Target Corp.’s online sales rose more than four times its total revenue in the fiscal second quarter ended Aug. 3.

It is notable that Target’s store and online sales increased in the second quarter, CEO Brian Cornell told investors during a conference call on quarterly results.

“Our digital team has done a great job of improving our digital experience, and that is reflected in our business results,” said Cornell. “We saw high single-digit growth in our digital comparisons in the second quarter and even faster growth in same-day services, led by Drive Up and Target Circle 360, both of which grew in the low double-digits.”

More than two-thirds of Target’s online sales now come from same-day fulfillment services, he said. The largest contributor to Target’s digital sales is Drive Up, he added. The company posted more than $2 billion in second-quarter sales and more than $4 billion in year-to-date sales.

Target is No. 5 in the top 1000 database is Digital Commerce 360’s ranking of North American online retailers by web sales. Target is also No. 80 in the Global Online Marketplaces Database, which ranks the 100 largest global marketplaces by third-party gross merchandise value (GMV). Digital Commerce 360 ​​categorizes Target as a mass merchant.

Target for online sales in the second quarter

Target’s total revenue reached $25.45 billion in the fiscal second quarter, of which only $431 million came from non-sales, representing a 2.7% increase over the same period last year ($24.77 billion). Operating income also rose to $1.635 billion, an increase of 36.6% over the roughly $1.20 billion in the same period last year.

At the same time, digital comparable sales – or Target’s online sales – rose 8.7% in the second quarter. That’s more than four times Target’s total comparable sales in the second quarter, which rose 2% year over year.

Target e-commerce sales per year

Additionally, Target’s online sales accounted for nearly a fifth of all sales in the second quarter, at 17.9%. That’s up from 16.9% of all Target sales made digitally in the year-ago quarter. However, physical stores still fulfilled the majority of orders – 97.9%. That’s largely the same as a year ago, when they fulfilled 97.6% of stores. At the end of the second quarter, Target had 1,966 physical stores. That’s 10 more than at the end of the first quarter.

“While it was fantastic to see revenue growth in the second quarter, it was even more gratifying to see it driven by traffic,” Cornell said. “After unprecedented growth during the pandemic, more guests are choosing to make more trips to Target. In total, our guests have already made nearly 1 billion trips to Target in the first six months of 2024, a number that has increased more than 20% since 2019.”

Traffic was up in all three months of the quarter, Chief Commercial Officer Rick Gomez told analysts on the conference call. However, that increase in traffic was partially offset by a decline in average order value, he added. That includes a year-over-year decline in Target’s average selling price. In May 2024, Target announced it would cut prices on about 5,000 items in its stores and on its website.

Adjusted inventory levels

The retailer also reduced overall inventory levels by 5% compared to a year ago, said Michael Fiddelke, chief operating officer and chief financial officer, on a conference call with investors.

“Also important: Inventory levels of our top items in the second quarter, the item with the highest unit turnover, were more than 50% lower than total inventory levels and also better than a year ago,” Fiddelke told investors.

“It is also worth noting that our total inventory investments at the end of the second quarter were slightly lower than a year ago. This means that the improvements in inventory levels we have seen are the result of operational improvements and not simply a result of us flooding our network with more inventory,” he added.

At the end of the second quarter of 2024, Target had approximately $12.60 billion worth of inventory, down from $12.68 billion in the second quarter of 2023.

Faster delivery via Target sorting centers

Target announced last year that it plans to open six new sortation centers by 2026 to increase delivery speed. So far, Gomez says, that’s working.

Local orders that Target processes through a sortation center arrive more than a day faster than the retailer’s network average, he said. And overall, Target’s sortation centers processed 19% more packages in 2024 than they did a year ago.

“This speed increase does not require any additional costs, as our unit delivery costs from a sorting center are about 20% lower than the average in our network,” he added. “In addition to this direct benefit, opening a sorting center in the market creates space for processing in the stores it serves, while also generating labor savings at those locations.”

Target opened a new sortation center in the Detroit area in August 2024. It expects to serve more than 3 million consumers in the region. And by 2028, Target expects the facility to process up to 60,000 packages daily, “and do so in a smaller than average footprint,” Gomez said.

“In addition to the increase in these facilities, our existing sortation centers continue to expand their capacity and we are finding new ways to integrate them into our broader network,” Gomez added. “For example, our recently opened sortation center in Chicago will supply packages to the sortation center in Detroit, increasing the number of packages that can be delivered next day in that market.”

Results of Target Circle Week 2024

Members of Target Circle, the retailer’s loyalty program, made about two-thirds of all Target transactions during the retailer’s July sales event, Target Circle Week.

“Beyond the direct benefit of guest interaction with the platform, Target Circle also helps us gain deep consumer insights so we can deliver more personalized and customized offers through our Roundel advertising business,” said Cornell.

Target Circle Week generated the highest digital traffic of the year so far, Gomez said.

This year, the dates for Target Circle Week fell in July, right before Amazon’s 10th annual Prime Day sale. Meanwhile, Walmart has announced a similar sale that overlaps with Target’s. Amazon’s staged summer sale has achieved record e-commerce sales in the US – including at other online retailers.

Target’s retail media network, Roundel

Target’s loyalty program also added two million new members in the second quarter, and it also launched a paid tier called Target Circle 360 ​​in April. Target Circle 360 ​​revenue grew by nearly double-digit percentages in the second quarter, Gomez said.

Gomez added that Target was able to offer four times more personalized offers compared to last year thanks to insights gained through its loyalty program. The same insights are also the basis for Roundel, Target’s retail media network, he added.

Roundel reported double-digit year-over-year growth in the second quarter. Cornell said Target expects Roundel to “grow in the high double-digits, in addition to over 20% growth in 2023.”

Check back later for more earnings reports. Click here to read the article on Target’s last quarter results.

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