Target’s holiday sales show the importance of stores even as COVID-19 drives business online

Target’s holiday sales show the importance of stores even as COVID-19 drives business online

Target Corp.’s

upbeat sales announcement for the November and December holiday period bolstered the case for bricks-and-mortar stores, even as consumers shift to e-commerce at an accelerated pace during the coronavirus pandemic, analysts and experts say.

Target said early Wednesday that same-store sales rose 17.2% during the holidays, with average ticket up 12.4%. The use of same-day services like Drive Up and Order Pick up rose 193%.

Comparable digital sales were up 102%. Taking into account sales in stores, same-day services and ship-from-store, about 95% of sales for this period were fulfilled by Target shops.

Target’s Chief Executive Brian Cornell has talked about the value of store fulfillment during past earnings reports.

See: Walmart testing grocery delivery technology with HomeValet ‘smart box’

“Given that the same-day options rely on our store assets, team and inventory they are much more profitable than traditional e-commerce fulfillment,” Cornell said in 2019.

Even as shoppers avoid stores during the COVID-19 pandemic, they’re still demonstrating their value in other ways.

“A few years ago, Brian Cornell’s decision to focus on and invest in physical shops was met with skepticism by Wall Street. Today, Brian Cornell and his team are having the last laugh,” wrote Neil Saunders, managing director at GlobalData Retail, in a note published Wednesday.

“Target has capped a phenomenal year with a glittering set of holiday sales numbers. The robust growth underlines the fact that Target remained a one-stop destination for consumers buying everything from gifts to holiday decorations to groceries.”

Target said it gained market share in core categories like home and electronics. Other experts highlighted that as well.

“Target’s holiday 2020 sales results… continue to position it as one of the true pacesetters in U.S. retail, and reinforce the importance of physical stores in a multi-channel model, especially in light of the challenged delivery environment,” said Moody’s Vice President Charlie O’Shea in a statement.

While the retail dynamic created by the pandemic muddies the relevance of year-over-year comparisons, Target’s numbers by any yardstick obliterate the bullseye as it continues to expand market share.”

Also: Every day of the holiday shopping season exceeded $1 billion in online sales: Adobe

O’Shea noted the importance of January for Super Bowl electronics purchases, gift card redemption and returns, but maintains confidence in Target’s execution.

“While expectations were high, these results bode well for the story, as they indicate significant customer growth, market share gains, benefits from omni-channel model, and overall solid execution,” wrote Credit Suisse analysts led by Seth Sigman.

“Further, there are upcoming catalysts including stimulus that could help further in the short-term.”

Credit Suisse rates Target stock at outperform with a $211 price target.

KeyBanc Capital Markets is also optimistic about what the holiday results mean for the retailer’s prospects moving forward.

“We continue to believe that the next leg of e-commerce growth will be driven by localized pools of inventory, and Target is well positioned against this framework,” analysts led by Edward Yruma wrote.

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“Long-term, we think Target (along with Stitch Fix) are well-positioned to capture share from ongoing closures in the department and specialty store space.”

Target stock has gained nearly 60% over the last year, outpacing the SPDR S&P Retail ETF
which is up 57.9% for the period. And the benchmark S&P 500 index

has gained 15.8% for the period.

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