Same-day services and in-store sales propelled Target’s sales growth in the third quarter, with executives at the Minnesota-based retailer saying they have the inventory and logistics capacity in place to meet customer demand across the holiday season no matter where the shopping journey begins or ends.
Target CEO Brian Cornell said on a conference call with analysts Wednesday (Nov. 17) that third-quarter sales through same-day services such as buy online, pickup in-store (BOPIS), curbside pickup and Shipt have expanded by nearly $2 billion, or 400%, over the last two years. Through the first three quarters of 2021, sales through these services have grown by more than $6 billion on a two-year stack.
“We see continued momentum in the marketplace,” Cornell said. “And guests are shopping all of our categories, utilizing both our stores and our digital channels, and we think that’s going to continue throughout the holiday season.”
Target reported comparable sales growth of 12.7% in the third quarter, on top of nearly 21% growth last year. Cornell noted that traffic was the “primary driver” of sales growth, with in-store comparable sales up 9.7%, on top of 9.9% growth last year, and digital comp sales up 29%, following 155% growth last year.
“This provides a vivid demonstration of the flexibility of our operating model to serve our guests no matter how they choose to shop,” Cornell said.
Chief Growth Officer Christina Hennington told analysts that all five of Target’s core merchandise categories delivered double-digit sales growth, led by essentials, such as baby care and pet products, beauty, and food and beverage. Electronics and apparel sales also grew by low single digits.
Hennington also noted that expanded partnerships with Disney and Apple, as well as the newly launched collaboration with Ulta Beauty, will see new shop-in-shops at hundreds of stores across the country in the coming months, likely continuing to drive traffic to stores. Next month, Target is also launching a line of lifestyle products in collaboration with Lego.
“With each partnership, we’re adding excitement, convenience and newness for our guests while unlocking incremental growth for each of the partners,” she said. “So, it’s no surprise we’re building on this momentum.”
See: Target Adding Nearly 100 Disney Shops To Stores In Expanded Partnership
For the fourth quarter, Target executives expect high single-digit to low double-digit growth in comparable sales, slightly higher than previous predictions for a high single-digit increase.
To be sure, Target is facing a consumer base that is more ready to shop for gifts digitally this year than last year, with 87% telling PYMNTS researchers they plan to do at least some of their holiday shopping online, 10 percentage points higher than in 2020.
Read more: Holiday Shopping Outlook Suggests ‘Amazon Christmas’ May Be Underway
Inventory and Supply Chain
The biggest focus heading into peak holiday shopping season, Chief Operating Officer John Mulligan told analysts, is “moving the right amount of inventory to the right place at the right time in our stores,” which currently fulfill over 95% of the retailer’s total sales.
At the end of the third quarter, Target’s inventory was more than $2 billion higher than last year, representing growth of about 18%. A “sizable amount” of this inventory will head to stores in the coming weeks, Mulligan said.
He added that Target has also seen a “significant reduction” in delay times and the company has secured enough capacity across rail and trucking to accommodate the necessary shipments in the fourth quarter. Target has also opened two new distribution centers this year and two new sortation centers set to open in the coming weeks; an additional two sortation centers are on track to open early next year.
“Bottom line, based on the incredible efforts of our team, we feel good about our inventory levels heading into the holiday season,” Hennington said.
Target is also in the process of hiring 30,000 new year-round supply chain employees to support current needs and expected future growth.
“Our team is looking ahead and not slowing down,” Cornell said. “We’re continuing to invest in our future, in our new stores and existing stores, [and] our supply chain and fulfillment capabilities.”
Earlier this week, Walmart also touted its ability to meet shoppers’ needs this holiday season, with nearly 50,000 new supply chain employees added in the third quarter and inventory up 11.5% year over year.
Related: Walmart Results Show Omnichannel Consumers Still Like to Shop in Stores