Earnings call transcript Q4 2022

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John Hulbert

Well, good morning everyone, and welcome to our 2023 Financial Community Meeting. I'd like to start by welcoming the investors and others who are attending this meeting remotely and of course we're happy that so many of you have joined us here in person today.

Before I turn it over to Brian to start the meeting, I have a couple of important disclosures.

First, any forward-looking statements that we make this morning are subject to risks and uncertainties, the most important of which are described in our SEC filings. And second, in today's remarks, we refer to non-GAAP financial measures, including adjusted earnings per share. posted measures in most financial our SEC which non-GAAP measure comparable presentations, all Relations filings, included Investor are financial are of to directly the GAAP and website. Reconciliations our on press releases,

With begin meeting. that, to the I'll over Brian it turn to

Brian Cornell

morning you good us. for Well, joining and thank

that and this that conditions our with rebuild lot, We're we'll a we how continue to had eager in just to forward continue changed have share our since Looking grow, strengthen time to to on Center passed how company. that had gathered a Time the become last here growth, profitability billion a crucial spending just business time, at milestone. We how you. year. $XXX we'll plans, including At we'll we

on we're We year growth. across of unit top reporting we full growth of straight by X.X%. placed that be our have sales billion the consumers shopping continue with merchandising the shop which XXXX, by they what and Target and about the where XXrd comp very buy, another inflation gained revenue buying traffic close today, means $X.X books we For despite that our difficulties categories, they at were on year, constrained core share quarter and throughout of and selective XXXX We grew growth. to which

Center and one this meeting Time was predictable. year's last between but path the However, anything

and out would restaurants we families under shifting was XXXX just travel mass of dollars moving to although York When and gathered how to post-pandemic had see are still a towards returning New we retail, and volatile beginning with here, last uncertain and some become. started consumers mandate, behaviors, though

by rapid in forced all purchases worse their seen to by spike and decades, to fuel we've in the caused escalation families most a the war of and necessities on on As made Russia's which Ukraine. of hold there expensive most environment prices discretionary was inflation operating spiraling spending on focus put was

variables effect have continue many a landscape. retail and others profound Those to on the

stock to we situation. path want on about morning ahead. want our that of Target's to We years So the clearly this for take planning to growth stay speak

growth We're focused expectations. focus focus time keeping long-term leadership continued this on with financial strategy, strong see We to operations, this agenda strategy a and and as fundamentals. combine on and investments our on very steady morning's retail our agility a

stay our this flexibility. in of morning durability goals lies across how guest navigating to the model our what challenges, into leaning portfolio, Our are We'll how you how its non-discretionary show and we'll growth term, multi-category with near we're categories. in business step means prioritizing to flex share in near-term we're the in which our

and we've share also built loyalty how traffic We'll reinforce the guests our gains. with and in shows trust our

realistic affordable expectations. right to of With differentiates in near the set now, absolutely clear remains use mind us is term. value factors able long term to to clear we top and advantage and mind, marketplace in time Given our joy the deliver over in being the focus that's also this those want and a

stakeholders progress what Social XXXX. shareholders and like can in track looks

marshal to scale by expertise have that tools to brought I continue of seen. ever excellence many company with the the by expected but we I XXXX, guests, the still while profitable as take In team XXXX efficiently. to nearly we and be growth our in time. come and back, turbulent gain to and They environment acknowledge of the recognizing It some the hustle incredible in start keep wasn't didn't new us most prioritize we're level, business step put a Taking 'XX might as effort a to the that to over easily. our scale our developing pace

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we in investing by our started team, digital in a growth key It part to the interaction age. human believe because in is

XXXX, As we they're move of and to lean team the into overall culture, we'll support continue our success. heart at knowing our into our

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standing you'll improvements XX% we're ongoing XXX% supply in that remodel investments sales, too. are of today, store sales fulfilled surprise no digital. are in but than digital, our more or plans expansion As of and bigger stores, in not chain It's by all or store hear our still our on case, including a

total XXXX, timeframe. only sales in nearly has Since that grew store XX% but our grown slightly, base

base in size our per team. foot all increased fulfilling our of XX% essentially asset tripled through nearly business and short nothing the on digital incredible Our of sales was part growth same by substantially and square that the

in So those them, through our gains hubs top as supply model. chain, on look on and to hold to of growth we'll continue we invest, in stores in to as put stores digital,

is and differentiation performance Our portfolio brand of in own that XXXX retail. unmatched strategy simply profit prioritize an the

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built and of includes XX motion, XXXX. adding two brands slowing our them has with billion own position we're in own brands. Meanwhile, of brands, strength since but That dollar on gather our in in all team plus and more down not good

the just opposite. fact, In

multi-category XXXX Well, across in was year from Target steady Circle. a else the introduced brands of hear cadence we ahead. you'll planning the and year our As portfolio we're brands that own strategy? What in national Christina, a newness within

user million that new it has XXXX, and increasingly for of was users. Since growing engagement, our At the a connected XX has guest quickly and and time asset the heart base ecosystem. still loyalty sales loyalty has meaningfully Circle personalization, doubled attracted powerful become that

value has and guests significantly, after Since company additional and the for with delivers. XXXX, great engagement each its sought growing media profit appreciate advertisers grown and Roundel It's reach by growth our because potential year relevance on and horizon. the the it our it's

more makes even and us preferences, and better gives it and us Roundel of profitable engaged retailer. understanding makes for a guest it an partners, deeply guest our because better more

emphasis investment potential and Circle XXXX, in and towards unlock. intend given growth Roundel the we additional So place they'll to

let's all So this I'll start here and pause to put together.

