Target is hitting on a winning formula amid the coronavirus pandemic. Aaronback explains why it’s his stock pick for 2020. WSJWhatsNow
. Investors just need to look past some near-term challenges.
The Minneapolis-based retailer has been meeting consumer needs for everything from pantry foods to baby clothes through surging e-commerce sales. This will help it cement relationships with customers for years to come and to grab share from rivals who were less adept.from a year earlier, driven by a 141% leap in digital sales. Digital sales accelerated through the quarter, rising 282% in April alone. More than five million customers shopped at Target.com for the first time.
Target said it saw digital-sales levels that it wasn’t planning for until three years from now. But the company’s lean model of shipping goods directly from its retail outlets paid off as store employees were able to quickly pivot to fulfilling orders. Some 80% of digital sales were fulfilled from stores during the quarter.
Some worry this model could become a long-term weakness if Target eventually needs to start investing more in warehouses and logistics. But Barclays analyst Karen Short argues that Target has plenty of runway left on its existing model by making more efficient use of its retail network. She estimates that this year Target will generate $341 of revenue a square foot of retail space, compared with $510 for Walmart .
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