While Target was able to beat Wall Street earnings estimates for Q4, the retailer still had a relatively mundane season in terms of revenue growth — largely due to weak sales in the key holiday categories of toys, electronics and home goods. In the quarter, Target’s net income grew to $834 million, or $1.63 per share, from $799 million, or $1.52 per share, a year earlier. Net sales grew 1.8% from to $23.4 billion in that period, while same-store sales jumped 1.5%.
Target’s comparable digital sales were up by 20% in Q4, lower than the 31% growth of Q4 2018. Same-day services were the backbone of the company’s holiday e-Commerce growth. In total, in-store “Order Pick Up,” curbside “Drive Up” pickup and Shipt delivery accounted for more than 80% of Target’s Q4 comparable digital sales growth. In 2019, the Target Drive Up service saw total sales growth of more than 500%, and Order Pickup saw sales growth of nearly 50%.
These increases are good news for the retailer’s bottom line: Target says these store pickup options are more cost efficient, with Drive Up and Order Pickup options 90% cheaper than shipping from a warehouse. The retailer is testing the addition of popular grocery items like milk, eggs and alcoholic beverages to these services.
The retailer’s Q4 same-store sales were right in line with the company’s previously revealed November and December holiday results, which saw growth of 1.4%. The company found strength in apparel and beauty, but slow sales in the toys, electronics and home goods categories offset those gains.
“Target’s Q4 results reflect the positive impact of pricing discipline and prudent inventory management on operating margins as, despite a heavily promotional season and previously announced sales softness in electronics and home, it was able to improve margins by 20 basis points (0.2%),” said Moody’s VP and Lead Retail Analyst Charlie O’Shea in commentary provided to Retail TouchPoints. “Stores continue to be significant contributors to Target’s online growth, and the various same-day product availability options are clearly resonating with its shoppers. Guidance continues to reflect Target’s expectations that its various investments and product initiatives will generate additional traction and improved profitability.”
In fiscal 2020, Target now anticipates earnings per share to range from $6.70 to $7, compared with analysts’ estimates of $6.87. The retailer said same-store sales will grow by the “low single digits,” while analysts forecast that they’ll be up by 3.2%.