Target’s Growth in Same-Day Services Shows Successful Omnichannel, Logistics Efforts
Target’s latest earnings results were notable for the general pullback in consumers’ spending on discretionary items and a continuing impact from retail theft.
Elsewhere in the second-quarter 2023 results that were posted Wednesday (Aug. 16), there were notable positive data points, underscoring the appeal of omnichannel and same-day delivery efforts.
At a high level, the company noted that comp sales were down 5.4% in the quarter that ended in July. In part, the decline was tied to backlash and controversy over Pride month in June. Digital comp sales were down 10.5%. Roughly half of the company’s sales come from discretionary categories, and management noted on a conference call with analysts that there had been a meaningful recovery in foot traffic and comps in July.
CEO Brian Cornell said on the call there are “multiple cross-currents that are affecting the U.S. consumer. These include the impact of inflation in frequency categories, like food and beverage, and essentials, causing these categories to absorb a much higher portion of consumers’ budgets. … In addition, consumers are choosing to increase spending on services like leisure travel, entertainment and food away from home, putting near-term pressure on discretionary products.”
Executive Vice President and Chief Growth Officer Christina Hennington said on the call that discretionary categories softened “further from recent trend” with apparel, home and hardlines seeing comp declines in the low double digits to mid-teens percentage points.
But in a nod to the evolving ecosystem and omnichannel journeys that consumers take where they are, Target’s results showed 4% growth in same-day services, and Drive Up use was up 7% on the heels of its returns activity.
“Consistent with our stores-as-hub strategy, more than 97% of our second-quarter sales were fulfilled by our stores,” Cornell said.
He added that the number of guest trips through the first half of 2023 was more than 169 million higher, or more than 21% higher than in 2019.
Improving Logistics
Chief Operating Officer John Mulligan said on the call that there had been improvements in supply chain activities, particularly in global shipping, “where second-quarter import lead times were nearly 30 days shorter than last year and within a couple days of pre-pandemic levels. In our domestic supply chain, because of strong partnership with our vendors, we’re seeing improvement on multiple performance metrics, including fill rates and on-time arrivals.”
Regional distribution centers, he said, have helped cut down inbound backlogs by a day as measured against last year.
“More precisely, stores being serviced by these new facilities have seen a 20% reduction in lead times, enabling them to respond more quickly to changes in guest demand,” said Mulligan.
In a discussion of the same-day services and returns, Mulligan said that, in the wake of Drive Up and returns being launched in the spring, “once a guest arrives at a Drive Up lane, the average wait time for a team member to process their return is within three minutes.”
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