Target reshapes expectations, puts fresh grocery pickup on hold
As the COVID-19 crisis has evolved, Target has been experiencing unusually strong traffic and sales, particularly in its stores and same-day services, as guests use Target for essential items like food, medicine, cleaning products and pantry stock-up items. As a result, the company has adjusted the expected timing of some of its strategic initiatives to support the team and minimize potential disruptions in their work to serve the needs of American consumers.
Updated plans for Target’s remodel program anticipate approximately 130 remodels in 2020, down from the previous expectation of approximately 300. This will allow remodel projects already under way to be completed, and move all other remodel projects into 2021. Similarly, the company now expects to open 15-20 new small format stores in 2020, rather than the 36 previously announced. This will allow projects already under way to be completed, but move the remaining new store projects into next year. In addition, the effort to incorporate fresh grocery and adult beverages into the company’s Drive Up and Order Pickup services is temporarily on hold.
“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. I want to thank our entire team for their efforts, which have been nothing short of heroic,” said Brian Cornell, chairman and CEO of Target. “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.”
Also announced last week, Target has raised its pay by $2 an hour for its store and distribution center hourly full-time and part-time team members until at least May 2. In addition, the company is offering a new option for team members who are 65 or older, pregnant or those with underlying medical conditions to access paid leave. Target’s latest investments include bonuses it is paying out to frontline team members, including, for the first time, bonuses for 20,000 hourly store team leads who manage individual departments in its stores across the country.
For the first three weeks of the first quarter, which began on Feb. 2, Target's comparable sales and category mix were in line with expectations and prior financial guidance.
Beginning with the fourth week of February and into the first part of March, the retailer saw an increase in traffic and comparable sales across its multi-category portfolio. For the month of February, total company comparable sales increased 3.8 percent.
Beginning in mid-March, the company experienced an even stronger surge in traffic and sales, with category mix heavily concentrated in the essentials and food and beverage categories. Around that time, strength also emerged within the portions of Hardlines that support in-home activities, including home office and entertainment, while performance softened meaningfully in apparel and accessories.
Month-to-date in March, overall comparable sales are more than 20 percent above last year, with comparable sales in essentials and food and beverage up more than 50 percent. During that same period, comparable sales in apparel and accessories are down more than 20 percent compared with last year.
“During these unprecedented times, the benefits of our strong balance sheet and diverse, multi-category assortment are particularly important,” said Michael Fiddelke, executive vice president and chief financial officer. “With the best team in retail focused on serving our guests, and ample financial capacity to navigate a highly uncertain outlook, we are confident that Target will emerge from the current environment with an even stronger guest relationship and continue to operate from a position of financial strength.”