Target's Q2 digital sales soar, curbside pickup services up over 700%

The retailer also revealed that it gained 10 million new digital customers in the first half of 2020 and $5 billion in market share across its core merchandise categories.

Target reported astronomical growth in its online delivery and curbside pickup services during the second quarter. Specifically, sales through Target's curbside pickup services increased 734% compared to the same quarter a year ago, while sales fulfilled by its online delivery service Shipt shot up more than 350% year-over-year.

The cheap-chic retailer also revealed that it gained 10 million new digital customers in the first half of 2020 and $5 billion in market share across its core merchandise categories. 

Target's digital same-store sales were up 195% in the second quarter and accounted for most of the retailer's growth. The company fulfilled almost 90% of those digital orders with local stores. Target is also spending less on sorting digital orders thanks to fulfillment optimization. 

The retailer's digital gains reflect the shift in consumer shopping habits in the COVID-19 era, with fewer people going into stores and opting for online purchases instead. Target's success during the pandemic is also tied to its classification as an essential retailer, which allowed the chain to remain open while other smaller retailers were forced to close.  

In prepared remarks, Target chief executive Brian Cornell said the comp sales growth in Q2 was the strongest the company's history.

"Our second quarter comparable sales growth of 24.3% is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model," Cornell said. "Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9% and stores enabling more than three-quarters of Target's digital sales."

Addressing concerns over Target's ability to scale its store-based fulfillment model, COO John Mulligan highlighted the company's success in meeting massive demand increases so far this year. 

"Our year-to-date digital sales of nearly $7 billion have already eclipsed our full-year digital sales in 2019 even though the peak holiday shopping season is still ahead of us," Mulligan said on a call with analysts. "Of this year's digital growth, sales on orders ship-from-stores have grown more than $1.6 billion. Sales from our pickup and Drive-Up services have also grown more than $1.6 billion so far this year, with Drive-Up accounting for well over $1 billion of that growth. And of course, much of this year's growth has been unplanned, meaning that our systems and store teams have had to adjust quickly in real time." 

As for the numbers, the retailer's Q2 net income rose 80.3% to $1.7 billion, or $3.35 per share. Total revenue increased 24.7% to $23 billion with non-GAAP earnings of $3.38 per share. Wall Street was expecting earnings of $1.62 per share with revenue of $20.09 billion. 

Shares of Target were up more than 8% in pre-market trading. Target didn't provide an outlook for the third quarter.