Target’s Q1 e-commerce sales account for a growing share of revenue
May 18, 2016 05:20 PM
Target Corp.’s online sales increased 23% year over year in the first quarter of 2016 compared with a year-earlier rise of 38%, the retailer reported Wednesday.
Online sales for the quarter ended April 30 accounted for 3.5% of the company's sales versus 2.8% in the year-ago quarter on a comparable basis. The 3.5% online proportion, while up year over year, is a decline from the 5% e-commerce penetration Target attained in the Q4 holiday period. Target is No. 22 in the Internet Retailer 2016 Top 500 Guide.
Though Target’s comparable-store sales edged up 1.2%, the retailer said it expects those sales to be flat or to decline 2% in the second quarter, partly due to consumers’ cautious spending and continued cooler, wet weather. The comparable-store sales include e-commerce sales. One slowdown at Target results from customers running fewer errands to buy discretionary items between big shopping trips, CEO Brian Cornell said during Wednesday’s earnings call with analysts. He said the retailer’s Cartwheel mobile coupon app will play an increasingly important role in driving such short shopping trips and meeting those customers’ needs. A spokesman declined to elaborate on how that would happen.
The Cartwheel app has been downloaded more than 23 million times and has helped generate more than $3 billion in revenue since it launched in May 2013, the spokesman said. That compares with Cartwheel’s more than 13 million downloads and its contribution of more than $1 billion in revenue as of March 2015.
Buy online, pickup in store service also is a growing part of Target’s business, according to a report released Wednesday by e-commerce analytics provider Slice Intelligence. The report says Q1 buy online, pickup in store orders grew 64% year over year, bringing those orders to 8.5% of sales on Target.com. Slice doesn’t provide dollar figures, a spokeswoman says.
Cornell said customers are redirecting their spending. “We recognize consumers are spending more on travel, leisure activities and investing in their homes,” he said. “There is no structural change (in Target’s business) that gives us pause.”
Target’s results follow those last week of major retailers such as Macy’s Inc. (No. 6), Kohl’s Corp. (No. 19) and J.C. Penney Co. Inc. (No. 33), which reported slower-than-expected Q1 sales and uncertainty about shoppers’ willingness to spend.
For fiscal Q1 ended April 30, Target also reported:
- Revenue dropped 5.4% to $16.20 billion from $17.12 billion in the year-ago period, primarily due to the retailer’s sale of its pharmacy and clinic businesses to CVS in December.
- Net income of $632 million, down 0.5% from $635 million a year ago.
Meanwhile, Cornell continues to realign the retailer’s top ranks, promoting Jason Goldberger to the new position of chief digital officer on Tuesday. Target also named former Nordstrom Inc. executive Mark Tritton chief merchandising officer and executive vice president. Tritton was president of Nordstrom Product Group, overseeing merchandising, design, manufacturing, marketing and omni-channel distribution of more than 50 private-label brands.