Target Corp. reported a nearly 20% increase in same-day delivery as it grew online sales year over year during its fiscal Q3, which ended Nov. 2.
Meanwhile, total Target comparable sales were nearly flat, increasing 0.3% year over year, which the retailer attributed to digital performance.
CEO Brian Cornell told investors on an earnings call that Target continues to see some of the same macroeconomic themes “that have defined the environment for some time.”
“Consumers tell us their budgets remain stretched and they’re shopping carefully, as they work to overcome the cumulative impact of multiple years of price inflation,” Cornell told investors. “They’re becoming increasingly resourceful in their shopping behaviors, waiting to buy until the last moment of need, focusing on deals, and then stocking up when they find them.”
Target is No. 5 in the Top 1000. The database is Digital Commerce 360’s ranking of North America’s online retailers by web sales. Target is also No. 80 in the Global Online Marketplaces Database, which ranks the 100 largest global marketplaces by third-party gross merchandise value (GMV). Digital Commerce 360 categorizes Target as a Mass Merchant.
Consumer spending habits shift at Target in Q3
Total Target revenue reached about $25.23 billion in Q3. That’s 0.9% year-over-year growth from about $25 billion in the same period of 2023.
At the same time, operating income fell 11.2%, to about $1.17 billion in Q3 2024 from $1.32 billion the prior year.
Chief commercial officer Rick Gomez said on the earnings call consumers have become increasingly resourceful. They know where to find deals and are willing to wait for sales and shop from multiple retailers to find them, he said.
“For example, our Target Circle week this quarter was one of our biggest yet,” Gomez said. “However, we saw a more pronounced sales dip both the week before and the week after the event, showing just how planful consumers are in seeking out promotions when they shop. Similarly, we saw consumers lean into everyday essential stock-up promotions throughout the quarter to further stretch their monthly budgets.”
Newly appointed chief financial officer Jim Lee told investors on the earnings call that a 2% decline in average order value offset Target’s 2.4% traffic growth in the quarter. Lee, who took over the CFO role in September, said monthly comparable sales within the quarter were strongest in October. He cited consumers responding well to Target Circle Week promotions.
Target online sales in Q3
Digital comparable sales — in other words, Target online sales — grew 10.8% year over year in Q3 2024. The nearly 20% growth in same-day delivery drove that increase, the company said, as well as double-digit growth in Target’s Drive Up service. Drive Up accounted for more than $2 billion in Q3 sales, Cornell said.
Digital Commerce 360 projects Target ecommerce sales to reach $20.77 billion in 2024.
Target ecommerce sales by year
Part of Target’s long-term strategy to improve its online sales includes full remodels, “smaller refreshes” and layout changes in its physical stores that would increase the efficiency of the retailer’s same-day services.
“We’re investing in our digital experience, in our website, app, and our full menu of fulfillment capabilities to become even more reliable and convenient for our guests,” he added.
Ecommerce may be growing at the expense of in-store shopping for Target, said James Risley, research data manager and senior analyst at Digital Commerce 360.
“Shoppers can shop in-store inventory online, and employees bring it out to the shopper’s car, so the shopper never needs to enter the store and just browse,” Risley said. “The lack of impulse purchases may be biting into higher-profit items that the retail giant sells. Employees are also being tasked with gathering and handing off items instead of maintaining the store as much.”
How Target is addressing inventory
Target ended its Q3 with a 3% year-over-year increase in inventory, said Michael Fiddelke, chief operations officer, on the earnings call.
He said the company often compares metrics to 2019 “as a useful way to look beyond the volatility we’ve seen in our business over the last five years.”
By that comparison, he said, Target Q3 sales grew faster this year versus 2019 than ending inventory did in the same period. Inventory is among the high priority of “retail fundamentals” that Fiddelke said Target is “laser-focused on” improving.
He said Target’s in-stock position has “improved meaningfully” since a year ago, but that in-stock is just one way to measure inventory reliability. A product being on the shelf is what makes it in-stock, “but that might not be enough depth to support the combination of in-store and digital demand,” he said.
To combat that challenge, Target also tracks a metric called “purchasability,” he added. It factors in both in-store and digital shopping experiences.
“If stock in an item begins to run low, we may choose to make the item temporarily unpurchaseable for same-day fulfillment in order to protect the in-store shopping experience,” Fiddelke said. “The team has been working hard to reduce the number of times this happens.”
In addition to improving its inventory reliability, he said Target wants to ensure its new stores are ideally located.
“Already, three out of four Americans live within 10 miles of a Target store,” he said. “And our properties team constantly monitors population and migration trends to determine where a new location might best serve a growing community.”
That helped Target open 13 new locations in Q3, he said.
Loyalty members and the Roundel retail media network
The retailer enrolled close to 3 million new Target Circle members in Q3, Cornell said, and will continue making investments in the loyalty program.
Target will “focus on reaching new members and driving incremental engagement among our existing base,” Cornell said. “Beyond the profitable traffic and sales we see from Target Circle, this program also helps us learn more about our guests and their preferences, which in turn helps to fuel our Roundel ad business.”
Roundel is the name of Target’s retail media network. It delivered “mid-teen growth in Q3,” he added. That benefited both Target total revenue and gross margin rate, Cornell told investors.
Early Black Friday sale at Target
Target held an early Black Friday sale that included turkeys and tabletop decor, Gomez said.
And this year, Target is bringing back its Thanksgiving meal deal. It includes a turkey at $0.79 per pound as well as stuffing and five additional side dishes, he said.
“And when you don’t feel like cooking on the day after Thanksgiving, well, we’ll be helping out by offering a free frozen pizza for our Target Circle 360 members,” Gomez said.
Check back for more earnings reports. Click here to read last quarter‘s article on Target earnings and online sales.
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