Target Corp. is one of the few retailers still open in the coronavirus shutdown — and seeing a rush to buy essentials and big declines in fashion that together capture the frazzled mind-set of the consumer today.
So far this month, Target’s comparable sales of apparel and accessories are down more than 20 percent, while its essentials and food and beverage businesses are up more than 50 percent, leading to an overall comp improvement of more than 20 percent.
But that gain is not coming with a corresponding profit bump and investors were deflated, trading shares of Target down 9.6 percent to $90.93 on Wednesday as the Dow Jones Industrial Average gained 495.64 points, or 2.4 percent, to 21,200.55 on hopes for the bailout from Washington.
Still, the mass retailer is on the right side of the new divide in retail, separating the haves (in this case stores that are still open for business) and the have-nots (those that have been forced to shutter operations and cancel orders to combat the spread of COVID-19).
The winners, especially the essentials-heavy Target, Walmart Inc., Amazon Inc. and Dollar General, are giving more money to employees to stock shelves or hiring while others focused more exclusively on apparel face potentially massive layoffs. H&M, for instance, warned it was considering global layoffs that could number in the tens of thousands.
But if keeping the lights on is an accomplishment for any retailer these days and an undeniable win, it doesn’t mean shoppers coming through the door are propelling the bottom line.
Food typically has lower gross margins and is often used as a way to draw shoppers into stores and then get them spending on higher-margin goods such as fashion.
Target said, “Continued sales declines in higher-margin discretionary categories could result in lower-than-expected gross margin dollar performance for the remainder of the quarter.”
The retailer is also tweaking its spending plans to finish up projects that are already under way.
Store remodels will tally 130 this year, down from the 300 projected, while 15 to 20 smaller-format stores will open, instead of the 36 previously announced.
“We are prioritizing the work that’s in front of us to support our team, store operations and supply chain as families across the country rely on Target for everything they need in this challenging environment,” said Brian Cornell, chairman and chief executive officer. “Over the past few weeks we’ve experienced an unprecedented surge in traffic and sales, as guests rely on our stores and same-day services. Ensuring we can take care of our team and deliver for the millions of guests who are counting on us remains our top priority.”
Target’s costs are also rising — to the tune of an incremental $300 million — as the retailer spends more on pay and benefits to manage the spike in volume.
The retailer raised pay for its hourly distribution center workers and part-time employees by $2 an hour last week until at least May 2. It’s also offering options for employees at greater risk of complications from COVID-19 and paying bonuses of $250 to $1,500 for 20,000 hourly store team leads.
Walmart said this week it was seeking to hire 150,000 associates, including full-time, part-time and temporary positions in distribution centers and fulfillment centers.
People can apply online and start working for Walmart in as little as 24 hours with pay at distribution and fulfillment centers ranging from $15 to $19 an hour. Through Memorial Day, all hourly associates for Walmart — the nation’s largest private employer with 1.5 million workers — will be paid an additional $2 an hour.
Amazon has also opened up 100,000 new roles to help keep up with the sudden surge in demand from a suddenly at-home world and said it is investing more than $350 million globally to increase pay by $2 and hour in the U.S. and similar amounts elsewhere.
Dollar General said it was investing $35 million in total for bonuses to all store, distribution center and private fleet employees. The company also plans to hire 50,000.
Lawmakers in Washington have reached a deal on a $2 trillion aid package to help prop up the U.S. economy. Although it’s not clear that support from the government will avoid massive retail layoffs, it will certainly help.
Minority leader Charles Schumer (D., N.Y.) described it as the “largest rescue package in American history” in an address on the Senate floor in the wee hours Wednesday.
In addition to more than $130 billion for medical needs, the plan will offer support for people being put out of work.
“We come to their rescue,” Schumer said, who described it as “unemployment compensation on steroids.”
“Every American worker who is laid off will have their salary remunerated by the federal government so they can pay their bills,” he said.
Small businesses will also get more access to loans to stay afloat.
“Help is on the way, big help and quick help,” Schumer said of the aid package, which is expected to be approved quickly by President Trump.
Just how long it will take for people to move beyond stocking their pantries and worrying about rent payments and to think about fashion is another matter entirely.