TARGET’S CONTINUING SUCCESS – RETAIL

This has been a challenging quarter for most retailers – J.C. Penney, Kohl’s, and even Nordstrom reported declines.

But Target’s results came in above expectations, with revenue of $17.63 billion which was above the expectations of $17.52 billion, and first-quarter earnings of $1.53 per share, versus the $1.43/share expected.  This puts Target at the same lofty level as Walmart, which also exceeded expectations for the first quarter.  So, what’s the secret sauce that Target is using – always our first question when things are going well.  (The “what’s happening” question is also the first that we ask when things are going poorly.  It’s always important to know what factors are contributing to either success or failure – knowing the cause of the changes allows company leaders to repeat successes, or avoid the actions that led to decline.)

The record shows that in the first quarter of 2019, same-store sales rose 4.8%, making this the eighth consecutive quarter of same-store sales growth.  Digital sales also grew, with an impressive 42% increase in e-commerce.  Target offers curbside pick-up for e-commerce sales – something that Amazon finds hard to combat, but with Amazon’s one-day delivery policy, there’s likely not a real issue between the two companies.    Target CEO Brian Cornell reported that Target is “well-positioned to deliver strong financial performance in 2019 and beyond.”  He also noted that the company would be little-impacted by the tariffs on Chinese merchandise.  Target’s baby goods and toys did particularly well this quarter – continuing the success that the company had during the holiday season by picking up some of the market share slack left by the dissolution of Toys “R” Us.  The company, in a bid to attract customers from struggling Victoria’s Secret, has also launched a wide selection of sleepwear brands.  And, a third area where the stores did particularly well during the past quarter was in the Vineyard Vines line which is said to have attracted long lines of shoppers.  All-in-all, Target owes its recent successes to smart investments – the company has invested heavily in its stores (with most being completely renovated and revitalized), in its e-commerce operations, and in beefing up its shipping logistics.  Clearly, these were good decisions to have made; we would have to agree with CEO Cornell that these timely changes will be the precursors for a successful 2019.

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