difference. giant starting deliberately revenue XXXX $XXX then. connection I'm drawing a billion, year had the $XX not on a While base XXXX ahead, there's and of the back billion between We're one we

reporting stands big five comp in year penetration other our are year digits digital we're XX%. our increase across unlike But too. three of merchandising $XX nearly now unit at the single categories. our is revenue a and differences similar billion, and full There just not to $X billion, XXXX core all XXXX, gains Today low shared plus growth

is ranks in deepen transactions we into pandemic, significant measured spend, the engaged, and reflected and the in XXXX. increase of by cross-category guests more with our also a as became During more since trips guests, Guest most engage Target, to attached engagement moved purchases.

XXXX focus back started to across positioned In base, levels we overall. even as fact, growing far our those we're expanding that engagement increases as base and guest keep as on

prudently much normal solid be on pre-pandemic like to to more rate So a the that the invest to see a over should next than we horizon. of with standing beyond It'll our consistent years, we new XXXX, return margin here and that plan operating X% today, years. is my few last time in growth in three sense rate towards move move as to and is XXXX and begin the income

how we'll at that you arrived Today alert, spoiler our strategy. for a with conclusion, but it work starts a show we

the this many seen accelerate short-term the drivers before to on we're to to while making us haven't respond our all while prioritizing environment elements will You've changes changed, strategy. growth that key times and advance of slide help continuing it facets and

rolling. year Target the detail, They all Target Target on our the Forward. of and magic Christina work cover to in sustainability and our growth this joy Circle, on including trajectory Roundel growth digital placing greater will affordable together focus strategy we're on keep that enterprise

will what of Michael as progress. will But process growth cover see the testing, how we're cautiously ongoing cut-off we given Then the scale. learning optimizing, what from the we're of operational describe and standpoint doesn't continue this year. what John challenges we we efficiency evolution, we we're believe in and from continued an anticipate mean planning from economic we're caution benefits to what appropriately

run and way cost anticipate we will between simpler, In most newfound The Target. of fact, in efficient questions translating progress yourself. a program to scale more what a the enterprise-wide an exciting some efficiency with you mindset ask be starts our difference cutting is

us, what cut? question isn't For can we the

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leader to isn't, What perspective what Target on to focus. his invite it what we'll So these efficiency. we is, improvement unlock offer and we Michael can how O'Neal, this continuous can it tap drive we the with coordinate across efforts

guests XXXX term flex proposition and next most that or We're unpredictable looking is to us to to the so. of We that up are and plenty We relevant categories year allows believe challenges the our the the which be the will a in durable near recognize hour horizon. on landscape forward the are there model today. value

We'll double execution. down on

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you is we our along. Before take here goal leave today, to

seeing. get So exactly with And what you that, let's see going. can we're

Christine Leahy

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sales X.X% XXXX. on X% last the full quarter on X.X% sales for comparable comparable XX% top grew year, of in And nearly year. Fourth top grew nearly of

we what growth growth the been expected. has vastly than generating business now, top of looked our last on While sales mix of had for year's different years

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John. that, over With I'll things to turn

John Mulligan

good and everyone. Christina, Thanks, morning,

environment last XXXX, of XXXX would career, in being you during had late unpredictable. So pandemic, in challenging would my few have be about told that, me the Brian talked I the you height well, joking. a the put operating To finer most that point were assumed on years if the

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plan the It was swing. same full about action time was inventory that our in

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give sortation look To and have core approach these give and talk centers closer a to how a to become we at leaders test our Target and delivery. applies business, last-mile about ask brief from our how you learn to tour you Shipt

take Let's a look.

John Mulligan

expect We the XX national last hitting we and few And from than quality. their of double the past our through sortation over Dori, heard carriers. with packages you year, that amount As and delivered and Sad in are years, opportunity using lot we've in Comau, cost help million speed, every to our and sortation centers just to stride. more XXXX learned local improve a centers regards,

help inventory we're investments management us sourcing, incredible capability the team. steady the for thanks times, tough fuel all nimble unpredictable making fulfilment more growth, Target, Together, to continue at and our create they and to and navigate a prepare

stores. our to guests years and made to our and The strides continues momentum forward with you We've through connect I sharing progress in come. our to to in quarters recent guests look with the build, huge

Michael, you. I'll over turn it to

Michael O'Neil

Thanks, John.

this year in a double-digit stage, Brian XXXX year growth generated comparable growth financial our even which it business that were we EPS. sales our was and As about in mentioned, a ago faster on results, in exactly talking

change, inventory including environment significantly discussed, on shipping yet transition rapid the to would as And related and higher domestic day dramatic was and those multiple The pressures this knew on last that we profit higher know markdowns that we led didn't year's actions, business, costs to costs Christina shrink. our transportation other of likely and to be. how but pace changes inventory

environment the to term, longer important evolve. will plans, we as for how our So on to focus continue and business XXXX both it's the consider

back the lot one are On many sports embracing full, things eating the and arenas consumer hand, in-store look life shopping. like consumers they behavior are Students out before already about again school, a people pandemic. did and are in are

changed in more has our extreme, At work a now more have Many means office virtual lot long-term playing jobs of spending working aspects are time patterns appear with meetings to buying life a implications That much remote for home, notably us which the are of at other multiple certain and most categories, business. many hybrid, role. food forever. significant

