Target (TGT) - Get Report on Wednesday put numbers to what many had already witnessed first-hand at the retail giant’s stores and on television: a significant jump in both foot traffic and same-store sales in the first three weeks of March, driven by coronavirus panic-buying.
In a business update, the Minneapolis-based company said same-store sales for the four-week period that included the last week of February and the first part of March rose by 3.8%, with an even stronger surge in traffic and sales as of mid-March, when coronavirus-driven panic shopping kicked into high gear across North America.
Month-to-date in March, overall comparable sales were more than 20% above last year, the company said, with comparable sales in essentials and food and beverage up more than 50%.
Over the same time frame, comparable sales in apparel and accessories fell by 20%.
“While Target has maintained its low everyday prices during this period, stronger-than-anticipated quarter-to-date sales have led to gross margin dollar growth ahead of prior expectations,” the company said.
“However, continued sales declines in higher-margin discretionary categories could result in lower-than-expected gross margin dollar performance for the remainder of the quarter.”
Target also said that first-quarter costs will be some $300 million higher than expected thanks to the company boosting pay and benefits for workers as well as a spike in merchandise volume in stores and in its supply chain – as well as “… more rigorous cleaning routines in stores and distribution centers across the country.”
Analysts, investors, and anyone watching television over the past few weeks are collectively confident that Target as well as the likes of Costco (COST) - Get Report, Walmart (WMT) - Get Report, Krogers (KR) - Get Report and other staples-focused retailers will undoubtedly post out-of-the-ballpark numbers for late February and March.
Much less certain, however, is how those same retailers will square away a drop-off in sales related to supply chain disruptions and store shelves quickly emptying as consumers mass-hoarded basic staples like toilet paper, disinfectant wipes and canned goods.
Indeed, given “the highly fluid and uncertain outlook for consumer shopping patterns and government policy related to Covid-19,” Target said it was withdrawing its prior guidance for first quarter and full-year 2020 sales, operating income and earnings per share - and also suspending its share repurchasing activity.
Target last week announced a pay raise of $2 an hour for its store and distribution center hourly full-time and part-time team members until at least the beginning of May, as well as bonuses for various front-line and back-end employees.
Target also said it was shelving plans to remodel some 130 of its stores as it recalibrates its focus to cutting costs and ensuring smooth operations through the coronavirus pandemic.
Shares of Target were down 5.96% at $94.82 in trading on Wednesday.