If you've been a Target (TGT -0.61%) shareholder for a while, you're probably winning on your investment. The retail giant has climbed about 200% over the past three years. During the early stages of the pandemic, customers flocked to Target's digital platform to shop for essentials. As lockdowns ended, shoppers continued to order online and resumed visits to Target stores. As a result, Target's overall business today is booming.
So, you might be wondering now about whether to hold onto Target shares for a while longer or sell and lock in gains. Especially since the retailer's stock has slipped so far this year. But I see this as a temporary movement. And there is good reason to buy more shares of this dynamic retail stock right now. Why? Let's find out.
Image source: Getty Images.
Winning online and in-store
The early days of the pandemic didn't slow down Target's business. As a matter of fact, this phase put Target on track to win both online and in-store. Target already had contactless delivery options in place. But the nature of the pandemic gave this part of Target's business an extra push. As a result, Target's digital sales grew by almost $10 billion in 2020. Same-day services -- Target's contactless pick up and delivery options -- climbed more than 200%. And overall, Target's sales growth was greater than in the previous 11 years combined.
Fast forward to the most recent financial snapshot. And that's the third quarter of last year. At this point, shoppers truly had returned to their usual routines -- or settled into new ones. And Target's business continued to flourish. Store sales, digital sales, and same-day services increased nearly 10%, 29%, and about 60%, respectively. Importantly, Target's sales in all five of its product categories climbed in the double-digits. And Target reported an increase in traffic of more than 12%.
Finally, another important thing to note: At the end of 2020, Target said 12 million more customers became multi-channel shoppers -- they shop at Target online and in-store. This type of customer typically spends four times more than an in-store only shopper and 10 times more than a digital only shopper over time.
All of this shows us that Target significantly grew its number of shoppers and its revenue over the past few years -- and in a way that is lasting.
Billion-dollar brands
I also like the fact that Target hasn't stopped there. The company has pledged to invest $4 billion annually in store openings and revamps, and to boost its fulfillment services and supply chain. Last year, Target opened 29 new stores and two new supply chain locations. The company also continues to expand its owned brands -- this is key because margins are higher here. Most recently, Target launched Brightroom, its home organization and storage brand. At least 10 of Target's owned brands have become billion-dollar brands.
These efforts should help bring more and more shoppers to Target -- and keep revenue climbing.
Now, let's take a look at why now is time to buy more Target shares. As I mentioned earlier, the stock has declined this year -- by more than 7%. And today, the stock is trading at only about 16 times forward earnings.
TGT PE Ratio (Forward) data by YCharts
At the same time, financial measures are looking positive. For example, return on invested capital and profit margin both have been on the rise.
TGT Return on Invested Capital data by YCharts
In my view, any declines in Target shares right now represent an opportunity to buy more shares -- or initiate a position in this unstoppable retail stock. Target has made gains in customers and sales. And it's made smart decisions to invest in areas such as pickup, its digital platform, and store remodels to better meet the needs of customers. The efforts have been bearing fruit. So, at today's stock price, one of the best deals at Target may be its shares.
