“It’s hard to understand what’s going to happen next week, let alone three or four months from now”, Target CEO Brian Cornell told CNBC Wednesday.
I won’t argue with that. What is debatable, though, is Cornell’s suggestion that canceled vacation plans and closed movie theaters contributed more to the company’s blockbuster quarter than stimulus checks.
Target’s comps beat looked like a misprint initially. Same-store sales rose 24.3%, triple the ~8% rise analysts were expecting. That is obviously the best result in company history.
Target added 10 million new “digital guests” in the first half of the year. Digital comps were up 195%. Store comps rose a more pedestrian 11%.
While Walmart’s Q2 presentation featured the word “stimulus” eight times, free money from the government gets relatively short shrift in Target’s explanation for a blowout quarter.
“The stimulus was a factor, but even as it waned we saw strong comparable-sales growth in June and July”, Cornell said. “And we are off to a very solid start in August”.
Apparently, Target is gobbling up market share as consumers are wary of going to more than one place to shop. Of course, it also helps (if you’re Target) that the competition is going out of business like there’s no tomorrow (because, for many in the industry, there’s not – a tomorrow, that is).
Home decor sales jumped a laughable 30%. Even apparel bounced back after logging a 20% drop in Q1. Curbside pickup was a big hit. The company’s release has some fun graphics in that regard, featuring rudimentary cartoons of Clark Griswold-style station wagons driving on bar charts.
On CNBC, Cornell explained how pandemics work, just in case some of the network’s audience might not be apprised by virtue of being too rich to care. “In the pandemic, we’re not going to restaurants, we’re not going to movies”, he said. Quoth Brian:
Those traditional summer trips have been canceled. We’re not on planes. We’re not spending dollars on lodging, so many of those dollars have been redirected into retail.
It’s true. Some “dollars” are being “redirected” into retail. That’s why retail sales are back to pre-pandemic levels.
There are two other possible explanations for Target’s results, though. One is simply that Americans are a consumption-addicted bunch — a nation of instant gratifiers.
The other is that Steve Mnuchin sent everyone making less than $75,000/year a free $1,200 check or simply deposited the sum in their bank accounts.
Although I haven’t been to a Target in at least half a decade, I assume they still have a higher-end clientele than Walmart. That said, the company’s shoppers probably skew towards people making less than $100,000/year. It is, after all, a pseudo-discount retailer. It’s not exactly as if you can go to Target and buy a Hermès Fleurs Graffiti crew.
We’ll see what happens to Target’s comps in Q3. The company did concede that back-to-school shopping appears to have been delayed and Cornell didn’t provide an outlook. On a call with reporters, he cited the company’s success at relationship-building as key.
“We’ve built tremendous trust with the guest”, he said. “[That’s] been one of the big drivers behind our success”.
Ok, Brian. But my guess is, Target would be almost as thrilled with another round of free money for America’s “tired and poor” as the “huddled masses” would be to receive it.