Target First Quarter : Fulfillment Fuels Sales, Loyalty Programs Ignite Customer Acquisition

‍Target reported a decline in net sales for the first quarter, with figures dropping to $942 million from $950 million a year ago. Comparable sales also decreased by 3.7% year over year, mainly due to shoppers' perception of inflation, which softened purchases of discretionary products like groceries, food, and beverages.

However, apparel and beauty categories performed well, with discretionary sales trends improving nearly 4 percentage points in apparel compared to Q4 2023. Although inflation cooled slightly in April, the consumer price index was still up 3.4% year over year. On a positive note, digital comparable sales grew by 1.4%. For the quarter ending May 4, the 3.7% decline in comparable sales was in line with Target's expectations.

Key Highlights 

Same-Day Services Growth

Digital comparable sales grew by 1.4%, with same-day services increasing by 9% and Drive Up experiencing a 13% growth. This trend highlights the industry's shift towards omnichannel fulfillment methods. Grocery Doppio’s State of the Digital Profitability research reports the aforementioned.

Cost of Picking and Fulfillment: 83% of grocers cited rising costs as a major performance inhibitor.

Cost of Logistics and Delivery: 73% of grocers expressed dissatisfaction with these costs.

Grocers are focusing on the following strategies to address these challenges and improve profitability

Improving Efficiency: 86% view-enhancing efficiency as the best method to boost profitability.

Reducing Third-Party Dependence: 77% aim to cut reliance on third-party services to improve financial outcomes.

Target Circle Loyalty Program.

In April, Target relaunched the free-to-join Target Circle loyalty program, which welcomed over 1 million new members in the first quarter. This initiative aligns with a key area for budget increase in grocery technology spending, where digital offers and loyalty programs saw a 7.3% rise.

Inventory Management

Inventory for the first quarter was 7% lower than the previous year, yet higher in-stock levels were achieved. This aligns with our forecasted research on grocery technology spending, which indicates a 9.6% budget increase for inventory optimization.

Future Outlook 

The future outlook for Target’s second quarter is expected to increase from 0 to 2 percent in comparable sales.