Target Corp. online sales grew at more than 4x the rate of total sales in its fiscal Q2, which ended Aug. 3.
It’s notable that in-store and online Target sales grew in Q2, CEO Brian Cornell told investors in an earnings call.
“Our digital team has done an outstanding job of enhancing our digital experience, and that’s showing through in our business results,” Cornell said. “We saw high single-digit growth in our digital comps in Q2 and even faster growth in same-day services led by Drive Up and Target Circle 360, both of which grew in the low teens. ”
Same-day fulfillment services now account for more than two-thirds of Target online sales, he said. The largest contributor to Target’s digital sales is Drive Up, he added. It generated more than $2 billion in Q2 sales, as well as more than $4 billion year to date.
Target is No. 5 in the Top 1000. The database is Digital Commerce 360’s ranking of North America’s online retailers by web sales. Target is also No. 80 in the Global Online Marketplaces Database, which ranks the 100 largest global marketplaces by third-party gross merchandise value (GMV). Digital Commerce 360 categorizes Target as a Mass Merchant.
Target online sales in Q2
Total Target revenue reached $25.45 billion in its fiscal Q2, with just $431 million of that not coming from sales. That’s 2.7% year-over-year growth from $24.77 billion. Operating income grew as well, to $1.635 billion. That’s a 36.6% increase over about $1.20 billion in the year-ago period.
Meanwhile, digital comparable sales — or Target online sales — grew 8.7% in Q2. That’s more than quadruple the rate of total comparable Q2 Target sales, which grew 2% year over year.
Target ecommerce sales by year
Additionally, Target online sales accounted for close to a fifth of all sales in Q2, at 17.9%. That’s up from 16.9% of all digitally originated Target sales in the year-ago quarter. However, physical stores still fulfilled the majority of orders — 97.9%. That’s largely the same as it was a year ago, when they fulfilled 97.6% of stores. As of the end of Q2, Target had 1,966 physical stores. That’s 10 more than it did at the end of Q1.
“While it was fantastic to see top-line growth in the second quarter, it was even more gratifying that it was driven by traffic,” Cornell said. “More guests choose to make more trips to Target following unprecedented growth during the pandemic. Altogether, over the first six months of 2024, our guests have already made nearly 1 billion trips to Target, a number that’s grown by more than 20% since 2019.”
Traffic grew in all three months of the quarter, chief commercial officer Rick Gomez told analysts on the earnings call. However, that traffic increase was partially offset by a decline in average order value, he added. That includes a decrease in Target’s average selling price compared to last year. In May 2024, Target announced it would reduce prices on about 5,000 items across its stores and website.
Adjusted inventory levels
The retailer also reduced total out-of-stocks by 5% year over year, said Michael Fiddelke, chief operating officer and chief financial officer, on the earnings call with investors.
“Also important: Out of stocks on our top items in Q2, the ones with the highest unit velocity, were more than 50% lower than total out of stocks and also better than a year ago,” Fiddelke told investors.
“It’s also notable that our total inventory investment at the end of Q2 was slightly lower than a year ago, meaning that the out-of-stock improvements we’ve been seeing are the result of operational improvements, not from simply flooding our network with more inventory,” he added.
At the end of Q2 2024, Target had about $12.60 billion in inventory. That’s down from $12.68 billion in Q2 2023.
Faster delivery via Target sortation centers
Target announced last year that it plans to open six new sortation centers by 2026 to increase delivery speed. So far, Gomez said, it’s working.
Local orders that Target processes through a sortation center arrive more than a day faster than the retailer’s network average, he said. And altogether, Target sortation centers have processed 19% more packages in 2024 than a year ago.
“That increase in speed doesn’t require more dollars, as our unit delivery costs from a sort center are about 20% lower than our network average,” he added. “On top of that direct benefit, opening a sortation center in the market frees up processing space in the stores it serves, while delivering labor savings in those locations as well.”
Target opened a new sortation center in the Detroit area in August 2024. It expects to serve more than 3 million consumers in the area. And by 2028, Target expects the facility to process up to 60,000 packages daily “while operating in a smaller-than-average footprint,” Gomez said.
“Beyond growth in the number of these facilities, our existing sort centers continue to ramp up their capacity, and we’re finding new ways to integrate them into our broader network,” Gomez added.” For example, our recently opened sort center in Chicago will be feeding the Detroit sortation center, increasing the number of packages eligible for next-day delivery in that market.”
Target Circle Week 2024 results
Members of Target Circle, the retailer’s loyalty program, made about two-thirds of all Target transactions during the retailer’s July sales event, Target Circle Week.
“Beyond the direct benefit of guest engagement with the platform, Target Circle also helps us gain deep consumer insights, allowing us to extend more personal, customized offers through our Roundel advertising business,” Cornell said.
Target Circle Week generated the highest digital traffic of the year so far, Gomez said.
This year, the dates for Target Circle Week in July fell just before Amazon’s 10th annual Prime Day sale. Meanwhile, Walmart announced a similar sale that overlaps with Target’s. Amazon’s manufactured summer sales holiday drove record U.S. ecommerce sales — from other online retailers.
Target’s retail media network, Roundel
Target’s loyalty program also acquired 2 million new members in Q2. It also added a paid tier in April, called Target Circle 360. Sales from Target Circle 360 grew in the low teens during Q2, Gomez said.
Gomez added that the insights Target gained through its loyalty program allowed it to offer 4x more personalized offers compared to the year before. Those same insights fuel Roundel, Target’s retail media network, he added.
Roundel experienced double-digit growth year over year in Q2. Cornell said Target expects Roundel “to grow in the high teens, on top of more than 20% growth in 2023.”
Check back for more earnings reports. Click here to read last quarter‘s Target earnings article.
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