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Target goes full speed with ship-from-store

August 19, 2015, 5:19 PM

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Online sales accounted for 20.7% of the retail chain’s overall sales growth in Q2.

Target Corp. plans to expand its ship-from-store capabilities as it hopes to grow on yet another strong quarter from an online sales perspective.

The retail chain, No. 16 in the Internet Retailer 2015 Top 500 Guide, reported that e-commerce accounted for 2.7% of the retailer’s overall sales in the second quarter of fiscal 2015, or $470.529 million. The merchant also reported e-commerce accounted for 2.2% of Target’s overall sales, or $373.054 million, in the same quarter last year. Based on those metrics, web sales increased 26.1% in Q2.

The roughly $97.5 million year-over-year growth in digital sales represents 20.7% of Target’s overall sales growth during the quarter.

On the retailer’s Q2 2015 earnings call, CEO Brian Cornell told analysts that Target intends to more than triple the number of stores from which it fulfills online orders in the second half of 2015, increasing that total to more than 450 by the end of the year from 140 now.

“Ship-from-store capabilities allow us to balance inventory across the network, leverage the capital and labor already in our stores, and reach guests more quickly,” he told analysts on the call, according to a transcript from Seeking Alpha.

That’s not the only digital initiative the retailer is taking on heading into the second half of the year. Cornell told analysts Target is planning to pilot a program called available-to-promise, which guarantees a shopper will receive a package within 2-3 days.

“If the guest orders on a specific date, we believe this capability will drive further increases in digital conversion rates, which are already improving rapidly as guests respond to a faster and firmer delivery commitment,” he said.

Analyst Abe Garver, managing director of BC Strategic Advisors, said it was encouraging to hear Target say it’s on track to have 450 stores serve as flexible fulfillment centers, and “What caught my attention most on today’s earnings call is that Target’s in-house approach to personalization, which incorporates both in-store and online guest history, appears to be working nicely (10%+ increase in number of offers downloaded per user, and as much as $100 million in incremental sales this year).”

For the second quarter ended Aug. 1, Target reported:

  • Total sales of $17.427 billion, up 2.8% from $16.957 billion in the same quarter last year.
  • Comparable-sales, which includes e-commerce, increased 2.4%.
  • Net earnings of $753 million, up 221.8% from $234 million.

For the first six months of fiscal 2015, Target reported:

  • Total sales of $34.546 billion, up 2.8% from $33.614 billion in the first half of fiscal 2014.
  • Net earnings of $1.388 billion, up 112.6% from $653 million.
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