If you thought tech companies were dominating the markets during the pandemic, Target’s (NYSE:TGT) second-quarter earnings blew everyone out of the water with some very impressive results. The company posted its strongest earnings in its 53-year history, nearly tripling digital sales thanks in part to the novel coronavirus pandemic. Target stock soared by 12% after the results were announced.
Unlike many brick and mortar stores, Target was one of the few companies that were deemed an essential business and remained open during the lockdown. This fueled the increase in demand for the company’s products as customers stocked up on staples.
With a jump in digital and in-store sales, Target stock is one of the best buys in the market right now.
Target Stock Has a Record-Breaking Q2
As coronavirus cases continue to surge across the nation, the last three months saw an unprecedented increase in online sales. During its second quarter, Target’s online sales surged by an eye-popping 195% from a year ago. This digital growth was a major reason for the company’s blowout results.
In terms of Wall Street expectations, the company beat estimates on all counts. Yahoo Finance reports Q2 net sales at $23 billion, in comparison to the expected $19.82 billion. Gross Margin was higher at 30.9% versus the estimated $28.98%, followed by earnings per share (EPS) at $3.38, which was more than double the expected $1.58 per share.
The shining jewel in Target’s earnings reports was its sales numbers which were unlike anything analysts had seen before. In short, sales increased in almost every product category. The largest of them being the sale of electronics, which rose by an enviable 70%. Apparel, food, and beverage sales increased by 20% individually, while home and beauty grew by 30% and 20%.
The coronavirus pandemic also drove demand for curbside pickup that lets customers skip a trip inside the store. Target’s delivery pickup service saw a 700% increase from the previous year, which was a huge boon for its online sales. The retailer operates this service through Shipt, which also saw a 350% year-over-year increase.
Target’s Q2 numbers are a testament to the strong position this company holds in the consumer retail market. When stimulus checks ran out in late July, analysts expected to see a dip in August sales. Target was able to keep sales numbers in the double digits for the month. Back-to-school sales were lower than expected as classes remain online indefinitely, but Target plans to extend this product category through the fall.
E-commerce Is the Way Forward
Target’s stunning results are proof of the growing power of the e-commerce industry. Although the massive increase in online sales this year was largely due to the coronavirus pandemic, experts say that this shift in consumer shopping habits will continue long after the pandemic.
Instead of investing in warehouses and logistics for online sale deliveries, Target fulfills most of its orders in its physical stores with the option of same-day delivery. While this is cost and time effective, the model may be unsustainable in the long-term. However, analysts believe the company has a lot of runway left before it needs to expand its supply chain to an external location.
Target is not alone in this e-commerce boom. Walmart (NYSE:WMT) saw a comparable increase in online demand this quarter with a 97% increase year-over-year. The retailer said that its e-commerce sales doubled during this period as well. Home Depot (NYSE:HD) and Lowes (NYSE:LOW) saw a 100% and 135% increase in online sales.
It’s clear that the e-commerce trend is not going away anytime soon. Investors would be wise to get behind the big players in the industry.
The Bottom Line on Target
Target has always been a powerhouse in the consumer retail sector and the corona-economy has only amplified its growth. Q2 results are indicative of the company’s influence over the consumers despite a turbulent economy.
With the unemployment rate over 10% and a surge in cases across the nation, Target has managed to remain a staple in consumers’ lives. The retailer’s incredible performance this quarter is just the beginning of what’s to come. Experts believe Target stock will outperform the market in the coming weeks, making this stock one of the best investments in the market right now.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020. As of this writing, Divya Premkumar did not own any of the aforementioned stocks.
