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Target’s online sales jump 34% in Q4 on a strong holiday season

February 24, 2016 12:12 PM
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Target Corp.’s online sales increased 34% year over year in the fourth quarter, the retailer reported Wednesday.

Online sales accounted for 5% of sales in the fiscal fourth quarter ended Jan. 30, up from 3.7% in the year-earlier period. For fiscal 2015, online sales accounted for 3.4% of sales, up from 2.6% in 2015. Target is No. 16 in the Internet Retailer 2015 Top 500 Guide.

Target had “a great holiday season, driving consistent growth throughout the fourth quarter and delivering on the sales and profit goals we laid out at the beginning of the year,” CEO Brian Cornell said.

Moody’s lead retail analyst Charlie O’Shea wrote in a note to investors, “A key takeaway from Target’s Q4 results is the performance of its online business, which grew 34% year over year, and will likely lead the brick-and-mortar pack on a percentage growth basis for the period.”

For the year, online sales increased 31%, short of the retailer’s 40% growth goal, chief financial officer Cathy Smith told analysts on an earnings call. Target did not disclose online sales figures.

Despite missing projections, Target chief operating officer John Mulligan said the retailer hit a new high in online orders fulfilled in stores during Black Friday weekend, which included Black Friday (Nov. 27), through Sunday (Nov. 29). Target fulfilled more than 1 million digital orders via order pickup, ship from store or ship to store.

Target also set a record on Cyber Monday, the Monday after Thanksgiving, with in-store order pickup increasing fourfold compared with the same day in 2014, Mulligan said. The retailer doesn’t disclose the exact figures.

In the days leading up to Christmas, in-store pickup orders accounted for half of Target’s online sales volume, Mulligan said. Online orders shipped from stores and picked up in stores helped Target capture more sales because about 40% of that volume consisted of items that were out of stock at Target’s e-commerce fulfillment centers, he said.

Target offered free shipping on online orders this holiday season for the second year. The retailer did not require a minimum order to qualify for free shipping, and that policy resulted in a 3% increase in average order size, according to a report by e-commerce analytics provider Slice Intelligence.

Wal-Mart Stores Inc. stuck with its $35 threshold for free shipping, and Walmart.com’s average order size dropped 5% during the holiday season, according to Slice.

For fiscal Q4, Target also reported:

  • Sales of $21.63 billion, down 0.6% from $21.75 billion in the year-ago period. Target noted that the sale of its pharmacy and clinic businesses to CVS in December reduced sales for the quarter and thus the year by approximately $550 million.
  • Net income of $1.43 billion compared with a loss of $2.64 billion.

For fiscal 2015, Target reported:

  • Sales of $73.79 billion, up 1.6% from $72.62 billion the previous year.
  • Net income of $3.63 billion compared with a loss of $1.64 billion.
 

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