TGT Target Corp

By Sarah Nassauer and Suzanne Kapner 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 4, 2020).

Target Corp., Kohl's Corp. and other retailers that posted lackluster holiday results must now confront the uncertainty caused by the coronavirus epidemic, which could help or hurt sales in the coming months.

Executives at Target and Kohl's said Tuesday that the impact from the virus has been muted so far.

"As of today, we haven't seen a large impact on our business or outlook, " Target Chief Financial Officer Michael Fiddelke told analysts. He said the retailer hasn't seen anything that would cause its 2020 results to differ from its longer-term trends.

In recent days, grocers have logged strong sales as some consumers stock up on food and other staples. The epidemic could also speed the shift to online ordering as people avoid visiting stores.

Costco Wholesale Corp.'s website was sold out Monday in the New York City area of several items such as Jif peanut butter and Kraft Macaroni & Cheese. Meanwhile, Amazon.com Inc. warned customers of its Prime Now same-day grocery service in San Francisco, Seattle and other cities that delivery availability might be limited.

Economists say it is too soon to know how much the virus might affect consumer spending but that it could upend supply chains and cause some product shortages, especially as retailers run out of Chinese-made goods already stocked in warehouses.

On Tuesday, Target reported comparable sales, which include stores and digital channels operating for at least 12 months, rose 1.5% during the quarter ended Feb. 1. The results were in line with a warning the company issued in January, when executives cited weak toy and electronics sales.

For the new fiscal year 2020, Target forecast per-share earnings between $6.70 and $7.00. Analysts had expected full-year earnings per share of $6.88, according to FactSet. Target said the potential impact of the coronavirus crisis is factored into its current financial forecasts.

"We've set up a team over the last month that is literally meeting daily to monitor [product orders], to understand the state of production in China, to understand the rate of workers returning to work" and other factors, Target CEO Brian Cornell said. The retailer is shifting product selection to reflect increased demand and expected supply delays, he said.

While no company is immune to inventory risk, larger chains including Walmart Inc., Target and Home Depot Inc. are better positioned than smaller ones, Wells Fargo & Co. analysts wrote in a research note Monday.

Target's muted statement on potential supply-chain delays "suggests that the ripples of disruption across all of retail are probably lower than some are expecting at the moment," said John Zolidis, an analyst at Quo Vadis Capital.

On Tuesday, Kohl's reported flat sales and profit in the holiday quarter. For 2020, the retailer forecast a comparable sales change in the range of -1% to 1%, after posting a 1.3% decline for 2019. The 2020 estimates don't include any impact from the coronavirus.

Kohl's CEO Michelle Gass said the company is monitoring the impact of the virus on its business. She said Kohl's has a good supply of spring goods that it received in February, and is talking to its suppliers daily to monitor the situation.

She said the company has moved production of its private brands, which account for 40% of sales, out of China in recent years, giving it more flexibility. She added that foot traffic to its stores so far hasn't been affected by U.S. cases of the virus.

Target's comparable sales for the full year rose 3.4%, and digital sales rose 29%. For fiscal 2020, Target predicted comparable sales would rise by a low-single-digit percentage.

Shares of Walmart, Target, Costco and other big retailers rallied Monday, outpacing a broader market rally and recouping some recent losses. Shares of Target fell 3% in Tuesday morning trading, while Kohl's shares fell 1%.

Corrections & Amplifications Target said it expects comparable sales in fiscal 2020 will rise by a low-single-digit percentage. An earlier version of this article incorrectly said the company expected a mid-single-digit percentage increase. (March 3)

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Suzanne Kapner at Suzanne.Kapner@wsj.com

(END) Dow Jones Newswires

March 04, 2020 02:47 ET (07:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.