mix seen a Fulfillment shift. has permanent also

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in Even grow guest continued with the of digital in-store few favor that's have the shopping, trips top of on to their as huge expansion engagement remixed people over last has services these years. occurred

about made XXX way. Most XXXX, In two importantly, about our increased years, guests few over in than last Target was XXXX. higher significantly Target, this the and to about which overall grow. it guests trips continues million has engagement it to billion Think with

services, of grew consumer from the And deepen year, proven the profitable and traffic into even well further deeper some reasons deliver many guests ahead. with established to The are our moved again. years products we've it last relationship to so we're positioned spending growth our as ability in away

there include to and costs seen but in elevated chain, still clearly that what changed are the permanently, in facing transportation These are Beyond others have several transition. where we've period. that improvement, variability we're supply compared the global already remarkable the pre-pandemic factors still

over inventory leading is in more and across the important retail has that fact economy to still past the an driver which most decades. the Another U.S. broadly inflationary broad uncertainty macro seen the pronounced significant finally, of And factor today we've period, two transition, is years. is shrink, increased in than

As room as on Christina higher make mentioned, prices put pressure rapidly discretionary spending necessities. prices for on rising have consumers

further car In addition, budgets pressured the of and higher cost interest by increasing rates loans. have mortgages

facing does we to the our very a where So remain in all that business, the drive Despite coming the pressures in of us and growth years. recent healthy strong position leave today? turmoil

experienced engaged more cash our our on laser-focused engagement that unexpected flow, the in than which headwinds ever, continued we both a even business grow year. during we're profitability a is are guests to and and strong, It after and forward. to unique path And Our year and sound. tumultuous remains even

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to to a lead. have I'd the efficiency work brief join Now like and we've so stage O'Neil asked can conversation me Mike Mike to Brian we about invite on enterprise

Brian Cornell

Mike, and background to pause be important get for you like to I you, helpful thank thanks why your work, selected it very really for Michael, I to Well, but just and and second a about talk know would today. would into we the this think joining initiative. us everyone lead

Michael O'Neil

their now Yes. financial on Thanks, our to worked their strategic I've Brian. XX-plus opportunity excited merchandising operation about in Target Really started at roles and for deliver lead the and to here for been to this with work years, finance, Target. in happy be help growth. partners priorities various

paying pandemic to I see benefits then workforce teams. -- business experience, take and led the and guests. the And and see resources great the on of to the our saw human that planning model members. had them care I over the our to went chance of a was a that got I couple of opportunity during lens the to work of the strategic through Through lens the to P&L. does our that A ago, quickly to team years of taking importance business of of care take lead team days the team early our

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last and do this now larger how business apparent pretty the couple the and to finance of think over me to was about model step we it to run at seen we've seeing back coming opportunity the scale. years, And growth the back

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Michael Fiddelke

share we took a about lot this bit what works initiated a Can time you we've about you what this and the when what and isn't. to spent role, talking accomplish? looking Mike, about work on of it we're the reasons

Michael O'Neil

Yes.

long-term it face maybe Target, about short-term revenues. isn't here to declining growth to what Well, right? to that's cost of continue look start isn't. I'll This not profits. I the in shrink are grow. your think A We sacrificing typical tactic is for base with growing,

work last has this the out years. the we've fact, from X In come growth seen over

billion we do than step $XX importantly, we since position over back That's opportunity a but more -- how prior. We've Target for future $XX how XXXX. a to billion larger more grown and this XX creates reimagine tremendous that years do business And scale, operate at growth.

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Michael Fiddelke

headwinds $X experienced thing want our XXXX. one we you last the clarify to clarify that I whether in mentioned questions After and in from about call, to that? $X the briefly. we natural billion earnings Brian recovery this Can number includes I got Mike, billion effort help some

Michael O'Neil

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come our designed deliver is from no, -- recover our And both will deliver bottom and our line natural that, on the fuel work line of last to goals. is included to not headwinds This that the top beyond year. both anything the so what's

Brian Cornell

Mike, about we lot of when project, we guardrails. spent a time thinking the actually lead this

want Now never compromise. in obviously, to But this guardrail never capture. to the things that there's want the opportunities "We'll want big also versus direction? opportunities there's you to we head about who say, we Do talk

Michael O'Neil

and those investments in the that's the with Yes, sacrifice anything pandemic during our take We're really for member willing given and a business things did appreciation going question. the our guest last years, start experience. run our an I had our to the spending resources to and couple team all away And time early team to human team the serve in of not that important not guests. over of a days we're think we've made to

to members not shopping the side, for look anything and we're looking And investments we the our that. retail. Target, Similarly, on and a investment team so I as key experience an and guest at make away from in differentiator take is at best team the our

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Michael Fiddelke

investors Mike, where ask results P&L? since this to should thoughts? work, Can I've we work show they bunch of first had in of the you share see me this up the expect initial announced your a

Michael O'Neil

Sure.

-- see think to I it's P&L. it you're going across the full

going to as I'm one So I think about this different the to me think opportunity. there's not though, work, isolated sure about scale, What single running you're line be excites top component. we

going start to sales. it's so And with

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efficient I as expand we'll to But more there in beyond to say So be our it P&L well. also the look see we as CapEx.

