Target's Digital Side Props Up Sales

Target's earnings report made one thing very clear: the big-box retailer has tossed a lot of its eggs into its digital basket.

Which, at the moment, seems to be paying off.

While Target missed analysts' expectations, its fourth quarter earnings saw a small sales growth of 1.9 percent for comparable store sales, thanks to the help of digital. Digital channel sales increased 34 percent, which accounted to 1.3 percentage points to comparable sales growth.

Where Target continues to grow the most is in what it refers to as its "signature categories," which is considered style, baby, kids and wellness. This segment is growing three times faster than the company average for sales.

For Target's full year 2015, its sales grew 2.1 percent and comparable traffic increased 1.3 percent. Sales for the quarter came in at $21.63 billion, compared with $21.75 billion a year prior. Target's stock was up slightly after the bell when earnings broke, up just above 2 percent. Sales for the full year 2015 hit $73.79 billion, up 1.6 percent from 2014's $72.62 billion.

Target's sales growth is on par with what the big-box retailers are seeing. In comparison, Walmart’s overall net sales were up 2.4 percent to $81.5 billion. But Walmart made it clear that it expects “relatively flat” net sales for much of the year.

“With traffic growing for five consecutive quarters and our signature categories of Style, Baby, Kids, and Wellness leading our growth, Target’s results demonstrate that we are focused on the right strategic priorities,” said Brian Cornell, Target's CEO. “I want to thank our teams across the company for giving our guests a great holiday season, driving consistent growth throughout the fourth quarter and delivering on the sales and profit goals we laid out at the beginning of the year. While we have made a great deal of progress in 2015, we are excited about the opportunity in front of us to provide a more seamless experience and accelerate profitable growth.”

As for the digital side of things, Target's growth this quarter is much stronger than it saw last quarter, likely because of the holiday sales boost. Digital sales in Q3 grew 20 percent in the quarter, but this was down from what Target had forecasted in growth, which was 30 percent. Q4's results seem to be more on point with what Target expects. Target's 2014 Q4 showed a similar pattern, with digital sales up 30 percent, and digital traffic growth from mobile growing more than 50 percent.



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