Target is showing that its aggressive investments in its stores, e-Commerce site, fulfillment and private label products have been fruitful in 2019: the retailer saw Q1 same-store sales jump 4.8%, lofted by e-Commerce sales growth of 42%.
Target’s earnings of $1.53 per share zoomed past Wall Street forecasts of $1.43 per share on net income of $795 million, while revenues reached $17.63 billion. Target also reported:
- Traffic at stores increased 4.3%;
- Transactions overall were up 4.3%;
- Average transaction amount was up 0.5%; and
- Profit margin expanded from 6.2% one year ago to 6.4% in Q1 2019.
The quarter’s digital sales increase heavily outpaced Target’s 29% Q4 holiday growth increase, and they represent 7.1% of all Target transactions, up from 5.2% one year ago. Same-day pickup and delivery services have contributed to 25% of overall same-store sales, with Target shoppers able to pick up online orders curbside at 1,250 stores or get same-day delivery on more than 55,000 items, thanks in large part to the Shipt delivery service.
While Amazon and Walmart are engaging in a back-and-forth over next-day delivery investments, a Target spokesperson said that half of its two-day shipping orders actually are delivered on the next day.
Target remodeled 400 stores between 2017 and 2018 as part of a $7 billion capital investment plan launched in 2017. The retailer said during a presentation to analysts earlier this year that it is remodeling another 300 stores in 2019, with 300 more remodels planned for 2020.
Although not reflected in the Q1 earnings, Target also generated buzz recently around the launch of its limited edition line with Vineyard Vines. When merchandise first hit stores on March 18, shoppers rushed to stores ahead of opening hours, with many items selling out that day. Target has used collaborations like this in the past to drive traffic.
Even with the looming threat of 25% tariffs on apparel and footwear imported from China going into effect, Target maintained its outlook for the full year, which remains in the range of $5.75 to $6.05 per share. Same-store sales are expected to increase by a low- to mid-single-digit percentage.
As more retailers plan around the tariffs, with major department stores such as Kohl’s, JCPenney and Nordstrom highlighting them as significant concerns in their own earnings calls, Target’s confidence throughout the trade tensions has spread to its investors. Target stock went up nearly 10% in the hours after the earnings release.