Retailers Confront Coronavirus Uncertainty -- 2nd Update
March 03 2020 - 12:32PM
Dow Jones News
By Sarah Nassauer and Suzanne Kapner
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%.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Suzanne
Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
March 03, 2020 12:17 ET (17:17 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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