Q4 2023 Target Corp Earnings Call

Unknown Executive: Music Music Music Music Music Music Music Music Music Music Music Music Good morning, everyone, and welcome to our 2024 financial community meeting. I'd like to start by welcoming the investors and others who are attending this meeting in person with us. And of course, we're happy that many, many more of you are attending the meeting remotely. Brian's going to kick off the meeting in a minute.

Yeah.

Mhm.

[music].

Speaker Change: Good morning, everyone and welcome to our 2024 financial community meeting I'd like to start by welcoming to investors and others, who are attending this meeting in person with US and of course, we're happy that many many more of you are attending the meeting remotely.

Speaker Change: Ryan is going to kick off the meeting in a minute, but first 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 todays remarks, we refer to non-GAAP financial measures, including adjusted earnings per share reconciliations of all non-GAAP measure.

Unknown Executive: But first, 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 filing. And second, in today's remarks, we refer to non-GAAP financial measures, including adjusted earnings per share. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measure are included in our financial press releases, financial presentations, and SEC filings, which are posted on our investor relations website. With that, I'll turn it over to Brian to get things started. What a beautiful day to go to Target. No, I'm not kidding.

Speaker Change: And the most directly comparable GAAP measure are included in our financial press releases financial presentations and SEC filings, which are posted on our Investor relations website with that I'll turn it over to Brian to get things started.

Speaker Change: Mhm.

Speaker Change: Hi.

Unknown Executive: I'll go to Target any day. When I walk in, I head towards the handbaskets, and I use my better judgment, and I get myself a card, if you know, you know. Target, Target, Target. We're gonna get stuff at Target. This is the best day ever. When you're at Target, you gotta get a whole kit. This is so freaking cute.

Speaker Change: Okay.

Brian: They want to and I have quite behind baskets for now you said that attachment and again I have been harvested.

Brian: Okay.

Brian: Yes.

Brian: Yeah.

Brian: Creating a separate target.

Brian: Great.

Brian: [noise], whereas target you've got to get a pulse.

Unknown Executive: I want it all. I just bought the most incredible pair of jeans. Twenty five dollars.

Brian: Thinking here I want it all.

Brian: Incredible.

Brian: One five.

Unknown Executive: Y'all want to know where they're from? They're from Target. To say I am excited for Target circle weave is an understatement. I'm so excited. Anything you need, you will find it. Oh, they did that.

Brian: Yeah.

Brian: I don't know where they are.

It's hard to say I am excited for target.

Brian: Is an understatement.

Brian: Anything you need you Bryan Kipp.

Brian: I believe that target the old days already.

Unknown Executive: Target's deals days already got me. Oh, I like that. Target has some good deals, huh? You see, this is why I love Target. Here it comes.

Brian: Okay.

Brian: I like that.

Brian: Marty.

Brian: Yes.

Brian: In this environment.

Brian: Yeah.

Brian: And then J&J.

Brian: Oh.

Brian: Mhm.

Brian: Hum.

Brian: [noise] good morning, and thanks for joining us.

Michael J. Fiddelke: And this is a tongue chaser. Good morning, and thanks for joining us. We're looking forward to providing our perspective on the results we shared this morning, and I can't wait for you to hear from several of our top leaders, including Christina Hennington, Rick Gomez, Jill Sandow, Cara Sylvester, and Michael Fiddelke. While Michael still has his hands firmly on the wheel as CFO, this is his first FCM in his new role as our Chief Operating Officer.

J&J: We're looking forward to providing our perspective on the results we shared this morning.

J&J: And I can't wait for you to hear from several of our top leaders, including Christina Hennington, Rick Gomez, Jill Sando, Curacao that Stewart and Michael Fidel King.

J&J: Well, Michael still has his hands firmly on the wheel as CFO. This is his first F see him in his new role as our Chief operating officer.

Brian C. Cornell: I can tell you we're looking forward to discussing Target's growth horizon and how it transcends volatility over any particular quarter or year. Our preference is always to think long term. It's why for years now, we've emphasized the durability of our business model, and many of you have validated that orientation in the conversations we've had with you over the years. So our session today will focus squarely on the long-term thinking that has driven top and bottom line growth over the last decade and positions us for continued proximal growth in the years ahead. You might be asking, why focus on decades?

J&J: I can tell you we're looking forward to discussing targets growth horizon, and how it transcends volatility.

J&J: Over any particular quarter or year.

J&J: Our preference is always to think long term.

J&J: Its why for years now we've emphasized the durability of our business model.

J&J: And many of you have validated that orientation in the conversations we've had with you over the years.

J&J: So our session today, we'll focus squarely on the long term thinking that has driven top and bottom line growth over the last decade.

