Target boosted by discount shoppers

Trying to plan the next day’s outfit can be a pain. Demand planning for retailers and many businesses right now is a special nightmare. Target says that its sales this year could rise or fall by a low-single-digit percentage from last year, according to Wall Street Journal reporter Sarah Nassauer. That difference of several billions of dollars could mean a solid cushion against rising labor and other operating costs versus a hard landing from the pandemic-era boom in its business. In two words CEO Brian Cornell described the operating climate as “very challenging.” The disclosure came Tuesday as the Minneapolis-based retail chain posted quarterly sales growth that surprised Wall Street but sharply weaker profits. For Target, selling more groceries can seem like a good thing but profits on those items are razor thin versus items like electronics or its private label home goods. So what might this mean for retailers in 2023, let us know. #business #sales #retail #economy #ecommerce

With #inflation still atop consumers' minds, Target is planning more discounts for shoppers this year. Driving the news: The Minneapolis-based retailer unveiled its 2023 plan to investors on Tuesday. Details: Target said in will launch or expand 10 private label brands, which are often lower priced than name brands. It will also enhance its Target Circle loyalty program and debut a new "affordable joy" ad campaign. What's next: Target will also spend $4 billion to $5 billion on its stores, supply chain and e-commerce this year. More on Axios from Nick Halter about Target's plan for 2023 👇

Year-End Results and a Look Ahead Today, we reported our Q4 2022 and full-year financial results: https://lnkd.in/gFGKvurC. Thanks to the hard work of Team Target and the strength of our business model, we drove $3 billion in sales growth in 2022. At the same time, we also faced industry-wide challenges such as inflation, shifts in guest buying behavior and inventory issues. We still delivered on guests’ needs and wants, reflecting the relevancy of our differentiated shopping experience. Three of Target’s owned brands made Numerator’s list of the fastest-growing owned brands of 2022: Brightroom, Favorite Day and Mondo Llama. We’re the only retailer to have more than one brand on the list. Guests loved the newness across our assortment, quickly snapping up new brands and partnerships like: Future Collective, Tabitha Brown, Stoney Clover Lane, Marks and Spencer and Fall Designer Collection. For 2023, that means we’ll keep leaning into the growth potential of our successful strategy, with its strength in stores, owned and national brands, guest experience and so much more. But we’ll also flex to accelerate key growth drivers. Think digital, our media business Roundel, our loyalty ecosystem led by Target Circle, and our enterprise sustainability strategy. I'm full of gratitude to our team, partners, guests and communities for their trust and support. Onward! 

Target’s Cautious, Challenging Earnings: Digital Decline and Heavy Discounting Crushes Operating Income Overall, Target is still a great retailer with great merchandise.  Unfortunately, no one wants this merchandise in this inflationary economy.   A few highlights (and Walmart comps): * Q4 comp store sales grew 0.7 % (under inflation) [Walmart 8.3%] * Their digital strategy needs to catch up to their main eCommerce competitors on a few fronts: marketplace and ads.  It showed in their results - a digital sales decline in Q4 of 3.6%. [Walmart up 17%] * Lack of ads progress is notable, with “Other” revenue going up only 9.8% on the year -- probably this includes Shipt too?  [Compared to Walmart’s 41% US Connect and Amazon’s 23% y/y growth on much higher bases.] * Marketplace is missing in action.   Difficult to make a material difference in a scaled retailer with a curated marketplace strategy.  At their size, they need to go big or go home.  While a few merchants have enjoyed outsized success on Target, the initiative has been underwhelming. Q4 2022 Highlights     * Comparable sales increased 0.7 % driven by an increase in guest traffic. * Operating income was $1.2 billion in fourth quarter 2022, down 44.7 % from $2.1 billion in 2021. * Total comparable sales grew 0.7 % reflecting comp stores sales growth of 1.9 % and a comparable digital decline of (3.6) percent. * Total revenue of $31.4 B grew 1.3 %: sales growth 1.2% and 8.4% increase in "other" revenue (ads). * Gross margin 22.7 %, compared with 25.7 percent in 2021 caused by an array of challenges: clearance, markdown, shrink. * Inventory at the end of the quarter was 3 percent lower than in 2021, despite an increase in early receipts compared with last year. (13% lower in discretionary, higher in frequency categories) Full-Year 2022 Highlights * Total revenue of $109.1 billion grew 2.9 %: sales growth 2.8% and 9.8% increase in "other" revenue. (ads, I think) * Sales increased 2.8 percent y/y, with 2.2 % increase in comparable sales. * Operating income of $3.8B in 2022 down 57% percent from $8.9B last year. * Gross margin rate was 23.6 %, compared with 28.3 percent in 2021. #Target

