Who says physical retail is dying?
Target reported yet another blockbuster quarter on Wednesday, led by a huge increase in sales at its physical stores that was complemented by continued online growth. The chic-discounter said comparable sales rose 22.9% in the first quarter, with most of that attributable to its thriving stores.
That came on top of a 10.9% increase a year earlier, showing how Target has emerged as one of retail’s biggest winners in the pandemic and its aftermath. It’s also well above the 6% clip Walmart reported this week for its U.S. stores. And it illustrates American shoppers’s desire to go spend again, at stores.
Indeed, visits to stores increased 17% year over year, as people’s spending shifted away from emergency stockpiling to a focus on more fun and more normal consumer behavior.
“The first quarter felt like a first step towards a post-pandemic world,” said Target CEO Brian Cornell on a call with Wall Street analysts Wednesday. “With vaccinations rolling out across the country and consumers increasingly comfortable venturing out, we’ve seen an enthusiastic return to in-store shopping.”
But Target was very much the author of its own success yet again. Under Cornell, Target in the last four years has invested billions to beautify and modernize its large fleet of stores with touches such as updated lighting and new wood panels on displays. The company also has equipped stores to serve as nodes in its e-commerce system. Some 95% of its online orders last quarter were filled by stores, either through delivery of merchandise sent from a store or customers picking up items at stores.
Target also has remade its portfolio of store brands, four of which now garner $2 billion in annual sales or more. And their success was central to the quarter’s sales increase: Apparel sales jumped more than 60%, while home goods and small appliances rose by more than 30%. Such items offer higher profit margins, helping Target report a profit of $2.1 billion—about seven times more than a year earlier. Revenue rose 23% to $24.2 billion in the first quarter.
And in a sign of how shopper behavior has changed, sales of food and household essentials grew only modestly, in contrast to a year earlier, soon after the outbreak, when shoppers were stocking up on such items.
The strong results led Target’s stock to an all-time high on Wednesday. Analysts believe the chic-cheap retailer’s hot streak will continue for a long time to come, well after the pandemic truly has receded.
“Quite simply, it is a best-in-class operator,” Neil Saunders, managing director of GlobalData, wrote in a research note. “The pandemic has helped it achieve great heights, but the superlative skill and prowess of the climber has also played a major role.”