Target extends streak even as online sales growth cools

Target’s streak of strong results extended into its latest quarter but its skyrocketing online sales growth has come back to earth.

The Minneapolis retailer reported Wednesday that sales at its stores that have been open for at least a year rose 8.7% in the three-month period that ended July 31. That was down from 10.9% growth in the same 2020 span.

And like Walmart, Target saw a slowdown from last year’s blistering online sales growth as more shoppers came out of their pandemic-forced isolation.

Target’s online sales rose 10% its fiscal second quarter, compared to a 195% surge in the year-ago period. It was also a slowdown from the first three months of the year, when online sales soared 50% from a year ago.

The company said Wednesday that it expects high single-digit percentage growth in comparable sales, near the high end of its previous guidance range.

Target’s results came on the heels of those from Walmart and Home Depot that indicated U.S. shoppers are going back to near normalcy.

Still, concerns are mounting over how shoppers will behave in the months ahead as the delta variant of COVID-19 surges across the U.S. and mask mandates are reinstated. Retailers are also grappling with higher prices on everything from food to automobiles. And temporary government stimulus and other benefits, which helped prop up overall spending, are dissipating. Target is also wrestling with supply-chain backups that are hitting companies worldwide.

So far, Target hasn’t seen any pullback from customers because of the delta variant, CEO Brian Cornell said during a media call.

"We continue to see a very optimistic guest," said Cornell. "We have a very resilient consumer. We are not seeing any adjustment in consumer behavior."

Target said that it earned $1.82 billion, or $3.65 per share, in its fiscal second quarter. That compares with $1.69 billion, or $3.35 in the year-ago period. Its adjusted earnings per share were $3.64. Revenue rose 9.4% to $24.83 billion.

Analysts were expecting adjusted earnings of $3.51 per share on revenue of $24.99 billion, according to FactSet.

Target’s online sales growth was driven by same-day services like order pickup and drive up. Such services were up 55% in the latest quarter, but down from 270% growth last year. More than 95% of Target’s second-quarter sales were fulfilled by its stores.

All five of Target’s major product categories, from fashion to home goods, showed solid sales growth.