5 Reasons To Love Target Right Now

On August 18, when Target TGT reported an EPS and revenue beat, it continued a streak that has been running for a handful of consecutive quarters. Despite COVID-19 related woes that plagued retailers and consumers, the home of the Bullseye continues to be a bright spot for both consumers and investors in the space. 

Several Wall Street analysts weighed in on the news of its earnings and they, too, agree that Target continues to soar. Here are five reasons they like Target right now:

1. Back-to-school/campus.

With so many students and educators heading back to learning institutions, supplies and needs are in high demand this year. Several analysts noted that consumers are ready to step into the “new normal” we are collectively figuring out. Although the full picture of what that entails and will ultimately look like is unclear across the board, consumer response to the return to class signaled that it includes heading back to class and campus in style with new stuff. In July, the National Retail Federation reported that BTS shopping had already kicked off earlier in the month, with consumers ready to spend big on their hauls. Part of the drive comes from stimulus checks and an overall spirit of conservative spending on behalf of consumers during the height of the pandemic. Target and its peers have enjoyed being a destination for shoppers seeking the BTS merch, from backpacks to dorm room twinkle lights.

2. Strategic initiatives.

Though this category is probably less fun than the others that made the cut, strategic initiatives hold a very key position and have a vast impact from the size of a store to what is stocked on the shelves. Telsey Advisory Group pointed out four initiatives currently on its radar: real estate, digital, merchandising, and supply chain. Equally less fun and more important, however, is any given shop’s supply chain. After making its presence widely known to consumers during the pandemic when runs on supplies such as paper goods and “hannitizer,” it continues to dominate top-of-mind issues. Telsey noted that Target is getting ahead of some potential supply chain woes through the opening of several strategically placed distribution and sortation centers. “We believe Target remains well-positioned to gain market share as the company benefits from ongoing strategies,” wrote Telsey Advisory Group in an update. In response to the distribution and sortation centers, Telsey Advisory Group added, “these actions combined with the power of data and loyalty [of about 100 million Target Circle members] should continue to make Target more relevant to customers.” 

3. Omnichannel ecosystem.

During Covid-19’s early days, shoppers continued to plan and execute Target runs, sometimes without stepping into the actual store. The main reason for this is Target’s robust omnichannel offerings for consumers, which Target continues to offer for those who prefer to get their items without going inside the store. Whether customers utilized the e-commerce courtesy of Target’s website and app, took advantage of the store’s newly-enhanced drive-up services, opted for shipping, or went ito the store physically, the results speak for themselves. Customers aren’t going anywhere and neither is Target’s new omnichannel ecosystem. Cowen & Company COWN notes that Target’s e-commerce channel alone has grown by over 205% over the past two years. Meanwhile, same-day services grew by 55%, atop up over 270% last year. “Drive up remains the most popular omnichannel solution and grew more than 80% on top of more than 700% last year,” wrote Cowen & Company. 


4. Food and beverage.

Admittedly, food and beverage might not be at the top item of a shopper’s list when they’re conducting a Target run, its food and beverage categories have expanded over time nonetheless. Now, shoppers can expect to find a bounty of fresh produce, frozen foods, dairy, and popular grocery brands alongside Target’s growing list of private label, in-house brands. Shoppers have taken note over time and food and beverage have grown to see some success. In the most recent quarter, Target reported, food and beverage purchases rose in the low-double digits aided by growth in its bakery, deli, and cafe offerings. Fresh groceries also enjoyed a boost in the quarter, aided by Target’s expansion of drive-up services. Credit Suisse noted that Drive Up was stronger than Pick up and Shipt for the quarter, “And benefitted from the expansion of products for the service.”

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5. Partnerships and collaborations.

This very exciting subject has been touched upon here before, but let’s recap: one big driver for Target fans is and will forever probably be its curation selections. Nowhere is the customer fan hood more on display than at Target’s often eye-popping, sometimes headline stealing limited edition collabs, which don’t show signs of slowing anytime soon. Up and coming partnerships include Opal House featuring Justina Blakely, apparel by designers Victor Gelmond, Nili Lotan, Rachel Conery, and Sandy Liaing, and children’s wares in partnership with author Christian Robinson. Target also launched Kindfull, a brand of pet food, and has collaborated with beauty supply favorite Ulta to create store-within-a-store experiences.

 Note: As of their notes dated Aug. 19, Credit Suisse rated Target Outperform with a $286 price target, Cowen & Company rated Target Outperform with a $300 price target, and Telsey Advisory Group rated Target Outperform with a $350 price target.

The Tycoon Herald