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Target (TGT) Tastes Success on Solid Digitization Endeavors

Amid the aggravating COVID-19 scenario people have been steering clear of malls, physical stores or other public places and are instead preferring online shopping. As work from home and dine at home have become the new normal, retailers have been directing resources toward advancing omni-channel capabilities and ramping up delivery services. No wonder, Target Corporation TGT is well equipped to serve customers be it curbside pickup or delivery at home.

This was best exemplified when this general merchandise retailer came out with sparkling e-commerce sales numbers in its recently reported quarterly results. Target registered a sharp rise in comparable sales during second-quarter fiscal 2020, courtesy of booming digital sales as consumers shifted to online shopping amid coronavirus pandemic.

Comparable sales for the quarter increased 24.3%, backed by a 18.8% jump in average basket as consumers consolidated trips amid the pandemic. The number of transactions rose 4.6%. Digital comparable sales soared 195% and added 13.4 percentage points to comparable sales. Markedly, Target witnessed sturdy market-share gains in all five core merchandise categories owing to strong demand.


 

Consumers splurged on office items, video games, décor, domestics and kitchenware as they work, learn, dine and play at home. While electronics sales surged more than 70%, apparel sales rebounded from a 20% decline in the first quarter to double-digit growth in the second quarter. Home and beauty rose by more than 30% and 20%, respectively. Notably, both essentials and food & beverage were up by about 20%.

We note that stores fulfilled more than 90% of the company’s sales in the quarter. Same-day services (Order Pick Up, Drive Up and Shipt) skyrocketed 273% and accounted for roughly 6 percentage points of total comparable sales growth. Sales fulfilled by Shipt were up more than 350% year over year and sales through Drive-Up were up more than 700% during the quarter under review. In-store pick-up sales rose more than 60%.

It is quite evident that Target has been aggressively adopting strategies to enhance the shopping experience through miscellaneous channels. It has been making investments to enhance omni-channel capacities, come up with new brands and remodel or refurbish stores in the wake of rising competition from Amazon AMZN, Kroger KR and Walmart WMT.

Wrapping Up

Target is leaving no stone unturned to improve top-line performance and expand customer base. It remains committed to address the challenges related to the pandemic and position itself for future. In this respect, it has been directing resources toward digital platforms in order to better engage with customers, augmenting supply chain, and concentrating on technology and process improvements.

We note that shares of this Zacks Rank #1 (Strong Buy) stock have surged 33.1% in the past three months compared with industry’s growth of 10.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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