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HomeTechnologyTarget's online sales grow $13 billion over 2 years

Target’s online sales grow $13 billion over 2 years


Target Corp.’s digital sales grew 20.8% for the fiscal year ended January 29 and 9.2% in fiscal Q4 of fiscal 2021, up from comparable periods the year before, the retailer reported.

Contributing to the retailer’s digital growth increase was a 45% year-over-year growth in sales made via the retail chain’s same-day omnichannel services, which includes in-store pickup, same-day delivery via Target’s Shipt service and curbside pickup, dubbed Drive Up by Target. That growth was on top of 235% year-over-year growth in same-day services in fiscal 2020.

Drive Up was its fastest-growing same-day service. Sales fulfilled via Drive Up grew more than 70% in its 2021 fiscal year, on top of a 600% increase in 2020, Target reported. For Q4, digital sales represented 21.8% of total sales, down slightly from 22.1% for the year-ago quarter.

Target says digital sales represented 18.9% of its $106.01 billion in total revenue for the year, up from 17.9% for the previous fiscal year. For the quarter, digital sales represented 21.8% of its $31.00 billion in total revenue, down slightly from 22.1% for the year-ago quarter.

During a March 1 meeting with analysts, Target CEO Brian Cornell said Target believes stores are vital to growing its digital business.

“The way we run our stores is the secret to why digital is now 19% of sales,” Cornell said. “So, as we look at the next five years, we are going to continue to build on our strengths. We have the culture, we have the connections, and we care. We care about delighting our guests. We care about delivering value to our stakeholders.”

Cornell also said inflation and the war in Ukraine adds more uncertainty about the state of the economy, even as consumers continue grappling with the effects of COVID-19.

“We see higher prices across the country,” Cornell said. “We see supply-chain constraints that are steadily working themselves out but will likely take more time. Both of which are made more uncertain by the crisis in Ukraine.

Cara Sylvester, Target’s chief marketing and digital officer, said at the event that Target currently has 40 million customers who shop across sales channels. Omnichannel guests spend four times as much as stores-only guests, she added. Sylvester said omnichannel customers also spend more with Target than digital-only guests but did not specify how much.

During the event, John Mulligan, Target’s chief operating officer, said the retailer’s stores fulfilled more than 95% of the Target’s sales in 2021, including “most of our digital demand.”

The March 1 meeting with analysts was Target’s first such in-person event since 2019.

Operating margins in the first quarter will be well below last year’s rate of 9.8%, the Minneapolis-based retailer said. Target said Monday it would add $300 million in wage and benefit expense amid a tight U.S. labor market. Rising inflation and higher freight costs threaten all retailers.

“Gross margin may be pressured in 1Q on persistently high product and transportation costs,” Jennifer Bartashus, a retail analyst at Bloomberg Intelligence, said in a report. “Investments to drive supply-chain efficiencies will persist in 2022.”

FY 2022 guidance

Target expects quarterly, year-over-year profit performance will be variable during the year, but generally improve as the year progresses. The company expects its first quarter 2022 operating margin rate “will be favorable in relation to historical performance, but well below its first quarter 2021 rate of 9.8%.”

In a note to investors, Oliver Chen, a managing director with financial services firm Cowen and Co., was upbeat about Target’s results.

“We believe broad-based category strength, retention of new customers, and store-as-a-hub execution drove performance,” Chen said in the note.

He wrote that the productivity of Target’s stores, combined with omnichannel services like curbside pickup, put Target in a position to drive ongoing strong revenue growth and maintain its profit margins. Chen added that Cowen is “most impressed” with the retailer’s guidance for fiscal 2022.

Michael Baker, an analyst at financial services firm D.A. Davidson expressed similar sentiments.

“The highlight of the release is the 2022 guidance,” Baker said in a note to clients. “This shows that the operational improvements — which were taking hold prior to the pandemic — along with the share gains over the last two years, are proving to be sustainable,” the note said.

Earlier in the week, Target said it would add more than 250 Ulta Beauty at Target locations in 2022, reaching about 800 total. In 2020, Target inked a deal with Ulta Beauty Inc. to add miniature “shop-in-shop” versions of the makeup stores inside Target locations. The first locations launched in August 2021. This week, Target also said it would raise its starting wages to $24 per hour from $15 and shorten the waiting period for new hires to enroll in company-sponsored health insurance.

For the fourth quarter ended Jan. 29, Target reported:

  • Total revenue was $31.00 billion in Q4 2021, up 9.4% from $28.34 billion for the comparable quarter a year earlier.
  • Digital sales represented 21.8% of total sales, down slightly from 22.1% for the year-ago quarter.
  • Net earnings were $1.54 billion, up 11.9% compared with $1.38 billion for the year-ago quarter.
  • Comparable sales grew 8.9%, on top of 20.5% in Q4 2020.
  • Target fulfilled more than 95% of its fourth-quarter sales through its stores.
  • Q4 operating income margin rate was 6.8% in 2021 compared with 6.5% in 2020.

For the full year ended Jan. 29, Target reported:

  • Total revenue for fiscal 2021 was $106.01 billion in total revenue, up 13.3% from $93.56 billion a year earlier.
  • Digital sales represented 18.9% of total sales, up from 17.9% for the previous fiscal year.
  • Net earnings were $6.95 billion, up 59% compared with $4.37 billion in fiscal 2020.
  • Total sales grew more than $27 billion since 2019, reflecting more than $14 billion of additional store sales and digital sales growth of nearly $13 billion.
  • Comparable sales grew 12.7%, on top of 19.3% in 2020.
  • All five core merchandise categories ← delivered double-digit comparable sales growth in 2021, on top of record growth in 2020.
  • Operating income margin rate of 8.4% expanded nearly 150 basis points from 2020.

Percentage changes may not align exactly with dollar figures due to rounding.

Bloomberg News contributed to this report.

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