A costly data breach, leadership changes and a wholesale exit from Canada contributed to a tumultuous 2014 fiscal year for Target Corp., but it’s fair to say its e-commerce operation did more than all right.
Digital sales at the mass merchant retail chain, No. 18 in Internet Retailer’s Top 500 Guide, increased more than 30% during the chain’s fiscal 2014, which ended Jan. 31, the company reported Wednesday. Target includes web sales and sales through its apps in digital sales. Target’s web sales growth rate is nearly double the U.S. web sales growth estimate released by the U.S. Commerce Department last week. It said U.S. web sales grew 15.4% in 2014.
Target does not report digital sales in dollars; however it says its digital operation contributed 0.7 percentage points to its 2014 comparable store sales growth of 1.3%. That means slightly more than half of Target’s comparable store sales growth came from the web, with the remainder coming from its retail stores. Target operated 1,790 retail stores as of Jan. 31.
Target’s total sales for fiscal 2014 increased 1.9% to $72.62 billion from $71.28 billion, including sales from stores that have been open less than a year.
Target generated $2.30 billion on the web in 2013, according to Top 500 Guide estimates. Combining the Top 500 2013 estimate with the 30% growth number Target released Wednesday, Internet Retailer calculates Target’s 2014 digital sales at approximately $3 billion. The 30% growth figure also indicates web sales are accelerating year over year for the retailer. Web sales increased 19.2% from 2012 to 2013, according to Top 500 Guide estimates.
The retailer generated $21.75 billion in total sales in the fourth quarter, up 4.1% from $20.89 billion a year ago, when sales fell 6.8% from Q4 2012, reflective of the effect of a data breach that exposed the credit and debit card details of 40 million customers and other personal information of 70 million shoppers. Target says breach-related expenses to date total $191 million.
On a comparable store basis, Target says Q4 sales increased 3.8%. It says digital sales contributed 0.9 percentage points of that, or 23.7% of the comparable store growth.
Target’s sales growth exceeded what Target had expected, having revised in January its Q4 estimate to 3%. Some of those stronger-than-expected sales may have been the result of an offer of free shipping with no minimum order in the lower 48 states that ran from October to Dec. 20. Earlier this week, Target announced it was lowering its normal threshold for free shipping from $50 to $25, in part due to the response during the holiday promotion. The $25 minimum is below the minimum required by Wal-Mart Stores Inc. ($50) and Amazon.com Inc. ($35). Walmart.com is No. 4 in the Top 500; Amazon is No. 1.
Target is investing further in its web business. A Target spokesman says the retail chain currently has seven U.S. fulfillment centers for web and app orders. It will open two additional online fulfillment centers later this year. The centers are located in Memphis, TN, and York County, PA.