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Target Sees Digital Sales Up 141 Percent

Sales were up strongly, but profits drop for first quarter.

Target Sees Digital Sales Up 141 Percent

Minneapolis-based Target Corp. saw a strong uptick in revenue and comparable sales for its first quarter, driven by customers shopping for essentials during the ongoing Covid-19 pandemic. The strongest results came from unprecedented growth in digital sales and demand for same-day services, such as deliveries from Target-owned Shipt.

Some of the company’s first quarter numbers are eye-popping:

  • Comparable digital sales were up 141 percent for the quarter
  • Comparable digital sales for the month of April were up 282 percent
  • Same day services such as order pickup, drive-up and deliveries by Shipt were up 278 percent for the quarter

“We saw some of the strongest comparable sales growth we’ve seen in our history,” said Brian Cornell, Target’s board chair and CEO, on a Wednesday morning conference call with analysts and media.

Cornell said that on an average day in April, Target was filling more digital orders than it had on the previous “Cyber Monday.”

Target leaders said that during the quarter 5 million shoppers ordered items on its website for the first time, while 2 million customers used the drive-up option for the first time. With Target’s drive-up service, shoppers don’t even have to enter the store. They can place an order with Target’s app, pull up outside the store, and a staffer will bring the items out to their car.

Target’s first quarter sales were up 11.3 percent to $19.4 billion. But on the flip side, its net earnings dropped 64.3 percent for the quarter to $284 million. That was due to a combination of increased labor costs as well as the drop in sales for higher-margin items such as apparel. Target’s line item for cost of sales, for example, was up 18.5 percent.

“We invested hundreds of millions of dollars in extra pay,” said Cornell. This week, the company announced that it will extend its temporary $2 an hour wage increase through July 4.

Target’s comparable sales were up 10.8 percent for the quarter, driven almost entirely by the growth it saw in e-commerce sales. Digital accounted for a 9.9 percent increase in comparable sales, while physical stores comp sales were up 0.9 percent. Comparable sales, which measure changes in stores that have been open for at least a year, is a closely-watched number for retailers.

Digital sales accounted for 15.3 percent of sales in the first quarter, the highest number that Target has ever seen in that category. A year ago for the first quarter of 2019, digital sales made up 7.1 percent of Target sales.

Target’s numbers show that although customers were making slightly fewer trips to the store, they are spending more each time as they load up their carts. The number of transactions for the quarter was down 1.5 percent, but the average transaction amount was up 12.5 percent.

Target’s fiscal 2020 first quarter ended on May 2.

Twin Cities Business previously reported on steps that Target took to bolster its balance sheet and have access to more cash amid the unpredictability of business amid the pandemic. The company raised $2.5 billion from a bond sale and lined up an additional, new $900 million credit line.

“We took these actions out of an abundance of caution,” said Michael Fiddelke, Target’s chief financial officer, in reference to the issuance of new debt and the new credit line.

In contrast to many small retailers that were deemed “nonessential,” Target stores never closed in response to Covid-19. Cornell acknowledged that Target is likely to be a beneficiary if other stores close and retail consolidation continues.

“I think we’re going to see a consolidation in how people shop,” said Cornell. “Today’s consumer is looking to make fewer stops.”

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