Target reports strong third quarter; Good & Gather plays its part

Target announced banner third-quarter earnings, growing total revenue by nearly 5% during the quarter. The company nodded toward “encouraging results” from the its new Good & Gather store brand.

CEO Brian Cornell said the spectacular results are further proof of the durability of Target’s investment strategy. He said the retailer has an "unmatched suite" of easy and convenient fulfillment options and an assortment of national and private label brands that are winning over more shoppers.

Target reported same-store sales of 4.5% during the third quarter ended Nov. 2. Earnings per share were $1.36 on net income of $714 million. Total revenue grew 4.7% during the quarter to $18.67 billion from $17.82 billion a year earlier, beating analysts’ expectations for $18.49 billion. 

While stronger sales in adult beverages, food, beauty and apparel were bright spots fueling the growth, Target added that the Good & Gather brand has made healthy traction since its launch in September. “We saw encouraging results from our launch of 650 items during the quarter and expect that Good & Gather will become our largest owned brand, once we roll out the full 2,000-item assortment by the end of next year,” Cornell said during an earnings call with analysts.

“The idea behind the brand is simple: Great food made for real life. Good & Gather incorporates simple, high-quality ingredients without any artificial flavors, synthetic colors, artificial sweeteners, or high fructose corn syrup,” he said.

“The initial response from the guest has been fantastic,” Cornell added. “I think it's really on trend with what the consumer is looking for in food and beverage from Target. Our team has done a fabulous job with the packaging. Despite our strength in own brands overall, we're under-penetrated from a food and beverage standpoint. So we think there is significant upside over time. And we think within the next year or so Good & Gather will likely be our single largest-owned brand at Target.”

Target said traffic during the third quarter was up 3.1%. The average transaction amount grew 1.4%.

Target raised its same-store and profit outlooks for the year based on the strength of its e-commerce, grocery, beauty and apparel strategies going into the holiday quarter.

The company said digital sales surged 31% during the quarter, with its e-commerce options including delivery and curbside pickup accounting for 80% of digital sales growth.

Target said it is seeing “amazing strength in beauty and cosmetics, which delivered high-single-digit comp growth in the quarter.” In the food and beverage categories, Target saw double-digit growth in adult beverages, along with strength in nonalcoholic beverages and in the bakery and deli departments.

Apparel had comp sales growth of more than 10% during the quarter. This was driven by even stronger trends in jewelry, accessories and shoes, intimates and sleepwear, young contemporary and women's ready-to-wear, the company said.

As the company enters the holiday season, Target said it is the first retailer to offer curbside pickup (which it calls Drive Up) in all 50 states, encompassing more than 1,750 locations. Also new this holiday, same-day delivery with Shipt, which offers delivery in as little as one hour, will be available directly from target.com and in the Target app. 

Target said its new loyalty program, Target Circle, which launched nationwide last month, already has more than 35 million members, “making it America's fastest-growing loyalty program,” Cornell said.

For the fourth quarter, Target expects same-store sales growth of 3% to 4%, and adjusted earnings per share of $1.54 to $1.74.

Minneapolis-based Target operates more than 1,800 stores, 39 distribution centers and Target.com.