Target reports its strongest quarter to date, preps final phase of Good & Gather
Target reported its strongest quarter to date, highlighted by an increase in same-store sales of 24.3% for the second quarter ended Aug. 1. Helping to drive this increase is Target’s own brands, which are outpacing the growth of national brands, are up 30% in sales overall, and growing in market share, said Brian Cornell, chairman and chief executive officer of Target Corp., during the earnings conference call.
Cornell also said the “flagship” Good & Gather food and beverage brand, in less than a year of being on shelves, has earned more than $1 billion in sales.
“Also, this fall, we’ll roll out the third and final phase of our Good & Gather assortment adding more than 600 items to bring the total number of items to nearly 2,000,” he added.
Cornell said during the call that the retailer’s exclusive brands and own brands are “enhancing Target’s differentiation and delivering attractive gross margin rates.”
An area where the company has a lot of store brand options is apparel, and it’s important to note, that Target reported a “double-digit” growth in comp sales for the quarter, compared to the previous quarter where it declined by 20%.
Helping to drive this is its activewear brand All in Motion, which Cornell said is thriving in a pandemic era, where activewear is the ideal work-from-home gear. Other categories that were down, include home products in decor, where consumers are doing more home projects. Target has a large assortment in that category, headlined by the Threshold brand. It also launched the new bedding brand Casaluna in June. Cornell gave the new brand a shout out for its use of natural materials like hemp, silk and cashmere at an affordable price.
He said Halloween will have a different look in the fall, too, with a lower assortment of candy, anticipating a dip in trick or treating, but costumes will be available, including its exclusive costumes. The retailer is also going to be rolling out gift bags with tips on how to celebrate Halloween safely this year.
Second Quarter Highlights
To go along with Target’s incredible 24.3% same-store sales increase, the retailer also reported a year-over-year jump in digital sales of 195%, accounting for 13.4 percentage points of Target's same-store sales growth. Target says its physical stores fulfilled more than 90% of Target's second quarter sales, however.
The services like Order Pick Up, Drive Up and Shipt grew 273% and accounted for approximately 6 percentage points of total company same-store sales growth. Specifically, Target’s curbside pickup service jumped by more than 700%.
As Cornell mentioned with its store brands, apparel stood out with its double-digit growth but electronics saw a 70% leap in sales, thanks to a need for equipment to work from home and a spike in gaming.
The food and consumables category dipped slightly compared to the previous quarter due to stock-up shopping but it still grew by 20%, year over year.
Lastly, Target’s second-quarter net income jumped 80.3% to $1.7 billion, or $3.35 per share, $938 million, or $1.82 per share, a year earlier. After excluding items, Target earned $3.38 per share. The company’s total revenue rose 24.7% to $23 billion from $18.42 billion a year prior, beating analysts’ expectations of $20.09 billion.
In the first half of the year, the company has gained approximately $5 billion in market share.
"Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9% and stores enabling more than three-quarters of Target's digital sales, which rose nearly 200%. We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team," said Cornell.