Target seeing ‘record-setting’ digital growth; extends wage hike until May 30

Marianne Wilson
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Target's mobile app
Target's mobile app

Target Corp.’s comparable online sales in April are up by more than 275% as Americans hunker down at home. But the discounter warned of lower first-quarter profits amid increased investments in pay and benefits and other costs. 

“While we expect our short-term profitability to be affected by COVID-19, we expect to have the financial capacity to emerge from this crisis in a position of strength,” the company stated.

In an interview with CNBC’sSquawk Box,” Target chairman and CEO Brian Cornell said the company’s investments in online shopping options and its employees will lead to “market share gains that I think will benefit the brand for years to come.”

Since Target’s fiscal first quarter began on Feb. 2, the chain’s total comparable sales have grown more than 7% reflecting a slight decline in stores and more than 100% growth in digital channels. Across the company's core merchandise categories, comparable sales have risen more than 20% in essentials, food and beverage; more than 16% in hardlines; increased slightly in home; and declined more than 20% in apparel & accessories. Acknowledging “significant changes in shopping patterns” in reaction to the COVID-19 pandemic, Target said it has seen broad market-share gains across its core merchandising categories.

For March in total, comparable sales increased in the low double digits, reflecting mid-single digit growth in stores and more than 100% in Target's digital channels. Sales increased approximately 40% in both essentials and food & beverage, and by approximately 20% in hardlines. Comparable sales declined in the low single digits in home and more than 30% in apparel and accessories.

Month-to-date in April, comparable sales have increased more than 5% as store comp sales have declined in the mid-teens while digital comp  sales have increased by more than 275%. Across core categories, month-to-date comp sales have grown more than 12% in both essentials and food and beverage; more than 30% in hardlines and in the high teens in home, while declining more than 40% in apparel & accessories.

Target expects first-quarter profit margins to take a hit amid declines in sales of higher-margin categories such as apparel, which will result in it writing down some of that surplus inventory. It is also spending more than $300 million on increased wages, bonuses and other benefits.

"Our strategy was built to be durable and sustainable in any environment and its strength is driving our business in the face of marked shifts in shopping behaviors caused by COVID-19," said Target chairman and CEO Brian Cornell. "We are seeing record-setting digital growth, strong demand for our same-day fulfillment services and broad market-share gains across each of our core categories. While this crisis will certainly put near-term pressure on our profitability, that pressure is far outweighed by doing right by our team and our guests. We're confident the actions we're taking today will drive growth and greater guest affinity over the long-term."

Target also announced plans to extend its $2 an hour temporary wage increase for store employees, additional child care benefits and paid leave policy for older or at-risk members of its workforce until May 30. The discounter had previously said the increase would last until at least May 2.

It also will provide thermometers to workers who request them so they can check their temperatures before they come to work. 

In recent weeks, Target has added safety measures in stores such as more frequent cleanings, plexiglass partitions at checkout lanes and providing workers with masks and gloves. 

In recent weeks, Target has added a number of additional measures to enhance the safety of its stores and distribution centers, including providing face masks and gloves to all employees, and implementing enhanced cleaning and social distancing processes.   

Target is also monitoring store occupancy and metering traffic, when necessary, to enhance the average space per person and reduce the possibility of congestion. Additionally, it has staffed up same-day services to accommodate increased shopper demand.