Target sees huge rise in sales thanks to coronavirus, but profits hit

The retail giant saw big jumps in grocery and online sales, but clothing plummeted.
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Target posted a huge increase in sales during its first quarter, but the unprecedented situation created by the coronavirus pandemic also meant it took a big hit to its profits.

The Minneapolis retailer announced Wednesday that it saw 10.8% growth in comparable sales between February and April, which it says was driven by a 12.5% increase in the average basket, with shoppers making "fewer, bigger shopping trips" as they limited essential travel.

Its online sales meanwhile grew a massive 141% compared to last year, rising from a 33% increase in February to 282% in April.

CEO Brian Cornell said that "Q1 was unlike anything we’ve seen in Target's long history."

But while sales shot up, profits took a hit, dropping 64.3% to $284 million.

That's because much of Target's boosted sales came in food and digital sales, which present lower profit margins, while the highly profitable apparel category struggled.

Also having an impact was the $2-an-hour pay bump given to all associates during the COVID-19 outbreak, which the retailer has just extended to July, which has cost the company an estimated $500 million.

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"Throughout the first quarter, our team and guests faced unprecedented challenges arising from the spread of COVID-19," Cornell said. "In the face of those challenges, our team showed extraordinary resilience as guests relied on Target as a trusted resource for their families.

"With our stores at the center of our strategy, and a significant investment in the safety of our team and guests, our operations had the agility and flexibility needed to meet the changing needs of our business.

"With the dedication of our team, the benefit of a sustainable business model and a strong balance sheet, we are confident Target will emerge from this crisis an even stronger retailer, with higher affinity and trust from our guests.”

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