Online retail has become very popular among customers. People find it easier to shop online and get their products delivered at their doorstep. In fact, according to ComScore, online retail spend is estimated to increase during the peak holiday season by a whopping 16% to $61 billion, with mobile spending rising 25%.
Therefore, retail giants who have a decent online presence are going to benefit. A retailer, which has already started benefitting from an increase in demand for online shopping, is Target (TGT, Financial). The company managed to overcome its problems and register great third-quarter results. The numbers beat the Street’s estimates, sending its shares higher.
An overview of the quarter
Revenue surged 2.7% to $17.73 billion, over the previous year’s quarter. This was higher than the estimate of $17.71 billion. The top line was driven by same store sales growth of 1.2% as against the estimate of 0.6% as demand during the Halloween and the back-to-school season increased. Also, there was an improvement in the consumer sentiment as overall income of the people increased and unemployment rate decreased.
The results are indeed remarkable since the company was witnessing declining store traffic as customers lost confidence in the company, due to the data breach last year. Moreover, the company provided huge discounts to attract customers. Discounts and various other promotions helped in luring customers.
Further, the bottom line impressive too. Earnings surged 3% to $0.54 per share, as compared to the expectation of $0.47 per share. Thus, it is clear that the retailer is being able to overcome the after effects of the data breach, which happened last year.
Even peers such as Walmart (WMT, Financial) also registered growth in its recent quarter. It reported a growth of 0.5% in same store sales even though there was not much of an increase in store traffic. As a result, its revenue surged 3% over last year, clocking in $119 billion. Its bottom line too beat the estimates by $0.03 per share.
Key highlights
Target’s ecommerce business performed really well. The online operations grew 30%, over last year, as the company took measures to strengthen this segment. Moreover, the categories in focus were furniture, baby products and fashion.
Also, sales from Canada grew 44% to $479 million as same store sales grew by 1.9%. Operations in China was suffering some time back as the company was not able to manage its inventory and its prices were high as per the standards in the region. Target stocked its shelves with appropriate products, which helped boost demand.
For the fall season, Target has entered into a partnership with Story, which provides products from premium brands and designers. This new deal is expected to bring in higher store traffic. Also, it plans to promote its products more, such as providing free shipping, opening stores earlier during Thanksgiving and offering other offers.
Conclusive thoughts
Target has come a long way and has been able to completely overcome the effects of the data breach. Because of various strategic initiatives such as ramped up marketing, the retailer’s future looks bright. Further, its online business and operations in Canada should help its business grow. Thus, Target expects same store sales growth of 2% for its December quarter. Overall, this stock should be given a thought.
