So much for the demise of brick-and-mortar retailing.
Target (TGT) on Wednesday reported a surge in shopper visits and digital sales that fueled its biggest comparable sales gain in 13 years, proving that its strategy to integrate stores and e-commerce is the winning one in competing with its chief rivals Amazon.com (AMZN) and Walmart. (WMT)
Its shares, which had rise 28% so far in 2018 through Tuesday’s close, rose another 6.8% to hit an all-time high.
The discount retailer said comparable sales, which includes digital sales but excludes business at store opened or closed in the last year, rose 6.5% in the quarter ended Aug. 4 from a year earlier, its best quarterly performance since 2005. Total revenue jumped 6.9% to $17.8 billion. Meanwhile, digital sales rose 41% proving that e-commerce and stores enhance one another, rather than eat into each other’s business. (Same-store sales were up 5%.)
Target is in the middle of a $7 billion, multi-year program to remodel stores, including configuring them to facilitate online order pickup and delivery. The company has expanded services like same-day delivery and curbside pickup to make online ordering easier. Target CEO Brian Cornell told reporters on a media briefing that the majority of target.com orders and now filled by stores. By the upcoming holiday season, Target will be able to offer same-day delivery to about two-thirds of U.S. households, facilitated by its acquisition last year of logistics company Shipt last year.
And while Cornell said the consumer environment was the best he’d seen, it’s clear that Target has helped its own cause with those e-commerce investments, as well as the successful launch of now a dozen new brands it has launched in the last 18 months that give shoppers a reason to come to stores. Home goods, a focus of Target’s new brands, sales were up more than 10%.
Target’s sales growth beat that of rivals such as Walmart andKohl’s which have also reported good quarters, suggesting it is winning business from its rivals in some categories. “But it’s more than just that as we see broad market share gains across all our major categories,” Cornell told Wall Street analysts on Wednesday. Target has successfully made a big play for bankrupt Toys ‘R’ Us’ business.
And the company does not see its momentum slowing anytime soon. Target raised its full year adjusted profit forecast to $5.30 to $5.50 a share, from an earlier projection of $5.15 to $5.45. The company thinks comparable-store sales in the second half of the year will be roughly 4.8%, on par with its performance in the first half of the year.