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Goal crushes estimates as retailers leverage new purchasing habits to achieve market share

People wearing masks avoid social distancing while waiting in line to enter Target in Herald Square amid the coronavirus pandemic on May 16, 2020 in New York City.

Alexi Rosenfeld | Getty Images

Target on Wednesday reported fiscal third quarter earnings slightly beating analysts 'estimates as the discounter gained market share by turning shoppers' pandemic habits into lasting profits.

The company said it had gained market share in all core categories from apparel to beauty. Since the beginning of the year, the company has gained $ 6 billion in market share, with stock gains of $ 1 billion in the most recent quarter.

Thanks to this strength, sales on the Internet and in stores open for at least one year increased by 20.7% in the third quarter. Comparable digital sales rose 155% while sales in the same store rose 9.9%.

Despite the strong results, Target declined to provide an outlook. The forecast was withdrawn in the first quarter as the coronavirus made it difficult to predict shopping habits.

In premarket trading, shares rose by around 1%.

This is how the company developed in the third fiscal quarter ending October 31:

Earnings per share: $ 2.79, adjusted versus $ 1.60, expected by consensus among analysts polled by RefinitivRevenue: $ 22.63 billion versus $ 20.93 billion, expected from RefinitivSame store sales: up by 20.7% versus 11.2% based on StreetAccount estimates

According to Target, net income for the third quarter rose to $ 1.01 billion, or $ 2.01 per share, from $ 714 million, or $ 1.39 per share last year. Excluding items, Target earned $ 2.79 per share, well above what analysts had expected to earn $ 1.60 per share.

Total revenue increased 21% from $ 18.67 billion last year to $ 22.63 billion, beating analysts' expectations of $ 20.93 billion.

More frequent trips

While some retail competitors had to close in the first few months of the pandemic, Target's nearly 1,900 stores remained open as a must-have retailer selling a wide range of goods, from gallons of milk to pajamas and laptops. In the past few months, as the malls' competitors reopened, Target said it has kept customers and gained more of their wallets.

Customers shopped at Target more often in the third quarter and put more in their baskets, the company said. The combined transactions in the Target stores and on their website increased 4.5% year over year. The average ticket increased 15.6% in the third quarter.

Sales in all Target product groups were higher in the third quarter than at the same time last year. Electronics increased by more than 50%. Home ownership rose a percentage in the mid-1920s. Clothing increased by almost 10%. And the other two categories, Essentials & Beauty and Food & Beverage, grew in old age.

Plans to grow beauty, clothes

The goal is to make long-term games to get business back up in troubled department stores and highly competitive malls. The company announced last week that it would be opening smaller versions of Ulta Beauty stores in hundreds of its stores with a curated selection of products, from hair care and perfume to lip gloss. More than 100 of the stores are expected to open in the next year.

Brian Cornell, CEO of Target, said on a call with reporters that apparel has been a ray of hope for the retailer too – and one to lean on. Along with loungewear, sleepwear, and intimates, he said children's and men's clothing performed well during the three-month period.

"Apparel has been one of our strengths [and] certainly one of the real highlights for our business in terms of market share throughout the quarter, and we see that continue into the year-end," he said.

The big box retailer's online options remain popular. Roadside pick-up service, Drive Up, increased more than 500%. Target's home delivery service, Shipt, grew nearly 280%. Order pickup, an in-store option that allows customers to view online purchases in person, increased by more than 50%.

However, the pandemic changed the pace of sales and purchases by customers, Cornell said. With many schools and colleges starting the year with distance learning, Target kept merchandise on shelves and customers later shopped back to school, he said. Those purchases resulted in cost growth in the middle of 20% in September, he said.

Hours spent at home would have resulted in "oversized growth in electronics" such as the purchase of computer software, video games, portable electronics, and office equipment. And buyers bought more than usual in the home category as they replaced decor and bought kitchen supplies.

Holiday buying started early

With the pandemic continuing into the Christmas season, Target got sales started early and tried to differentiate in terms of safety and convenience. Last month, the company announced that it would provide twice as many parking spaces for roadside pickups. Features have been added to help customers during the normally busy time such as: B. a website tool that allows them to check if there is a line outside their store and, if so, reserve a seat before visiting.

According to Cornell, customers have already started shopping for gifts, "but they still have a very long shopping list to complete over the next few weeks."

"We expect them to decorate their homes," he said. "We expect a lot of gifts as many families send gifts across the country and celebrate very differently than in the past."

He added, "This is a holiday season when the guest will try to find a little joy."

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