Target CEO Brian Cornell’s most important business KPI is traffic. As such, it’s no surprise that traffic increased during Q2 2024 and the management commentary centered on the discussion about the health of the business on its quarterly update.
Comparable-store sales increased +2%, comparable transactions increased +3%, and traffic per venue increasing +4.9% according to our data. The Target Circle event (July 7-13) was partially strong from a visit standpoint. Target's merchandise mix also improved, with apparel (+500 basis points quarter-over-quarter) and beauty (+9%) highlighted. This led to a better average ticket despite meaningful price rollbacks on everyday essentials in a bid to boost units and traffic (which it did). Profits were up meaningfully due to the better mix, lower fulfillment expense, less theft-shrink, and other adjustments.
Target’s new free same-day delivery loyalty program (Target Circle 360) also shows promise as “digital” sales increased +8.7%. Within this increase, curbside and same-day delivery were both up +14%. However, as traffic has been slightly slower in July and early August (see the chart below), management lowered its Q3 2024 comparable-store sales growth expectations to 0%-2%.
On the consumer, Cornell shared, “Given the significant headwinds they faced with inflation over the last few years, consumers continue to focus on value as they work hard to manage their household budgets. And while they continue to turn out and shop around holidays and other seasonal moments, many are delaying purchases until the moment of need. Against that backdrop, our team continues to focus on providing unbeatable value for our guests. And of course, that starts with a focus on low everyday prices, including our recent price reductions on frequently purchased items. But our focus on value only begins with low prices. Whether we're highlighting compelling deals for our Target Circle members, offering an additional 5% savings to our Target Circle cardholders, designing and sourcing high-quality owned brands at compelling prices or delivery, ease and convenience with Drive Up and Target Circle 360, our team is continually working to find more ways to deliver more value for our guests.” Readers will recall many of our stories this past year on how increased loyalty programs across essentials-based retailers are distorting traffic and unit economics and our most recent article on the topic: No One Staying in Their Swim Lane.
