Target hits a bullseye in Q2

Photo: RetailWire
Aug 22, 2018
George Anderson

Data breaches and other past missteps are not part of the conversation around Target today after the retailer posted its best quarterly comparable sales growth in 13 years.

The retailer’s comparable sales growth (online and stores) grew 6.5 percent during the second quarter as revenues at physical stores improved 4.9 percent and online jumped 41 percent, on top of 32 percent growth during the same period in 2017.

Target reported 6.4 percent traffic growth, the highest increase since the chain first began reporting the number in 2008.

CEO Brian Cornell pointed to the chain’s “enhanced and differentiated shopping experience” as the key factor driving customers to its stores and

We laid out a clear strategy at the beginning of 2017, and throughout this year we’ve been accelerating the pace of execution. We’re on track to deliver a strong back half and we’ve updated our full year guidance to reflect the strength of our business and the consumer economy,” said Mr. Cornell.As we look ahead to 2019, we expect to achieve scale across the full slate of our initiatives — creating efficiencies and cost-savings, further strengthening our guest experience and positioning Target to continue gaining market share.”

On the bottom line, Target reported that adjusted earnings per share were up 19.8 percent over the second quarter last year. The retailer’s shares were up 5.38 percent in premarket trading on news of its second quarter performance.

DISCUSSION QUESTIONS: What is your take on Target’s strong second quarter results and its prospects for the rest of 2018 and 2019?

Please practice The RetailWire Golden Rule when submitting your comments.
"The Target Syndrome: customers brag about going in for one thing and leaving with a cartload."
"Let’s face it, all boats are floating right now ... I wouldn’t get TOO excited about the latest quarterly — for anybody actually."
"Like Kohl’s, Target has taken the Sears, Kmart and J.C. Penney customer and continually focused on how to do better with them."

Join the Discussion!

18 Comments on "Target hits a bullseye in Q2"

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Art Suriano

Target can absolutely pat themselves on their backs for this great quarter. For months, we have read about the many initiatives and new concepts that Target has been testing and rolling out and it has paid off. Moreover, they continue to invest in the company they have and are not chasing after other companies they can buy. Recently, we read about how they were committed to remodeling stores over the next couple of years. We have seen them test different delivery methods and a smaller store concept. The point is, Target is committed to making their company the best it can be, and they’re focused on “wowing” their customer.

Bob Phibbs

Like Kohl’s, Target has taken the Sears, Kmart and J.C. Penney customer and continually focused on how to do better with them rather than take them for granted.

Neil Saunders

Target deserves its success. It has innovated and invested and is now reaping the dividends.

Two things that stand out for me are the investment in stores and the development of own-brands. Both have created an elevated non-food shopping experience and our data show customer numbers and conversion rates in areas like apparel and home are trending higher as a result.

The investment in digital is also generating uplift with more shoppers taking advantage of services like curbside collection.

It’s certainly true that the economy has played ball over this period, however, Target has also engineered its own success.

Ricardo Belmar

Target’s strategy is starting to bear fruit! Compared to other retailers, what’s most evident is that Target has a plan while so many do not. As we saw with Walmart the other day, the large scale both Target and Walmart have access to is finally being put to proper use to drive their success while providing the fuel for innovation. As others, like Steve Dennis, have stated, we are seeing a bifurcation of retail or a split between the “haves” and the “have-nots.” Those with scale are finally learning to leverage that scale to allow them to experiment and innovate at a pace that others cannot. This helps them to find the right mix of new ways to serve their customers. As Target continues to modify their approach and renovate stores to their new dual-sides layout to facilitate convenience shoppers vs. those just “shopping” we can expect to see more success. How Target performs going into the holiday shopping season this year will be quite telling as to their future success!

Charles Dimov

I’m cheering on Target. Target has been a big promoter of omnichannel retailing. This is a great thing. It is the future of the industry. They have pushed the extremes with 60 percent to 70 percent of online orders fulfilled from stores. Great initiative. I have to wonder whether being on the leading edge of retail (unlike Sears and others) might be part of the answer. The economy has been doing well. Retail has been doing well. Being on the leading edge and making positive progress — that’s clearly doing well. Kudos to Target!

Dick Seesel

There are a few common themes among the results from Target, Kohl’s and Walmart: First, a robust omnichannel strategy helps enliven brick-and-mortar sales. Next, product matters — all three stores have merchandising initiatives they can point to. Finally, the consumer is rewarding those retailers who execute well with market share gains.

Paula Rosenblum

I am really curious to see how Q4 plays out. I am thinking that Amazon’s growth may be slowing a bit (I can’t tell from Q3 because it had Prime Day in there), and that retailers are now finding their footing.

I think Target and Walmart both deserve to pat themselves on the back for a job well done. They have risen to the challenge and I’m impressed — especially because they don’t exactly serve the same customer.

Georganne Bender

Target has created a customer experience that’s immediately identifiable to its stores. TV ads set the stage; online, marketing and social media back it up. The stores are bright, easy to shop and merchandised with great product, thus the Target Syndrome: customers brag about going in for one thing and leaving with a cartload.

The thing about the shopper experience at Target is that it doesn’t change, it just consistently gets better. It’s refreshing to see a retailer set a strategy and actually follow it through.

