TGT Target Corp

By Sarah Nassauer 

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 (April 24, 2020).

Target Corp. said sales from stores weakened significantly in late March and early April, while online sales surged, squeezing profits as shoppers grew increasingly reluctant to venture outside amid the coronavirus pandemic.

Consumers flocked to stores to stock up in late February and early March, but traffic slowed considerably and buying shifted online through home delivery, store pickup and other services, said Target Chief Executive Brian Cornell on a call with reporters.

"As expected, as millions sheltered in place, sales trends in stores started to soften," said Mr. Cornell. "The consumer is listening to direction."

Since Feb. 1 Target's comparable sales, those from stores and digital channels operating for at least 12 months, rose 7%. In the first three weeks of March, comparable sales rose 20%, the company said last month. So far in April comparable sales are up more than 5%, the company said. Digital comparable sales have risen more than 275% during that period.

Throughout, Target has experienced a surge in sales of food, household goods and, more recently, office supplies and cooking appliances, while sales of higher-margin goods such as apparel and accessories have fallen. That dynamic, along with higher labor costs and the shift to digital sales, which are less profitable than store sales, are eating into margins, the company said.

Those factors, as well as write-downs associated with reducing its inventories of apparel and accessories, will lower the company's first-quarter operating margin by more than 5 percentage points, the company said.

Target shares were down about 4% to $102.63 in early trading Thursday.

Last month Target withdrew its financial forecast for the quarter and full year and said it would suspend share repurchases. At the time, Target said it expected to spend an additional $300 million during the current quarter on virus-related changes to labor, cleaning routines and supply-chain demands.

Some trends, especially the shift toward digital fulfillment, are likely to be long-lasting, Mr. Cornell said on the call. Longer-term, shoppers will "embrace routines developed during these weeks at home with their families," he said. Target's model of using stores as online delivery and pickup hubs "will continue to serve us well," he said. "Today, it's proving critical."

Many retailers deemed nonessential by local governments have closed and furloughed workers. For the others, staying open has brought its own set of challenges.

Tractor Supply Co. said earlier this month that comparable sales grew 12% in March, with consumable goods such as animal feed and heating fuel up more than 20%, offsetting declines in other categories such as clothing and footwear.

Walmart Inc., the country's largest retailer by revenue, has about 150,000 of its 1.5 million U.S. workers out on leave due to coronavirus-related issues, The Wall Street Journal reported last week.

Other sectors have seen parts of their business grow and other parts hurt by the broader impact of the pandemic. For example, Facebook Inc., Twitter Inc. and several news websites have reported rising use of their products but also warned about the sharp pullback in advertising.

Target said it would extend the added benefits and pay it offered hourly workers starting last month. Target will now temporarily pay workers at least $15 an hour through the end of May, as well as extend backup child-care benefits and a 30-day paid leave for workers who are 65 and older, pregnant or have underlying medical conditions.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

April 24, 2020 02:47 ET (06:47 GMT)

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