Target spent much of 2018 turning some of its biggest stores into mini-warehouses for shipping and pickup online orders and opening smaller neighborhood stores, a major reorganization of priorities as it looks to remain competitive in the age of Amazon. It appears those efforts are paying off.
Target posted what it called the biggest rise in comparable sales in 13 years in 2018, buoyed by its fast-growing e-commerce operation and a push to marry the in-store and digital experiences. During the competitive holiday season it removed minimum purchase thresholds for online orders and expanded its Drive Up service for retrieving online orders at stores to more than 1,000 locations.
Comparable sales grew 5 percent for the year, with in-store sales growing 3.2 percent over 2017, while digital sales rose 36 percent. Target said 2018 marks the fifth straight year that digital sales have grown by more than 25 percent. Roughly 75 percent of online sales were either picked up in stores or sent directly from stores, rather than warehouses, to customers.
“We have been driving an ambitious agenda to transform our Company, evolve with our guests and drive strong growth,” Target CEO Brian Cornell said in a statement. “On every count we’ve been successful, and as we enter 2019, we will continue to lead the industry by adapting, innovating and delivering more for our guests and shareholders.”
Target beat analyst expectations for profits and revenue for the fourth quarter, with earnings of $1.52 per share on $23 billion in revenue. Target stock rose 4.5 percent today.
Despite the rapid growth in digital sales, in-store purchases still make up the vast majority of revenue. For all of 2018, only 7 percent of all sales were originated online, up from 5.5 percent in 2017. However, in the fourth quarter, the percentage of sales originated online crossed 10 percent for the first time.
Target opened a net of 22 new stores in 2018, to bring its total footprint to 1,844 locations. All of that growth came from the proliferation of stores that are 50,000 square feet or less, such as the two planned for the Ballard and University District neighborhoods in Seattle.