Brian Cornell

been there's of some on quite on. still things to want in Mike, some stages of working Do early work, I know for those? highlight can the that that we you you're now also build the So time scoping we've but

Michael O'Neil

morning I that about significantly years decreased years. fulfillment, underway. has around Sure. you our We over work been several XX% is think, hub cost. as When that stores fulfilment X touched digital base think John -- in on example. model, We've our this great a mentioned work

We've across delivery, pickup to ship whether ship guest also and home, to speed and increase all different able the nodes, efficient. been those capital improved or extremely delivery that's of order experience Drive-Up, it's

a investment density scale business for our dollars That's look market think map in been capability and that's you hundreds we If continue to on few forward now, but there's road years -- level a requires centers. a sortation unlock with unlock. to at to now, our that's the of million

And given the last now we growth that. have over the years, X

and there's opportunity to XX dozen have of plan a by we there so a And markets. think have X total metro of out already XXXX. We facilities in

looking those centers And streamlining we efficient processes technology. so introduce also make up, automation and about think we'll more them well we'll in to those open as but as and

Michael Fiddelke

you're Thanks, newer Mike. Can effort you also example a about? provide of excited an

Michael O'Neil

Yes.

was best the My the finance is I it of underway serves example at example the women's think for and work. what I This to partner is is now as apparel with think our first work possible really also my business. that's in apparel. one role near dear this a great heart. Target

materials $XX to the right, We've just the $X raw partner store business that Apparel, over seen business, have we and like we that also business. explosive has fact now of growth. over has our apparel the vendors in It rest grown unique source billion fact billion from in with to unique for presentation. its complexities, fixtures

go So and weather planning all that assortment geographical and considerations demographic and the into allocation.

we with so opportunity future it how run back do do combined to step scale? this a business And at growth, larger And we that a say, for and makes tremendous "How that growth?" complexity, position

so, And we fulfilment. chain, in focused pair guest assortment consistency driving see on all to from down expect to across the value planning, and so we're benefits doing the speed right chain. of And way entire to simplicity, supply now

labor see markdowns, see be will in sales. We'll benefits and the received across P&L. line the we'll And it productivity, top productivity, lower increased it in

love because you give years. I and step seen I example last back three the "Look, over so And chance say, to that this growth we've a

look the most we so, P&L for And our work chain do How differently? across it believe to with How one being do benefits end-to-end doing the we we sales. see in value simplify top position line the guest?" across for the important we'll

Brian Cornell

play. love the Mike, framed any all fueling to Are about simplicity, driving our I this, touch guest you reducing components there never upon? you about the want experience complexity, the think this So compromising role other This teams up. you and future as is way growth,

Michael Fiddelke

let say and simple I'd a for are And member a would this thanks be reiterate with is do multiyear team I our on deliver problem a and see it it's how solving team members better me examples. I'd just chain. with our for come growth. a great do going value couple impact we P&L. work journey, we to say end-to-end better of about you across starts Well, that, to our team, make the is starts It a to easier But experience, up and our focus guests we'll when that making a experience.

Brian Cornell

want today. you Mike, thank us Well, really the here for of front are stage in I that to opportunities about joining on excited We're us.

few the heard provide continue You've to along examples a we'll way. today, and updates

thank Mike, for Michael, back So you you I'll joining have a in here second. us.

Michael Fiddelke

Great.

Brian Cornell

take questions, recap we hear heard I of to you've from today. your as briefly ready the you get So themes I'd and some thought

our as to ever. strong First, our as guests commitment is

guests. our stay to to we're keep multi-category our going stores connected need provide our we closely because strategy, our Second, as to the flexibility hub portfolio, model will growing

at over there fundamental Finally, some Target changes the X have been last years.

team retail. to in is best guests. and most with as Perhaps something our changed. in than step very developing takeaway the ability shift standard, the We our that We'll innovate business $XX And that's pace in in categories hasn't set which build that stores more to our important the realm. the our set We're omnichannel We'll and and billion hubs. bigger. continue supporting

If they from those categories need discretionary as $XX a we'll was year prioritize to you into Food categories. Essentials, generated sales. down, But billion in Christina, in heard spending our when discretionary lean and

they They're eager newness. value Day. that and They're experience, And enjoying our be really guests and growth. today Valentine's in affordable we guest traffic to to celebrating responding joy. seeing are at in out stores we seasons it know our Our as saw we're just

So time, we'll categories. our those back our we the to our share guests to on be trends, substantially into lean discretionary flex portfolio we to plans And categories remain to discretionary and in fully today. as near-term building multi-category over ready committed essentials

outcomes through meantime, long-term for fundamentals. we're in deposit in thoughtfully. performance, including But am know both incredibly emphasizing ability on down fuel I retail near-term and growth our We happen. over we're translate forward finding stakeholders, will our that to about moving potential And time. returns efficiency. shareholder the for positive prudence in the while We're We're doubling all further

a the for up it back, of us around to to ask John we'll Michael So globe, and team I journey. as our close open And thanking and and tune that, questions. with come from thanking for want this by Christina, all in on your I'll staying you with

All around paddle right. got I room. already see hands going We've up. the runners

As I call on yourself you, ask question. to I and might pause, introduce you just your ask

we right here. So why start don't Michael?

