The same confident, positive tone set during the retailer’s Investor Day in March continued throughout the first quarter’s earnings report. Target remains confident in its store-focused initiatives and bolstered by this strong start to 2019.
By the numbers
Target saw its eighth consecutive quarter of positive comps, exceeding its own plans and expectations with sales up 5.1%, comps up 4.8% and digital sales growth of a whopping 42%. This digital performance accounted for around half of the company’s comp, while another significant factor was a 4.3% increase in store traffic.
This strong start to the year online means that Target is currently on track to grow its digital sales by around $1 billion in 2019. This growth continues to be fueled by its same-day fulfillment methods of Pick Up, Drive Up, and Shipt, which accounted for over half of the growth. Drive Up is now available in 1250 stores and Shipt is operating in markets spanning 1500 store locations.
Stores also played a significant role in Target’s performance. 53 more stores were remodeled in the quarter, helping to both drive increased traffic and support the efficient in-store fulfillment of digital orders. Stores processed around 80% of Target’s digital orders for the quarter, helping to deliver products to guests faster, and achieve better margins vs. traditional shipping methods. Seven new urban stores also opened during the quarter, and store-to-door delivery services in these locations reportedly drove baskets 5x larger than those of the average urban store guest.
Categories & Brands
Target continued to focus on adding private label and exclusive brands to both Style and Frequency categories, with the launch of three new lingerie brands (Auden, the Stars Above and Colsie), seasonal brand Sunsquad, and Everspring brand in essentials, focusing on natural ingredients and packaging. Its popular California Roots brand also expanded into wine, helping to drive the adult beverage category to be the strongest performer in the Food & Beverage category. Target also saw continued strong performances in baby and toy, indicating continued growth and potential share gains in the categories.
For Q2, Target expects comps in the low- to mid-single digits, slightly below its Q1 performance, as it laps the boost from last year’s closure of Toys ‘R’ Us and Babies ‘R’ Us. For the year, it is maintaining its annual guidance of low- to mid-single digit comps. Management also did take time to comment on tariffs, noting that those set to go into place in June are baked into its current outlook, and that its diversified category offer will help it to hedge against any future tariff increases.
Stay tuned for an in-depth review of Target’s Q2 performance on KRIQ.com in the coming days.