Robust Online Shopping Pushes Target's Earnings Past Projections
- By Mayank Marwah
Target Corp. (NYSE:TGT) released its fourth-quarter and full-year results before the opening bell on March 2. The retailer posted quarterly earnings and revenue beats thanks to robust digital sales and strong same-store sales, especially during the holiday shopping season.
The company's shares surged 1.8% in premarket trading to $189.50 following the earnings announcement.
Key metrics
Target's net income of $1.38 billion jumped 66% year over year, translating to GAAP earnings of $2.73 per share. The company reported adjusted earnings of $2.67 per share, which topped analysts' estimates of $2.54. Revenue came in at $28.34 billion, surpassing expectations of $27.48 billion.
For full-year 2020, revenue amounted to $93.56 billion compared to $78.11 billion in 2019. GAAP earnings were $436.8 billion, translating to $8.64 per diluted share. That compares with $328.1 billion, or $6.34 per share, recorded in 2019.
Same-store sales grew 20.5%, which was more than the anticipated increase of 16.8%. While the number of transactions surged 6.5% during the quarter, the average transaction amount soared 13.1% as compared to the same period last year.
Reflecting on 2020, CEO Brian Cornell had the following to say:
"Following years of investment to build a durable, scalable and sustainable business model, we saw record growth in 2020, as our guests turned to Target to safely provide for their families throughout the pandemic. With the strength of our unique, multi-category assortment and the flexibility we offer through our reliable and convenient fulfillment options, we gained nearly $9 billion in market share in 2020, and grew our revenue by $15 billion, which is more than the 11 prior years combined."
Digital sales
As a result of the Covid-19 pandemic, customers often refrained from going to physical stores, which is why digital traffic and curbside pickup gained momentum during the quarter.
Comparable digital sales climbed a massive 118%. The retailer said its curbside pickup service flourished during the quarter, up more than 500% as compared to the same period last year.
The big-box retailer's same-day services gained traction during the quarter, rising 212% year over year. The services allowed customers to pick up products they ordered online on the day of their purchase.
Robust holiday sales
Like most other retailers, Target started rolling out its holiday sales in early October due to the Covid-19 pandemic. Sales and promotions related to Black Friday were spread across multiple stores and online events for several days in order to avoid huge crowds.
The company noted that its comparable sales during the November-December period grew 17.2%, while comparable digital sales improved 102% courtesy of its same-day fulfillment services.
Target's electronics category saw sales grow in the mid-20% range in the holiday shopping season as customers bought office products and video games. While essentials and beauty categories grew in the low teens, the food and beverage segments met the company average. The home division saw a low-20s percentage increase and the apparel segment inched up in the high-single digit range.
Disclosure: I do not hold any positions in the stocks mentioned.
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This article first appeared on GuruFocus.
