TGT Target Corp

By Sarah Nassauer 

Target Corp. said sales surged in the most recent quarter, driven initially by online shoppers who stockpiled food and other essentials to brace for coronavirus lockdowns and more recently by rising demand for items like electronics and makeup as states have begun to lift stay-at-home orders.

Comparable sales, those that come through stores or digital channels operating for at least 12 months, rose 10.8% for the quarter ended May 2. Digital sales rose 141%, growing each month during the quarter, while comparable-store sales increased less than 1% in the period.

"Last quarter was unlike anything I've ever seen," Target Chief Executive Brian Cornell said on a call with reporters. "It was intense. It was volatile. It was stressful for our guests and for the country."

Mr. Cornell said the retailer saw a drop-off in store traffic when shelter-in-place orders went into effect in the middle of the quarter. By the middle of April, he said, there was "a rapid increase in traffic and sales" driven by a surge in discretionary categories such as apparel and kitchenware. Electronics, grocery and beauty-product sales grew fastest overall, he said.

The Minneapolis-based company benefited from government stimulus checks sent to many Americans as well as from shoppers returning to stores in the first wave of states that reopened for business, Mr. Cornell said.

Target has invested heavily in recent years to add e-commerce buying options for shoppers, including home delivery and curbside pickup. Those services helped the company gain market share during the quarter as more shoppers stayed away from physical stores, said Mr. Cornell. Around five million people used Target.com for the first time and over 2 million tried ordering online for pickup in store parking lots, he said.

The pandemic has prompted many retailers to lay off staff and pushed some, already struggling with the shift to online buying and competition from Amazon.com Inc., over the edge. This month luxury retailer Neiman Marcus Group Inc., apparel seller J.Crew Group Inc. and J.C. Penney Co. have filed for bankruptcy protection.

For those that stayed open, such as Walmart Inc., Home Depot Inc. and Costco Wholesale Corp., sales jumped as shoppers stocked up on household goods. But profits shrank as labor and operational costs rose and a higher percentage of sales came online.

Walmart, the country's largest retailer, said Tuesday comparable sales rose 10% during the most recent quarter. It also said it absorbed about $900 million in additional costs related to Covid-19, including raising wages for warehouse workers and paying bonuses to its store staff.

Target expects to spend about $500 million from the beginning of March through July 4 on higher wages and other operational changes related to the coronavirus, Mr. Cornell said.

Target's adjusted earnings per share fell to $0.59 during the quarter, compared with $1.53 for the same period last year, beating analysts' estimates of $0.44, according to FactSet.

Stores sales are generally more profitable than online sales because of added shipping and other supply-chain costs. In addition, fewer sales of higher-margin goods such as clothing ate into profit, Target said.

Total revenue hit $19.6 billion, up 11.3% from $17.6 billion a year earlier.

In March, Target withdrew its financial guidance for the year amid uncertainty related to coronavirus.

"We are still trying to understand what's going to happen with children going back to school, what's happening with colleges and universities and how guests will celebrate holidays," as well as the economic situation, said Mr. Cornell. "There is just so much uncertainty."

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

(END) Dow Jones Newswires

May 20, 2020 06:49 ET (10:49 GMT)

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