Minneapolis-based Target BB #:166987 has been overhauling both physical stores and its workforce over the past few years, and if its second quarter earnings report is any indication, the changes are good.
Target shares jumped 17% to a record high over $100 per share August 21, when the company reported the best same-store sales growth it’s seen in a decade.
During the company’s second quarter earnings report, executives were upbeat about a 3.4% increase in same-store sales, combined with last year’s results for a 10% stacked-two year same-store sales increase.
“We saw outstanding financial performance in the second quarter as our business delivered sales growth that was in line with our expectations and bottom-line results that were well above our expectations,” said CFO Cathy Smith, during the call.
Executives pointed toward digital, particularly the company’s store fulfillment model, as a highlight.
“In our digital channels, we continue to see the most rapid growth in our same-day fulfillment options, in-store pickup, drive-up and Shipt, which together have more than doubled their sales in the last year,” said Brian Cornell, chairman and CEO.
COO John Mulligan said the in-store model is growth for digital.
“In the second quarter, these three services accounted for more than a third of our digital sales, up from about 20% last year,” Mulligan said. “In other words, our same-day options are growing much faster than our digital sales.”
The shift toward store-level fulfillment comes with a 90% reduction in cost, Cornell said.
“As we shift our fulfillment from upstream DCs to our stores, we see our cost go down by upwards of 40%,” he said. “When it moves to one of our same-day options, pick up in-store, drive-up or Shipt, we see a 90% reduction in that cost.”
As the company continues its remodel program, with 300 stores on the docket for overhauls in 2019, also comes a shift in employee roles at the store level.
Mulligan said Target created more specialized roles for employees, to bring their expertise to categories like food, beauty, electronics and apparel.
“So, people in the food area actually can speak about perishables,” Mulligan said. “They are doing the ordering. They are responsible for that area. They are responsible for the out-of-stocks.”
The second quarter was the first time the company had new system in place across the country, and it is pleased with the results.