Coronavirus compounds retailer worries after lackluster holiday

How will coronavirus impact retail sales?

Strategic Resource Group Managing Director Burt Flickinger discusses the state of retail as coronavirus concerns continue.

Target Corp., Kohl's Corp. and other retailers that posted lackluster holiday results must now confront the uncertainty caused by the coronavirus, which could help or hurt sales in the coming months.

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In recent days, grocers have logged strong sales as some consumers stock up on food and other staples. The virus could also speed the shift to online ordering as people avoid visiting stores.

Costco Wholesale Corp.'s website was sold out Monday in the New York area of several items such as Jif peanut butter and Kraft Macaroni & Cheese. Meanwhile, Amazon.com Inc.'s app for Prime Now same-day grocery orders warned customers in San Francisco, Seattle and other cities that delivery availability may be limited.

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Economists say it is too soon to know how serious an impact the virus will have on consumer spending but it could upend supply chains causing some product shortages, especially as retailers run out of Chinese-made goods already stocked in warehouses.

On Tuesday, Target reported comparable sales, which include stores and digital channels operating for at least 12 months, rose 1.5% during the quarter ended Feb. 1. The results were in line with a warning the company issued in January, when executives cited weak toy and electronics sales.

TARGET POSTS STRONG ONLINE SALES BUT REVENUE COMES UP SHORT

For the new fiscal year 2020, Target forecast per-share earnings between $6.70 and $7. Analysts had expected full-year earnings per share of $6.88, according to FactSet.

While no one is immune to inventory risk, the larger chains such as Walmart Inc., Target and Home Depot Inc. are better positioned than smaller chains, analysts at Wells Fargo wrote in a research note Monday.

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A widespread coronavirus could also dent demand at department-store chains like Kohl's or Nordstrom Inc. that rely on apparel and don't sell groceries. Executives at both are expected to update investors Tuesday.

On Tuesday, Kohl's reported flat sales and profit in the holiday quarter. For 2020, the retailer forecast comparable sales change in the range of -1% to 1%, after posting a 1.3% decline for 2019.

WHAT IS A SUPPLY CHAIN?

Target projected improved sales growth in the current quarter after logging lackluster gains in the quarter ended Feb. 1. The outlook reflected the company's expectations for coronavirus, a spokeswoman said.

Executives are expected to provide more details at a briefing later Tuesday. The company canceled an investor meeting scheduled for New York amid coronavirus concerns and will instead brief shareholders via a webcast.

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For the full-year, Target's comparable sales rose 3.4% and digital sales rose 29%. For fiscal 2020, Target predicted comparable sales would rise by a mid-single digit percentage.

Shares of Walmart, Target, Costco and other big retailers rallied Monday, outpacing a broader market surge and recouping some recent losses. Shares of Target were little changed in premarket trading, while Kohl's shares jumped 10%.

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