Target Corp. is roaring out of the pandemic, gaining about $1 billion in market share during its fiscal first quarter behind well-merchandised and digital-ready stores that welcomed a shopper base with money to spend and plenty of pent-up demand. Store traffic was up 17% in the period.
For the quarter, which ended May 1, the Minneapolis-based mass merchant grew total revenues by 23.4% to $24.2 billion and comparable-store sales blew away the most optimistic estimates at 22.9%. The same-store figure reflected 18% comps in-stores and a 50% comparable increase in digital sales. Target’s operating income was $2.4 billion, up 407%, and its operating income margin rate of 9.8% was up from 2.4% in last year’s first quarter.
Gross margins as a percent of sales totaled 30%, up from 25.1% last year, reflecting a more profitable sales mix led by apparel and home goods.
Net earnings increased 639.8% to $2.1 billion and adjusted earnings per share totaled $4.17. Analysts had anticipated earnings per share of $2.21 and sales of $21.75 billion.
Target in the first quarter a year ago was beset by a virtual evaporation of general merchandise sales and sharp reductions in store traffic as stay-at-home orders to combat the spread of the coronavirus tempered consumer spending and store visits, but the shutdown of rivals not deemed “essential” was a boost. The performance in the first quarter illustrates how strongly the company has bounced back, particularly as consumers return to in-person shopping and categories they may have eschewed amid uncertainty a year ago. Rival Walmart also posted stronger than expected results this week, although its comps increased by 6%.
Target said its sales growth was led by apparel, home and hard lines, while food and beverage grew in the low- to mid-single digits, lapping last year’s, and essentials grew on top of last year’s historic stock-up sales.
Target also indicated its momentum had continued into the current quarter, where it expects mid- to high-single-digit growth in comparable sales and an operating margin rate “well above” the 7.2% of 2019’s second quarter and last year’s 10% operating margin.
“Our performance in the first quarter was outstanding on every measure, and showcased the power of putting our stores at the center of our strategy. Store comp sales grew 18% in the quarter, even as they also fulfilled more than three quarters of Target's digital sales—including more than 90% growth of our same-day services,” CEO Brian Cornell said in a release. “Importantly, market-share gains of more than $1 billion in the first quarter, on top of $1 billion in share gains a year ago, demonstrate Target’s continued relevance with our guests, even as they have many more shopping options compared with a year ago.”