J&J: And positions US for continued continued profitable growth in the years ahead.

J&J: You might be asking.

Why focus on decades.

Brian C. Cornell: in part because that feels like a long enough time frame to be meaningful. But it's also because we look at longer horizons when evaluating growth potential for investment, like new stores, supply chains, and other assets, and it's good to ask. What else would need to be true for those investments to succeed? So we'll analyze our 2023 performance in that context, provide insights on how our 24 plans and guidance fit into that vision, and we'll spend time outlining our plan for sustained growth as well as our capacity to react to unforeseen reality. Both have been important over the last 10 years. By designing for steady growth before 2020, we were positioned to absorb exponential growth during a demand boom that none of us could have anticipated.

J&J: In part because that feels like a long enough timeframe to be meaningful.

J&J: But it's also because we look at longer horizons, when evaluating growth potential for investments like new stores supply chain and other assets.

J&J: And it's good to ask.

J&J: What else would need to be true for those investments to succeed.

J&J: So we will analyze our 2023 performance in that context will.

J&J: We'll provide insights on how our 24 plans and guidance fit into that vision.

J&J: And we'll spend time outlining our plan for sustained growth as well as our capacity to react to unforeseen realities.

J&J: Bolt had been important over the last 10 years.

J&J: By designing for Citigroup before 2020.

J&J: We were positioned to absorb exponential growth.

J&J: Demand boom that none of us could have anticipated.

Brian C. Cornell: Even now, the country and the retail industry are in a prolonged post-pandemic return to normal, which has been nearly as unpredictable as the pandemic itself, from a consumer, social, political, and economic perspective. By staying agile as a team, and continuously refining our approach and innovating, we've been able to navigate this time frame. In fact, if you think back to our earlier algorithms and long-range plans, we're well ahead of where we believed we'd be just a few short years ago. At the same time, we recognize this is a unique moment to clarify our roadmap for growth. Let me be really clear.

J&J: Even now the country and the retail industry.

J&J: Are in a prolonged post pandemic returned to normal.

J&J: Which has been nearly as unpredictable as the pandemic itself.

J&J: From a consumer social political and economic perspective.

J&J: By staying agile team.

J&J: And by continuously refining our approach and innovating we've been able to navigate this time frame.

J&J: In fact, if you think back to our earlier algorithms and long range plans were well ahead of where we believe we'd be just a few short years ago.

At the same time.

J&J: We recognize this is a unique moment to clarify our roadmap for growth.

Brian C. Cornell: Our goal is to recapture profitable sales, traffic, and Marketshare Games by expanding what makes Target different and better for our guests. Amplifying our appeal to consumers beyond our existing guest page and reinforcing the innovation and investment that drive durable and consistent results for our business and shareholders. So I might start today with the elements of the overall strategy that have been staples all along and will continue to be staples going forward, starting with our stores. The most visible and tangible proof of our long-term planning and investment. When I arrived at Target, we had just over 1,800 stores that didn't quite cover all 50 states.

Speaker Change: Let me be really clear.

Speaker Change: Our goal is to recapture profitable sales traffic and market share gains by.

Speaker Change: By expanding what makes target different and better for our guests.

Speaker Change: Amplifying, our appeals to consumers beyond our existing guest base.

Speaker Change: And reinforcing the innovation and investments that drive durable and consistent results for our business and shareholders.

Speaker Change: So I might start today with the elements of the overall strategy that have been staples all along.

Speaker Change: And we will continue to be staples going forward.

Speaker Change: Starting with our stores.

Speaker Change: Most visible and tangible proof of our long term planning and investment.

Brian C. Cornell: Since then, we've built more than 200 new stores. We've invested in more than 1,200 existing locations, through remodels and partnerships, and our store footprint has expanded to cover the entire U.S. On any given day, two-thirds to three-quarters of all U.S. shopping is still done in stores, and thanks to the Storages Hub model we invented in the last decade. Nearly all Target shopping, including our significant digital penetration growth and our $30 plus billion in revenue growth, was made possible by our stores. So if you think store shopping will wind down any time in the next decade, we'll politely disagree on that point once again over the next decade.

Speaker Change: When I arrived the target we had just over 1800 stores that didn't quite cover all 50 states.

Speaker Change: Since then we built more than 200 new stores.

We've invested in more than 1200 existing locations through Remodels and partnerships.

Speaker Change: And our store footprint has expanded to cover the entire U S.

Speaker Change: While retail is decades in the new digital era.

Speaker Change: On any given day, two thirds to three quarters of all U S shopping is still done in stores.

