What’s Behind Target’s Impressive Financial Results

As Sharon Yoo reports in this KARE11 story, Target on Aug. 22 revealed a 6.9 percent revenue increase (to $17.8 billion) in its second quarter ending May 5, compared with results from one year ago. This and its earnings results were higher than analysts had expected. Same-store sales grew by 6.5 percent, its best results on this front in 13 years However, this includes online comp sales, which positively skew this number as they rose an incredible 41 percent. Without online sales numbers, Target’s same-store sales grew 4.9 percent, still strong, but relatively speaking, fairly close to competitor Walmart’s 4.5 percent same-store sales growth during the same period.

There are three reasons why Target’s results were so strong. First is the strong economy, which is helping other retailers as well including Walmart, Nordstrom and Kohls. The National Retail Federation on Aug. 13 said it expected sales for the entire industry during  the rest of 2018 to be stronger than previously expected.

A second reason is that there are less competitors, as Toys R Us is out of business, Sears is dwindling and Herberger’s, Younkers and others are going out of business or scaling back.

However, third is that Target’s $7 billion bet on re-energizing what had been a fading brand appears to be paying off (solid proof won’t be available until numbers released next February reflect results for its 2018 holiday season). That bet includes hefty investments in technology, creating 12 new exclusive brands that can be tailored based upon customer feedback, investing in major store redesigns, improving inventory management systems and display/inventory mix, and increasing the number of locations offering same-store delivery or curbside pickup.

Here are a few other thoughts:

The best performing area for the retailer this quarter was, surprisingly, home furnishings and decor, up 5.5 percent from a year ago. This may be another sign that brick and mortar has staying power: most people still want to see, feel and experience furniture and furnishings before buying them. Other categories such as apparel and accessories were up less than 3 percent.

Remember one quarter does not make a year. Analysts figure Walmart and Target will likely finish this year neck-to-neck on gains in revenues and market share.