Foot Traffic Propels Target’s Q2 Sales

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Consumers are starting to reward Target for its work to transform its product, customer experience and fulfillment offerings.

Target on Wednesday announced it achieved a 1.3% increase in comp sales during the second quarter, ended July 29, boosted by a 2 percent increase in store traffic. Sales increased 1.6% to $16.4 billion from $16.2 billion thanks to gains in four of the company’s five divisions: apparel, home, essentials and hardlines.

Earnings per share were $1.22 up from $1.07 during the last year period.

Net earnings decreased 1.2% from $672 million this quarter from $680 million during the same time frame last year.

Target chairman and CEO Brian Cornell attributed the uptick to the company’s effort to shift to full price and the Run & Done marketing campaign, which has boosted essentials.

“We’re at our best when we balance both style and household essentials, and you’re seeing that balance come to play in the second quarter and we’re going to continue that for the balance of the year into 2018,” Cornell noted.

[Read more about Target’s style refresh: Target Freshens Up Apparel, Home Amid Questions About its Overall Strategy]

As Target tries to reposition as an everyday low price player, it’s pulling back on promotions, which it acknowledged is likely to have short term negative effects. In the second quarter, however, the retailer experienced an increase in full price sales, which “demonstrates progress and gives us confidence we’re on the right track,” according to Cornell.

Target’s online initiatives are also on the right track with sales up 32 percent in the quarter. Pressured to deliver on those sales, Target continues to aggressively test new fulfillment options. “We recognized to move forward and to continue to execute, we have to continue to provide fulfillment options our guests are looking for today,” Cornell said.

The new initiatives include an internal curbside test in the Minneapolis area that will turn consumer facing this fall. The company also just announced the acquisition of last-mile solution provider Grand Junction, with which it’s already testing same-day delivery in New York’s TriBeCa neighborhood, resulting in orders that contain four times the units of typical basket.

Target is also expanding ship from store to 350 more locations by the holidays and Target Restock will offer next day essentials delivery in seven new markets in Q3. Buy online, pick up in store continues to gain traction, growing more than 30 percent in the first half.

The company is accelerating its remodel efforts, which are slated to transform 600 locations in three years. One hundred of those stores will be done by year’s end and the company anticipates performance there will be in line with the 2 percent to 4 percent sales increases seen at remodeled locations open for at least a year.

Target is also on track to open 100 small format stores for urban and college neighborhoods, which typically result in double the productivity of the average store and high single digit comp increases.

Finally, the mass merchant has launched two new private label collections this year with four more scheduled to bow in the third quarter. Already the Cloud Island layette line has generated double digit comp sales increases since its debut in May. And the year-old Cat & Jack collection has pulled in $2 billion, far exceeding expectations. The retailer has promised a total of 12 new brands by the end of next year, which will replace existing, stale labels like Mossimo and Merona.

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