Michael Lasser

UBS. X% meeting, It's year you A questions. Michael Lasser few margin. at one, had Number operating talked this last an from about

going changed has it operating make the this year a next take to business? business margin operating to with is year year year? this to margin to what to Two, the get lower -- So structurally to X% it by last what

and And missed third, we Brian, to sorry, "Hey, few did you look do. it quarters at expected the experience say, over what the last we

potential planning more a room upside? we're this cautious how view for on take conservative, let's leaving year, So

Brian Cornell

the ask of I don't come back I'll question. half why then Michael, you and start, to answer that and back

Michael Fiddelke

Yes.

guided income expect net year-over-year. And to a got low growth plan, foremost. plays to range in expect over journey billion the front, end, want important over on first we wide time. back that's today, and we the role XXXX get that to stepping of we we've an a at execute So where in even and in profit we front us But $X to

from set to do because to we've the take of to performance got got in recover we And work years XXXX. right the get we our there. in conditions, can then But it squarely last year. focus we've next we'll think Under of X% couple from

the conversation. the to into over growth dollar and remarks, we in we optimal to and in want dollar when with go on click philosophically, have in I dollars between that's today. what's we that -- over growth, be think thing come. time. the a said few leave months place about group now the profit maximizes But that to we quarters there's I'll want think that we will variables And As what I optimal time, rate that still back focused

Brian Cornell

one on, learned the in very and to I'm it And most leadership And protected the head used of last year. last back recognized lessons bit quite from uncertainty adjustments the way consumer Michael, trends challenge, the a today. quickly. is experience. things We've term the took We embraced year move that proud the made this inventory team of guest our the

with why unit well XX%. continue share our to That's see for positioned down traffic discretionary today we why portfolio importantly, and inventory XXXX but down X%, gains so we're inventory growth and across overall

our proud guests learned and So position but long our with dealt issue of protected way us for lessons incredibly upfront, protected for term. this us, the the I'm team, team that

Paul Lejuez

give attach Paul that that returns on typical store? Curious you Lejuez, are opportunity? get percent might Also you convert store your that risk what also returns. an sales? When at of a your Citigroup. up would in item, done there return A of them Drive-Up somebody questions what a couple do you to rate? is Is

in level, And cash for free in you your all look once view year? flow does what upcoming capital get 'XX, cash this high the F working changes just then flow like through second, free

Brian Cornell

changes we're with questions so talk the second there. start explain part Drive-Up? I Michael, through about excited So you then and question. can why And making several about might returns we answer to of to we're the the ask

Michael Fiddelke

back back portion majority of The a come are us. meaningful still returns store, but to Yes. to shipped

not So insignificant. that's

and your is to second we pickup of rate, started the question question when started part relates and your -- it this Drive-Up. As order attach we the around when

-- shipped. respectfully that's they at we to us interact important What every an them see allow see important them guests And when into when the how jump we is when is And they use us us, not see Drive-Up, with step to consideration. choose.

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create ease. provides another to this so And them opportunity

I You've on put and got I this off we'll the great. got Saturday, that come your that the And bring milk kid day then up. they stock-up They in be in my whatever I again. the trip, my take and return show away, in milk, need at Target. I'm that I will and to back. do some trunk. on and

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Brian Cornell

X up of right, Drive-Up things the going engagement over delivering it expanded one think carefully and in Shipt, I right said, this So with the and your years, is impact home all and as store. last learned guest started watched pick we we we the to we've

It's opposite. quite the

As actually reward us and just our guests more of in use all dollars spend capabilities, they with more store trips.

it's been that build learning on. And just solution returns. engagement them give easy I think important So we'll an deepen another that as we we'll for

Michael Fiddelke

Yes.

about economics by about But on. the the We economics the care at the path. transaction over We about piling of care of We thing level. risk the guests. time economics we at economics is at the level. that fulfilment care Just differently the cutting about category thought

to guests more friction be in the it on. process make take the easier and most with economic powerful love just of to focused call for out more we That's Target. and relationship When

and a example. we've time again, time think that I and learned perfect is Drive-Up

cash On flow expect on a question, I the guiding flow not but free some improvement to flow from free specifically, drivers. cash we the material cash of we're free basis. touched

better is first profitability. The

recovery. The mean, our I second is slowed. turns we expect working capital

chain. times volatile Our sure that this product supply early a to we're getting here were enough capital chain supply and working make longer investments with came with year,

so working the capital of were bulk through And XXXX. running suboptimal at we levels

move to that would you through improve. XXXX, I If expect

Brian Cornell

in a right up hand say I'd think row. I this first

In fact, will start middle. a the few right in

Simeon Gutman

Stanley. Morgan Gutman, Simeon

become suddenly that less $XXX mentioned that since such organization to and billion you Is the versus get And fact sales requires the getting there to freight investments? ultimate you've X% are of this have costs, invest lapping that that of back XXXX. path shrink level? is down to is back much I pure any the on to much merit fulfillment XX% recapture so how to think, that markdowns, how efficient You question back costs digital your

Brian Cornell

changes quickly. efficient expect been Yes, a as direction We've not I'm are both. one one, how But hub shrink as fulfillment to us the It's drive, able we've about huge seen it to turn talked to being in different fulfillment. We some given a stores a happy of piece structural comes advantage start. that's digital is the business. a to to in when efficiency and that we

to as Mike guest. of be like important for fast work. build of engagement work. work growth The play keep getting in us We continue right a economics efficiency a we have shared, focused, the also profit efficiency the as on role It's investing we from in And it us, outcome want that $XXX-plus that's billion fuel for the to Separately, and we about talked will business. the we before. to should And that retailer.

