Target ended a string of same-store sales declines, as its focus on pricing, unveiled after a tough fourth quarter, helped drive increased store traffic and stemmed negative food and beverage trends.
The positive signs weren't limited to food and household goods either: Target, long known for its cheap chic image, said it gained sales and share in the apparel and home categories, and it racked up a huge ecommerce sales gain.
If there is a shadow over the results, it's only that its two most serious competitors, Amazon and Walmart, may be moving even faster than Target is.
The Minneapolis-based company on Wednesday posted a 1.3% Q2 same-store sales gain, its first in five quarters. Customer visits picked up more than it expected, reversing previous declines to turn positive. Online, sales rose 32%, double the year-earlier rate and the biggest contributor to the quarter’s comparable sales increase. Target also raised its previous downbeat full-year forecast.
The results, said CEO Brian Cornell, give the company increased confidence that they are focusing on the right long-term strategies.
One of the key long-term strategies is to be price competitive. Target took a hit on profit—Q2 gross margins dipped—by cutting regular prices on some key food and household products in an effort to re-assert its price credibility with consumers. The discount retailer also started a Target Run and Done campaign focusing on essentials to spur customers’ quick fill-in trips and make them think of Target as a one-stop shop.
Those initiatives have helped to boost both traffic and the number of items shoppers bought, although the average transaction amount declined. Comparable sales in food and beverage were flat, after prior declines. Food and other essential categories, which totaled 44% of Target’s sales last fiscal year, are critical to get right because they are key to driving foot traffic. That’s especially pressing as consumers increasingly shop online.
Responding to consumers' convenience needs, Target is also adding more ready-to-eat, heat, or cook offerings, Chief Merchandising Officer Mark Tritton said on the call Wednesday.