For retailer Target Corporation (TGT), this year was a year of growth. Since the beginning of the year, company’s shares have risen nearly 40 percent, which were at $179.05 in trading on December 2. The COVID-19 pandemic, which changed the consumer spending behavior, was one of the drivers of growth. But question arises whether the firm could sustain growth post-pandemic.
In the third quarter, Target’s comparable revenue rose more than 20 percent. At the same time, e-Commerce increased by 155%. Total sales rose to $22.6 billion by 21%. Household products, electronics, food, cosmetics, and so on, have sold well in previous quarter, according to Target. Consumers’ tastes shifted during the pandemic, as they focused more on purchasing products instead of having experience. For Target, this was a positive factor.
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Furthermore, Target was able to increase its operating margin from 5.4 percent to 8.5 percent because of a reduction in the amount of marketing campaigns and ads. As a result, company’s adjusted earnings per share more than doubled to $2.79.
Over the next two years, Target will possibly continue to post good revenues and earnings performance. As the number of cases of COVID-19 is rising, no improvements are anticipated in consumer behavior compared to the previous quarters. Therefore the main activities will still take place at homes.
In 2021, because of the advent of successful vaccines, the pandemic could begin to weaken. Social activity will most probably return to levels similar to pre-crisis levels. Again, this can allow individuals to spend more on experiences rather than goods. Lunch and dinner at restaurants, travel, visits to the cinema and theatre, for instance, will resume. The end of the pandemic may in turn be a drain on Target’s sales in large categories of items, other than clothes.
Even so, it is likely the Target will hold a greater market share than in 2019. While growth in financial indicators is expected to slow down in 2021-2022, as some factors that have led to growth in 2020 will disappear.
As the company has demonstrated its ability to adjust to new challenges and retain a strong competitive position, Target Corporation (TGT) remains a potential long-term destination for the investors.