By Tonya Garcia, MarketWatch
While Amazon.com Inc. races to get purchases delivered to customers in a day, Target Corp. is getting people to come to them, driving digital sales even as they get customers to go to stores.
Target /zigman2/quotes/207799045/composite TGT +2.13% says comparable digital sales were up 31% in the third quarter, with 80% of the retailer’s digital growth attributed to customers’ use of same-day services, like Drive Up, which brings packages to shoppers’ cars.
As a result, Target has managed to drive online sales without hurting profit.
“Although online now accounts for a greater share of sales than ever (7.5% of revenue versus 6% last year), unlike many retailers there has been no negative impact to Target’s bottom line,” wrote Neil Saunders, GlobalData Retail’s managing director.
Target reported third-quarter net income of $744 million, or $1.39 per share, up nearly 15% from $622 million, or $1.17 per share, last year. Adjusted EPS of $1.36 blew past the $1.19 FactSet outlook.
Operating income rose 22.3% to just over $1 billion.
Revenue and same-store sales also beat the FactSet consensus, and Target raised its guidance, sending shares soaring more than 8% in Wednesday trading.
“Given that the same-day options rely on our store assets, team and inventory they are much more profitable than traditional e-commerce fulfillment,” Brian Cornell, Target’s chief executive, said on the earnings call, according to a FactSet transcript.
Amazon /zigman2/quotes/210331248/composite AMZN -0.18% announced in April that it was cutting two-day shipping for Prime members in half, with the company spending more than $1 billion so far to make it happen.
Target certainly offers delivery as well, launching free shipping for the holiday season on Nov. 1, offering Shipt same-day service, and delivery during a designated window for a $7 fee from its small-format stores, which are largely focused around urban areas and college campuses. Shoppers are more likely to take public transportation in areas where these stores are located, making in-store pickup more difficult.
Cornell said on a Wednesday call with the media that baskets at those small-format stores offering the delivery option are up to four times bigger than average because customers don’t have to worry about how to get purchases home.
Walmart Inc. /zigman2/quotes/207374728/composite WMT -1.22% has also been investing in its e-commerce capabilities, with grocery core to its online sales. The retail giant is going so far as to deliver into customer refrigerators through an InHome Delivery option.