Will Target Sacrifice Profits by Closing Permanently on Thanksgiving Day?

On Nov. 22, Target (TGT 1.28%) announced that its stores would remain closed on Thanksgiving Day permanently. The retailer had closed its stores on the holiday last year due to the pandemic. But is this policy change something designed to help keep workers happy amid the "Great Resignation," or is it more a matter of the company's rapidly expanding e-commerce presence giving it more flexibility? In this segment of Backstage Pass, recorded on Nov. 22, Fool contributors Jason Hall, Toby Bordelon, and Rachel Warren discuss.

Jason Hall: Target: Did they hit the target, or did they miss the mark? Target has announced that they are officially, permanently going to close their stores on Thanksgiving Day. Now, they closed it last year because of a spike with COVID during the surge late fall, early winter. They're saying they're doing it permanently.

Here's the question. Toby, kick us off. How much of this is doing the right thing, or just PR, or is the reality, financially, it's just becoming an irrelevant store for them to even be open.

Toby Bordelon: I think some of it's certainly PR, Jason. I think you have to accept that. But the question becomes, what's driving the PR? Is it driven by, "We want to do the right thing and get some nice press out of it"? Or is it because, "Well, we're going to do this anyways. We might as well get some good PR out of it." I think it might be the latter when you talk about Target.

I think there are some practical aspects here, too. I would not be surprised if they couldn't find enough employees to work over Thanksgiving, and they were getting some pushback, and they weren't going to staff their stores and so they just said, "You know what? Let's just not even try." It's just easier that way. Have you been to Target recently?

Rachel Warren: Yeah.

Hall: My wife has. It's been a minute for me. We order from the website all the time.

Bordelon: Right. You go to the one here, and I wonder ... I don't know, there's a lot of people in there, but the store -- the ambiance, the cleanliness -- is not what it once was, and I wonder if they are having trouble. That's just my thought, but that's just one store. I think if you're going to do this, though -- and I agree with it, I think it's cool. I wish other people would go this route, but I think you've got to do other things.

You've got to have earlier sales, which a lot of people are doing right now, early Black Friday sales, or you're going to have to have a big sale after Thanksgiving weekend, or a robust e-commerce channel. You've got to have something, because if you're going to miss the Thanksgiving weekend sales in-store, you've got to capture that somehow, or you're going to get way behind. But again, maybe they were already going to be way behind and this isn't going to matter that much. I guess we will see when the Q4 results come out, won't we?

Warren: Yeah, actually, it's interesting on that note: When the company reported their third-quarter earnings, which I believe was last week, management said that its turnover rate for hourly workers was lower this year compared with 2019, even accounting for new hires, and that they were adding 100,000 new temporary employees to meet holiday shopping demand.

I think they are trying to combat that whole trend we've been seeing of retailers struggling to staff their stores. I agree with Toby: This is a great thing. I have always felt so bad for workers in retail who have to leave their families before Thanksgiving dinner is barely even over to go and deal with the crazy stampede of shoppers.

I can shop online, I can shop the next day. I'd rather those people be able to be with their families or just enjoy a day off. I think that that is a great thing for employees. I'm sure there's a PR aspect to it, but I also don't think that a company like Target needs to be open on Thanksgiving in order to meet its top- and bottom-line guidance. For example, in the third quarter of this year, digital comparable sales were up 29% year over year, and that was following growth of 155% last year.

That is accounting for more and more of its overall revenue growth, is its online sales. So I don't think this is something where Target is going to be sacrificing a lot of profitability here in order to do this, and I'm sure it makes employees happier as well. I think it's a win-win all around, in my opinion.

Hall: Yeah, I think it's largely just the day has become a bit irrelevant. It's not a revenue [driver], it's probably becoming a smaller bit of their share.