Trying to plan the next day’s outfit can be a pain. Demand planning for retailers and many businesses right now is a special nightmare. Target says that its sales this year could rise or fall by a low-single-digit percentage from last year, according to Wall Street Journal reporter Sarah Nassauer. That difference of several billions of dollars could mean a solid cushion against rising labor and other operating costs versus a hard landing from the pandemic-era boom in its business. In two words CEO Brian Cornell described the operating climate as “very challenging.” The disclosure came Tuesday as the Minneapolis-based retail chain posted quarterly sales growth that surprised Wall Street but sharply weaker profits. For Target, selling more groceries can seem like a good thing but profits on those items are razor thin versus items like electronics or its private label home goods. So what might this mean for retailers in 2023, let us know. #business #sales #retail #economy #ecommerce

Target’s Cautious, Challenging Earnings: Digital Decline and Heavy Discounting Crushes Operating Income Overall, Target is still a great retailer with great merchandise.  Unfortunately, no one wants this merchandise in this inflationary economy.   A few highlights (and Walmart comps): * Q4 comp store sales grew 0.7 % (under inflation) [Walmart 8.3%] * Their digital strategy needs to catch up to their main eCommerce competitors on a few fronts: marketplace and ads.  It showed in their results - a digital sales decline in Q4 of 3.6%. [Walmart up 17%] * Lack of ads progress is notable, with “Other” revenue going up only 9.8% on the year -- probably this includes Shipt too?  [Compared to Walmart’s 41% US Connect and Amazon’s 23% y/y growth on much higher bases.] * Marketplace is missing in action.   Difficult to make a material difference in a scaled retailer with a curated marketplace strategy.  At their size, they need to go big or go home.  While a few merchants have enjoyed outsized success on Target, the initiative has been underwhelming. Q4 2022 Highlights     * Comparable sales increased 0.7 % driven by an increase in guest traffic. * Operating income was $1.2 billion in fourth quarter 2022, down 44.7 % from $2.1 billion in 2021. * Total comparable sales grew 0.7 % reflecting comp stores sales growth of 1.9 % and a comparable digital decline of (3.6) percent. * Total revenue of $31.4 B grew 1.3 %: sales growth 1.2% and 8.4% increase in "other" revenue (ads). * Gross margin 22.7 %, compared with 25.7 percent in 2021 caused by an array of challenges: clearance, markdown, shrink. * Inventory at the end of the quarter was 3 percent lower than in 2021, despite an increase in early receipts compared with last year. (13% lower in discretionary, higher in frequency categories) Full-Year 2022 Highlights * Total revenue of $109.1 billion grew 2.9 %: sales growth 2.8% and 9.8% increase in "other" revenue. (ads, I think) * Sales increased 2.8 percent y/y, with 2.2 % increase in comparable sales. * Operating income of $3.8B in 2022 down 57% percent from $8.9B last year. * Gross margin rate was 23.6 %, compared with 28.3 percent in 2021. #Target

