Target Corp. crushed all estimates for its second quarter as it posted skyrocketing profits and the strongest quarterly same-store sales growth in its history amid strong digital and store growth.
As if that wasn’t enough, the retailer said it has gained approximately $5 billion in market share during the first half of the year, surpassing all of 2019.
Unlike some retailers, Target didn't credit the stimulus checks for its blow-out quarterly results. Instead, company CEO Brian Cornell pointed to all the activities that have been temporarily shut down due to COVID-19.
“In the pandemic, we’re not going to restaurants, we’re not going to movies,” he said on CNBC’s “Squawk Box." “Those traditional summer trips have been canceled. We’re not on planes. We’re not spending dollars on lodging, so many of those dollars have been redirected into retail.”
Target's total comparable sales grew 24.3% in the quarter ended Aug.1, the strongest Target has ever reported. E-commerce sales nearly tripled, increasing 195%. Same-store sales rose 10.9%.
The company's net income soared 80% $1.69 billion, or a record $3.35 per share, up from $938 million, or $1.82 in the year-ago period. Adjusted earnings per share were $3.38 per share, also a record. The Street consensus was for $1.63 per share. Target said its strong operating performance offset “unprecedented investments” in employee pay and benefits. (In July, Target raised its minimum wage to $15 per hour.)
Revenue rose to $22.98 billion, up from $18.42 billion last year, and easily topping estimates for and $19.97 billion. The company recorded growth across its five core merchandise categories, with apparel moving from a first-quarter decline to double-digit growth in the second. The retailer saw its strongest sales in electronics, up more than 70% over the same time last year. Target’s new private label grocery brand, Good & Gather, which debuted last fall, hit $1 billion in sales.
In a statement, Cornell noted that Target’s stores were the key to its “unprecedented growth” during the quarter. More than 90% of its sales growth involved a store, whether the customer made the purchase at the register, had it shipped it from a store or picked it up at a store. Stores enabled more than three-quarters of Target’s digital sales. In-store pick-up sales increased more than 60%.
The retailer added 10 million new digital customers in the first half of the year as its same-day fulfillment offerings grew 273%. The fastest-growth was in drive-up, up more than 700%. Sales fulfilled by Shipt grew more than 350%.
As fall approaches, retailers nationwide are wondering what the holiday season will look like given all the uncertainty surrounding the pandemic. On the company's quarterly earnings call, Cornell told analysts that Target's research indicates that customers still want to celebrate seasons and holidays, "even as they acknowledge the things will be different in this new environment."
"To help our guests adapt to these changes, we're building flexibility into our merchandising and operations, to allow our guests to celebrate the season in new ways," he said. "Knowing that many parents across the country are still facing uncertainty about whether their children will be attending school in person or virtually, we'll be featuring our back-to-school assortment for an extended period this year, allowing parents to delay shopping until they have more certainty on their school district plans."