Traffic continues to boost sales
Target (TGT) posted better-than-expected sales for the first quarter of fiscal 2019. Improved sales across core merchandise categories and higher comps in both the stores and online platform supported the first-quarter sales beat. Comps rose 2.7% in stores. Meanwhile, digital sales contributed 2.1% to the overall comps growth rate.
Target reported total revenues of $17.6 billion, which increased 5.0% on a YoY basis and exceeded analysts’ expectation of $17.5 billion. Comps rose by 4.8%, led by a 4.3% increase in traffic and 0.5% growth in average ticket size.
Notably, the expansion of fulfillment options, new and exclusive assortments, store remodeling, and competitive pricing continue to drive traffic, and in turn, its sales. Management stated that comps have now improved in the past eight quarters, driven primarily by robust growth in traffic across stores and the online platform.
Amid heightened competition, large retailers like Walmart (WMT), Target, and Costco (COST), continue to invest in price and the online platform to defend their market share and drive comps. Target, Walmart, and Costco successfully defended their market share and have reported stellar comps growth in the past several quarters despite the expansion of Amazon (AMZN), which is commendable.
Comps at Walmart’s US business have now improved in the past 19 quarters. Meanwhile, Costco continues to outpace both Target and Walmart with its comps growth rate.
We expect Target’s comps growth rate to continue to be impressive. Higher traffic led by expanded digital offerings and store remodeling is expected to drive traffic, and in turn, sales. Management expects comps to mark low-to-mid-single-digit growth in both the second quarter as well as fiscal 2019.