High-Margin Goods Boost Comparable Sales for Target Corporation (TGT)

Target Corporation (NYSE:TGT) reported total sales for the fourth quarter that slipped 0.6% due to its sale of Pharmacy unit. However, its comparable store sales not only witnessed 1.9% growth in the fourth quarter but also topped the analysts’ expectations of 1.5% growth. The positive surprise was possible by pushing high-margin goods in the fourth quarter. The results demonstrated that its efforts to push high-margin goods were driving the traffic to turnaround the company.

Apparel Sales Grows

Target Corporation (NYSE:TGT) indicated that it’s CEO, Brian Cornell, efforts are gaining traction at a time when its rival Wal-Mart Stores, Inc. (NYSE:WMT)’s comparable store sales failed to meet the analysts expectations. Wal-Mart blamed the strong Greenback and weak demand for apparel. However, Target’s apparel sales witnessed growth while several other retailers like Nordstrom, Inc. (NYSE:JWN) and Ralph Lauren Corp (NYSE:RL) suffered weak sales. The holiday season sales itself fell shy of the National Retail Federation’s expectations.

The company’s CFO, Cathy Smith, said that the stocking of trendier styles, and better in-store, as well as, online presentation helped to boost its apparel sales. In a research note, Conlumino CEO, Neil Saunders, also felt that the company outperformed in the apparel segment due to its fashion-savvy shopper demographic. Aside from that, its market efforts during the holiday season also helped it to boost sales.

Online Sales Growth

In November, Target Corporation (NYSE:TGT) issued a warning that it was difficult to achieve the target of 40% online sales growth in 2015 blaming  slowing electronic sales. Obviously, investors were concerned about that. However, the company did well to achieve 34% growth in the fourth quarter thus alleviating the concerns raised on the slowdown in digital sales. Sterne Agee’s analyst, Basanta, termed the digital performance as solid progress since its platform is still a nascent one.

Since assuming the position of CEO of Target Corporation (NYSE:TGT) in August 2014, Cornell has been taking steps aggressively to turn it around following the sluggish growth witnessed by it for a number of years. His efforts included investments in a narrower set of high-margin ‘signature’ categories like health, baby, and wellness. It was because of this reason that its high-margin categories witnessed a growth of three times more than its average. Significantly, he pulled out from Canada.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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