Speaker Change: And thanks to the stores as hub model, we invented in the last decade.

Brian C. Cornell: We expect to open more than 300 new, mostly full-size stores and billions of dollars in incremental growth, will continue to remodel stores with plans to invest in the vast majority of our nearly 2,000 stores in the next 10 years, and will also continue to invest in our supply chain and technology. In less than 10 years, we've created, acquired, and constantly advanced sortation centers. Upstream Distribution Centers.

Speaker Change: Nearly all targeted shopping, including our significant digital penetration growth.

Speaker Change: Our 30 plus billion dollars in revenue growth was made possible by our stores.

Speaker Change: So if you think store shopping more wind down anytime of next decade.

Speaker Change: We will politely disagree on that point once again.

Speaker Change: Over the next decade, we.

Brian C. Cornell: Food Distribution Centers and a steady stream of replenishment, technology, and logistics innovation. At least 10 additional supply chain facilities are in the pipeline and will be operating within the next decade. Underpinning all of this is our longstanding and ongoing investment in technology, which includes a leading team of engineers. Data Scientists and Product Managers focused on further integrating AI and machine learning and driving early adoption of generative AI, all geared towards making it easier for our team to best serve our guests, across both the digital and physical assets. Take same day for so much.

Speaker Change: We expect to open more than 300, new mostly full site source.

Speaker Change: Billions of dollars of incremental growth.

Speaker Change: We'll continue to remodel stores with plans to invest in the vast majority of our nearly 2000 stores in the next 10 years.

Speaker Change: We'll also continue to invest in our supply chain and technology.

Speaker Change: In less than 10 years, we've created acquired and constantly advanced sortation centers.

Speaker Change: Upstream distribution centers.

Speaker Change: Distribution centers.

Speaker Change: And a steady stream of replenishment technology and logistics innovation.

Brian C. Cornell: Our initial investments gave us an early lead in the same day. Today, Samedi is much more competitive. But continued innovation and better integration with our Target ecosystem means we're ready to expand same-day delivery for our guests while also building on our next day capabilities. You'll hear more about this from Christina and Cara, including big moves we're making with Target Circle. A program that didn't exist 10 years ago but today has well over 100 million members.

Speaker Change: At least 10 additional supply chain facilities are in the pipeline and we will be operating within the next decade.

Speaker Change: Underpinning all of this is our long standing and ongoing investment in technology.

Speaker Change: This includes a leading team of engineers.

Speaker Change: Data scientists and product managers focus on further integrating AI and machine learning and driving early adoption of generative AI.

Brian C. Cornell: Here, we will talk about the incredible progress the team has made with Target Circle and where we're headed next. For now, I'll just emphasize the focus we're placing on unlimited same-day delivery through a new membership feature called Target Circle 360, which is launching next month. Here's the takeaway. Without huge investments in stores, supply chain, and tech, there is no drive-up or order pick-up, which were monumental growth drivers during COVID and today, and without stores, supply chain, and tech and providers like UPS, FedEx, and SHIP. There is no home delivery, so this restaurant is ready for a step change in guest acquisition, satisfaction, and loyalty.

Speaker Change: All geared towards making it easier for our team to best serve our guests.

Speaker Change: Across both the digital and physical assets.

Speaker Change: Take same day fulfillment.

Speaker Change: Our initial investments gave us an early lead in same day.

Speaker Change: Today.

Speaker Change: Sandy is much more competitive.

Speaker Change: But continued innovation and better integration with our target ecosystem means we're ready to expand same day delivery for guests. While also building on our next day capabilities.

Speaker Change: You'll hear more about this from Christina and Kara.

Speaker Change: Including Big moves, we're making with target circle.

Speaker Change: A program that didn't exist 10 years ago, but today, he has well over 100 million members.

Brian C. Cornell: As we move forward, we'll leverage our 2017 acquisition of HIP to help us build unmistakable recognition for Target same-day delivery. Target's Rondell advertising business is another example of something that didn't exist 10 years ago. But today, it's the fastest growing contributor to the other revenue line on our P&L. In a crowded field of similar offerings, we're punching way above our weight, relative to the scale of our retail footprint. The unique relationship we have with our guests and the value our ad business unlocks for the brands that advertise with us are at the heart of Rondell's performance today. And since our roadmap for growth focuses on strengthening our relationship with guests and converting more consumers into guests, We see tremendous growth potential for Rondell for years to come. Additionally, there are a number of other points of continuity and cohesion in our strategy. But for this intro, I'll focus on just one more.

Speaker Change: Carol will talk about the incredible progress the team has made with target circle.

Speaker Change: And where we're headed next.

Speaker Change: For now I'll, just emphasize the focus were placing on unlimited same day delivery.

