Big-box US retailer Target has reported the biggest quarterly sales surge in its 58-year history, sending one of the clearest signals yet that shifts in consumer behaviour in the pandemic are widening the gap between the strongest chains and their weaker rivals.
Brian Cornell, chief executive, hailed Target’s performance as “extraordinary” as the company on Wednesday disclosed a 24 per cent year-on-year rise in second quarter like-for-like sales.
Such an upswing is remarkable for a retailer the size of Target, which opened its first outlet in Minnesota in 1962 and has since expanded to 1,900 stores across the US.
The stronger-than-forecast figures pushed shares in Target up 10.2 per
cent in morning trading in New York, giving a market capitalisation of
$75bn and putting them on track for a record closing high.
Target’s performance, driven by ecommerce but also supported by strong growth in stores, outshone robust numbers earlier this week from Walmart, which said comparable sales at its US business rose 9.3 per cent.
Customer demand had been strong across categories, Target said, as Americans spending more time at home bought goods from video games to garden supplies. Sales of electronics rose more than 70 per cent, home categories such as kitchenware 30 per cent, and food, beverage and other essentials 20 per cent.
During lockdown, big-box chains had a huge advantage over clothing outlets, department stores and other more discretionary retailers that were forced to close.
Target and Walmart were allowed to stay open because they stock groceries, toiletries and other vital items. As well as essentials, they also offer a wide range of other products.
Even as other retailers have reopened, Target’s format has given it an edge over struggling competitors as its product selection has made it a convenient one-stop shop.
Target said it had gained $5bn of market share so far this year, in clothing among other products. “Every one of our merchandising categories is gaining share, virtually each and every week,” Mr Cornell said.
The company produced revenues of $23bn in the three months ended August 1, about $4.5bn more than the same period last year. Net income rose from $938m to $1.69bn.
Digital sales almost tripled in the quarter, helped by Target’s same-day collection services. Mr Cornell said the company was reaping the rewards of a “seemingly counter-intuitive” decision to make its stores the hub for online as well as physical retail.
Despite its successes in the quarter, Target did not provide financial guidance for the full year and Mr Cornell cautioned there was “a lot of uncertainty” about the back-to-school shopping season.
Two-thirds of US students were due to begin school remotely, he said. “Sitting here today, I don’t know if 30 days from now that number is going to be 6 per cent or 96 per cent.”
Still, Target said comparable sales in August had risen by a “low double digits” percentage — a reassuring sign for investors after Walmart sent jitters through Wall Street over how long it could sustain the momentum. Walmart said a spending splurge driven in part by stimulus cheques of up to $1,200 per person from Washington had recently begun to fade.
Mr Cornell said: “Certainly stimulus was a factor, but even as the stimulus has waned, we’ve continued to see very strong comparable sales growth.”
He added: “We know we need to deliver on the third quarter amid a pandemic that’s not yet contained.”