Michael Fiddelke

the brought increased over to million X in Sorry, $XX years. seen -- over X store mentioned our $XX million productivity have call it sales so relates last because years. you gone, that. Brian. I'd has XX% to from fulfillment, the it as the last store an on up we've average particularly Brian We capacity, add still by

median million. than $XXX that still does quartile do have top the $XXX store. million well We stores over significantly and The over more do

turn our So to we have in-store to both have our to tons the to significant we we're in digital on but inventory, need business. of we which journey how we stores back stores unused capacity continue to on, the move faster sitting and inventory out move quickly and improve there capacity our again, sales how ability drive and

Brian Cornell

the in back? go we don't Why

Unidentified Analyst

talk have adopt to like losing your strategies down you're about who are you bit allow trade a I'd may you extent traded win-back down. do you saying, -- database the on are donor share Brian, or targeted you impacts gainer the And people some those out? does to a there, the trade have net to customer little

Brian Cornell

want Christine, far shopping behavior? to as what do you as we're guest talk about seeing

Christine - A Leahy

to. happy Yes,

ecosystem. amount of last of First gained couple all, tremendous Target of we've new guests into a over the years, the

has our focus been our engagement with right now to deepen the guests. so And

always Of course, we want more guests.

more value capabilities is experience food Drive-Up they once the to the them an incredible using they of opportunity front recognized convert deeply beverage offering and loyal more once much we become they of ease have. more convenience or because into of target proposition the suite they much in But us and the understand what

focus are down. that's we right words talk When so primary And facets. our are in many trade that now. about different Those used

private Sometimes talking label. it's used about internally in

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reflect based And so the the on the own past. would future the of growth our strategy we've brand in significant potential had success in

now, create better, the our are sure we the right deepen and consumer. less of a experience, we have loyalty that make with what to guests is make sure aware frictionless focus our So

Brian Cornell

just jump I'll mic. in I Maybe Melich. I'll got Right. Greg the --

Greg Melich

What some particularly of delinquency you that and the profitability headwind. help also other called credit John, do two the that of Really you I'm if do see, maybe, now charges thinking Michael, actually out on questions. drivers us changing? other still are could that? you you to is margin the shrink, some fix rates

X% lever traffic? pulling Brian, go year picture, or and much pay mix? we bigger or more traffic important how it about X% you matter Is maybe promotion then you it margin is so keeping traffic do less? Or those expect that just that no slip what? this And You've think levers in given How pulling X? about as keeps customer do gained think through critical could growing engagement. and uncertain your versus How

Brian Cornell

consecutive most And I the a why Michael, of indicator today, that's it's we one retailer's think store don't had why start health sales comp years indicator. and now. traffic. the the on seen that me and we've important growth, about talk focus where of fact back and for traffic here we've quarters XX of And traffic. good as is years we feel about heard so We this with on the sit you've the all

more We're getting more footsteps site, our visits engagement. into greater our to stores,

they're are critically important. more us more spending They rewarding we trips us. with more think with are that's shopping and guests categories. Our And

assortment in foot, to ability while relationship, as deepen categories. our a to to potential point, go lift further. newness our few we've John's we And with to and their And like sales per there's significant capabilities square our we last introduce other in Target over guests years in the think about know connect seen Circle, those them still

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John Mulligan

of second and profitability the and line the starts encouraged going trends of -- top with feel did. strength a we've lot, And in maybe Brian is Greg, seen. to question, for to matter by what that it when comes your part the traffic it general, margin the we

the few of seen shrink. about metric but year, a you the talked a for monitor. in In I it you'd it's stay credit on with wouldn't next industry. see the terms I in them, what watch, list We've of we'll one other close highest some and of buckets, hit factors on think the structural normalization to put of that consistent

also we We've some in of talked what covered earlier today.

quarter, tailwinds We us, sure something we the in salvage margin that. though. markdowns could make the expect was typical that fourth We we want mean that see expect and responding to for some anniversary-ing recover guests on that, promotional side and continue. environment that's we I We'll a next year. to of extremely we're promotion in level have also

improvement chain some in seen and We've supply freight.

peaks we the guy a that as so on some should the line. year, And anniversary good margin of last from be

variables those that today. factored into we we the so all And guidance it's of gave

Ivan Feinseth

And Could into demonstrate vendors Ivan What go Feinseth, I value on them? percentage of proposition are Tigress how Partners. two detail Financial you on contributes revenue how to to it? growth? your your questions. Roundel some you have

those you a growth second and spoke And on and choice categories? see strength morning you my home on in forward question CNBC, in your toys retailer interview become do your opportunities of going What could category then you this other in that your about goods. lever

Brian Cornell

time. talk Roundel Right. our I'll question Christina, just all is it's let been vendor bit the about you how the deepening for about engagement. something and talk we a and But important partners Well, second

added And sitting $XX built us. know and know, here over today, growth, we you have around and while we have we momentum all I both still great opportunities billion of category

Christine Leahy

Yes.

our Roundel, they're part It most and my opportunity to intrigued products their likely see vendors to ecosystem. guests quality an to I remarks, that first, new as they that is be prepared like the market. in bringing important So gives incredibly our of an merchandise the of target by mentioned

selling to them it's we us insights of allows because give how and It loop those closed products that highlight the reporting offer. about real-time can

part huge a been has the this a of businesses. for so of demand generation lot And our

into guest what's owned centricity because across because spectrum it know an is believe to the that broad across to guests future, engaged and are of important national model, vendors and also fits we and brands brands very portfolio. the relevant going our lives. Roundel part both We how their but bring the new want partly and be the entirety with a of of that that of to

think don't can is a second time. a we about strength we market. really have. question we the pivot We So what in a maybe broad in for opportunities I talk portfolio. build of and differentiator multi-category snapshot assortment to Well, the have an And that our portfolio

So to us having change. across as conditions a market every healthy flex dimension, business allows

But a took and Beverage. into couple years & home center the now, Essentials flexing and was Right hardlines Beauty stage. and that it Food we're of ago,

positions having we seasonal that is to make ability for continue the important market many to with having share relevance businesses. build destination strong and guest-centric saying to The we So way to consumers a sure that working is relevance connect by in super businesses are us. and

you guests Seasonal in are kind way backpack. back-to-school, you of do a one store our Everything time. core to one it's businesses for for your get great because can more DNA in at need

You your can calculator. get

you can can You your your get pens and new paper, get outfit.

those So really of are us, the importance but other to important is the newness.

