Target just had its best quarter ever thanks to pandemic bulk buying
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Target reported a monster quarter on Monday, as online sales nearly tripled thanks to the retailer’s array of same-day order delivery and retrieval services that gave pandemic-weary shoppers ways to pick up goods in parking lots and other alternatives to going to the store.
The retailer said comparable sales rose 24% in the quarter ended Aug. 1, by far the best performance in the 58-year-old company’s history, and twice the rate as the year’s first quarter. It helped that Target has been deemed an essential retailer by selling groceries and staples. But the company has also helped itself by investing in tech to integrate stores and e-commerce, helping online sales rise 195% in the quarter. Some 10 million Americans shopped on Target’s e-commerce site for the first time.
Target shares rose 7% in premarket trading, which would bring them to an all-time high.
But its 1,900 stores played in starring role in Target’s blockbuster quarter. Target in recent years has spent billions to equip stores to ship online orders or make it easier to have shoppers come and retrieve them.
The use of Target’s drive-up, in-store, or same-day Shipt services nearly quadrupled during the quarter, showing how crucial its stores are to its e-commerce as well. And they also help make e-commerce more profitable by reducing shipping costs. Target’s profit rose 81%.
Target, which has launched a panoply of popular new store brands in the past three years, also had success getting people to shop in its stores, where sales rose more than 10%. Target executives pointed to big gains in categories such as food, electronics, and home goods, items that typically foster in-store visits.
Target CEO Brian Cornell told reporters on a briefing he estimates the company won $5 billion in sales from other retailers in all categories since the pandemic started, a time that has seen 44 retailers file for bankruptcy protection and others like Macy’s close dozens of stores.
The company said electronics sales were up 70% as customers bought home-office items and video games. Home goods and beauty product sales rose more than 20%, while food, an area in which Target is finally finding its footing, growth was about 20%. Its Good & Gather grocery line has become a billion-dollar brand less than a year after its launch.
“In the current environment, each of our categories are performing very well,” Cornell said on the call. And unlike Walmart, which pointed to a marked slowdown in growth when government stimulus checks stopped, Target “continued to see strong growth,” Cornell said, with comparable sales in August up at least 10%.
Target total revenue reached $22.9 billion in the quarter, including $3.9 billion online, compared with $18.4 billion in the same quarter last year. Chains like Target and Walmart are benefiting from consumers’ growing tendency to consolidate shopping trips to stores where they can buy everything and minimize time in stores.
“Target has developed a proposition that is cohesive, which means its guests will happily shop multiple (product) categories, allowing Target to maximize its share of wallet,” Neil Saunders, managing director of GlobalData Retail, wrote in a research note.
Target’s flexibility has served it well so far in the pandemic, and the company will need to tap into that as uncertainty around consumer behavior is likely to continue into the new school year and the holiday season. Cornell said back-to-school sales, off to a slow start, were hard to get a handle on. He noted that some data suggest 66% of students are starting the school year remotely.
“Sitting here today, I don’t know if 30 days from now that number is going to be 6% or 96%,” he told reporters. “So we’ve got to be flexible, we’ve got to be adaptable.” Thus far, Target has been, explaining its record-setting success.