aim Fiscal first quarter revenue rose 23% on Wednesday as investments in exclusive brands and services like roadside pickup fueled customer loyalty and kept bringing them back.
The retailer also said it was benefiting from a reopening economy and busier social calendars: shoppers were excited about new goods, especially clothing.
“Guests right now and consumers are increasingly optimistic and we certainly expect continued heavy traffic in our stores and visits to our website,” said CEO Brian Cornell on a media call.
Carried by that confidence, Target offered a second-quarter forecast that was well above Wall Street’s expectations, despite difficult comparisons to be made from last year.
Other retailers including Walmart, Home Depot and Macy’salso achieved surprisingly strong results in the first quarter. Companies have partially attributed growth in sales to customers having more money in their pockets from stimulus checks. Walmart and Macy’s said customers buy items like luggage and teeth whiteners when they travel and go back to parties. But they haven’t stopped investing in their homes yet, which was a trend that started last year.
However, Target had unique benefits prior to the pandemic that kept its business going during the health crisis. It fulfills almost all of its in-store online orders, which improved the company’s profits. Numerous private labels have been introduced and expanded that set it apart from its competitors. And it has been ahead of other retailers when it comes to raising employee wages, which has held off a labor crisis and cleaned up stores.
Shares rose nearly 4% on the Wednesday leading up to trading.
The following was what Target reported for the fiscal first quarter ended May 1 compared to its refinitive consensus estimates:
- Earnings per share: $ 3.69 adjusted versus $ 2.25 expected
- Revenue: $ 24.20 billion versus $ 21.81 billion expected
Net income rose to $ 2.1 billion, or $ 4.17 per share, from $ 284 million, or 56 cents per share last year. Excluding items, the retailer made $ 3.69 per share, more than analysts surveyed by Refinitiv expected $ 2.25 per share.
The more than sevenfold increase in net income compared to the previous year was due to several factors. In the early days of the pandemic, Target saw profits slump and labor costs spike as customers skipped high-margin merchandise like apparel and accessories and employees took on new responsibilities from extra cleaning the store to picking online orders.
Buyers are again spending more on apparel and housewares, and Target has increased sales of its own private label products.
Total revenue increased 23% year over year to $ 24.2 billion, beating analysts’ expectations of $ 21.81 billion.
The retailer said it continued to attract new customers and encourage them to spend more. It said it increased Market share of $ 1 billion over the three months, in addition to the market share of $ 9 billion in the last fiscal year. It cited internal and external research.
In the stores and on Target’s website, traffic over the three-month period increased 17% year-over-year and the shopping cart size increased 5%.
Like-for-like sales, a key metric that measures sales in stores that are open for at least 13 months and online, increased 22.9% year over year. This was significantly more than the 10.7% that analysts had expected in a StreetAccount survey. Sales from comparable stores increased 18% while sales from comparable digital stores increased 50%.
Roadside and in-store pickup and home delivery were popular options during the pandemic for safety reasons, but remain in demand for their convenience. Same-day service revenue grew more than 90% over the three-month period, led by Drive Up revenue growth of 123%. In-store pickup sales increased 52% while shipments increased 86%.
Apparel was Target’s strongest merchandise group for the quarter. Sales increased by around 60% compared to the same period in the previous year. Hardlines, a category that includes items such as consumer electronics and exercise equipment, grew in the high range of 30% and home sales grew in the mid-range of 30%. Beauty product sales increased by a large percentage to teenagers. Food and beverage and the essentials – two categories that were particularly strong at the height of the pandemic – saw low to mid-single-digit growth.
The strength of the apparel was partly due to its weakness the year before when customers focused on stocking up on groceries and detergents rather than buying a new outfit.
A key part of Target’s strategy was to offer products that were only available in stores. In February, Target announced its activewear brand All in Motion was the youngest private label with sales of $ 1 billion. In the first quarter, sales of own brands increased by 36% compared to the same period of the previous year – the strongest jump in the company’s history.
Cornell produced other bright spots: he said Mother’s Day inspired shopping and was one of the strongest in years. He said he expects similar excitement from customers as they prepare for summer vacation like Memorial Day and prepare to return to the classroom or college campus.
The discounter shared a forecast of modest year-over-year growth, despite facing tough year-on-year comparisons due to unusually high sales during the pandemic. Comparable sales are expected to grow mid to high single digits in the second quarter and single digits in the last two quarters of the year.
Michael Fiddelke, Chief Financial Officer of Target, said the retailer is on track to invest around $ 4 billion this year to improve the customer experience and increase in-store presence. Among those investments, he said it would increase its working hours to ensure store shelves are well stocked, open 30 to 40 new stores, remodel around 150 stores, and allow customers to pick up wine or beer in by roadside pickup most of its businesses.