Target Corp. continues to experience topline growth on top of unprecedented increases over the last two years. According to its first quarter results, comparable sales grew 3.3%, on top of 22.9% growth last year. Some highlights were comparable sales growth reflecting traffic growth of 3.9%, digital comparable sales growing 3.2%, following growth of 50.2% last year and same-day services (order pick-up, drive-up and Shipt) grew 8% this year, led by drive-up, which grew in the mid-teens on top of more than 120% last year.
Target’s multi-category assortment helped serve a wide range of customers’ needs during the first quarter, with the strongest performance in food and beverage, household essentials and beauty. And its same-day delivery continues to expand. Earlier in the year, Shipt teamed with two new retailers — 7-Eleven and Walgreens — increasing the number of store locations available on its national marketplace by more than 40%.
As part of its $5 billion investment in its physical stores, digital experiences, fulfillment capabilities and supply chain capacity in 2022, Target recently announced it will soon allow its shoppers to use Supplemental Nutrition Assistance Program (SNAP) payments for online purchases, as well as drive-up and pick-up orders. Target will further enhance its same-day pickup services later this year by allowing customers to pick up Starbucks coffee orders and return products curbside, among other improvements.
"Our first-quarter results mark Target's 20th-consecutive quarter of sales growth, with comp sales growing more than 3% on top of a 23% increase one year ago," said Brian Cornell, chairman and CEO of Target. "Guests continue to depend on Target for our broad and affordable product assortment, as reflected in Q1 guest traffic growth of nearly 4%. Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time. Despite these near-term challenges, our team remains passionately dedicated to our guests and serving their needs, giving us continued confidence in our long-term financial algorithm, which anticipates mid-single digit revenue growth, and an operating margin rate of 8% or higher over time."
During the first quarter, total revenue of $25.2 billion grew 4.0% compared with last year, reflecting total sales growth of 4.0% and a 6.7% increase in other revenue. Operating income was $1.3 billion, down 43.3% from $2.4 billion in 2021, driven primarily by a decline in the company's gross margin rate.
First quarter gross margin rate was 25.7%, compared with 30.0% in 2021. This year's gross margin rate reflected higher markdown rates, driven largely by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as costs related to freight, supply chain disruptions and increased compensation and headcount in distribution centers.
Target reported first quarter GAAP earnings per share (EPS) of $2.16, down 48.2% from $4.17 in 2021. First quarter adjusted EPS of $2.19 decreased 40.7% compared with $3.69 in 2021.
The company's first quarter 2022 net interest expense was $112 million, in line with $108 million last year.
Target paid dividends of $424 million in the first quarter, compared with $340 million last year, reflecting a 32.4% increase in the dividend per share, partially offset by a decline in average share count.
During the first quarter, Target opened five new stores and three sortation centers to serve even more customers.
For the second quarter 2022, the company expects its operating income margin rate will be in a wide range centered around first quarter's operating margin rate of 5.3%. And for full-year 2022, Target continues to expect low- to mid-single digit revenue growth. For full-year operating income margin rate, the company now expects it to be in a range centered around 6%.
Minneapolis-based Target Corp. is No. 6 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America, with nearly 2,000 locations.