By most measures, Target had a successful Q3. The retailer saw quarterly adjusted earnings per share ($0.91), revenue ($16.67 billion) and same store sales growth (0.9%) beat estimates, with digital sales jumping 24%. In a November 15 interview with CNBC’s “Squawk on the Street,” Target CEO Brian Cornell noted: “We feel really good about our performance, the progress we’ve made — and I feel really confident that we’ve got all of the elements working well as we go into Q4.”
But despite these promising results and Cornell’s upbeat response, projected numbers for the holiday season fall short of analysts’ expectations. Target forecast adjusted earnings of $1.05 to $1.25 per share for Q4, considerably below the average analyst estimate of $1.24, leading the retailer’s stock to dip more than 9% after the earnings reveal.
CEO Cornell: “Stores Still Matter”
In the CNBC interview, Cornell said he was surprised by the shareholders’ reaction, but re-emphasized the importance of brick-and-mortar stores. Cornell noted that more than half of Target’s digital sales growth is enabled by its stores.
“I feel good about our store performance,” Cornell said during the interview. “Whether it’s someone ordering online and picking up in a store, someone ordering and driving up to a store — we ship from store now at 1,400 locations — our stores really enable our digital growth. I love the fact that in a given week, approximately 30 million Americans shop in our stores. There’s a great balance between what we do in our stores and how that enables our digital fulfillment.”
In February, Target revealed that it plans to invest more than $7 billion in store renovations over the next three years. Target ended Q3 with more than double the number of small-format stores it had at the start. The big box retailer has 1,800+ locations in total, including 276 stores larger than 170,000 square feet and 44 stores smaller than 49,999 square feet.
Target is in the process of remodeling 1,000 of these locations by the end of 2020. The retailer has completed 37 store remodels in Q3 and will have finished 110 renovations by the end of the year. Same-store sales of the remodeled stores have been rising between 2% and 4%, according to Cornell.
Back To Basics
On top of the same-store sales growth, Target saw a 1.4% traffic increase in its stores. In the interview, Cornell noted that household essentials remain a major value driver for these traffic bumps. The retailer has slashed prices on thousands of household and grocery items in 2017 as it continues its pricing war with Walmart and Amazon, and even expanded its newly developed Target Restock next-day delivery service to 10 markets.
“We have invested to make sure we’re priced right every day, that we deliver the kind of value our guest is looking for in those essential categories,” Cornell said. “While the comps were down slightly, units were up, and that’s driving trips back to the essential categories. Once they’re there, they’re shopping the whole store. I expect comps to improve over time, but right now, units are growing in those categories. We’re regaining market share, it’s driving trips and that’s really important to our future.”
Latest from Glenn Taylor
- Exclusive Q&A With Babylist CEO: How Video Content And Multi-Retailer Data Spur Registry Growth
- After Year-Long Wait, Macy’s Launches STORY Concept Within 36 Stores
- Exclusive Q&A: Shinola President Reveals How Customer Insights Shape Evolving Loyalty Strategy
- Hibbett Sports CFO Resigns Soon After CEO Announces Retirement
- CVS Pharmacy Expands Same-Day Prescription Delivery To 6,000 Stores