Strong digital sales change the face of Target’s (TGT) holiday shopping

Target Corporation (NYSE: TGT) reported double-digit growth in comparable sales during the holiday season. The company saw a massive spike in demand during 2020 due to the COVID-19 pandemic as people turned to big-box retailers to stock up on supplies. E-commerce played a huge role in driving growth as people did more of their shopping online during the lockdown period. Target’s stock has gained 68% over the past one year.

However, as vaccines become available and the pandemic slowly subsides, there are concerns that the enormous growth seen last year will begin to normalize. Even so, it appears that certain trends such as an increase in online shopping, particularly during holidays, are set to continue.

Holiday sales

Comparable sales grew 17.2% year-over-year during the November/December period, driven by a 4.3% increase in traffic and a 12.3% increase in average ticket. Comparable store sales grew 4.2% while comparable digital sales rose 102%.

Delivery services

Target’s same-day fulfillment services – Order Pick Up, Drive Up and Shipt – played a big part in driving the growth in comparable digital sales. On a combined basis, these services grew 193%. Drive Up saw the highest growth at more than 500% while Shipt grew more than 300%.

In December alone, 150 million items were purchased using Drive Up and Order Pickup, which was almost four times more than the same period last year. Target also fulfilled 6.5 million items via Drive Up and Order Pickup in a single day, achieving a new record. The company also saw 5.1 million fresh grocery orders placed through Order Pickup for holiday meals.  

Approx. 95% of sales during the November/December period were fulfilled by Target’s stores. The company also adopted a new strategy of spreading its deals throughout the holiday season to reduce the crowds and stress associated with holiday shopping. This approach proved to be successful and Target plans to continue it this year as well. Hence, Target will close its stores on Thanksgiving Day.

Category performance

During the November/December timeframe, Target gained share across all its core merchandising categories. Home and hardlines recorded the highest growth in comparable sales which was in the low-20% range. The strength in hardlines was driven by a mid-20% growth in electronics.

Comparable sales grew around 17% in food and beverage while beauty and essentials grew in the low teens. Apparel saw comparable sales growth in the high single digits. The most popular items during the holiday season were family sleepwear sets, Christmas tree ornaments and Wondershop gingerbread houses.

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