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The shares of Target Corp. rose 20.4% on Wednesday, following a second-quarter earnings report, which provided analysts with further evidence of the value of a combination of in-store and online sales.
The movement of stocks means target
TGT + 3.22%
is heading towards a record percentage gain in one day.
Target has posted second-quarter earnings and revenue higher than the FactSet consensus and higher expectations. On the earnings call, John Mulligan, Retail Operations Manager, explained how the company's omn-ichannel strategy of consolidating physical stores and e-commerce into a sales and fulfillment unit fulfilled its objectives. goals.
"Think of it this way: the stores that had good sales last year represented an average productivity of just over $ 300 per square foot," he said, according to a FactSet transcript. "And when you do the math, every additional billion dollars of store sales would increase that productivity by about $ 4 per foot.
"In other words, if we double the $ 5 billion in digital sales last year and we realize all this additional volume in our stores, we will see our average productivity in sales increase by just over 20 dollars per foot.
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Target said digital channel sales increased 34 percent in the second quarter. In addition to ordering online and delivering items to the customer's home, Target also offers options such as order picking, which allows stores to buy items from customers the same day.
"The contribution of the stores is even greater when the number of online transactions made using in-store collection options is increased," said Neil Saunders, managing director of GlobalData Retail. "Although many investors were skeptical, Target had rightly understood the importance of the store for the health of its entire operation. That is why the renovation of stores has been an essential part of success. "
Target CEO Brian Cornell also highlighted this aspect of the business.
"Because these options leverage the infrastructure, technology and teams of our stores, same-day delivery also delivers exceptional financial performance," he said.
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"Each measurable measure demonstrates continued acceleration and validates the company's strategic change in February 2017, demonstrating that short-term pain can generate long-term gains if the strategy is well executed," said Charlie O'Shea. vice president of Moody's.
"In the future, we expect Target to continue to be one of the top performers in the US retail business. We note that the track will probably be longer and wider, with food products now repositioned, which will generate traffic and offer more opportunities to sell higher margins. private and exclusive product. "
Target announced this week that its latest home brand will be Good & Gather, a food brand consisting of more than 2,000 products by the end of 2020.
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"Without exception, we think this is one of the most comprehensive quarters Target has been reporting for some time, with the strength of its P & L," wrote UBS. "Its investments in omni-channel and its stores are generating good returns."
Neutral UBS rate in target stocks with a target price of $ 86.
The target stock is up 60% since the beginning of the year, while the S & P 500 index
SPX, -0.05%
is up 16.7% for the period.
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