Target comp sales up over 20%; expects more than $300 million in added Q1 costs
Target Corp. provided a update into its performance amid the COVID-19 outbreak, during which it has experienced surging sales in certain categories and rising costs.
So far in March, the discounter’s same-store sales are up more than 20%. By category, same-store sales in “essentials” and food and beverage are up more than 50%. Comp sales of apparel and accessories are down more than 20%.
Target noted that stronger-than-anticipated quarter-to-date sales have led to gross margin dollar growth ahead of prior expectations. It warned, however, that continued sales declines in higher-margin discretionary categories could result in lower-than-expected gross margin dollar performance for the remainder of the quarter.
In addition, Target expects to have more than $300 million in additional costs in the first quarter, driven by employee wage hikes and bonuses, increased merchandise in stores and its supply chain and reduced store hours to allow for more cleaning.
Given the “highly fluid and uncertain outlook for consumer shopping patterns and government policy related to COVID-19,” Target withdrew its prior guidance for first-quarter and full-year 2020 sales, operating income and earnings per share. In addition, the company is suspending share repurchase activity in the current environment and has scaled back its store remodel and expansion plans for the rest of the year.
"During these unprecedented times, the benefits of our strong balance sheet and diverse, multi-category assortment are particularly important," said Michael Fiddelke, executive VP and CFO. "With the best team in retail focused on serving our guests, and ample financial capacity to navigate a highly uncertain outlook, we are confident that Target will emerge from the current environment with an even stronger guest relationship and continue to operate from a position of financial strength."
Target’s costs have risen during the virus pandemic as it increases pay and benefits. The retailer raised pay for its hourly full-time and part-time workers in store and distribution center workers by $2 an hour last week until at least May 2. It also, for the first time, will pay out bonuses to its 20,000 hourly store team leads, who oversee individual departments in Target stores. The bonuses, to be paid in April, will range from $250 to $1,500.
Target is also offering new options for employees at greater risk of complications from COVID-19.