By Aishwarya Venugopal and Melissa Fares
(Reuters) - Target Corp (N:TGT) on Wednesday reported its best quarterly comparable sales growth and online revenue that nearly tripled as customers took advantage of the retailer's quick and contact-free delivery to shop for clothes, videogames and home decor.
Shares of the Minneapolis-based retailer jumped around 12% to a record high of $153.77 in morning trading after it handily trounced estimates for quarterly profit and revenue.
The surging demand seen at big-box chains at the height of the lockdown caused by the coronavirus pandemic has continued into the second quarter even as restrictions ease, with some U.S. shoppers using their stimulus checks to shop for bigger-ticket non-essentials, such as tablets and beauty products.
"The biggest change we saw from Q1 to Q2 ... was the exceptional growth we saw in in-store shopping in an environment where many Americans were turning to digital to fulfill their needs," Chief Executive Officer Brian Cornell told reporters.
While foot traffic at Target stores rose 4.6%, Walmart said on Tuesday it saw a 14% decline.
On the whole, shoppers are also generally shopping less frequently but purchasing more in one trip to the store.
"Target's digital offer is working in tandem with their fleet of 1,900 stores and shows that the multichannel mojo is a strategic positive in the battle vs. Amazon (NASDAQ:AMZN) and Walmart," Evercore analyst Greg Melich said.
In the second quarter ended on Aug. 1, Target's apparel sales grew by double-digits after a 20% first-quarter drop, with electronics sales up more than 70%.
The retailer also echoed bigger rival Walmart (N:WMT) as well as department store chain Kohl's Corp (N:KSS) in describing the start to the back-to-school season as slow because of uncertainty around when students would go back to classrooms. In response, it will extend back-to-school offerings, it said.
Cornell added that even as the effect of government support has waned, sales remained strong in June and July with August off to a "solid start," recording low double-digit growth.
"As we move into Q4 we can expect a hard-fought election and a holiday season that, like so much of this year, is likely to be unprecedented," Cornell said.
Through the pandemic-ridden first half of the year in which numerous bankruptcies occurred among traditional brick-and-mortar retailers including J.C. Penney and Neiman Marcus, Target said it won about $5 billion in market share across categories.
The group's comparable sales, which include online and store sales, jumped 24.3% in the quarter, handily beating expectations of a 8.2% increase, according to IBES data from Refinitiv.
Comparable digital sales surged 195%, driven largely by the success of Target's same-day services, such as in-store pick up, Drive up and Shipt, which grew 273% in the quarter.
"Target's Q2 performance obliterated the bullseye, with every line item vastly exceeding our expectations," Moody's (NYSE:MCO) retail analyst Charlie O'Shea said.
Target said that nearly 90% of its online orders were fulfilled through stores, another sign investments in swifter delivery and remodeling stores were paying off.
Target's net earnings jumped 80.3% to $1.69 billion, with adjusted earnings per share of $3.38, well ahead of analysts' $1.62 forecast. Total revenue rose about 25% to $22.98 billion, also topping expectations of $20.87 billion.