Target's profit sinks 64% as costs soar amid pandemic
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Target sales surged as customers stocked up on essentials in order to ride out the COVID-19 outbreak from home, but higher operating costs wiped out any bottom-line gains.
The Minneapolis, Minnesota-based big-box retailer said comparable sales rose 11 percent from a year ago as customers made fewer, bigger shopping trips and total revenue climbed to $19.37 billion. Digital sales soared 141 percent.
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The company’s first-quarter profit, however, fell 64 percent year-over-year to $284 million, or an adjusted 59 cents a share. Wall Street analysts surveyed by Refinitiv were expecting adjusted earnings of 40 cents a share on revenue of $19.04 billion.
Target's first-quarter gross margin fell to 25.1 percent, from 29.6 percent in 2019, amid higher digital and supply chain costs and increased investments in employee wages and benefits.
“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," Target CEO Brian Cornell said in a statement. "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."
The company gained market share in all five of its core merchandise categories, which include essentials, food and beverage and beauty products.
Target returned $941 million to shareholders during the first quarter — $609 million through share repurchases and $332 million in dividends.
Target withdrew its full-year guidance on March 25 due to uncertainty caused by COVID-19.
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Shares were down 3.93 percent this year through Tuesday, outperforming the S&P 500's 9.53 percent decline.
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