In the coronavirus-impacted first quarter, Target made big comp gains, with digital driving the sales growth, while earnings fell short as the company had to boost costs focused on employee and consumer safety and health measures.
Net earnings in the quarter were $284 million, or 56 cents per diluted share, versus earnings of $795 million, or $1.53 per diluted share, in the period a year previous. Adjusted for one-time events, earnings per share were 59 cents versus $1.53 in the year-before quarter.
Target beat a Zacks Investment Research analyst consensus adjusted diluted earnings per share estimate of 46 cents. The company asserted that first quarter earnings performance reflected hundreds of millions of dollars of incremental employee pay and benefits as well as investments to protect the health and safety of consumers and workers.
First quarter comparable sales gained 10.8% year over year, according to Target, driven by a 12.5% advance in average basket, as consumers made fewer, bigger shopping trips. Store comps increased 0.9% while digital comps increased 141%, accounting for 9.9 percentage points of the comparable sales growth. Digital comps accelerated every month in the quarter from 33% in February to 282% in April. Stores fulfilled almost 80% of company digital sales in the quarter.
Same-day services, including order pick up, drive up and Shipt delivery, grew 278% versus the 2019 quarter, and accounted for about five percentage points of total company comparable sales growth.
Total revenues were $19.62 billion and sales were $19.37 billion in the quarter, versus $17.63 billion and $17.4 billion, respectively, in the period a year earlier. Operating income was $468 million versus $1.14 billion in the quarter a year past.
In a conference call, Brian Cornell, Target chairman and CEO, credited employees and the ability to use stores as fulfillment hubs for success in the quarter, despite COVID-19. Food and essentials purchases became more prominent from the last week of February through mid March as first stores then e-commerce traffic gained. At that point, merchandise “oriented around staying at home” took off, Cornell said. Product segments that advanced included home office and housewares. Store traffic, which fell off starting in mid-March, began to gain again in mid-April, driving store comps.
Cornell said, “Throughout the first quarter, our team and guests faced unprecedented challenges arising from the spread of COVID-19. In the face of those challenges, our team showed extraordinary resilience as guests relied on Target as a trusted resource for their families. With our stores at the center of our strategy, and a significant investment in the safety of our team and guests, our operations had the agility and flexibility needed to meet the changing needs of our business. With the dedication of our team, the benefit of a sustainable business model and a strong balance sheet, we are confident Target will emerge from this crisis an even stronger retailer, with higher affinity and trust from our guests.”