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Will Other Retailers Follow Target's Bold Announcement?

By Maurie Backman – Dec 14, 2021 at 7:02AM

Key Points

  • Target made a big change in the course of the 2021 holiday shopping season.
  • It's a shift the retailer says will be permanent.
  • In time, more retailers may opt to follow Target's lead.

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Once again, Target is doing its part to give itself an edge.

This year, countless shoppers hit the stores on Thanksgiving Day, pausing their face-stuffing plans to capitalize on discounts and doorbuster deals. But one store they didn't hit was Target (TGT -1.04%).

Just before the holiday, Target announced that it would be shuttering all locations on Thanksgiving Day 2021. But that's not a one-time deal. Rather, Target says its stores will remain closed on Thanksgiving forever.

Person in store looking at clothing.

Image source: Getty Images.

A decision initially fueled by the pandemic

Target used to see its fair share of foot traffic on Thanksgiving Day. The big-box giant is well known for its wide array of products and competitive price points, so it's not surprising that it would top shoppers' list at a time when discounts are known to be abundant.

But last year, Target made the decision to close its stores on Thanksgiving Day due to the pandemic. And now, the company is moving forward with a permanent Thanksgiving Day closure.

Will Target's big move hurt its business or help it?

Losing out on Thanksgiving Day revenue is something many retailers can't afford to do. But Target is hardly starved for revenue these days.

In its last fiscal quarter, the retail giant brought in $25.65 billion in revenue, which exceeded the $24.78 billion analysts were expecting. Meanwhile, net income rose to $1.49 billion last quarter, up from $1.01 billion a year earlier.

Unlike other retailers that suffered financial losses during the pandemic, Target managed to thrive. And while its status as an essential retailer allowed it to gain that edge, what really helped matters was Target's quick pivot to address changing consumer habits.

In the course of the past year and a half, Target has gone big on product delivery, ramping up its same-day shipping service as well as introducing options like curbside pickup and BOPIS (buy online, pay in store) to cater to a range of customer needs.

As such, this year's Thanksgiving Day closure is unlikely to have a major impact on Target's earnings. And going forward, the same is apt to hold true.

In fact, from a goodwill standpoint, Target's move may actually help its business far more than hurt it. For years, labor advocates have argued that retail stores should stay closed on Thanksgiving so as to allow workers the option to spend that time with family. Some states have even barred big-box stores from opening on Thanksgiving Day.

Shutting its doors on Thanksgiving could end up working wonders for Target's image, all the while building up customer and employee loyalty. The latter is particularly important at a time when labor shortages are abundant and retailers are struggling to hire staff. (Target, incidentally, has already managed to address that issue through holiday incentives and flexible scheduling initiatives that allow existing employees to pick up extra shifts when they want to.)

Will more retailers follow suit?

Many big-name retailers rely on Thanksgiving Day sales as a major driver of revenue. But given the way so many consumers have shifted to digital shopping in the course of the pandemic, in the coming years, opening up on Thanksgiving may no longer be as necessary. And more retailers may therefore opt to stay closed that day rather than deal with the backlash that could come from opening.

Furthermore, while it was once the case that the best deals of the season were made available to consumers exclusively on Black Friday (which typically spilled over to Thanksgiving Day), these days, retailers are spreading those discounts out to attract more customers. That's a practice that's been upheld this year in particular due to supply chain issues and inventory shortages.

In time, the practice of opening on Thanksgiving could wane. But the fact that Target made that move first might further benefit the retail giant. And that's a good thing for real estate investors, because Target currently serves as a major shopping center anchor tenant. And at a time when so many retailers are closing their doors, having that mainstay is essential to commercial landlords.

Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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