Target is the latest retailer to release its first quarter earnings report. Yahoo Finance’s Brian Sozzi breaks down the financial results.

Video Transcript

ADAM SHAPIRO: Julie, let me bring you in first on this one. Julie, any insight into Target?

JULIE HYMAN: Well, the overall theme, right, for many of the retailers that are so-called essential at this time seems to be their sales are going up. That was the case with Target. As you pointed out, their digital sales went up a lot. They saw people order online, pickup in parking lots in some cases. But whether you're talking about Target or Walmart or Amazon, for that matter, that increase in sales came paired with a decrease in profitability and an increase in spendings. Well, in the case of Target, $500 million worth of spending in part because of things like hazard pay, which it has now extended into July 4, I believe and, you know, things like getting stuff to people quicker.

So perhaps if we're seeing a little bit of a weight on the shares, it could be that idea that this increase in sales is coming with some increased expenses as well.

ADAM SHAPIRO: Brian, do you think that they can sustain the remarkable push with e-commerce?

BRIAN SOZZI: Well, no, Adam. I don't think you'll see Target sustain 140%-plus gains online. But there is a new normal online. I think a lot of what has happened with retail and during the pandemic, new habits have been formed. It's no longer buy online, ship from store. It's buy online, have it delivered right to your car from into the parking lot. And that's the new norm in retail.

And how that's done, it's done digitally. But I think also what you're seeing, Adam and Julie, is that the winners in retail are really emerging here. It's Target. It's Walmart. It's Home Depot. Its Lowe's. And of course, it's Amazon's. So these companies with the big balance sheets that could invest in their business, they're separating themselves. And I think the reality is, you're going to see a lot more bankruptcies in retail before the 2020 holiday season.

ADAM SHAPIRO: You had a chance to speak with Target's CEO. Did he give you any insight as to how they grow the business, especially with parts of retail contracting?

BRIAN SOZZI: Yeah, last night we hopped onto a media call with Target chairman and CEO Brian Cornell. There is no visibility, for the most part, into this business. Keep in mind, Target didn't come out with any second quarter guidance, didn't come out with any 2020 guidance. They pulled their guidance for the full year in late March. The sales volatility week to week remained very strong.

What I did ask him though, annual-- annual-- hourly wage increases for workers. They put in an extra $2 an hour increase several months ago, sort of what you're-- what's being called pandemic pay. I asked him is that permanent. To me it sounded as though he's getting ready to make it permanent. But it's going to be a higher cost of doing business. And it's not just Target. It's Walmart. It's a whole other set of retailers. They're going to be paying a lot more to stay in operation.

ADAM SHAPIRO: Brian, when you take a look at what's going on with retail in general, Walmart and Target are doing well. But you just alluded to the contraction that's going on. Do these companies absorb that loss? Or does this go to Amazon?

BRIAN SOZZI: Well, I think you'll see the same situation as what you saw when Sports Authority went out of business. All those sales essentially shifted to Amazon. But also Dick's Sporting Goods consolidated its position. I think you'll see as the JCPenney goes out, who will consolidate? It will be Target with its apparel section. It might also be Macy's because the reality is Macy's, no one will have a major competitor in the mall. JCPenney, hundreds of stores potentially will be closed very soon.