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Coronavirus boosts Target's sales but squeezes profits
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Target Corp. said sales of food and household goods are surging because of the coronavirus pandemic, but the retailer may report lower-than-expected profits as demand falls for high-margin goods such as apparel and it becomes more expensive to staff and clean stores.
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Comparable sales, those from stores and digital channels operating for at least 12 months, are up more than 20% thus far in March compared with the same period last year. Sales of household essentials, food and beverages have risen more than 50% during that time, while sales of apparel and accessories have declined more than 20%.
Target, Walmart Inc., Amazon.com Inc. and other retailers selling groceries and cleaning products have struggled to restock stores and handle the surge as people race to stock up as the virus spreads. Walmart and Amazon have announced plans to hire 250,000 temporary workers.
As schools around the country close and many people work from home, sales of home-office supplies and children's entertainment items have risen, but "higher-margin discretionary categories declined dramatically, " Target Chief Executive Brian Cornell said on a call with reporters. If that trend continues, gross profit margin will be lower than expected for the current quarter, he said.
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Target is also spending more than expected on worker pay and benefits because of the spike in product volume moving through its supply chain and the need for more-rigorous cleaning routines, the company said. The company expects those changes to cost more than $300 million during the current quarter.