And They're get to of a the where an consumers is lot it you about heard are environment not me same done. going that. in More trade-offs. talk making

lately, the haven't something our innovation right floor pad of on aesthetics it's now, And Yes. and investing excites styles, the been the so them absolutely site or The and in that attention in our grabbing apparel you right guests. are it don't check like stores really our our if out. on colors,

Brian Cornell

top the you and the to the retail want market. about growth Michael something Despite to to we've X% we last Sitting few your back And Do represent over of the line $XX that adding question. growth. opportunities all today, go billion well I I to over years, grow of share? many continue have here time. seen of to talked the heart we of it's

continue So see to digital across portfolio, leadership from and team, our as in opportunities we store a to grow a entire multi-category standpoint. growth leverage

the to see significant every runway So we've while a progress and tremendous business, categories we seen we've we're transformed the across proud still of our way going of share major take one that great ease experience forward, leveraging across experience destination digital guests such that and Target country. and offer, that makes combination great a in-store inspiration the guest the of for we great

tremendous for our continue to share see opportunities we years to come So position. bolster to

Let's come while. hands row. know up have your been I back a to the front for

Unidentified Analyst

follow-up $X as quick billion do for And any like category versus from the you. efficiency why [indiscernible] faster? move not 'XX? $X strong little baked more stores? down been into on of a gains, then real maybe click just has bit billion performance Ulta, in in you difference on And have a sounds the Can a Beauty non-Ulta maybe that Sandler. Piper It to you there

Brian Cornell

about talk want start you And and Christina, Beauty? talk about 'XX. can Michael, then to do we

Christine Leahy

Yes.

Target number a years. for story has and Beauty of success been a at First foremost,

has But experience completed and been our to store have table a has We the servicing assortment our while. Ulta to brought incredible the been missing in with adding our that's relevant the has ability an Beauty products for expertise offer prestige that Ulta assortment, link.

And completed so we've that picture.

really about to John We're as at excited of looking already and partnership. And add stores, as talked really the so performance, we're about accelerate. And our XXX part more, our program. excited we'll remodel about,

the there. future So really about bullish

Brian Cornell

results grow. driving the I we're same fact more the time, Ed, Ulta excited about you heard team about you beauty very Beauty and clearly I continues actually the that walked at even traffic think to team, a seeing our with core and target. you talked that from store local our But it's fact recently. that to to the And assortment

becoming they're for just and and more destination that So each we're complementing more beauty shopper. other,

Michael Fiddelke

billion, nature. But of of $X On that in in grew. to a multiyear think amazing think there's up apparel I is the about that guest it piece chunk And example large billion shared, XXXX. you $X business good shows did Mike a over so a protect that a we years. that's to experience few our example. the just last That's grew a perfect fast that job as teams And an the

for why see of to the those just how step multiyear processes changing happen make the important. those easier things significant. to some benefits we much like guests, when simplify, a our make and look business opportunity expect easier But overnight. nature is And things for back But end-to-end team. apparel, we across be won't we core That's

Chris Horvers

JPMorgan. Horvers, Chris

general first sit of categories at apex is these my were So major you question that COVID different merchandise winners.

and say the computing at decorative getting unit are to in the some curve? it's away peel the TVs the or whether maybe that any you as given fourth of look we're bottom of has quarter, you there or athleisure? like Is home there that signs stability, trends to you saw So or encouragement anything

implied than the the X.X implied the be the freight which operating fiscal doesn't better X but versus first bigger from to margin And the the look quarter much going coming all for markdowns, maybe lap then down, not fiscal they're side, year. quarters, second salvaging. should of guide quarter, the It's to question the midpoint is first like headwinds you're around is my yet the what's these like on year. It

you consumables over see and to the -- wouldn't So XQ? why performance? why relative Improves, operating better inflation isn't performance to down comes presumably the margin year relative

Brian Cornell

Christina, unpack seeing to the some in you trends we're of want categories? discretionary

Chris Horvers

Yes. is there's relevance. still consistent theme most innovation, where The there's

consumers them. so And finding are

will new great Social is spike and surprised a become consumers be things to you'll new and products quickly. media, of to for ideas, course, way connected

we prepared. you would And sometimes But tell see coming those other don't that pockets there are times, in them in well I we're of business. every

opportunities planning discretionary where And an into at so certainly but leaning we're cautiously, see right market we're share level aggregate categories now, them. the more we

be on have national owned and category. the We in half believe this that brand grow year, the potential share there's the that business, in brands both to in launching opportunity we'll home back and side more the that of

It over definitely of you the last performance fashion interested bought trend. a doesn't right they're matter buying Apparel, seeing the they couple where years, moment fashion We're it the in where in still right of in get lot that new.

