Americans stocking up on essentials as they hunker down during the ongoing coronavirus outbreak have sent sales at Target way up so far in March, even as the crisis creates various new challenges for the discount retailer.
Target, considered an essential store by many local authorities because it sells food, medicine, and cleaning products, said on Wednesday that comparable sales, a metric that excludes results from newly opened or closed stores, have risen 20% so far this month in what the company called an “unprecedented surge” of customer shopping.
That increase was led by food, beverages, and other essentials like cleaning products. Comparable sales in those categories grew 50%, at a pace unabated even as it has become clear there are no food shortages in the country. Other categories that did well include home office items, notably electronics, and games.
But it was clear that shoppers were focused on what they would need during the outbreak and not much else: Comparable sales of clothing and things like shoes and handbags have plunged 20% this month, even as rivals in those product categories like Kohl’s and Old Navy have closed stores.
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Despite the surge in sales, Target said that low margins on food and the volatility of consumer spending made estimating profits too difficult, and it became the latest retailer to pull its 2020 financial forecasts because of the virus outbreak. It also eliminated share buybacks.
(As Fortune reported this week, many top national retailers have drawn down money from their credit line to increase their access to cash if needed; Target has not done so.)
Further pinching its profit, Target has also said it is giving store workers incentives totaling $300 million—including temporary wage increases and bonuses for department managers—to keep them working during the crisis.
The shopper focus on essentials, as much as it has boosted Target’s top line so far in the first half of the current fiscal year, has upended many of its plans to build on the past two years of big market-share gains.
“Knowing we’ll need to prioritize the flow of food, medicine, and other essentials for the foreseeable future, we’re adjusting the timing of several initiatives,” Target chief executive Brian Cornell told reporters on a conference call.
As part of these changes, the company will remodel only 130 of its 1,800 stores this year, instead of the 300 originally planned as part of a yearslong program to update its fleet, and will drastically curtail the number of stores it opens this year in its successful smaller format. These efforts have been instrumental to Target’s remarkable turnaround since 2017.
What’s more, Target will suspend activities like accepting returns until things get back to normal and will no longer allow customers to drive up to collect online orders of alcohol or fresh food, in order to free up staff to deal with the crowds shopping for food and toilet paper. “This preserves our focus on daily operations that are crucially important right now,” Cornell explained.
Those operations rely on a workforce that is exposed daily to customers at a time when new coronavirus cases are rising quickly. Target said it was taking steps to avoid coronavirus infections, such as setting up checkout lane markers to help guests stay six feet apart, and cleaning the scanner area after each transaction.
Those steps don’t go as far as those of Kroger, which said on Tuesday it would install plexiglass partitions at many of its registers and allow workers to wear masks and gloves.