Target on Wednesday blew past every forecast on Wall Street for its fiscal second quarter as it attracted millions of new customers online, setting a record for same-store sales that drove profits up by an eye-popping 80.3% to $1.7 billion.
Sales online and at stores open for at least a year climbed by 24.3% during the quarter ended Aug. 1— an all-time high for the retailer. Same-store sales climbed by 10.9% while the company’s digital sales nearly tripled from a year earlier.
Shares jumped by more than 8% in premarket trading.
Here’s how the company did in the second quarter versus what analysts forecast, based on average estimates compiled by Refinitiv:
- Adjusted EPS: $3.38, vs. $1.62 expected
- Revenue: $23 billion, vs. $20.09 billion expected
- Same-store sales growth: 24.3%, vs. 7.6% expected, according to a StreetAccount survey
CEO Brian Cornell said on a call with reporters that the retailer’s mix of merchandise and online options resonated with customers who sought out safe and convenient ways to shop in the midst of the pandemic. The company benefited from its designation as an essential retailer during U.S. lockdowns that forced some competitors to close.
“Throughout the year and over the last few years, we’ve built tremendous trust with the guest,” he said on the call. He said that relationship with customers has “been one of the big drivers behind our success.”
During the second quarter, Target’s shopping traffic picked up, customers filled up their baskets with more items, and even beauty and apparel sales were strong. Sales were also up across all five of Target’s merchandise categories. The retailer reported its strongest sales in electronics, which was up by more than 70% overa year earlier as customers bought home office items and video games. Home and beauty grew respectively by more than 30% and 20%. Two categories — food and beverage and essentials — were up by about 20%.
Apparel, which dropped by about 20% during the fiscal first quarter, grew by double digits in the second quarter from a year earlier.
The company’s online offerings were especially popular. For example, sales through Target’s curbside pickup service shot up by more than 700% in the second quarter from a year earlier. Target sales fulfilled by its online delivery service Shipt grew more than 350% year over year.
Cornell said the company attracted 10 million new digital customers in the first half of 2020. He said it also picked up $5 billion in market share in the period, while many 44 retailers including J.C. Penney to Sur La Table filed for bankruptcy and others, such as Macy’s and Sephora, laid-off workers.
The retailer’s second-quarter net income soared by more than 80.3% to $1.7 billion, or $3.35 per share, $938 million, or $1.82 per share, a year earlier.
After excluding items, Target earned $3.38 per share, more than double the $1.63 expected by analysts surveyed by Refinitiv.
The company’s total revenue rose 24.7% to $23 billion from $18.42 billion a year prior, beating analysts’ expectations of $20.09 billion.
Target’s private label grocery brand, Good & Gather, hit $1 billion in sales after launching in September. It joined other in-house brands, such as children’s apparel brand, Cat & Jack, in reaching that mark.
Cornell did not provide a financial outlook for the rest of the year, saying it’s hard to predict shopping patterns in light of the pandemic. For example, he said, families have delayed back-to-school shopping as many still wait to hear if their children will return to the classroom or attend school from home.
Still, he said, it’s been able to keep up the momentum in early August with same-store sales, including digital sales, in the low double digits.
He said the retailer is bracing for uncertainty, too, as it prepares for the holidays and school districts change plans depending on the spread of Covid-19.
Cornell said he just saw numbers estimating that 66% of U.S. students are starting out the school year remotely.
“Sitting here today, I don’t know if 30 days from now that number is going to be 6% or 96%,” he said. “So we’ve got to be flexible, we’ve got to be adaptable.”