Target’s showcase store on the Las Vegas strip
Target, one of the clear retail winners in the pandemic era, posted another impressive quarter, with Q4 revenue, earnings and comparable sales outpacing projections and its omnichannel strategy firing on all cylinders as it reported a $9 billion gain in market share based on internal and market research.
Even with ecommerce growth of 118% for the quarter and 145% for the year, Target executives continually stressed that the store continues to be the foundation of its success, driving digital as well as physical sales gains.
At the same time, Target announced an ambitious plan to invest $4 billion annually over the next several years to enhance fulfillment services and the store experience, last-mile and replenishment operations, and open new stores while remodeling existing ones.
Revenue was up 21% in Q4, from $23.4 billion to $28.34 billion, compared to expectations of $27.48 billion. Adjusted net income was $1.35 billion or $2.67 per share, up 66% from 2019 and ahead of the Refinitiv analyst consensus of $2.54 per share.
Overall comps grew 20.5% in the quarter (up 6.9% for stores, 118% for ecommerce), with traffic growth up 6.5% and average ticket value up 13.1%.
For the year, Target’s ecommerce sales were up 145%, and overall revenue increased 19.8% to $93.6 billion, the highest gain in 11 years, the company said.
Target’s same-day services, including store and curbside pickup and delivery via Shipt, grew 212%, with curbside up a massive 500%. More than 95% of Target’s fourth quarter sales were fulfilled by its stores, either through purchase or ecommerce fulfillment. And the company now has more than 90 million members in its Circle loyalty program, two years after its launch.
Brian Cornell, CEO of Target, said the store fleet remains firmly at the center of the company’s omnichannel strategy.
“We created a durable, sustainable and scalable business model that puts Target on a road of our own,” Cornell told analysts on an earnings call. “Our goal was to use our proximity, nearly 1,900 stores within 10 miles of the vast majority of U.S. consumers, to offer the fastest and easiest digital fulfillment in retail, and the capabilities we’ve built to become America’s easiest place to shop also cracked the essential question of how to grow our digital sales exponentially while maintaining the overall profitability of our business.”
Cornell said the company’s massive investments in supply chain, store operations and overall technology are paying dividends in terms of the ability to make its stores a rollup of showroom, service center and fulfillment hub.
“Without these investments, we simply wouldn’t have been able to satisfy the exploding guest demand for same-day services, represented by more than 600% growth in drive-up,” he said. “Likewise, Shipt is an extraordinary capability that grew by more than 300% last year and will continue to grow as more guests recognize the power of having their purchases brought to their doorstep in as little as an hour.”
Target EVP and CFO Michael Fiddelke said the company has seen a high degree of loyalty and repeat behavior among both the 12 million new omnichannel customers that were attract to Target over the past year and existing ones, which he attributed to a focus on the “guest relationship” and team performance.
“Thanks to the incredible experience our store teams provide, once guests try a service like drive up, they come back, and we’ve seen higher rates of stickiness this year than historically for some of those digital fulfillment services,” Fiddelke said. “That bodes well for the stickiness of those guests and those behaviors going forward. … A lot of America shops Target, and it’s the deepening of those existing guests as they shop us in new and different ways, and more often, that’s our focus.”