The Supply Chain Matters blog continues with our highlights of retailers that were able to significantly benefit from the COVID-19 pandemic because of their investments in online customer fulfillment and digital business processes. A further theme was benefitting by being an online one-stop presence for deemed essential goods that could be garnered with safety and convenience in-mind.

In prior commentaries we specifically highlighted online performance results from Amazon, Home Depot and Walmart. In this commentary, we focus on Target and Lowe’s Home Improvement.

Target Online Shopper


Bix box retailer Target Corporation performed in what has been headlined as a “monster quarter” in financial and operational performance, reporting the strongest quarterly sales growth in the firm’s history. Similar to other retailers that we have highlighted, Target benefit from selection, inventory availability and convenience.

Performance for the retailer’s fiscal second quarter ended on August 1st included:

  • Total Revenues just shy of $23 billion vs, analyst expectations of $20 billion.
  • Net Earnings rose 80.3 percent to $1.69 billion compared to $938 million in the year-earlier period.
  • Sales growth of both physical store and online channels open for 12 months rising 24.3 percent, an all-time high. Online sales nearly tripled from the year earlier period.
  • Same-day services (Order Pick Up, Drive Up and Shipt) grew 273 percent and accounted for approximately 6 percentage points of total comparable sales growth.
  • Quarterly gross margin climbing to 30.9 percent from 30.6 percent despite added costs related to COVID-19 safeguards and compensation.


CEO Brian Cornell indicated to analysts and investors that the retailer added 10 million new guests for the first half of the year, likely taking market share from other retailers. Once more, the retailer’s average ticket value, a measure for gauging sales per receipt rose 18.8 percent in the quarter, yet another reinforcement that consumers opted for one-stop safety and convenience. Category growth reflected one-stop convenience with the categories of Home rising 30 percent, Electronics rising 70 percent, Food and Beverage as well as Beauty each up 20 percent.

As this blog has noted in many prior commentaries related to Target’s online strategy, this retailer has made concerted multi-year bets on making its physical stores the physical hub of the online shopping experience including online fulfillment directly from available store inventory when available, and other sources when not. According to this retailer, more than 90 percent of second-quarter sales volume involved either physical in-store, curbside pick-up or shipped from store. Sales channeled to local store curbside pick-up reportedly rose 700 percent from year earlier periods. Sales fulfilled by online grocery delivery services firm Shipt, acquired by Target in 2017, grew more than 350 percent year-over-year.

In our Supply Chain Matters commentary reflecting on Target’s fiscal first quarter performance, we acknowledged CEO Connell’s dogged focus in changing corporate culture to reflect the online experience. Chief Supply Chain Officer Arthur Valdez, recruited in 2017, after serving a leadership role at Amazon, has subsequently added other talented leadership from Amazon, Walmart and other innovative online companies. That included the creation of the role of Executive Vice President for Global Inventory Wide Management, a role previously unheard of in retail. Such moves were to prepare for needed capabilities that varied from traditional retail thinking several years ago, namely that online and in-store had to exist as two separate business, merchandizing and P&L entities. That changed thinking has now provided meaningful business outcomes.


Lowe’s Home Improvement

Home improvement retailer Lowe’s Home Improvement reported robust sales volumes for the May to July fiscal quarter, joining rival Home Depot in benefiting from consumers stuck at home. CEO Marvin Ellison indicated that demand for home improvement strengthened as consumers redirected discretionary spending.

Financial and Operational headlines included:

  • Total Quarterly Revenues of $27.3 billion compared with $21 billion in the year-earlier period.
  • Quarterly Net Earnings of $2.8 billion compared to $1.7 billion in the year-earlier period.
  • Comparable same store revenue growth of just over 35 percent for U.S. stores, and 25 percent overall.
  • Gross Margin increasing 197 basis points to 34.08 percent. Operating Margin increase of 315 basis points to 14.5 percent. This retailer invested $460 million to support front-line workers, stores and distribution center safety measures related to COVID-19.


Similar to Home Depot, sales from do-it-yourself consumers outpaced those from contractors, although Home Depot has a higher concentration of contractor-based sales. That reportedly played to Lowe’s advantage in terms of inventory availability. Comparable average ticket price rose by 11.6 percent in the quarter.

The retailer has been playing catch-up in terms of online fulfillment capabilities and has embarked on a $1.7 billion multi-year supply chain transformation initiative announced in 2018. This effort includes augmenting logistics networks that includes 50 cross-dock terminals, and additional plans for adding multiple new distribution and bulk shipment handling sites to speed-up online and direct ship order fulfillment.


Added Thoughts

Once again, we especially provide our Tip-of-the Hat recognition to all front-line essential workers that assisted these two retailers in both ensuring that demand was fulfilled, but also in being instrumental to such significant financial and operational outcomes.

Tip of the Hat Recognition


As noted in each of these select retailer highlights, prudent investments and unforeseen events coincided in market opportunity and groundbreaking performance, unfortunately at the expense and likely peril of other retailers. Being deemed essential retailers and not subject to closing certainly helped.


According to reporting by The Wall Street Journal, Amazon, Walmart, Target, Lowe’s and Costco Wholesale accounted for 29.1 percent of all U.S. retail sales in the second quarter, according to data compiled by Customer Growth Partners. That represented a 3.5 percentage point increase from the year-ago period, and represents a rather larger dollar figure overall.

The fact that all of the retailers we have profiled in this series have curtailed any future guidance is a sobering indication of the uncertainty remains in the COVID-19 economy.



Bob Ferrari

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