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Target Has A Warning For Amazon And The Rest Of Retail

On a top-line basis, Target is clearly performing well. The company noted that it has gained market share across all of its core merchandise categories. However, the retailer is also taking on significant incremental costs, as changes in its supply chain to cope with the surge in digital sales and higher wages and bonuses for staff have added up. Target said it would continue its $2/hour temporary wage increase through May 30, which comes on top of the $300 million investment in wages, bonuses, paid leave, and benefits that it announced in March. Because of those investments and expenses, as well as a shift to lower-margin categories like food and beverage and inventory writedowns for unsold apparel and accessories, Target said that its operating margin for the first quarter will fall by more than 5 percentage points from the previous year. That implies an operating margin of less than 1.4%, compared to 6.4% in the year-ago period, threatening its quarterly profit. Read more at The Motley Fool.