- Target is benefiting significantly from the pandemic.
- The retailer’s CEO has clarified the reason for the surge in sales.
- Walmart recorded growth in sales, including e-commerce, but Target’s digital sales are growing faster.
U.S. retail sales have been rising for three months consecutively. In the depths of a pandemic, this has been a noteworthy accomplishment.
One of the obvious beneficiaries of the increase in retail sales has been online stores. But retailers such as Walmart (NYSE:WMT) and Target (NYSE:TGT) have not been left out either, as their most recent results show.
So, why have retail sales risen amid scores of job and income losses due to the pandemic?
Not the Government Checks
While it’s assumed that the stimulus checks sent out under the CARES Act boosted retail spending, this is not the primary reason.
The proof is that, in the case of Target, strong demand continued well into July even as the impact of the stimulus relief waned. August is off to a solid start as well.
According to Target CEO Brian Cornell, the rise in retail sales has everything to do with consumers redirecting expenditure from activities and experiences that have been shuttered by the pandemic:
In the pandemic, we’re not going to restaurants, we’re not going to movies. Those traditional summer trips have been canceled. We’re not on planes. We’re not spending dollars on lodging, so many of those dollars have been redirected into retail.
Target’s CEO talks about the retailer’s record-setting quarter in the video below.
"In the pandemic, we're not going to restaurants, we're not going to movies. Those traditional summer trips have been cancelled … so many of those dollars have been re-directed into retail," says $TGT CEO Brian Cornell on Target's huge growth in retail sales. pic.twitter.com/sAFE5fqpLP
— Squawk Box (@SquawkCNBC) August 19, 2020
Target Flourishing Amid Economic Devastation
In Target’s second quarter, operating income rose 74% to $2.3 billion. Total revenue increased by 25% year-over-year to reach $23 billion. The retailer gained $5 billion in market share during the first half of 2020.
Target benefited from the growing trend toward online shopping amid the pandemic. The retailer’s digital sales grew by an eye-popping 195% in Q2.
Target’s second-quarter results blew past every Wall Street forecast, including on adjusted per-share earnings, revenue, and same-store sales growth.
Target’s stock jumped over 7% in pre-market hours after the results came out.
Since hitting a 2020 low of about $91 per share, the stock is now up by over 60%.
And the Winner Is… Target
Target’s results come just a day after Walmart’s relatively less impressive release. The latter is a much bigger rival, though, and growth at that level is harder to achieve.
Walmart’s e-commerce sales surged 97%, which is dwarfed by Target’s number.
The big-box retailer’s total revenue increased by 6% to reach $137.7 billion. Operating income rose by 8.5% to hit $6.1 billion.
Like Target, Walmart beat Wall Street forecasts on nearly every metric.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author holds no investment position in the above-mentioned securities.