Retail news that keeps industry pros in the know
Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.
Target finally hit the mark in Q2 with a return to growth after several quarters of slumping sales. The turnaround, CEO Brian Cornell told shareholders, is the result of the retail giant’s focus on lowering prices and providing value to inflation-weary customers.
“On the frequency side of our assortment, both our food and beverage, and essential categories saw traffic growth in the quarter as consumers are responding to our offerings in an environment where they’re focused on value,” he said in an earnings call.
The executive said Target cut prices on 5,000 frequently purchased items over the summer, and launched a new loyalty program, Target Circle, that added more than 2 million new members in Q2.
Christine Short, vice president of research at Wall Street Horizon, told Retail Brew that Cornell signaled these moves back in Q1 when he said Target needed to communicate to customers that it could offer value. “It sounds like that’s been paying off and they recognize how value-driven and discerning the consumer has become,” she wrote in an email.
A pullback in discretionary spending has been a headwind for the general merchandise store recently, but Q2 saw growth in both essential and discretionary categories. While essentials grew in the low single-digits, comparable sales of beauty grew 9%, and apparel grew 3% from the previous quarter.
- This tracks with Bank of America’s recent internal data showing that the market share for “value apparel" has increased 4% for Gen Z and millennials in the last year.
Still lagging: Digital was also a driver of Target’s comeback, increasing 8.7% for the quarter on the back of double-digit growth in same-day services available through programs such as Drive Up and Target Circle 360. But the company still has a long way to go to catch up with rival Walmart, according to Juozas Kaziukėnas, founder of Marketplace Pulse, an e-commerce research firm.
“Target still lags compared to Walmart, even [though] both of them rely heavily on stores for digital growth,” he wrote in an email to Retail Brew. “Walmart has been posting 20+% digital growth quarters for a while.”