Target is picking up the pace on its comeback plan — and it's paying off. The company shattered traffic records for a second consecutive quarter, posting traffic growth of 6.4%, the strongest since the company began reporting traffic 12 years ago, the company reported Wednesday.
In turn, sales are setting new records too. Comparable sales in the quarter increased 6.5%, while comparable store sales grew 4.9% and comparable digital sales grew 41%. Target said these are the best comps in 13 years at the company. Revenue is up too, 6.9% over last year, reaching $17.8 billion.
In light of the strong results, Target updated its guidance for the rest of the year, laying out expectations to spark sales growth in line with the 4.8% comps growth the company has delivered in the first half of the year. "As we look ahead to 2019, we expect to achieve scale across the full slate of our initiatives — creating efficiencies and cost-savings, further strengthening our guest experience and positioning Target to continue gaining market share," CEO Brian Cornell said in a press release.
In just a year and a half since Cornell announced a much needed $7 billion investment to modernize stores and digital operations, Target has roared back to life. And it doesn't look like it's slowing down any time soon.
As Cornell said in his prepared comments, the company is "accelerating the pace of execution" on its plan, which hinges on making the mass merchant "America's easiest place to shop." When it comes to winning the convenience game with customers these days, speedy delivery and store pickup, as well as constant newness in merchandising and easily navigated stores, are paramount. Target is pushing heavily to make good in all of these areas, with the focus still on differentiating its assortment (especially with a consistent pipeline of new private label brands) and using its stores as hubs for fulfillment, delivery and other services.
According to the company, more than 95% of digital orders for in-store pickup are now ready within an hour.
The company is making progress on delivery ambitions as well, which include a goal to add its Drive Up program (a buy online pick up in store service) to 1,000 stores before the holidays. The service, which is currently offered at more than 800 stores in 25 states, on Tuesday rolled out to California and Colorado. Same-day delivery is now available in more than 1,100 stores in 160 markets. In the second quarter, the company's Restock program also expanded nationwide to reach 75% of the U.S. population.
By all accounts, the company "hit the bullseye" in the quarter, according to Moody's Lead Retail Analyst Charlie O'Shea. "Reflecting the company's myriad investments, margins reflect slight, almost de minimus compression, which is the short-term pain for long-term gain, and we note that working capital continues to improve, with accounts payable exceeding inventory, indicating improved leverage with vendors," he said in comments emailed to Retail Dive.
"The raising of guidance for the back half of the year is consistent with our view that there are macroeconomic tailwinds that can be exploited by the strongest, most financially flexible retailers that are hitting on all cylinders, with Target definitely in that class," O'Shea added.