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Target’s Q3 comparable sales leap almost 21%

Digital sales up 155% as retailer posts record-high adjusted EPS

Russell Redman

November 18, 2020

5 Min Read
Target Drive Up worker.jpg
Sales via same-day services in-store and curbside pickup and Shipt home delivery rose by a combined 217% in the quarter, with Drive Up curbside rising 500%, Target reported.Target

Fueled by booming e-commerce business, Target Corp. topped 20% sales growth in its fiscal 2020 third quarter, with Chairman and CEO Brian Cornell citing record-high adjusted earnings per share that more than doubled versus a year ago.

Minneapolis-based Target said Wednesday that, for the quarter ended Oct. 31, net sales rose 21.3% to $22.34 billion from $18.41 billion a year earlier. Total revenue also was up 21.3%, reaching $22.63 billion.

Overall comparable sales jumped 20.7% year over year, reflecting gains of 9.9% in same-store sales and 155% in digital sales. Traffic increased 4.5% on a comparable basis, while the average ticket grew 15.6%.

Brian_Cornell-Target_Chairman-CEO_copy.jpg

“Since the pandemic began in March, we have experienced a meaningful acceleration in basket growth, both in stores and online, as guests have consolidated their shopping into much larger trips,” Cornell (left) told analysts in a conference call on Wednesday. “Across channels, our store comps grew nearly 10%, while our digital comp sales grew 155%, contributing nearly 11 percentage points to the company comp.”

Sales via same-day services Order Pick Up (in-store pickup), Drive Up (curbside pickup) and Shipt (home delivery) climbed by a combined 217% in the quarter, Target reported.

“Within digital, we continue to see the strongest growth in our same-day services: [Order] Pick Up, Drive Up and Shipt, which together grew more than 200% in the quarter,” said Cornell. “These services are fast, convenient, reliable and contactless, which explains why they continue to generate very high levels of guest satisfaction.”

Related:Target to partner with Ulta Beauty for ‘shop-in-shop’ concept

According to Chief Operating Officer John Mulligan, same-day services added more than $1 billion of incremental sales in the third quarter.

“Nearly $700 million of this growth was from our Drive Up service alone, which increased more than 500% compared with last year. Amazingly, this growth was not at the expense of in-store pickup, which increased more than 50%. And while Shipt remains the smallest of our same-day services, it continues to grow rapidly, as Target sales on Shipt increased nearly 280% in the quarter, accounting for more than $200 million of incremental sales,” Mulligan said.

The two executives pointed to Target’s “stores as hubs” model for driving the strong omnichannel sales results, with Mulligan noting that the strategy “allowed our team to pivot seamlessly when guests moved their shopping between stores and our digital channels.” Stores orignated 84.3% of Target’s sales in the quarter versus 15.7% for digital.

Related:Target makes checkout, pickup faster and safer for holidays

“Specifically, same-day orders are fulfilled by our store teams along with Shipt shoppers, who rely on store inventory and systems to deliver to the front of our stores, our parking lots or guests’ front doors within a couple of hours of receiving an order,” Cornell explained, adding that same-day fulfillment also aids Target’s P&L by reducing shipping costs.

“Altogether between same-day services and packages shipped to our guests, about 75% of our third-quarter digital sales were fulfilled by our stores. And of course, if you add that on to our conventional-store sales of more than $18 billion, you can see that more than 95% of our total third-quarter sales were fulfilled by our stores,” Cornell told analysts. “This ‘stores as hubs’ model is a foundational element of our strategic plan we announced at the beginning of 2017, just over three years ago. Our performance for the first three quarters of 2020, which includes digital sales growth of nearly $6.5 billion and a store sales increase of more than $3.5 billion, is a direct result of our ‘stores as hubs’ strategy, combined with the tireless work of our team to bring it to life.”

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COO John Mulligan said Target's

At the bottom line, Target posted third-quarter net income of $1.01 billion, or $2.02 per diluted share, compared with $714 million, or $1.40 per diluted share, a year ago. On an adjusted basis, excluding a loss on debt extinguishment and other items, EPS from continuing operations was $2.79 per diluted share versus $1.36 in the prior-year period. Target said the strong earnings result offset continued investments in employee pay and benefits and worker and customer safety measures amid the COVID-19 pandemic.

“Our third-quarter adjusted EPS of $2.79 established another record high for the company and was up more than 100% from last year,” Cornell said.

Analysts, on average, projected Target’s third-quarter adjusted EPS at $1.60, with estimates ranging from a low of $1.13 to a high of $2.01, according to Refinitiv/Thomson Reuters.

“With the deepening level of trust our guests are placing in our team and our brand, we continue to see very strong business results. Third-quarter sales grew nearly $4 billion over last year, bringing our year-to-date growth to more than $10 billion,” Cornell said in the call. “This unprecedented growth both in the quarter and the year has been driven by meaningful share gains across every one of our core categories, as guests increasingly rely on Target to reliably and safely serve their wants and needs. Based on the cost of leverage driven by steeply higher sales, our business continued to deliver impressive bottom-line performance despite the outside investments we have been making in our team, safety and digital fulfillment.”

Target finished the third quarter with 1,897 stores overall, up from 1,868 at the end of the second quarter and 1,862 a year ago. Mulligan reported that 18 new stores were opened in October alone.

“For the year, our team successfully opened 30 new stores, of which 29 were small formats, making 2020 the biggest year of small-format openings ever,” he said. “In any year, setting records would be notable. But in a year in which COVID caused it to delay our new-store construction, it has been amazing to watch how quickly our team was able to restart such a large number of projects and successfully bring them to completion in advance of the holiday season.”

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About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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