Target Adds Health Care Heft to Board
Target has added some technology and health care expertise to its board of directors.
The company revealed that Christine (Chris) A. Leahy, president, CEO and director of CDW, and Derica W. Rice, former EVP of CVS Health and president of CVS Caremark, have been added as directors. Leahy’s appointment becomes effective Jan. 1, and Rice’s appointment becomes effective Aug. 31.
Leahy, 56, is president and CEO of Lincolnshire, Illinois-based CDW, a leading multibrand technology solutions provider to business, government, education and health care customers. She joined CDW in 2002 and held a series of executive leadership roles prior to being named to her current position in January 2019, including chief revenue officer; SVP, international; chief legal officer; corporate secretary; and general counsel. Leahy also serves as a member of CDW’s board of directors. Prior to CDW, Leahy spent 11 years at Sidley Austin, most recently as partner. She serves on the boards of the Economic Club of Chicago, Northwestern Memorial Hospital, Junior Achievement of Chicago and Children’s Home + Aid.
Rice, 55, was EVP of Woonsocket, Rhode Island-based CVS Health and president of CVS Caremark, the pharmacy benefits management business of CVS Health, from March 2018 through February 2020. Previously, he held various executive positions at Eli Lilly and Co., most recently that of EVP of global services and CFO from 2006 to 2017. He is currently a member of The Walt Disney Co.’s board of directors and will join the board of directors of Bristol Myers Squibb effective Sept. 1. He previously served as a member of the board of directors of Target from 2007 to January 2018.
“Chris and Derica bring broad expertise and unique perspectives that will complement the skills and viewpoints of our current board. As CEO of a premier technology company, Chris’ voice will be a welcome addition to our discussions as we continue to accelerate the growth of our business and invest in our team. We’re pleased Derica is returning to the board. His deep financial acumen and leadership prowess, honed over more than 15 years in high-level positions at respected brands, will prove more valuable than ever in these challenging times. I welcome both Chris and Derica to Target and am looking forward to their insights as we focus on deepening our trust with guests and advancing our durable strategy,” said Brian Cornell, chairman and CEO of Minneapolis-based Target.
Last week, Target reported a 24.3% same-store sales increase, the strongest comps the company has ever reported, and nearly 200% digital growth in the its second quarter.
Store comps increased 10.9% while digital comps grew 195%, accounting for 13.4 percentage points of Target's same-store sales growth. Target said that its stores fulfilled more than 90% of the company's second-quarter sales. Same-day services (Order Pick Up, Drive Up and Shipt) grew 273%, accounting for approximately six percentage points of total company same-store sales growth. Specifically, Target’s curbside pickup service jumped by 734%.
The company saw unusually strong market-share gains across all five of its core merchandise categories. Sales in food and consumables rose 20%. Sales in electronics exploded 70% as consumers shopped for work-from-home gear. Apparel sales rebounded from a 20% first-quarter decline to rise by double digits in the second quarter.
For the second quarter ended Aug. 1, the retailer’s net income soared by more than 80.3% to $1.7 billion, or $3.35 per share, from $938 million, or $1.82 per share, a year earlier. After excluding items, Target earned $3.38 per share. The company’s total revenue rose 24.7% to $23 billion, from $18.42 billion a year prior, beating analysts’ expectations of $20.09 billion.
In the first half of the year, the company has gained approximately $5 billion in market share.
"Our second-quarter comparable-sales growth of 24.3% is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9% and stores enabling more than three-quarters of Target's digital sales, which rose nearly 200%. We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team," Cornell said. "We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year. With our differentiated merchandising assortment, a comprehensive set of convenient fulfillment options, a strong balance sheet and our deeply dedicated team, we are well equipped to navigate the ongoing challenges of the pandemic, and [will] continue to grow profitably in the years ahead."
In an earnings call with analysts, Cornell said that Target plans to roll out the third and final phase of its Good & Gather private-brand grocery assortment this fall. More than 600 items will be added, bringing the total number of SKUs to nearly 2,000.
"The brand is clearly resonating with our guests and delivering our food and beverage vision to enhance the Target experience by making it easy for families to discover the joy of food," Cornell said. "We launched this new flagship brand less than a year ago. It is already generating more than $1 billion in sales. With momentum from this new brand, our own-brand food and beverage business is growing more than 30% so far this year, significantly outpacing the market and growing market share. The brand has outgrown national brands so far this year as guests prefer their unmatched value, enhancing Target's differentiation and delivering attractive gross-margin rates."
The second-quarter results were an acceleration of sales trends that Target experienced in its first quarter ended May 2, when same-store sales increased 10.8%, stores fulfilled nearly 80% of orders and digital sales grew 141%. The second-quarter acceleration is notable because Target’s first quarter included the impact of pantry loading in March and April, which positively affected food retailers’ performance. Target also benefited from this shift in shopper behavior, but its exposure to more discretionary categories, such as apparel and accessories, offset those gains in the first quarter.
Target operates more than 1,800 stores, 39 distribution centers and Target.com.