Target released their Q4 2022 earnings this morning. For transportation providers and their vendors, there are many insights that can be gleaned regarding what 2023 will likely look like. Two charts below made from their quarterly data. Fiscal quarters mapped to the closest calendar quarter (e.g., Target’s latest release covers November 2022 – January 2023, but maps to Q4 2022). Thoughts: •Top plot shows my estimate of seasonally adjusted and inflation adjusted sales for Target, where inflation adjustment is done using the General Merchandise price deflator (Line 23) from Table 7U. Chain-Type Price Indexes for BEA Retail and Food Service Sales from the Bureau of Economic Analysis. As shown, once we adjust for inflation, Target’s sales were likely down ~3% year-over-year and flat quarter-of-quarter (on a seasonally adjusted basis). However, sales remain well above 2019 levels, up 23.7% from Q4 2019. In general, I take the sale volumes remaining so elevated as a good sign for Target, as it is suggesting a permanent capturing of some market share gained since the onset of the pandemic. •Bottom plot shows seasonally adjusted gross margin rate, calculated as (revenue – cost of goods sold)/revenue. This plot is more troubling because it suggests Target’s profit per dollar of product sold remains quite muted from 2021 and even 2019 levels. One likely explanation for this is the decrease in discretionary items and the increase in grocery sales (https://lnkd.in/g25_49gi), given each dollar of groceries sold brings in less margin than, say, consumer electronics or discretionary clothing. This dynamic is also what explains the sharp drop in Q1 2020 (which covers February 2020 – April 2020 during COVID lockdowns). •Regarding inventory performance, Target’s seasonally adjusted days to turn inventory in Q4 2022 increased by 9.6% from Q3 2022, indicating that Target didn’t burn down stocks quite as much as expected. However, days to turn inventory are 7.7% better than Q4 2021. As such, Target isn’t entering 2023 with the same inventory overhang we saw in 2022. Implication: Target’s quarterly numbers show a retailer that is maintaining most of its pandemic volume gains, but now with a different product mix focused on consumer essentials that is pulling down gross margin rates. This is a bad sign for container ship operators, as this suggests muted import volume in 2023 for those consumer discretionary items like electronics and many household goods/furniture items. #supplychain #supplychainmanagement #earnings #shipsandshipping #ecommerce #freight #trucking

There's been a hidden gem buried in Target earnings over the last three quarters, but today it's front and center as the 4th quarter's #2 highlight. What is it? "Same-day services (in-store pickup, Drive Up, and Shipt), which represent more than 10 percent of total sales, increased 4.3 percent in the quarter." 3 key points to unpack here: 1. "more than 10% of sales" is a significant statement for the retailer. Last week, Walmart leadership noted eCommerce was now 13% of the company's total business globally. Hard to believe Target's total eComm contribution doesn't exceed that. 2. Same-day services have far outpaced total eCommerce growth every quarter this year. Q1: +8% v. +3.2% Q2: +11% v. +9% Q3: "High single digit" v. +0.3% The +4.3% in this release for same-day is obviously a slowdown against the full year's trend, but it's clear Target is delivering value to its guests with this service. 3. Target's ability to grow in this space has a significant consequence on non-physical retailers (i.e. Amazon) in the market. It's unlikely this area of the business is only growing because of Shipt's same day delivery service (although it could be leading the way). That means in-store/drive-up offerings continue to maintain healthy growth over two crazy years. That's a behavioral change in the customer base, as well as an indication these customers are finding balance in new shopping experiences. It was recently reported that Amazon is investing in more rapid delivery options. More, DoorDash continues to expand its offering into non-restaurant sectors. These major players do this all while the rapid delivery space has already consolidated with a waning demand. Needing something "fast" is relative to the customer. Fast could mean "I don't want to go IN the store", or it could mean "I don't have time to leave my house before I need it". As noted, there's a lot of competition in the latter, but the former has lost a bit of public focus and its clear Target is capitalizing on it. Target beat on both the top and bottom line, but a cautious outlook will never make the market happy. Still, there was definitely a diamond in the rough. #target #retail #earnings