Target reported a 12.7% increase in comparable sales during the three-month period, on top of a 20.7% growth last year. The retailer reported its same-day services, including order pickup, drive up and Shipt, grew 60% this year, on top of 200% growth last year. The earnings report underscores that consumers are still participating in behaviors that began trending during the height of the COVID-19 pandemic in 2020.
Despite headlines citing supply chain challenges and potential inventory issues, Target executives stated the retailer is well stocked for the holiday shopping season.
"Following comp growth of nearly 21[%] a year ago, our third-quarter comp increase of 12.7[%] was driven entirely by traffic, and reflects continued strength in our store sales, same-day digital fulfillment services and double-digit growth in all five of our core merchandising categories,” Brian Cornell, chairman and CEO of Target, said in a statement. “With a strong inventory position heading into the peak of the holiday season, our team and our business are ready to serve our guests and poised to deliver continued, strong growth, through the holiday season and beyond."
To end the year, Target is expecting “high-single-digit to low-double-digit growth in comparable sales,” up from the previous guidance for a high-single-digit increase. The company expects its full-year operating income margin rate to reach 8% or higher.
Supply Chain Strategy
Executives noted Target has taken several steps to mitigate supply chain issues over the last several months, including identifying bottlenecks to keep inventory flowing. Those efforts drove up incremental costs, although the company is viewing them as a “continuation of the many productive, long-term investments we’re making in our business in support of the trust we have built with our guests,” Cornell said during the company’s earnings call Nov. 17. Overall wholesale costs from suppliers have also risen.
Target’s strategy to bolster inventory investment has helped bring customers in, the company touted.
“Inventory on the balance sheet was more than $2 billion higher than last year, representing growth of about 18% from a year ago,” John Mulligan, executive vice president and COO, said during the call.
Compared to the third quarter 2019, Target’s inventory has grown 3%, or $3.5 billion.
Despite higher sales during the quarter, the retailer’s stock dipped Wednesday after gaining 40% year to date.
Target executives also touched on staffing during the earnings call, noting it has made bigger investments in wages, recruitment, education and benefits to retain its workforce. The retailer has increased wages several times throughout the pandemic and added bonuses. Target sought to hire 100,000 seasonal team members to its stores ahead of the holiday season.