Target had its best year since 2005

Posted at 7:55 AM, Mar 05, 2019

Target capped off its best year in more than a decade with a strong holiday shopping season.

Sales at Target stores open at least a year grew 5 percent last year — its best performance since 2005.

Target's stellar 2018 got a big boost from the holiday season. Comparable sales grew 5.3 percent during its most recent quarter compared with last year. Its digital sales grew 31 percent.

The big-box retailer gained market share in key categories like clothes and home furnishings during the holidays and got a boost from the growing economy. Target said foot traffic to stores was up.

Target's stock rose nearly 6% during pre-market trading Tuesday, despite thinner profit margins from fulfilling online orders. Target waived its minimum order requirement on online orders during the holidays.

The gap between retail's best and worst performing companies widened during the holidays and Target is among the winners.

"We have been driving an ambitious agenda to transform," CEO Brian Cornell said in a news release Tuesday.

The company's strategy to compete against Amazon and Walmart by focusing on Millennials and young parents with affordable brands and offering a wider array of merchandise is paying dividends.

Parents are crucial to Target's success because they spend more every year than shoppers without children.

Investments in its stores have helped, too. Target has aggressively remodeled hundreds of stores, built out delivery and buy-online-pickup-in-store capabilities, and built small stores to extend its reach within cities and college campuses.

Target also launched more than 25 exclusive brands, such as Goodfellow, a clothing label, and A New Day, a homegoods label, that burnish its trendy image.

"Target's strategic initiatives announced two years ago are clearly bearing fruit, with its online push continuing to generate impressive gains," said Charlie O'Shea, analyst at Moody's.

Target has succeeded recently, but a parade of top retailers reported uneven results this earnings season. Some, including Walmart, TJX and Best Buy thrived. But L Brands-owned Victoria's Secret, JCPenney and Gap struggled.

Kohl's sales at stores open at least a year grew 1 percent during the holidays, the company announced Tuesday. Like Target, Kohl's has focused on developing exclusive brands, such as Sonoma Goods for Life and Apt. 9, to drive traffic and stand out against rivals. It has also been running a pilot with Amazon at some stores to offer free returns for customers' orders.

Under CEO Michelle Gass, Kohl's has been shrinking the size of some stores and adding more athletic brands like Under Armour to court mid-income moms. Kohl's said Tuesday that it plans to close four under-performing stores in April and open up smaller stores later this year. It can save money with small stores by carrying less inventory and employing fewer workers.

Kohl's stock rose 5 percent in pre-market trading.