Target reported yet another strong quarter of growth in Q2. With comps up 3.4% on top of the impressive 6.5% comp it achieved in the year-ago quarter, Target is proving that its strategies have staying power and are resonating with guests. Stores contributed a 1.5% comp while online sales grew 34%, both heavily driven by increased traffic. Target’s same-day fulfillment strategies continue to drive more sales and now account for one-third of total digital sales and three-quarters of Target’s digital comp. Store remodels also continue to contribute positively to comps. With 84 remodels completed in Q2, Target is on track for 300 remodels in 2019. Another 300 stores will be remodeled in 2020 with current plans to remodel about 150-200 stores per year thereafter.
From a category perspective, Target achieved growth across a wide variety of departments. Apparel, beauty, and essentials achieved 5% comp growth, while food and beverage saw a low single-digit comp. Its Vineyard Vines collaboration — one of the strongest in the company’s history — will be featured in the upcoming anniversary release of some of Target’s top styles from its brand partnerships over the past 20 years.
Several areas drove much of the conversation about the quarter, including the role of stores, growing private brands, preparing for an uncertain economic future, and investing in teams. All raise important questions for suppliers.
Stores as both destinations and fulfillment hubs: Target will continue to seek both productivity and efficiencies in stores through its new operating model as it looks to enhance the store experience with better merchandising and marketing. While the goals will remain the same, the remodels will change over time as Target tests and learns from previous iterations and incorporates new practices in each location. The rapid adoption of its same-day fulfillment capabilities has changed — and will continue to change — how Target operates. Supplier question: How will all of this change how shoppers interact with stores?
The evolution of private brands: Though new brand introductions are slowing, the latest addition to Target’s portfolio is significant since it is the first in quite some time in the food and beverage category. Good & Gather will be the retailer’s new flagship food brand, launching with 600 SKUs and growing to more than 2,000 next year. Supplier questions: How will this new brand affect Target’s shelf strategy in food? What can we learn from other categories Target has recently disrupted with brands like Ever Spring and Smartly?
Preparing for an uncertain future: With tariffs looming, Target is preparing for all scenarios in the face of economic uncertainty. Supplier questions: How will shoppers be affected by a potential slowdown? How can suppliers best position themselves to support Target and its guests through the disruptions to come?
Investing in diversity: Underlying each successful effort discussed this quarter was management’s focus on creating and supporting great teams to execute and deliver on these strategies. Target has a strong focus on inclusion and diversity both in how it operates and how it serves guests. Supplier question: How is your company investing to align with Target’s inclusive strategies that target growing and diverse shopper segments?
We will address these questions and more at our Target Workshop in Minneapolis on Oct. 3. See the detailed agenda and register for the event here.
In the meantime, stay tuned to KantarRetailIQ.com for our full analysis of Target’s Q2 results, and check out our existing research on all things Target on our Target Insights Center.
For more information, please contact:
Tiffany Hogan, Senior Analyst