Target in blowout quarter; cites ‘unprecedented’ market share gains

Marianne Wilson
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Target Corp. reported a blockbuster quarter that easily outpaced Street estimates as the discounter continues to leverage and benefit from pandemic-related shopping trends.

Target said it gained market share throughout the third quarter across all five of its core categories. Electronics rose more than 50%, home-related items saw comp growth in the mid-20% range and apparel increased by nearly 10%. Essentials & beauty and food & beverage were up in the high teens.

Year to date, Target, which last week announced plans to open hundreds of in-store Ulta Beauty shops, said it has gained more than $6 billion in market share, with $1 billion in share gains coming during the latest quarter. (Target said it measured the gains with third-party and internal research.)

On the company’s earnings call, chairman and CEO Brian Cornell wouldn't say which retailers are losing market share to Target. 

"It has been broad based...We're picking up share from our traditional competitors as well as specialty competitors,” Cornell told analysts. 

Target’s income rose to $1.01 billion, or $2.01 per share from $714 million, or $1.39 per share, in the year-ago period. Operating income was $1.9 billion, up 93.1% from $1.0 billion in 2019.

Excluding items, Target earned $2.79 per share, which was way ahead of $1.60 per share expected by analysts.

Total revenue surged 21.3% to $22.63 billion, beating analysts’ expectations of $20.93 billion, Comparable traffic was up 4.5%, and the average ticket increased 15.6%.

Target’s total comparable sales rose 20.7% in the quarter, compared to estimates of 11.2%, reflecting same- store sales growth of 9.9% and digital sales growth of 155%. Digital accounted for 10.9 percentage points of Target’s comparable sales growth.

The retailer’s online services (in-store order pick up, curbside pick-up and Shipt) increased 217% during the quarter. The strongest growth was in curbside, which grew more than 500%. More than 95% of Target’s third quarter sales were fulfilled by its stores.

“Our strong results in 2020 reflect the benefits of our multi-year effort to build a durable and flexible model, with a differentiated assortment and a suite of industry-leading fulfillment options — all brought to life through the passion and effort of our team,” stated Cornell. 

Cornell added that that the chain has experienced deepening levels of engagement with its customers, resulting in “unprecedented market share gains and historically strong sales growth, both in our stores and our digital channels.”

On the earnings call, Cornell said that apparel has been a bright spot for Target and that the chain is planning to emphasize it.

“Apparel has been one of our strengths, [and] certainly from a market share standpoint, one of the real highlights for our business throughout the quarter, and we certainly see that continuing as we finish up the year,” he said.

Target has rolled out a number of initiatives for the holiday season, including making changes to eliminate crowds by enhancing its contactless pick-up options.

“In a holiday season that will feel different for our guests, we’re committed to helping them navigate the season safely, as they find new ways to celebrate with family and friends,” Cornell stated.

On the call, he noted that while holiday shopping has already begun, customers still have a “very long shopping list” yet to fulfill.

We expect them to be decorating their homes,” he said. “We expect a lot of gift giving as many families will be shipping gifts across the country and be celebrating very differently than they had in the past.”

Target also announced that it has lifted its share repurchase suspension, which it had announced in March following the onset of the COVID-19 pandemic. The company expects to resume share repurchases in 2021.