And most so correlation. that's consistent been the

also With and introducing newness Food of that said, level interest & in categories we're that Essentials. Beverage like and

two. that suites the brand of day seen year years, favorite a has last the couple been is explosive Our which over over has growth or we've last brand, launched

is the the a ice will shown we brought in across board to cookies whether that this market so categories, it's give place really And they them liberty to. forth profiles where cream if the items to the basic taken the a innovate we've guests or have the and flavor way reason engage and that

Brian Cornell

to we discretionary back go if Chris, categories.

billion on us $XX revenue trends, we in generated today, heard categories. You the the XXXX, of Christina highlighted of in discretionary that fact softening despite some still

is I this XXXX, by during highlighted $XX to One I we've go interview things discretionary of CNBC almost my back billion. morning grown portfolio our the

were to be know in we growth And from a So point, going to we're relevance led much and return forward base move to over going bigger Christina's they time to much are It's to newness by credibility going categories. more space near those relevance we're pandemic. different And the going much we the have before. ever we a innovation in much term. more pre than in think forward than in position and But and I

Michael Fiddelke

Yes.

flows Christina. at years seen why on the be the so now. That's to ebbs I XX the categories traffic. build And or across in moment time. us, We've the that winners in long-term think both assortment over at, Target, ones our focused and we're what, we're will engagement that so

Apparel time again, do. they and will be this positioned well their and when on on have home we'll

On themes. balance to go just think I versus of broader of the first the year, quarter the back I'd the some

of a biggest that's any one for the tough us now. think variable, I right to predict

path mindful year, It's reflective lot, the fourth plays move of discretionary I of in together just a the what that we the year. we'll at. And quarter. learn that what's year the inform consumer and will We the the out first during the trends we saw the quarter of think, through balance as and the

the right we to But we've place cautious well approach an appropriately as trends in think start based on year the seen package progresses. the and is

Brian Cornell

hands been haven't we the while scan room to I'm a trying gotten to. for that up see to have through

Karen Short

Suisse. Short Credit from Karen

a know in were dollars. I So of wanted terms ask. -- of what to couple questions your for headwinds We or 'XX

billion You're what at year. plus we the kind mark. you're know of on operating $X And for guiding to profit dollars this obviously,

have would it the seems guess like question I that maybe I bar. low set a But is, you've

Is if real guess, inclined the more down to for bottom continuing question top invest the upside five-plus operating you that be to the is, 'XX? line. you kind so percent to line? into maintain margin of choose something would I to, to Or would flow there's to And lean that

billion on most and And just would beyond? then like I question the it 'XX but a $X little from? you there's the have coming buckets more $X second those to is give are sounds capture the could on billion, of 'XX, then of just if in And bit where is some it

Michael Fiddelke

guess about go It's business. a the of philosophically Karen. And back kind in dollars business. Yes. I maximizing we're the I'd we just good question, how to think

and read through And choices think beyond. maximize so XXXX this both we make well profit right for react position dollars we'd that the for and year us to

nothing say, played thought. half that the to case, maybe to I'd in conversation back out that the consumer year quarters the that's and come thrilled trends to some have than we'd we The outperform. was more be in happily of stronger." and if love than stronger And "Gosh, the

we year, kind we just want But the sit reality at isn't cautiously is, start I And that think And the the plan uncertain to that. in it's of as an environment. on of It accomplished year that We clean paper that's inventory we've the right? positioning like the from important caution, goal. we're making was feel to start sure an business, perspective. that

flexibility things a for if right appropriately buys lean of to we to but with prudent volatility the ton our discretionary would inventory like cautiously think see out we'd now. the that's better, categories And turn react that in in we

Brian Cornell

think like got one paddle right. question. a more I back. see we've up I for Looks in the time All

Peter Benedict

I a on than more Benedict be little Baird. XXX margin, at points gross Peter down XXXX. guess question would first since basis

get next better the doesn't couple mix of years. any Assuming

mix the Where would that? without again, you how the think opportunities there? Just portion recapture curious, dramatically about What of getting Michael, you think, are better? of a

second event in this still my end sales deliver up expected, your would you in are $X confidence much how improvement tougher ability of front? on billion year flexibility question in that your then EBIT, And than that be, just that the thinking to

Michael Fiddelke

that Yes. we today scenarios reverse. that now. gave the Maybe envision right I'll range wide of is we The those do guidance in reflective of

about good lot the the out. line so the now in with as smarter drawn we that guidance plays and feel sand And get a we've year together

list, good about one with be margin to to guests the would way. interact some for talked message the link individualized what guest that lot the make just comes offer And we've line, but show add to right a able time. to Christina at right us for more opportunities, of them the to maybe translates a example, the it can of up right news about Circle or and I right Target our we the in already, When as on top talked how valuable with it a and is for is to

personalized higher over to translate we promotions. mass We've also markdowns efficient learned personalized efficiency promotion. our should promotion more a that get a a It on has return than as time with

even gives Circle the better in so the more to that of years come. do to opportunity And

there's years but so unpack we're within that also no the some and business that doubt come, takes, you the things in And margin macro to a lot of driving as puts important there's we know.

Brian Cornell

Right.

you to So with of that, see the I the us throughout know at year, for hope and joining many you we'll I year. Center want Time thank you today. of to next here I back all all see of

home So joining us. thanks safe. for Get

Target (TGT) 28 Feb 232022 Q4 Earnings call transcript