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Target's 1st-Quarter Financial Results: Key Takeaways for Investors

Target Corp. (NYSE:TGT) released its first-quarter results before the opening bell on May 20. The retailer posted both an earnings and revenue beat thanks to robust digital sales, which comprehensively offset coronavirus-related costs of roughly $500 million.

By the numbers

Target reported adjusted earnings of 59 cents per share, which topped analysts' estimates of 46 cents. Revenue came in at $19.62 billion, surpassing expectations of $19.1 billion.


Same-store sales grew 10.8%, which was more than the anticipated increase of 7.5%. While the number of transactions plunged during the quarter, the average basket jumped 12.5% as compared to the same period last year due to customer's lesser but larger shopping trips.

"Throughout the first quarter, our team and guests faced unprecedented challenges arising from the spread of Covid-19," Chairman and CEO Brian Cornell said. "In the face of those challenges, our team showed extraordinary resilience as guests relied on Target as a trusted resource for their families. With our stores at the center of our strategy and a significant investment in the safety of our team and guests, our operations had the agility and flexibility needed to meet the changing needs of our business."

He added that he is confident the company will emerge from the crisis even stronger as a result of "the dedication of our team, the benefit of a sustainable business model and a strong balance sheet."

Digital sales

As a result of the pandemic, customers often refrained from going to the physical stores, which is why digital traffic gained momentum during the quarter.

Comparable digital sales climbed a mammoth 141% during the quarter. Around 5 million new customers shopped from the company's website during the quarter. Over 2 million used Target's Drive Up service, which is available in Target's app. In addition, more than 70 million people have enrolled in Target circle, which is a free countrywide loyalty and rewards program.

Digital sales grew 33% in February. This was followed by 100% growth in March and a mammoth 282% increase in April.

Other growth contributors

Target's hardlines category, which comprises durables like appliances, saw sales grow more than 20% in the first quarter. While the food and beverage category was up 20%, essentials and beauty grew in the high teens. By contrast, apparel sales dropped approximately 20%.

The big-box retailer's same-day services gained traction during the quarter, up 278% year over year. The company, through its same-day services, permits its customers to get hold of the products they ordered online on the day of purchase.

Guidance

Target pulled its financial forecast for the full-year, citing the global uncertainty caused by the coronavirus pandemic.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.