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Consumer

Target keeps eye on supply chains as demand for essentials soars

US retail giant coordinates with vendors to maintain inventories, CEO says

A shopper carries a Target paper bag in New York City's borough of Manhattan on March 1. The company has enjoyed a surge in traffic to stock up on essentials.   © Reuters

NEW YORK -- Coronavirus-fearing American shoppers have raided such stores as Costco, Walmart and Target for nonperishable foods and household supplies.

And although retail sales are expected to rise, investors are more concerned about the impact on supply chains, judging by Target's earnings call Tuesday for the fourth quarter ended Feb. 1.

"We've certainly seen a U.S. consumer that's starting to stock up on household essentials -- disinfectants, food and beverage items, all those staple items that the CDC [U.S. Centers for Disease Control and Prevention] has recommended they add to their pantry," Chairman and CEO Brian Cornell said.

Target has "been working very closely with some of our domestic vendors," Cornell said, to ensure that the company is meeting the growing demand in household essentials and food and beverages "with the right level of inventory."

"We've been looking at this from all possible dimensions, and certainly from a merchandising standpoint, we know that we're going to see some periodic delays," he said. "We're out in front of that making changes in our assortment" and "our promotional and presentation plans," he added.

Target's total revenue grew 1.8% on the year to $23.4 billion. So-called comparable sales rose 1.5%, reflecting a 20% jump in comparable digital sales. Target saw a strengthening of sales trends in February across categories and across multiple weeks of the month, Chief Financial Officer Michael Fiddelke said. But COVID-19 jitters did not get the credit.

"In every quarter, there is some uncertainty about trends going forward, and that's only exaggerated by the fluid situation regarding the coronavirus," Fiddelke said.

Regarding the company's guidance, he said that "we've built in everything we know today, but we haven't incorporated a placeholder for anything we haven't yet seen."

"We haven't seen anything so far that would cause our financial expectations for 2020 to deviate from our longer-term algorithm," Fiddelke said.

More than 92,000 cases of COVID-19 had been confirmed worldwide as of Tuesday afternoon, with 3,100-plus deaths, according to a tracking website maintained by Johns Hopkins University. While China accounted for more than 81,000 cases, the outbreak seems to be gaining momentum elsewhere. South Korea, Italy and Iran all had quadruple-digit tallies that placed them right behind China. Confirmed cases in the U.S. exceeded 100.

The American Red Cross has told the public how to "prepare in case this new coronavirus risk level increases in the U.S." Recommended measures include stocking up on food staples and household supplies, ensuring at least a 30-day supply of prescription drugs, and having other health supplies on hand.

"We are putting our concerns to work preparing," said Nancy Messonnier, director of the CDC's National Center for Immunization and Respiratory Diseases, in a press briefing last week. "And now is the time for businesses, hospitals, communities, schools and everyday people to begin preparing as well."

They have apparently heeded the call, with many supermarkets and other stores running low on supplies.

And Target is on top of it, Cornell stressed. "We've been working closely with our overseas vendor partners, both our own-brand partners and our national-brand partners, to understand the state of play," he said.

"It's an ongoing process and it's very dynamic. ... Our focus is going to be to continue to meet the needs of our guests during these challenging times that we're all facing," he said.

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