| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3301 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
Target hits the bullseye in Q4 as performance points to additional market share gains (191.13 +5.04) Coming off back-to-back blowout quarterly reports, Target (TGT) once again exceeded expectations in 4Q20 as robust holiday eCommerce sales provided the impetus for strong performance. The magnitude of the EPS upside wasn't nearly as substantial this quarter ($0.13 beat) compared to the last two (average of $1.45), indicating that analysts' estimates are catching up to TGT's momentum. However, the results still tell a bullish and familiar story, characterized by market share gains and the company's ability to capitalize on its digital and same-day service capabilities. For the quarter, comparable sales increased by 20.5%, topping the 17.5% forecast, fueled by a 118% surge in digital sales. While impressive on an absolute basis, what especially stands out is TGT's outperformance relative to rival Walmart (WMT). When WMT issued 4Q20 results on February 18, it reported an 8.6% increase in U.S. comparable sales as its eCommerce channel generated 79% growth. This divergence in growth is an ongoing matter. In 3Q20, TGT's comparable sales growth outpaced WMT's by about fourteen percentage points. The numbers clearly suggest that TGT is taking market share from WMT, which is a concept that TGT CEO Brian Cornell embraces. In this morning's earnings press release, he put a figure on those gains, stating that the company gained nearly $9 bln in market share in 2020. At the core of TGT's market expansion is its multi-category product assortment and shopping experience that is resonating well with customers. For example, the company recently announced partnerships with Disney (DIS), Ulta Beauty (ULTA), Levi Strauss (LEVI), and, most recently, Apple (AAPL), to significantly bolster its portfolio of national brands. Enhancements to its product offering, along with strength in TGT's private brands, is driving market share across all five of its core merchandising categories. Additionally, the added convenience of TGT's same-day services is creating another competitive advantage within the retail space. In Q4, growth for same-day deliveries and store pick-up was spectacular at 212%, accelerating from last quarter's 193% jump. As strong as TGT's results were, there are a couple blemishes worth noting. While this may be construed as nit-picking, in-store comparable sales slid to 6.9% from 9.9% in Q3. That's still very respectable, but it plays into one of the primary concerns facing TGT this year: digital sales growth will likely taper off in the coming months due to vaccine rollouts. With the company already facing increasingly difficult yr/yr comparisons, the slowdown for in-store comparable sales and the anticipated deceleration in digital sales will produce much slower growth ahead. On a related note, TGT once again opted against providing specific EPS or revenue guidance. The company isn't alone in this regard, joining Home Depot (HD) and Lowe's (LOW) in opting to withhold guidance. The issue, though, is that it creates doubt and uncertainty, leaving the door open for investors and analysts to make erroneous assumptions. On the positive side, TGT is instilling some confidence by reinstating its share buyback program, which currently has $4.5 bln of remaining capacity. TGT turned in another very solid quarterly result, defined by further market share gains and triple-digit digital sales growth. Although a slowdown in growth is inevitable this year, the primary story for TGT continues to revolve around its breakaway performance against its main rival, WMT. |