Goal extends streak even as online sales growth slows
Target’s strong earnings streak extended into the final quarter, but its blistering growth in online sales came down to earth.
The Minneapolis retailer reported Wednesday that sales at its stores that have been open for at least a year rose 8.7% in the three months that ended July 31. This is on top of a 10.9% growth over the same period of 2020.
And like Walmart, Target has seen a slowdown from last year’s meteoric growth in online sales as more shoppers emerged from their pandemic-enforced isolation.
Target’s online sales rose 10% in its second fiscal quarter, compared to a 195% increase a year ago. It’s also a downturn from the first three months of the year, when online sales soared 50% from a year ago.
The company said Wednesday it expects high-single-digit percentage growth in comparable sales, near the top of its previous guidance range.
Major retailers are releasing quarterly earnings numbers this week and at Target, like Walmart and Home Depot before it, there is data that points to near normality for U.S. shoppers. At this point last year, millions of people were stocking up on food and preparing for a long stay at home. This year, the same crowd has at least partially emerged from its hibernation, shopping for clothes, eating out and traveling.
The same trends are playing out at Home Depot and Lowe’s, which also reported earnings this week. Sales are still strong, but the DIY craze that started among homeowners at the start of the pandemic has cooled. Lowe’s on Wednesday predicted annual revenue above Wall Street estimates amid a boiling housing market.
But there are restrictions even among professional builders.
Homebuilding fell 7% in July as homebuilders struggled to weather a variety of headwinds, the Commerce Department reported Wednesday. This is the slowest pace since April, but still 2.5% higher than a year ago.
And retailers are wary of the recovery as the delta variant of COVID-19 increases in the United States and mask mandates are reinstated. They are also grappling with higher prices just as the government’s temporary stimulus measures and other benefits, which helped boost spending, fade. Tangled supply chains continue to be a problem.
So far, nothing seems to be slowing down spending.
Lowe’s CEO Marvin Ellison said Wednesday that stores have seen no material impact in areas with large spikes in cases of the delta variant.
Target CEO Brian Cornell told reporters he continues to see a “very upbeat guest.”
“We have a very resilient consumer,” Cornell said. “We don’t see any adjustment in consumer behavior.”
Target said it earned $1.82 billion, or $3.65 per share, in its second fiscal quarter. That compares to $1.69 billion, or $3.35 a year ago. Its adjusted earnings per share was $3.64. Revenue rose 9.4% to $24.83 billion.
Analysts had expected adjusted earnings of $3.51 per share on revenue of $24.99 billion, according to FactSet.
Target’s online sales growth was driven by same-day services such as order pickup and drive-up. These services grew 55% in the last quarter, but down from 270% growth last year. More than 95% of Target’s second-quarter sales were made through its stores.
Sales increased in all five major product categories tracked by Target, led by apparel, which saw double-digit percentage growth.
Cornell told reporters that many traditional back-to-school items like backpacks, lunch boxes and school uniforms are selling well. Earlier this month, Target launched the first Ulta Beauty mini-stores. The stores are approximately 1,000 square feet and offer makeup, skincare and fragrance, operating alongside existing beauty sections in Target stores.
Anne D’Innocenzio, AP Retail editor
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