People wearing masks avoid social distancing as they wait in line to enter Target in Herald Square amid the coronavirus pandemic on May 16, 2020 in New York City.
Alexi Rosenfeld | Getty Images
Target reported Wednesday fiscal third-quarter earnings that easily outpaced analysts’ estimates as the discount retailer won market share by turning shoppers’ pandemic habits into lasting gains.
The company said it grabbed market share across all of its core categories, from apparel to beauty. Year to date, it said it has won $6 billion in market share, with $1 billion in share gains coming during the latest quarter.
Buoyed by this strength, sales online and at stores open at least a year rose 20.7% during the third quarter. Comparable digital sales grew by 155%, while same-store store sales climbed 9.9%.
Despite the strong results, Target declined to provide an outlook. It withdrew its forecast during the first quarter as the coronavirus made predicting shopping habits more difficult.
Shares are up more than 3% in premarket trading.
Here’s how the company did in the fiscal third quarter ended Oct. 31:
- Earnings per share: $2.79, adjusted vs. $1.60 expected by a consensus of analysts surveyed by Refinitiv
- Revenue: $22.63 billion vs. $20.93 billion expected by Refinitiv
- Same-store sales: up 20.7% vs. 11.2% expected by StreetAccount estimates
Target said its third-quarter net income rose to $1.01 billion, or $2.01 per share, from $714 million, or $1.39 per share, a year earlier. Excluding items, Target earned $2.79 per share, considerably more than the $1.60 per share expected by analysts.
Total revenue grew 21% to $22.63 billion from $18.67 billion last year, besting analysts’ expectations of $20.93 billion.
More frequent trips
While some retail rivals had to shutter in the early months of the pandemic, Target’s nearly 1,900 stores remained open as an essential retailer that could sell a wide range of goods, from gallons of milk to pajamas and laptops. In recent months, even as shopping mall competitors have opened again, Target said it has held on to customers and won more of their wallets.
Customers shopped more frequently with Target in the third quarter and when they did, they put more in their baskets, the company said. Combined transactions in Target stores and on its website were up 4.5% year over year. The average ticket grew 15.6% in the third quarter.
Sales in all of Target’s merchandise categories were higher in the third quarter than the same time a year earlier. Electronics shot up by more than 50%. Home rose by a mid-20s percentage rate. Apparel increased by nearly 10%. And the other two categories, essentials & beauty and food & beverage, grew in the high teens.
Plans to grow beauty, apparel
Target is making long-term plays to pick up business from struggling department stores and hard-hit mall staples. The company announced last week that it will open smaller versions of Ulta Beauty shops inside of hundreds of its stores with a curated assortment of products, from hair care and perfume to lip gloss. More than 100 of the shops are expected to open next year.
Target CEO Brian Cornell said on a call with reporters that apparel has been a bright spot for the retailer, too — and one it plans to lean into. Along with loungewear, sleepwear and intimates, he said kids’ and men’s clothing performed well during the three-month period.
“Apparel has been one of our strengths, [and] certainly from a market share standpoint, one of the real highlights for our business throughout the quarter, and we certainly see that continuing as we finish up the year,” he said.
The big-box retailer’s online options have remained popular. Its curbside pickup service, Drive Up, increased more than 500%. Target’s home delivery service Shipt grew nearly 280%. And Order Pickup, an in-store option that allows customers to retrieve online purchases in person, climbed more than 50%.
The pandemic, however, changed the rhythm of sales and the purchases that customers made, Cornell said. Since many schools and colleges began the year with remote learning, Target kept merchandise on the shelves and customers did back-to-school shopping later, he said. Those purchases drove cost growth in the mid-20% range in September, he said.
Many hours at home have translated to “outsized growth in electronics,” he said, such as purchases of computer software, video games, portable electronics and office equipment. And shoppers bought more than usual in the home category as they replaced decor and bought kitchen supplies.
Holiday buying began early
As the pandemic continues amid the holiday season, Target kicked off sales early and has tried to differentiate on safety and convenience. Last month, the company said it would devote twice as many parking spots to curbside pickup. It added features to help shoppers during the typically busy time, such as a website tool they can use to check if there’s a line outside of their store and if so, reserve a spot ahead of their visit.
Cornell said customers have begun buying presents already, “but they still have a very long shopping list that they have to fulfill over the next few weeks.”
“We expect them to be decorating their homes,” he said. “We expect a lot of gift giving as many families will be shipping gifts across the country and be celebrating very differently than they had in the past.”
He added, “this is a holiday season when the guest is going to try to find that little bit of joy.”
This story is developing. Please check back for updates.