Brandon Rael

Well done and congratulations to the Target team. Target has done an outstanding job of listening to their customers, learning from these insights and fully capitalizing on the significant gap left by J.C. Penney, Sears and Kmart’s poor performances.

The combination of offering their own private label as well as the digital omnichannel fulfillment capabilities, BOPIS and others, is paying true dividends. Their retail footprint is one of their main advantages. In the battle to mitigate the last mile, Target is making significant progress.

The true test for the Target team will be Q4 and the holiday season. If you consider that they fulfilled 70 percent of digital orders in stores during last year’s November and December shopping period, just consider the massive opportunity to engage with and up-sell these customers coming into their stores.

Lee Peterson

Let’s face it, all boats are floating right now. Don’t forget, Target was also way ahead (numbers-wise) just before the Great Recession. I wouldn’t get TOO excited about the latest quarterly — for anybody actually.

Having said that, Target is doing a lot of things right but I think mostly on the merchandise side. They’ve got a strong brand, which really helps in good times, but they’ve also made good moves in assortment and just-in-time inventory technology that’s made a big difference. Walmart is way ahead of them in key innovation areas like grocery delivery and BOPIS but, for now, it looks like Target can raise a glass to a good quarter and keep on moving forward. I like it when the tide is high.

Shep Hyken

Congrats to Target. They are finding the balance between online and in-store sales. They are executing well on all levels. They get it. Now they must continue this path. Remember, every day is a new day (as every quarter is a new quarter). It’s time to reset and start over.

Mark Heckman

Not taking anything away from the recent efforts of Target or Walmart to become more competitive and attractive to shoppers but the booming economy, specifically as it bolsters the spending of the middle class, is undoubtedly driving a significant portion of their respective successes. With that said, both retailers and particularly Target have improved in key areas of e-commerce, in-store and home delivery, and especially in the area of fresh foods. Given that shoppers are developing new norms in terms of where they shop for various categories, it will remain critical for Target to continue to grow their online business for categories and commodities that shoppers are embracing online. It will also be smart to re-invest some of the current gains into making stores more shopper-centric through better design and traffic flow, keeping in mind that shoppers are increasingly valuing their time and the efficiencies of the stores they shop.

Mel Kleiman

If done right customers still like the experience of shopping in stores. Stores just need to provide the 3 P’s. A clean neat inviting PLACE to shop. Have PRODUCT the consumer wants to buy. PEOPLE who are pleasant and want to take care of the customer. If they provide the 3 P’s the 4th P will follow. PROFIT.

Brian Kelly
1 year 6 months ago

It took Cornell longer than most expected, and it seems he understands his customer and what Target can do to surprise and delight them. My local store was just reset and it has returned to a logical and easily shopped experience. Departmental adjacencies make more sense and overall selling model is coherent. Silos seem to be dissolving. Victory can only be declared in February. For now, it looks like Target has its TarZhay back.

Harley Feldman

Over three years, Target has spent a lot of time focused on its customers, what they want, why they buy from Target and getting their online presence working well. The acquisition of Shipt will help them deliver purchased items to homes, a necessary ability in today’s competitive retail environment. Target has an IT team developing the applications, customer support and supply chain tools to meet the demand of its shoppers. All of these efforts and others are beginning to show results in the earnings report.

As long as Target continues to develop these areas of the business, they should be able to stay in front as a major retailer and grow. The Buy Online and Pick Up in Store activities that have started provide a competitive way to distinguish itself from Amazon. After a lot of effort and changes, Target appears to be on the way as a successful major retailer.

Ananda Chakravarty

Although it might be easy to apprise this win by Target to a rising tide lifting all boats, Target had made some very specific decisions that went against the grain — McNamara’s been pushing the envelope, bringing his engineering teams in-house, diversifying to include women, and embracing agile and a test and learn culture. The tech is in-line with the strategy of keeping the customer focus and making the shopping experience worth the time spent. It’s succeeding with Shipt, copied Curbside, and shifted management. Lots of changes and they seem to be coming together in sales. What I love most about Target is their striving not for perfection in everything, but for perfect execution in test and learn.

Scott Norris

Excellent point about test-and-learn — I live just down the road from T1 and they’ve already made several subtle tweaks to layouts and adjacencies since the big reset last year, both in soft lines/general merchandise and grocery. They’re seeing much greater shopper adoption of the self-scan kiosks recently, especially because it integrates so well with the Cartwheel app.

I had a chance to visit the State Street store in downtown Chicago mid-afternoon Monday this week and that location was also packed. Target is hitting urban and college areas that Walmart can’t reach on all cylinders, too. Well done!

Larry Corda

Great job Target! There still is a number of people who like to shop at brick and mortar stores. The options for these people are becoming less and less due to consolidations, bankruptcies and closings. We also have a number of brick and mortar stores that are just struggling to connect with their customer (the Sears, Kmarts and JCPs) and are forcing them to shop elsewhere. This gives opportunities for places like Target to increase their customer base and sales.

"The Target Syndrome: customers brag about going in for one thing and leaving with a cartload."
"Let’s face it, all boats are floating right now ... I wouldn’t get TOO excited about the latest quarterly — for anybody actually."
"Like Kohl’s, Target has taken the Sears, Kmart and J.C. Penney customer and continually focused on how to do better with them."

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