Target is winning back shoppers, especially online

MINNEAPOLIS — Brian Cornell says Target's fifth consecutive quarter of traffic growth is evidence that the retailer is making good progress on its omnichannel capacity improvements.

 

For the fourth quarter ended Jan. 30, same store sales at Target increased 1.9%, driven by traffic growth of 1.3%. This is Target's sixth consecutive quarter of rising same store sales.  

 

“With traffic growing and our signature categories leading our growth, Target’s results demonstrate that we are focused on the right strategic priorities,” said Cornell, chairman and CEO of Target. “I want to thank our teams across the company for giving our guests a great holiday season, driving consistent growth throughout the fourth quarter and delivering on the sales and profit goals we laid out at the beginning of the year. While we have made a great deal of progress in 2015, we are excited about the opportunity in front of us to provide a more seamless experience and accelerate profitable growth.”

 

The retailer said sales in the Style, Baby, Kids and Wellness categories grew more than three times faster than the company average. But the big story in Target's results was the 34% jump in online sales. Target offered free shipping on all online orders for the holiday season for the second straight year.

 

“A key takeaway from Target’s Q4 results in our view is the performance of its online business, which grew 34% year-over-year, and will likely lead the ‘brick-and-mortar' pack on a percentage growth basis for the period,” stated Moody’s lead retail analyst Charlie O’Shea. “As we saw throughout retail this holiday, promotions were impactful overall, with Target’s gross margin feeling the heat as it was down 60 bps year-over-year, however the company was able to more than make up for this drop with solid control of operating expenses. Going forward, we believe Target’s continuing efforts to strengthen its food business will resonate with consumers, and drive increased traffic through more frequent shopping visits.”

 

Earlier this week Walmart reported a 0.6% increase in same store sales and e-commerce growth of only 8%, raising questions about how well it is fighting back at Target and Amazon. 

 

For the quarter, Target reported a profit of $1.43 billion, or $2.32 a share, up from a loss of $2.64 billion, or $4.10 a share, a year earlier. This includes the gain stemming from the sale of its pharmacy and clinic businesses. Revenue was $21.63 billion.

 

For the full year, Target’s same store sales grew 2.1%, traffic increased 1.3% and adjusted EPS increased 11.3% to $4.69. Target returned $4.8 billion to shareholders in 2015 through dividends and share repurchases.