Target Corp. said sales surged in the most recent quarter, driven initially by online shoppers who stockpiled food and other essentials to brace for coronavirus lockdowns and more recently by rising demand for items like electronics and apparel as states have begun to lift stay-at-home orders. Comparable sales, those that come through stores or digital channels operating for at least 12 months, rose 10.8% for the quarter ended May 2. Digital sales rose 141%, growing each month during the quarter, while comparable-store sales increased less than 1% in the period.

Target stores have remained open across the country during the coronavirus pandemic, but the crisis has underscored the challenge of making money from e-commerce. As retailers sell more online, they’re also taking on more work, such as picking items, packing them and shipping them. That typically squeezes their profits —whether retailers fill an order for curbside pickup, mail it or deliver it to customers’ doors.

In late April, Target warned the company’s increased expenses – such as higher pay for workers – would pressure its profits for the quarter, sparking a stock sell-off. The cost of the increased wages, store cleaning and other expenses related to the pandemic has totaled about $500 million, CEO Brian Cornell told reporters during an earnings call. That includes $2 per hour wage increases and and improved benefits that will be paid through July 4.

Target said first-quarter net income fell to $284 million, or 56 cents per share, from $795 million, or $1.53 per share, a year earlier. Excluding some items, Target earned 59 cents per share. Analysts were expecting Target would earn 40 cents per share, according to Refinitiv.

In March, Target withdrew its financial guidance for the year amid uncertainty related to coronavirus. “We are still trying to understand what’s going to happen with children going back to school, what’s happening with colleges and universities and how guests will celebrate holidays,” as well as the economic situation, said Mr. Cornell. “There is just so much uncertainty.”

Todd Horwitz Chief Strategist
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