Target Q2 2021 - Growth & Improvement of Operating Leverage

Retail
Written By Rick Watson

Target reported Q2 earnings continued to grow faster than Walmart and improve their operating leverage.

A few notes:

  • Sales grew 8.9% and Digital Sales grew 10% y/y on top of 195% y/y growth the previous year.

  • Same Day Digital Delivery Services (BOPIS, Driveup, Shipt) grew 55% y/y, on top of 270% growth previous year. Incredible.

  • More than 95% of Target’s 2Q Digital sales were fulfilled by its stores - 2 new sortation centers opening this year, these are downstream of stores in high-density markets to facilitate same-day efficiency. This is a good sign, it means that some of their store efficiency improvements are baked in and they are moving further down the value chain. (This is tech they acquired from GrandJunction)

  • Super-interesting note that Target Circle (membership/loyalty) is 100M members. Compared to Amazon ~150M US Prime Members, this is great. I don’t recall tracking Target Circle recently. Walmart+??

  • In the past 5 years, Target employees grew 20% while sales grew 45%. This is great operating leverage and likely that will continue to improve. No doubt this is due to smaller store formats being the primary mode of investment.

    Continue to be on track to open 30 new small format stores this year - these are little fulfillment centers.

Rick Watson

Rick Watson founded RMW Commerce Consulting after spending 20+ years as a technology entrepreneur and operator exclusively in the eCommerce industry with companies like ChannelAdvisor, BarnesandNoble.com, Merchantry, and Pitney Bowes.

Watson’s work today is centered on supporting investors and management teams incubating and growing direct-to-consumer businesses. Most recently, in partnership with WHP Global, Rick was a critical resource in architecting the WHP+ platform, a new turnkey direct to consumer digital e-commerce platform that powers AnneKlein.com and JosephAbboud.com.

Watson also hosts a weekly podcast, Watson Weekly, where he shares an unbiased, unfiltered expert take on the retail sector’s biggest players.

In the past year alone, Rick has spoken at many in-person and virtual events as well as podcasts on topics ranging from retail/ecom to supply chain/logistics and even digital grocery including CommerceNext IRL, ASCM Connect, and Retail Innovation Conference.

https://www.rmwcommerce.com/
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