Target reported stellar holiday results fueled by eye-popping digital momentum. It also fulfilled a remarkable 95 percent of all transactions through brick and mortar, underscoring Salesforce findings that store-based fulfillment separated the season’s outperformers. Urban Outfitters, meanwhile, had a notably more muted year-end frame.
At Target, comparable sales rose 17.2 percent, as digital comp-sale growth reached 102 percent. The mass discounter noted on Wednesday a 4.3 percent rise in holiday traffic amid a 12.3 percent uptick in average ticket prices. Store-originated comp sales rose 4.2 percent.
As has been the case in recent earnings, same-day fulfillment played a starring role in Target’s digital bonanza. Taken together, orders fulfilled by customers retrieving their purchase in stores or in their vehicles, along with via Shipt, cumulatively climbed 193 percent during the November-December period. Of the trio, the drive-up option grew 500 percent, the fastest of the group, while Shipt-serviced sales expanded by 300 percent.
Between store-originated sales, same-day services and ship-from-store, roughly 95 percent of holiday sales were fulfilled by stores. Target gained market share in its top five categories: home and hardlines (both in the low-20 percent range), beauty and essentials (low teens), food and beverage (“in line with the company average”) and apparel (high-single-digit range).
Target chairman and CEO Brian Cornell said the company has “seen continued strong sales trends in the new year, and as we turn to our 2021 plans, our team is focused on continuing to build on the guest engagement and significant market share we gained throughout 2020.”
Charlie O’Shea, Moody’s vice president and lead analyst for Target, said the holiday results position the chain “as one of the true pacesetters in U.S. retail, and reinforce the importance of physical stores in a multi-channel model, especially in light of the challenged delivery environment.”
In fact, Target’s very happy holiday sets a tough act to follow, he added. “While the retail dynamic created by the pandemic muddies the relevance of year-over-year comparisons, Target’s numbers by any yardstick obliterate the bullseye as it continues to expand market share,” O’Shea said. “We note sales tell only one part of the story, and January is an important month given returns, gift cards, and Super Bowl-driven consumer electronics purchases, [so] we expect Target’s superior execution ability to drive margins that will result in significant profitability for [the fourth quarter].”
The year-end frame was considerably more disappointing for Urban Outfitters Inc., which reported that net sales for the two months ended Dec. 31, fell 8.4 percent over the same year-ago period. Comparable retail net sales tumbled 9 percent, as stronger conversion rates failed to offset flagging store traffic. However, double-digit growth in digital partially offset lower store net sales. Comps climbed 1 percent at Free People, but fell 8 percent at Urban Outfitters and plunged 12 percent at the Anthropologie Group. Wholesale net sales slipped 1 percent.
And while retail comparable net sales have rebounded in January, Urban said it expects total Q4 gross profit margins to be down by several hundred basis points, driven in part by the deleveraging in delivery and logistics expenses stemming from higher digital sales.
In data revealed Wednesday, Salesforce said digital commerce surged later in the year despite the holiday season’s earlier start. While retailers launched holiday promotions in October, Salesforce said the bulk of holiday digital sales were still generated during the traditional shopping period. Cyber Week digital sales hit $270 billion globally and $60 billion in the U.S., with the first two weeks of December accounting for $181 billion in global sales and $39 billion in the U.S.
Of note, retailers that offered curbside and other pickup options saw digital revenue rise by 49 percent year-over-year on average, far outpacing the 28 percent average growth among those that didn’t.
Salesforce also shed light on the categories that captured consumer interest. Sporting goods led the way at 108 percent revenue growth over 2019, followed by home goods (89 percent), general apparel (40 percent), active apparel (35 percent) and footwear (3).
The software giant echoed widespread expectations that returns will again plague the retail sector. Salesforce sees more than $330 billion in online purchases wending their way back to merchants worldwide, reflecting 30 percent of total e-commerce transactions.