Amid the general US retail doldrums, Target’s Q2 results stand out as a beacon of what’s possible when you have a plan, you’re disciplined in implementing it, and not afraid to spend on innovation where it will pay back.
In a press release, Target highlighted its Q2 financial achievements including:
- 6.4% store traffic growth
- 6.9% revenue growth reaching $17.8 billion in Q2
- 6.5% sales growth, the best comparable growth in 13 years
- digital sales growth of 41% following a 32% increase last year
- adjusted earnings per share of $1.47, up 20% over last year.
Brian Cornell, chairman and chief executive officer of Target said, “We laid out a clear strategy at the beginning of 2017, and throughout this year we’ve been accelerating the pace of execution. We’re on track to deliver a strong back half and we’ve updated our full-year guidance to reflect the strength of our business and the consumer economy. As we look ahead to 2019, we expect to achieve scale across the full slate of our initiatives – creating efficiencies and cost-savings, further strengthening our guest experience and positioning Target to continue gaining market share.”
Growth by the store numbers
The 6.4% Q2 growth is the company’s strongest performance since 2008. A big part of Target’s success has been its “Stores as Hub” and “Differentiated Products” strategies.
Let’s look at a blueprint of the “Stores as a Hub” strategy driving the record Target financials performance:
- order pickup: 95% of orders are ready within one hour and available for free pickup at every target store
- same-day delivery: 1,100 stores and 160 markets offer same-day delivery of groceries and merchandise for $99 annual membership
- drive-up: at 800 stores in 25 states, order via Target app, drive to the store and a target employee will bring your order to your car
- free two-day shipping: REDcard holders get free two-day shipping of orders over $35
delivery from store: for just $7, in-store purchases can be delivered same-day in 60 major urban stores in Boston, New York, Chicago, DC and San Francisco- Target restock: for $2.99 or free for REDcard holders, can get next-day delivery of a shopping cart full of basics products like diapers, paper towels, and kitchen essentials; now available for 75% of the US market.
In this “stores as hub” strategy, Target has set a high level of customer service by using its reach and scale to improve product service and delivery to key customers. Many retailers will be challenged to compete at this level.
Differentiated products strategy
Target has invested in creating unique, affordable products available only at its own stores and providing a unique customer experience:
- Made by Design: launched in June, these foundational products complement the growing range of Home products portfolio.
- Toys & Baby: partly in response to the closure of Toys “R” Us, Target expanded its toys line of products and emphasized new baby products for substantial growth.
- Heyday: it’s custom line of more than 150 electronics products, many priced at $20 or less, launched in June for back to school and college savings.
- Wild Fable & Original Use: Target introduced new women’s and men’s apparel lines geared at Gen Z and millennials.
Powerful payback on strategy
In a recent article on MSN.com, host Jim Cramer believes Wall Street analysts have been “dead wrong” in their evaluation of the retail sector.
“As an example, Target reported second-quarter earnings on Wednesday that beat Wall Street’s expectations, bolstered by growth in its home category. Millennials love to fix up their apartments. That’s driving the incredible growth,” said Cramer.
Within a year of implementing its new growth strategy, Target is seeing results despite a challenging retail market and well-financed competitors online and off-line. The 41% growth in online sales in Q2 2018, and 32% growth in Q2 2017, is particularly impressive given the competition by Amazon and other online businesses. Other retailers have much to learn from Target’s success so far.
Visuals courtesy of Target
Updated with Jim Cramer quote from MSN.com
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