MINNEAPOLIS — Target’s sales have spiked more than 20% this month from people stocking up on food and household supplies, yet the disruption caused by the coronavirus means the retailer is putting on hold or postponing its plans for the year, Target CEO Brian Cornell said.
The Minneapolis-based company will scale back the number of remodels and new stores opened, as well as adding fresh groceries and alcohol to its pickup services.
In doing so, he said the company hopes to minimize potential disruptions at a time when employees are hustling to restock shelves, sanitize checkout lanes and fulfill a record number of Drive Up and in-store pickup orders during this “unprecedented time,” Cornell said.
“We need to be disciplined about making sure our stores and supply chain can focus on serving our guests without any unnecessary distractions, knowing that we’ll need to prioritize the flow of food, medicine, and other essentials for the foreseeable future,” Cornell told reporters.
As the COVID-19 crisis has unfolded, many department stores, specialty retailers, restaurants and bars have shut down for at least two weeks. But retailers such as Target, Walmart, Costco and groceries that sell food, medicine and other essentials have remained open and have been seeing a deluge in shopping — and in some cases hoarding — that has led to frequently empty shelves of items like frozen chicken, disinfectant wipes and toilet paper.
“A surge in stock-up shopping really set in at the end of February and in the weeks since then there’s been a prolonged surge,” Cornell said.
While Target’s comparable sales in February, up 3.8%, were fairly in line with expectations, he said sales and traffic have accelerated in March, with categories such as food, beverage and household supplies skyrocketing 50%. In addition, he said the company has seen strong sales in office supplies, crafting items, small kitchen appliances and other in-home activities as more families work, eat and stay at home.
Meanwhile, overall apparel sales are down more than 20% this month, which could hurt Target’s gross profit margins since those tend to be more profitable.
On Wednesday, Target also announced stepped-up safety measures to what it had already rolled out in recent weeks as both employees and customers are on heightened alert about their risk of catching the virus. It will temporarily stop selling and packing items into reusable bags. If customers still want to use their own bags, they will be asked to pack them themselves.
Target also will discontinue accepting returns for three weeks, while giving an extended return window afterward once that suspension is lifted.
And it will now have workers clean check lanes after each transaction (instead of once every 30 minutes), mark off where customers should stand 6 feet apart while waiting in line, and ensure customers are social distancing.
Given how rapidly the business is fluctuating and the continued uncertainty about the coronavirus, Target, like many retailers, withdrew on its quarterly and full-year guidance it laid out just three weeks ago. It’s also suspending share buybacks.
At its investors’ meeting in early March, Target’s leaders laid out a number of projects for the year, which are now being pared back.
Target had planned to remodel 300 stores this year. On Wednesday, it said it would complete 130 of them which are already underway, and will push off the others to next year since they can be quite disruptive to store teams.
While it had planned to open 36 small-format stores this year, which would have been a company record, Target said it will reduce that to about 20 stores and move the remaining projects to next year.
“This preserves our focus on daily operations that are crucially important right now,” said Cornell.
This spring, the company had also planned to begin adding fresh grocery in the Twin Cities, and alcohol in other select markets, to its in-store pickup and Drive Up services, with a wider rollout to more stores across the chain later in the year. But those initiatives are now temporarily on hold.
Target also said it expects to have higher costs than expected in the quarter as it has increased pay, hours and benefits. Last week, Target announced it would spend more than $300 million on temporary $2 an hour wage increases for hourly workers, bonuses and increased benefits and paid sick time for employees. Other retailers have announced similar measures.
While other retailers such as Amazon, Walmart, CVS and Dollar General are hiring tens of thousands of additional workers to keep up with demand, Cornell said Target is offering additional hours to current employees first to increase staffing of services such as order pickup and Drive Up and then will hire from the outside as needed.
Shipt, Target’s same-day delivery service for it and other retailers, has also gone on a hiring spree to recruit thousands of additional contract workers in markets around the U.S. including in the Twin Cities.
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