How Target is winning shoppers: Circle loyalty program, Good & Gather brand, deliveries and curbside pickup

Chicago Tribune Finance 2 weeks ago

Target is bursting into the critical holiday season with strong third-quarter earnings as the company pushes faster delivery and invests heavily in stores, on technology and on new brands.

The company raised its expectations for the year and shares rose more than 10% before the opening bell Wednesday to what will be an all-time high.

The Minneapolis retailer’s comparable sales, which also include online sales, rose 4.5%. That reflects 2.8% growth in stores open at least a year. Third quarter online sales rose 31%. Customer traffic to its stores and website rose 3.1%.

Target is demonstrating how an intense focus on both low prices and customer convenience can put traditional retailers on a competitive footing with, which has upended the retail sector. Walmart last week raised its annual profit expectations after reporting strong third-quarter results helped by its grocery business.

Other traditional rivals, particularly department stores and mall-based clothing chains, have been unable to keep pace and are suffering.

Still, the holiday season is expected to be brutally competitive. Faced with the shortest holiday shopping season since 2013, retailers are to get into the minds of potential customers early.

Target will spend $50 million more on its payroll this quarter than it did during the same period last year to ensure customers can find help whenever they need it.

The company is also introducing some new incentives this holiday season such as a new loyalty program called Target Circle. So far, it has signed up more than 35 million people. It found in an early test of the program that customers shopped more frequently and spent 2% to 5% more.

This past fall, it launched a new grocery store label brand called Good & Gather, which will be expanding to 2,000 products by late next year.

It’s also offering a variety of options to buy, from picking up online orders curbside or in the store. Through Shipt, which it purchased in December 2017, shoppers for a fee can get deliveries to their doorstep in a few hours because there is likely a Target store nearby. The company said Wednesday that same-day services accounted for 80% of its third quarter digital growth

“Target continues to operate in rarified air, with (third-quarter) results outstanding across the board,“ said Charlie O’Shea, lead retail analyst at Moody’s Investors Service.

Target appears to be in a good position to avoid price cuts and other promotions that can lower profit because inventory levels are down vastly from a year ago, O’Shea believes.

“With inventory levels down around $1 billion year-over-year, Target is well-positioned for holiday,” O’Shea said.

Third-quarter profit was $714 million, or $1.39 per share, including discontinued operations worth 2 cents. Earnings, adjusted to account for discontinued operations and non-recurring gains, came to $1.36 per share, easily beating Wall Street per-share expectations for $1.19.

Revenue was $18.67 billion, also topping projections.

Target Corp. now expected adjusted earnings per-share of $6.25 to $6.45 in 2019, compared with earlier projections of between $5.90 and $6.20.

Portions of this story were generated by Automated Insights using data from Zacks Investment Research.

Follow @ChiTribBusiness on Facebook and @ChiTribBiz on Twitter.

Tags: Business

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