While 2020 was a miserable year for a host of retailers, it was a stellar year for Target (NYSE: TGT). The big-box giant just announced its fourth-quarter earnings. Not surprisingly, they exceeded analysts' expectations.
For the fiscal fourth quarter ended Jan. 30, Target's earnings per share came in at $2.67, versus an anticipated $2.54. Revenue, meanwhile, was $28.34 billion, versus an expected revenue of $27.48 billion. And net income rose 66% to $1.38 billion.
What drove Target's success?
Target has had a lot of things going for it during the pandemic. For one thing, it's been able to offer a host of options for online consumers, from same-day shipping to in-store pickup. It's also been able to draw in new customers by constantly expanding its product line. In fact, recently, Target announced a partnership with Ulta Beauty (NASDAQ: ULTA) to open makeup and skin care shops inside its stores.
Not only did Target enjoy a surge of revenue during the holiday season, but it also saw an uptick in online sales following the distribution of $600 stimulus checks under the relief bill signed into law in late December. And CEO Brian Cornell said the company experienced an increase in foot traffic at its stores. Not only that, but sales were up across all merchandise categories in January.
Good news for real estate investors?
Target's success can be seen as a mixed bag. The upside for real estate investors is that Target's strong sales further secure its position as a shopping center mainstay. The downside is that Target has the potential to drive other big-name retailers into the ground. If consumers choose to flock to Target over department stores, for example, malls could suffer in a very meaningful way -- and mall real estate investment trust (REIT) investors could lose out.
What retailers can learn from Target
A big part of Target's success can be attributed to the fact it's really a one-stop shopping destination. As consumers have shifted toward fewer in-person shopping trips during the pandemic, Target has served an essential need -- one other retailers don't have the capacity to fill.
But even outside its scope of products, Target has a few other key things working for it. First, it adapted very well to the pandemic by offering shoppers a host of options for accessing purchases. While other retailers may have increased their shipping capabilities, Target's same-day service really gave it an edge. And during this past fiscal quarter, same-day services grew by 212%.
Another thing Target has done well is expand its product line -- something department stores also have the potential to do. For example, last year, it added hundreds of new food and beverage offerings to its grocery lineup, and it also expanded its line of premium grocery items. Given that people are spending more time cooking at home and are spending less to dine out, boosting its line of speciality sauces, coffee, and other specialty items was key.
The Millionacres bottom line
While many retailers have a natural disadvantage to Target, some have the potential to learn from its recent wins. And those that do will be more likely to thrive in the near term. That would, in turn, be good news for real estate investors who don't want to see an increase in store closures in the wake of a very volatile year.