Target reported a healthy 28% gain in ecommerce sales in the first quarter, while same-store sales rose 3%, helped by a 3.7% growth in traffic. Strong categories included home goods, household essentials and food and beverage.
“This demonstrates the benefits of maintaining a balanced portfolio as strength in these categories offset the impact of a late spring on our temperature-sensitive categories, which have accelerated dramatically as we entered the second quarter,” said Brian Cornell, CEO and Chairman of Target Corp in an earnings call. “We also benefited this quarter from the launch of three new owned or exclusive brands in home and apparel and a successful limited time partnership with Hunter.”
Based on changes in the business, Cornell said Target is seeing multiple growth drivers paying out from investments in stores, supply chain, new brands and its team, along with a partnership with CVS.
In the quarter Target completed more than double the number of store remodels compared to 2017. The company is seeing incremental sales lift of 2% to 4% following completion of a remodel, the CEO said.
“We continue to expand the physical reach of our brand, rolling out new small formats in neighborhoods we didn’t serve in the past,” said Cornell. “These stores serve as a beacon for our brand, reaching guests who have a high affinity for Target.”
In the beginning of 2018, Target rolled out free two-day shipping on hundreds of thousands of items on Target.com with no annual fee.
“We’re able to make that commitment and control costs because over the last few years, we’ve developed the capacity to increasingly rely on our stores and serve as a shipping point for digital orders,” said Cornell.
Target has also rolled out Drive-Up services to stores across the country. This service allows Target to have orders ready in an hour. Its rollout of same-day delivery through acquired unit Shipt expanded to nearly half its stores by the end of the quarter.
“Like Drive-Up, this service is receiving very high satisfaction ratings from our guests and we’ve been very pleased with the execution of the Shipt team as they rapidly scale up into new markets across the country,” said Cornell.
Target is also rapidly rolling out same-day delivery of store purchases from urban locations, mainly aimed at bulkier items that are difficult to get home. Shoppers pay a fee to have their order delivered through a courier later that day and can choose the time. It is also expanding its Target Restock program for everyday essentials nationwide and testing a new supply chain model to reduce store inventory and speed ecommerce fulfillment.