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Target Is Winning the Pandemic Race

WWD | February 2, 2021 Target might have mastered the perfect pandemic formula. Products from fashion and food to home goods and essentials are available through brick-and-mortar stores, online shopping, personal shoppers, same-day delivery services and drive-up options.

“Target is operating on all eight cylinders. And if they had more cylinders they’d be operating on those as well,” Craig Johnson, founder of Customer Growth Partners. “Yes, there’s a lot of competition in the retail industry and everything else. But they are about as well positioned as anybody.” Target logged more than $1 billion in profits in the most-recent quarter, with a stock price up nearly 65 percent year-over-year. The stock rose 1.10 percent on Tuesday to $185.59, leaving the mass merchant with a market capitalization of nearly $93 billion.

Some top areas where Target’s leading momentum:

Enhanced Omnichannel / Fulfillment Options The many same-day purchase options — including buy online, pick up in store; drive-up and delivery service Shipt — continue to grow in popularity, with drive-up growing the fastest — up 500 percent, year-over-year, in the most-recent quarter and more than 700 percent, year-over-year, the quarter prior to that. “Target has taken the friction out of the shopping process, making it as easy as possible for customers to do business with them,” said Michael Lasser, equity analyst at UBS. “And they’ve done a good job of merchandising, creating the right products, products that customers want, and at the right price.”

Shift to Discretionary Items Target grew across all categories during the holiday shopping season thanks to shifting shopping patterns. Many consumers began investing in a greater mix of discretionary items.

“Target is benefiting from this, much more than Walmart or Costco, with its makeup and merchandising mix,” Johnson said. “Costco is like 70 percent groceries; Walmart is about 60 percent a grocery store. Target is more like 20 percent a grocery store and its mix is higher up in discretionary categories.”

Online Growth Target revealed holiday sales, with total comparable sales up 17.2 percent, year-over-year, for the November-December period, driven by skyrocketing growth in online sales as well as its leveraging of its physical store base to fulfill digital orders. Comparable digital sales grew 102 percent during the same period, year-over-year.

“Target is enjoying rapid online growth. That’s not new news,” Johnson said. “But it’s higher than either Walmart or Costco. I’m talking about comp traffic growth. By our metrics, we’re seeing a higher rate of both in-store and digital traffic at Target. And unlike both Walmart and Costco, Target is getting solid in-store traffic growth. What that means is that net traffic is also up, Target has the best of both worlds.”

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