Digital sales growth of more than 100% helped Target boost comparable sales by 7% for the quarter to date — even with a slight decline in physical store sales. However, the retailer revealed that its Q1 profitability will likely be reduced due to higher investments in associate pay and benefits, a shift in purchases to lower-margin categories and higher costs for digital fulfillment.
Across both online and offline channels, Target achieved comparable sales growth of more than 20% in the essentials and food and beverage categories and more than 16% in hardlines, with a 20%+ decrease in apparel and accessories.
The physical-digital divide has been even more stark during the month of April, when overall comparable sales results for the month increased by 5%. While store-based comp sales declined in the mid-teens, online sales increased by more than 275% for the month so far.
“Target’s update was illuminating on multiple fronts, providing meaningful ‘color’ on the current retail environment through the lens of its open stores,” said Charlie O’Shea, lead Target analyst at Moody’s in comments provided to Retail TouchPoints. “The mix of sales, specifically the significant softness in apparel, indicates that consumers, once they decide to go to the store or hit the web site, are focused on efficiency and ‘needs versus wants’ as necessities are driving the significant increase in comp store sales, as well as the explosive growth online,” he added.
Target is extending its $2 per hour temporary wage increase through May 30, along with backup care for associates and 30-day paid leave for those who are 65 or older, are pregnant or suffer from underlying medical conditions as defined by the Centers for Disease Control (CDC).
“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 Brian Cornell, CEO of Target, in a statement. “Because of our strong business model, we are able to make considerable investments to support our team, put protections in place, and adjust to serve our guests who are being advised to shelter in place and avoid stores. As a result, 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.”