The target increases growth during the Covid-19 pandemic, at the expense of rivals

Comparable sales, in stores and digital channels that have been operating for at least 12 months, increased by almost 21% in the fiscal quarter ended January 30, boosted by strong demand for online services, including same-day order picking and delivery. For the full fiscal year, revenues reached $ 93.6 billion, an increase of 20%.

“After years of investing in building a sustainable, scalable and sustainable business model, we have seen record growth in 2020,” said CEO Brian Cornell.

In recent years, Target has intensified investment in online services. Instead of spending a lot to set up a massive network of fulfillment online stores, Target has used stores as hubs to ship orders online or to allow shoppers to pick up their orders from store parking lots.

In the last fiscal year, about 95 percent of sales came from in-store fulfillment, which includes in-store purchased products as well as in-store online orders, the company said. Comparable digital sales – orders placed online or via the Target app – have doubled in the last quarter.

This model, as well as the sale of products in high demand during the pandemic, such as home decor, food and toilet paper, have helped Target gain market share in the last year. Target, along with many retailers, remained open in the early days of the pandemic, while department stores and retailers were forced to approach shoppers in the store. Target said Tuesday that it estimates it has earned about $ 9 billion in sales from competitors.

The target’s profit rose last year, despite a jump in Covid-19 spending that remains high, executives said. As sales grew rapidly, “our gross margin rate also increased, and we saw a low amount of leverage,” the company’s chief financial officer, Michael Fiddelke, said in a call with analysts. This increase “compensated more than the investment in team and guest safety,” he said.

In the last quarter, net earnings reached $ 1.38 billion, up 66% from the previous year. Earnings per share were $ 2.67, compared to $ 1.69 a year earlier.

Target said it intends to step up store remodeling and other investments this year, after discontinuing some of those activities at the start of the pandemic. He said he would spend about $ 4 billion annually over the next few years. Its plans include remodeling 150 stores before the holidays this year and 200 a year in the coming years, as well as building about 35 new small-format stores each year, mainly in urban areas and on university campuses.

Target store brands grew rapidly last year, executives said, accounting for about a third of revenue and a higher percentage of gross margin.

Like other pandemics retailers that have done well in the pandemic, Target has become more dependent on e-commerce because of the disruption. For the entire fiscal year, 18% of sales came from digital channels, up from 8.8% a year earlier. Best Buy last week Co.

said its online sales rose nearly 90 percent to $ 6.7 billion in the last quarter and accounted for 43 percent of total U.S. sales, almost double the share a year earlier.

Retailers have reported mixed results in the last year. Last week Home Depot Inc.

He said revenues rose 20 percent in his last fiscal year as Americans spent a lot on home improvement. Annual sales at Macy’s Inc.

fell by almost 30% amid weak demand for out-of-home clothing.

Some retailers say pandemic-induced buying trends will persist in the longer term, while other industry executives say buyers will return to previous models later this year as more people are vaccinated and resume spending. for meals or travel.

Target executives said they expect consumer demand to return, such as buying clothes to wear outside the home or luggage for travel. But germ sensitivity and a preference for social distancing may remain long-term, Mr Cornell said in a call to reporters.

Target said on Tuesday it would not share financial guidance for the current year, citing “extremely fluid and uncertain prospects for consumer shopping patterns and the impact of Covid-19.” Many companies stopped issuing financial guidelines last year, citing uncertainty over the pandemic.

Write to Sarah Nassauer at [email protected]