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Will Higher Traffic Boost Target’s Q1 Sales?

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Consensus estimate

Wall Street expects Target (TGT) to post net sales of $17.5 billion, which implies YoY growth of 4.3%. The projected growth rate reflects a strong improvement on a sequential basis. Analysts expect continued growth in Target’s comparable sales to drive its top line in the first quarter.

The company’s management expects low to mid-single digit growth in comparable sales for the first quarter driven by continued growth in traffic. Meanwhile, higher digital sales are likely to support comparable sales further. Moreover, Target’s exclusive merchandise, expanded online assortments, store remodeling, and opening of new small-format stores are expected to drive traffic, in turn, its top-line growth.

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Strong performance in the recent past

We remain impressed with Target’s comparable sales growth in the past several quarters. Higher traffic and ticket size continue to support its stellar growth in comparable sales. On average, traffic at Target has increased by about 5% in the past four quarters.

Target’s continued investments to expand its digital fulfillment options, including same-day delivery through Shipt and curbside pickup, supported growth in traffic, and in turn, its comparable sales. Digital sales contributed 1.8% to the comparable sales growth in fiscal 2018.

Meanwhile, comparable sales at stores added 3.2%, reflecting exclusive merchandise, remodeling of stores, and value pricing.

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