Unusually strong market share gains at Target drove a 24.3% same store sales increase, the strongest comp the company has ever reported, and nearly 200% digital growth in the company’s second quarter.
Store comps increased 10.9% while digital comps grew 195%, accounting for 13.4 percentage points of Target's same-store sales growth. Target says its stores fulfilled more than 90% of Target's second quarter sales. Same-day services (Order Pick Up, Drive Up and Shipt) grew 273% and accounted for approximately 6 percentage points of total company same-store sales growth. Specifically, Target’s curbside pickup service jumped by 734%.
The company saw unusually strong market-share gains across all five of its core merchandise categories. Sales in food and consumables rose 20%. Sales in electronics exploded 70% as consumers shopped for work-from-home gear. Apparel sales rebounded from a 20% first quarter decline to up double-digits in the second quarter.
For the second quarter ended Aug. 1, the retailer’s second-quarter net income soared by more than 80.3% to $1.7 billion, or $3.35 per share, $938 million, or $1.82 per share, a year earlier. After excluding items, Target earned $3.38 per share. The company’s total revenue rose 24.7% to $23 billion from $18.42 billion a year prior, beating analysts’ expectations of $20.09 billion.
In the first half of the year, the company has gained approximately $5 billion in market share.
"Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9 percent and stores enabling more than three-quarters of Target's digital sales, which rose nearly 200 percent. We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team," said Brian Cornell, chairman and chief executive officer of Target Corporation. "We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year. With our differentiated merchandising assortment, a comprehensive set of convenient fulfillment options, a strong balance sheet, and our deeply dedicated team, we are well-equipped to navigate the ongoing challenges of the pandemic, and continue to grow profitably in the years ahead."
In an earnings call with analysts, Cornell said Target plans to roll out the third and final phase of its Good & Gather private brand grocery assortment this fall. More than 600 items will be added to bring the total number of SKUs to nearly 2,000.
"The brand is clearly resonating with our guests and delivering our food and beverage vision to enhance the Target experience by making it easy for families to discover the joy of food," Cornell said. "We launched this new flagship brand less than a year ago. It is already generating more than one billion dollars in sales. With momentum from this new brand, our own brand food and beverage business is growing more than 30 percent so far this year, significantly outpacing the market and growing market share. The brand has outgrown national brands so far this year as guests prefer their unmatched value, enhancing target's differentiation and delivering attractive gross margin rates."
The second quarter results were an acceleration of sales trends Target experienced in its first quarter ended May 2, when same store sales increased 10.8%, stores fulfilled nearly 80% of orders and digital sales grew 141%. The second quarter acceleration is notable because Target’s first quarter included the impact of pantry loading in March and April, which positively impacted food retailers’ performance. Target’s also benefitted from the shift in shopper behavior, but its exposure to more discretionary categories such as apparel and accessories, offset those gains in the first quarter.