Target's sales growth in the latest quarter came at the cost of profits (TGT)

pulse

March 7, 2018 4:18 PM

Target reported its earnings for its fiscal Q4 2017 (ended February 3, 2018), which showed that it had nearly $22.8 billion in sales, up 10% year-over-year (YoY) for the quarter.

This story was delivered to BI Intelligence "" subscribers hours before appearing on Business Insider. To be the first to know, please .

Targetreportedits earnings for its fiscal Q4 2017 (ended February 3, 2018), which showed that it had nearly $22.8 billion in sales, up 10% year-over-year (YoY) for the quarter.

Comparable sales rose 3.6% YoY, giving Target threeconsecutivequarters of growing comparable sales after declining for the previous three periods. This growth was driven by its 3.2% YoY increase in traffic across stores and digital, with comparable digital sales jumping 29% YoY.

Despite its improving sales, Target posted its lowest gross margin in 20 years, with online order fulfillment costs seemingly the culprit. Target has been working to improve its e-commerce performance, but it still doesn’t have the digital fulfillment capabilities of Amazon, for example, and it's paying the price. The holiday season brought tremendous sales, but also a huge number of deliveries, and Target appears to have struggled with them, dampening its strong sales.

Fulfillment struggles and Target’s large self-investment may lead some to question the retailer's future plans. Target’s short-term performance may continue to be hindered by fulfillment costs, and the retailer is only partway through its plans to invest $7 billion in itself. Costs are likely to continue to pile up, and while they are leading to sales growth across channels, some may be skeptical of Target’s long-term success because of its short-term profit issues.

Target appears to be undaunted, as it's announced plans to expand a number of fulfillment programs in 2018. Some of the programs could help it alleviate the fulfillment costs it's struggled with, while others may cause them to increase, as Target seems intent on offering as many convenient delivery options as possible.

pulse

Enhance Your Pulse News Experience!

Get rewards worth up to $20 when selected to participate in our exclusive focus group. Your input will help us to make informed decisions that align with your needs and preferences.

I've got feedback!

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng