinking of the chain’s footprint will coincide with an attempt to emulate international fashion success stories like H&M, Uniqlo and Zara.

In an investor update on Thursday, Wesfarmers, which owns Target, revealed approximately 50 per cent of its Target stores were unprofitable.

In the next five years the most unprofitable stores would either disappear or be converted into Kmarts, Wesfarmers chief executive of department stores Guy Russo said.

Three Target outlets have already been converted into Kmarts – a brand that is also owned by Wesfarmers.

Mr Russo said the smaller Target would no longer attempt to compete with budget department stores such as Kmart and Big W.

“It’s H&M, Uniqlo and Zara,” he said, saying Target was emulating these three retailers’ approach to “fashion, quality, and fabrics”, but at a cheaper price.

“We’ve brought on three amazing designers. We also have an end-to-end design solution for Target, so it’s all done in house, has been for a while.

He said the Target management team’s mandate was to “up the fabrics, up the quality, up the fashion”.

“But as far as price is concerned, we’re already dropping items that are similar to those three brands, but about half the price. So I’m still talking $30, $40, $50, when [K-Mart] is talking about an average sell price of $5. I’m at least double that.”

He said that Target’s Danni Minogue jacket, which costs $59, had sold out. He claimed a similar item in H&M, Uniqlo or Zara would “have ‘1’ in front of it”.

Regarding “rebadging” Targets as Kmarts, Kmart boss Iain Bailey said this would only happen if it made commercial sense.

“We’ve done three stores in the last little while. Two have gone very well, one has been a bit more average than we would have liked, which we’re investigating and analysing. Every one that we do has to commercially stack in its own right,” he said.

Kmart has been much more successful than Target in recent years. But Wesfarmers revealed on Thursday that this success would not translate into a significant expansion of the chain.

In the next five years, Kmart expects to grow its store space by about 20 per cent.

Overall, it has so far been a big year for Wesfarmers. In March, the retail giant revealed it would offload its single biggest brand, supermarket chain Coles, and list it separately on the ASX.

In May, after months of speculation, Wesfarmers revealed it was calling time on its disastrous attempt to establish Bunnings Warehouse in Britain.

Wesfarmers’ announcements on Thursday caused the share price to drop slightly. By Friday afternoon most of the losses had been recovered.

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