Yesterday Minneapolis big-box retailer Target held its Q2 2018 results earnings conference call. Participating executives included Brian Cornell, Chairman, and Chief Executive Officer; John Mulligan, Chief Operating Officer; Mark Triton, Chief Merchandising Officer; and Cathy Smith, Chief Financial Officer.
The retailer presented strong results for the quarter. With comparable sales growing 6.5%, representing Target’s strongest quarterly comp performance since 2005. The increase was driven by traffic growth of more than 6% which represented the strongest performance since the retailer began reporting the metric in 2008.
Total sales were up 7% from last year, reflecting 0.5 points of growth from new and non-mature stores. Store comp sales increased nearly 5%, and digital sales grew more than 40% in the second quarter as guests continue to respond to a growing collection of fulfillment options, newness around merchandising categories, freshly remodeled stores and a higher level of service across stores.
Perhaps most exciting was the obvious strategic importance of private brand at Target. With Brian Cornell heralding, “our work deliver a constant drumbeat of new and exciting merchandise throughout our owned (private brand) and exclusive brand portfolio. “He went on to say “…of course, as the year progresses, we’ll continue to benefit… brand launches in multiple categories”
Mark Triton, Target’s Chief Merchandising Officer later joined the call and had numerous call outs for the private brand portfolio beginning with the overall strength in the Home category which included nearly 10% growth, driven by growth in décor and kitchen, driven by their new private brands.
Electronics also saw strong growth influenced by the launch of Heyday Target’s new youth-focused electronic accessories private brand.
“On top of the new ownership and exclusive brands, we launched in 2017, and earlier this year, which continue to perform really well. We launched four new own brands in the second quarter that will drive our results going forward. Three of these new brands were designed to invite young millennials in the emerging Gen Z guests to experience Target in ways that are authentic to them.
Wild Fable is our newest apparel and accessories brand for young women. It’s driven by current trends and focused on enabling just to create their own style, for their own many life moments. For young men, we just launched Original Use, a street meets vintage modern brand focused on enabling guests to explore fashion, culture and individuality. Both Wild Fable and Original Use feature a wide range of sizes reflecting our commitment to inclusive sizing.”
“As I mentioned earlier, we launched our exclusive Heyday brand of electronic accessories in June. This brand is designed to appeal to style-conscious guests an incredible value without sacrificing quality with trendy, fun and quality tech at very affordable prices. Also, in June, we’ve launched our newest home brand, made by design consisting more than 750 items in kitchen storage, bedding, bath and even furniture with most items below $30. This brand is the ultimate expression of Target DNA, a commitment to the democratization of design, offering high-quality style at affordable prices. We design each product to intuitively go beyond the expected delivering smart solutions that make everyday tasks easier. For example, the cookware incorporates pour spouts on the rims and built-in strainers in the lids, glasses are stackable and towels include hang hooks that keep them of the floor and items were designed to forgive minor mistakes like silicon and nylon tools that can handle heat up to 450 degrees in case you accidentally leave your spatula on a hot fry pan.”
As well as Targets continuing commitment to investing in their private brands to drive differentiation.
“But our differentiation doesn’t just happen with new brands. We also delivered newness through our existing brand portfolio. Look at Cat and Jack, we launched the kids brand more than two years ago and sales and market share continue to grow. That’s because we continuing to invest and deliver newness and great designs through Cat and Jack every day, every season. Whether we’re talking about our new brand or an existing brand, it’s our focus on the guest, innovation and great design at a great price that are keys for Target to continue to win through differentiation. And that is not going to slow down.”