Target’s same-store sales up 17% over the holidays as it holds on to some of its pandemic gains

Earnings

A shopper wearing a face mask due to the coronavirus disease (COVID-19) pandemic browses toys at a Target store in King of Prussia, Pennsylvania, November 20, 2020.

Mark Makela | Reuters

Target said Wednesday comparable sales rose 17.2% in November and December, as customers bought matching pajamas and gingerbread house kits to celebrate a cozy holiday at home during the pandemic.

While online sales remained robust, shoppers also visited Target’s stores and spent more money per purchase than they did last holiday season. Combined transactions in Target stores and on its website rose 4.3% and average tickets grew by 12.3% year over year, the company said.

Despite the strong results during the peak shopping season, the pace of Target’s sales growth slowed slightly compared with the gains it logged in fiscal third quarter. The deceleration underscores the challenge that Target faces in the quarters ahead. As more Americans get vaccinated, the company will have to prove it can hold on to market share gains, even as consumers feel more comfortable making numerous trips to smaller stores or returning to malls.

The pandemic may permanently change the cadence of the holiday shopping season, too. Target said its stores will be closed on Thanksgiving Day 2021.

The retailer had opted to remain closed last Thanksgiving due to the health crisis. To spread out sales and thin crowds, Target began sales weeks before Thanksgiving, which previously had been the starting line for the search for gifts and stocking stuffers. It also put more of its deals online.

Target said comparable digital sales more than doubled in November and December compared with the year-ago period, while comparable store sales grew by 4.2%.

Target’s guidance includes only sales in November and December even though its fiscal fourth quarter won’t end until Jan. 31. It will report the full quarter’s results on March 2 at a virtual investor day. Ahead of Wednesday’s news, analysts surveyed by Refinitiv estimated Target would earn $2.27 per share, after adjustments, on revenue of $26.67 billion.

Target has been one of the bright spots in a hard-hit retail industry. It has reported eye-popping sales growth and $6 billion in market share gains as many other retailers have been pummeled by temporary store closures and even filed for bankruptcy during the pandemic. As consumers have limited store trips, they have spent more of their dollars in a handful of places and those have tended to be big-box retailers where they can get a gallon of milk, cleaning supplies and sweatpants all in one stop or all on one website.

As in earlier months of the pandemic, Target shoppers continued to use the company’s quick and contact-free online options. Its same-day curbside pickup service, Drive Up, grew by more than 500%. Target sales fulfilled by Shipt grew more than 300% during the holidays.

Few retailers have reported their holiday sales so far, but Target far outpaced the industry’s e-commerce growth. According to Adobe Analytics, U.S. online purchases over the 2020 holidays grew 32.2% from 2019, as more shoppers shopped from home during the pandemic.

Target has also made strategic moves that have paid off. It owns Shipt, a same-day home delivery service. It recently added fresh and frozen groceries to curbside pickup, a same-day service that grew by more than 500% over the holidays. And it has expanded the assortment in its food and beverage private label, Good & Gather, with a premium line of gourmet pasta sauces and coffees as people cook more at home.

Home goods and hardlines, which include appliances and sporting equipment, were especially popular during the holidays. Both categories saw same-store sales gains in the low-20% range compared with a year earlier. Within hardlines, growth was fueled by electronics sales.

Comparable sales of food and beverage rose about 17%, Target said. Beauty and essentials saw growth in the low teens and apparel saw high single-digit gains.

Target said family sleepwear sets and Christmas tree ornaments were among its bestsellers. The retailer also sold nearly 2 million of its Wondershop gingerbread houses.

Target shares, which have a market value of nearly $100 billion, have gained nearly 60% over the past year. The stock closed Tuesday at $199.10, not far from its 52-week high of $199.50, which it set Monday.

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