An aggressive campaign at Target to let customers do more online is paying off.
The retailer exceeded first quarter expectations on just about every level, saying the same day services it’s rolled out, including picking up online orders at the store, drove more than 25% of comparable sales growth. That measure, which includes sales at stores open at least a year and online sales, rose 4.8% on top of traffic growth of 4.3%. Online sales soared 42%.
It’s been a mixed quarter in the retail sector with major companies like Target and Walmart making gains on online leader Amazon. Off-price chains like T.J. Maxx remain a top choice for shoppers.
But a slew of somber reports from department stores including J.C. Penney, Kohl’s and Nordstrom were surprisingly weak.
And challenges loom for all of them.
Escalating trade fights and rising tariffs could lead to price hikes and that could stall some stellar sales growth at successful companies. It comes at a time when big retailers are spending heavily to speed deliveries to customers who now expect to get what they ordered online at their doorsteps in a day or two.
Walmart launched free next-day delivery on its most popular items this month in Phoenix and Las Vegas. It plans to roll out next-day delivery to most of the country by year-end, covering 220,000 popular items from diapers to toys, with a minimum order of $35. The announcement was made two weeks after Amazon said it would upgrade its free shipping for members from the standard two-day delivery, to one day. Target requires a $35 threshold for two-day delivery. A Target spokesman said Wednesday that half of its two-day shipping is actually coming next day.
Target is spending more than $7 billion through 2020 to update its stores, open smaller stores in urban areas and expand its online operations. The company is remodeling hundreds of stores, while overhauling its lineup of store brands and creating new ones. This spring it launched three new exclusive brands in bras, underwear and sleepwear— Auden, Stars Above and Colsie — as it joins other retailers to take on Victoria’s Secret, which is floundering.
The company lets shoppers to pick up online orders curbside at 1,250 stores. Through Shipt, which it purchased in December 2017, shoppers can get deliveries to their doorstep in a few hours with a monthly or annual subscription fee.
Target Corp. reported profits of $795 million, or $1.53 per share, beating Wall Street expectations by a dime, according to a survey by Zacks Investment Research.
Revenue was $17.63 billion, also beating forecasts.
Target expects its per-share earnings this quarter of between $1.52 and $1.72, and full-year earnings in the range of $5.75 to $6.05 per share.
Target says that it expects a low-to mid-single digit increase in comparable sales for the current fiscal year.
Shares jumped nearly 8% in premarket trading Wednesday.