Target is on a roll, boosting comparable store sales for the fifth quarter in a row and improving results across the board. It appears that Target’s enormous investments in just about every channel are working. The retailer’s better-than-expected Q2 results included:
- A 6.9% revenue increase, to $17.55 billion;
- Traffic growth of 6.4%, the strongest since Target began reporting the metric in 2008;
- Adjusted earnings per share increasing 19.8%; and
- Same-store sales growth of 6.5%, the fastest growth in 13 years.
Comparable digital sales rose 41% in the quarter, boosted by the one-day sale in July designed to compete with Prime Day and help Target test its systems before the holidays. The retailer promoted the “One-Day Sale” on July 17, generating its highest single day of web site traffic and sales in 2018, according to a company statement. Target reported that 90% of the orders placed online during Prime Day would be fulfilled from its stores.
In an interview with CNBC, Target CEO Brian Cornell said the company has continued to focus on three major areas of the business as it competes with Amazon and Walmart: opening and remodeling new stores, offering new brands to guests and leveraging Drive Up delivery and Shipt same-day delivery services.
Last year, Target revealed that it would invest $7 billion in capital in stores over the next three years, and the move has thus far paid off. The company plans to remodel more than 1,100 stores by 2020, with 300 planned for 2019.
Cornell’s other two focus points have been significant drivers of Target’s growth. The retailer has gone full-throttle into private label, adding 15 new brands over the past year, such as Hearth & Hand with Magnolia, Pillowfort and Goodfellow. On August 3, the company launched three new Millennial-focused brands: Heyday, Wild Fable and Original Use.
And nearly nine months after acquiring Shipt, Target has rolled out same-day delivery of groceries and other merchandise from more than 1,100 stores in 160 markets. The company will continue to expand to new markets and reach 65% of U.S. households by holiday 2018. Additionally, the Drive Up service is now offered at more than 800 stores, while the Target Restock same-day delivery service now reaches 75% of U.S. households.
Target isn’t settling for just these changes, however, particularly as peak shopping season comes into view. In the CNBC interview, Cornell noted that his company seeks to fill the void of the Toys ‘R’ Us/Babies ‘R’ Us liquidation ahead of the holiday season by investing more in toys and baby products.
“With Toys ‘R’ Us going away, with Babies ‘R’ Us going away, we’ve got to make sure we are taking more than our fair share of that market share,” Cornell said. “That’s going to drive even more trips to our stores in the back half.”