Are Walmart and Amazon Doing Better Than Target Amid Coronavirus?
Target (NYSE: TGT) detailed the consumer response to the spread of coronavirus when it announced the withdrawal of its first quarter guidance. Sales are soaring. For the month of March, comparable store sales have climbed 20%, well above the 3.8% the company saw in February.
The challenge for Target, and likely other retail giants like Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN), is that growth is coming from low-margin grocery sales. Target says sales in the Essentials and Food & Beverage categories surged 50% compared to last March, but Apparel & Accessories sales are down 20%. As a result, management sees potential for "lower-than-expected gross margin dollar performance" going forward.
Meanwhile, Target is taking steps to mitigate the spread and effect of coronavirus, including increased pay and benefits for its workers. Management estimates it'll cost an extra $300 million in the first quarter, which started in February. Combined with lower gross margin performance, the increased operating expenses could drag down profits despite the surging sales. Walmart and Amazon could see similar challenges.
Source Fool.com
