Target Corp., No. 17 in the Internet Retailer 2018 Top 1000, reported its largest-ever quarterly increase in online sales for the third quarter ending Nov. 3, which was a 49% increase over comparable sales from the same period last year. E-commerce sales reached $1.07 billion for the quarter, representing 6.0% of total sales. That’s up from 4.6% of total sales during the same period last year.
Ship-from-store sales doubled for the quarter, according to chief operating officer John Mulligan, but other shipping methods stayed flat. “Compared with shipping from farther away, shipping from store provides speed for our guests, while dramatically reducing the average cost per shipment,” he said in an earnings call transcribed by Seeking Alpha.
In-store pickup, which bypasses shipping costs completely, also grew and now is used for 15% of online orders, Mulligan said, without giving exact growth figures. He also noted strong growth in its next-day delivery program Restock and Drive-Up fulfillment—where Target employees bring orders out to customer cars at Target stores. This service is now available at nearly 1,000 stores.
Those Drive-Up orders are replacing orders that would otherwise be shipped to customer homes, according to Mulligan. “Obviously, given the cost of last-mile shipping, we like the economics of Drive-Up much better, and our guests are clearly happy as well,” he said.
However, the increase in online sales is partially blamed for a lower-than-expected profit margin of 28.7%. Online sales growth was higher than expected, according to chief financial officer Catherine Smith, driving up fulfillment costs for the quarter. But preparation for the holidays also contributed to lower margins, she said, with inventory up 18% in advance of Black Friday coming early in the quarter.
Target’s store sales were up 3% for the quarter, and overall sales were up 5.7%. Total revenue, which includes revenue from third parties using Target-owned Shipt, increased 5.6%.
In other earnings news:
- At electronics retailer Best Buy Co. Inc. (No. 8), U.S. online sales topped $1.21 billion during the third quarter ending Oct. 28, a 12.6% increase over the same period last year. That’s a slowdown from the 22.3% Q3 growth reported last year, but e-commerce’s share of total revenue continued to rise, accounting for 13.8% of sales in Q3 2018, compared with 12.7% in Q3 last year. 40% of online sales came from orders picked up in store, the seventh-straight quarterly increase, according to CEO Hubert Joly.
- Online sales at department store Kohl’s Corp. (No. 18) saw a “mid-teen increase,” according to chief financial officer Bruce Besanko on an earnings call transcribed by Seeking Alpha, but he didn’t share exact figures. Mobile traffic accounted for 70% of traffic and half of sales, CEO Michelle Gass said. App use is leading that growth, and conversion rates in the app are growing faster than any other digital channel, Gass said, without revealing more.
- L Brands Inc. (No. 26), owner of Victoria’s Secret and Bath & Body Works, reported that direct sales were up 22.1% for the third quarter ending Nov. 3. Direct sales, which encompasses online orders, rose to $498.9 million from $408.6 million. Updating Victoria Secret’s digital platform is the “most significant technology project” the retailer is undertaking, according to chief financial officer Stuart Burgdoerfer. The project will allow the brand to offer buy online, pickup in store fulfillment from multiple distribution centers and better global performance for online orders, he said.
- Shoe retailer Foot Locker Inc. (No. 44) posted a comparable online sales increase of 5.9% for the quarter ending Nov. 3. The retailer didn’t break out exact figures. During the quarter, Foot Locker launched digital sales in Singapore and Hong Kong, and started a limited digital offering in mainland China.