Speaker Change: Through new membership feature called target Circle, $3, 60, which is launching next month.

Speaker Change: Here's the takeaway.

Speaker Change: Without huge investments in stores supply chain and tech there was no drive up order pickup.

Speaker Change: Which were monumental growth drivers.

Speaker Change: During COVID-19 and today.

Speaker Change: And without stores supply chain attack and providers like UBS Fedex and shipped there.

Speaker Change: There is no home delivery, which.

Speaker Change: Which is ready for a step change and guest acquisition satisfaction and loyalty.

Speaker Change: As we move forward, we will leverage our 2017 acquisition of hip to help us build unmistakable recognition for target same day delivery.

Brian C. Cornell: That's the strength of our multi-category portfolio and the balance and stability offered by our mix of frequency and discretionary categories. The way we bring those categories to consumers is a standout strength we'll continue to build on. The curation.

Targets Rondell advertising business is another example of something that didn't exist 10 years ago.

But today, it's the fastest growing contributor to the other revenue line on our P&L.

Speaker Change: In a crowded field of similar offerings, we're punching way above our weight relative.

Brian C. Cornell: The Authority on Trend and Newness, and the competitive advantage and assortment built around beloved national brands, world-class brand partnerships, and a fleet of own brands that drives about a third of our business and puts us in a league of our own. Ten years ago, our Starbucks and Disney collaborations were strong and growing, and we were building our partnership with Apple. Those three relationships have continued to grow throughout this time frame.

Speaker Change: Relative to the scale of our retail footprint.

Speaker Change: The unique relationship we have other guests and the value our AD business unlocks for the brands that advertise with US are at the heart of <unk> performance to date.

Speaker Change: And since our roadmap for growth focuses on strengthening our relationship with guests and converting more consumers into guests.

Speaker Change: We see tremendous growth potential for rondell for years to come.

Brian C. Cornell: And we added and expanded outstanding partnerships with CBS, Levi's, Hearts in Hand with Magnolia, and Ulta Beauty at Target that drive traffic, sales, and loyalty. This element of our strategy; it's been a bright part of our future. It will continue to play a big role in the decade ahead, thanks to our team's expertise in product design and development and brand creation and management. That really fuels our own brand portfolio. Braids like cat and jack, threshold, couldn't gather; they brought millions of guests to Target.

Speaker Change: There are a number of other points of continuity and cohesion of our strategy, but for this intro I'll focus on just one more.

Speaker Change: That's the strength of our multi category portfolio and.

Speaker Change: And the balance and stability offered by our mix of frequency and discretionary categories.

Speaker Change: The way, we bring those categories to consumers is sustained that shrink will continue to build on.

Speaker Change: The curation.

Speaker Change: It's already in trend in newness.

Speaker Change: And the competitive advantage and assortment built around beloved national brands World Class brand partnerships and a fleet of own brands that drives about a third of our business and puts us in a league of our own.

Brian C. Cornell: There are three of the 11 brands that generate a billion dollars or more in sales each year. [inaudible] And they have laid out a roster of target brands that contribute to more than $30 billion in annual sales. Plus, outstanding margins for our bottom line, and a steady cadence of brand launches like Figment last year and Dealworthy last month that help keep our edges sharp on the newness, discovery, and affordability consumers crave in the market and find at Target. I believe our own brand capabilities will only become more prominent in the decade ahead, which is why we'll spend time this morning taking you behind the scenes on where we're headed with our own brand. Another area where we'll continue to excel is our commitment to our team. In the last decade, we've taken a leadership position in both pay and benefits and Learning and Development and will continue to be a pacesetter as we ensure our team has all the support they need to take care of our guests, themselves, and their families. So as we start to pull all this together, you might be saying, Brian.

Speaker Change: 10 years ago, our Starbucks and Disney collaborations were strong and growing.

Speaker Change: And we were building our partnership with Apple.

Speaker Change: Those three relationships continue to grow throughout this timeframe.

And we added and expanded outstanding partnerships with Cvs.

Speaker Change: Bis Heartland hand with Magnolia.

Speaker Change: And Ulta beauty of target.

Speaker Change: That drive traffic sales and loyalty.

Speaker Change: This element of our strategy has been a bright part of our future.

Speaker Change: It will continue to play a big role in the decade ahead.

Speaker Change: N.

Speaker Change: Our team's expertise in product design and development and brand creation and management.

Speaker Change: Their towering strengths that really fuel our own brand portfolio.

Speaker Change: Brands like Cat and Jack threshold could gather.

Speaker Change: Bring millions of guests to target.

Speaker Change: There are three of the 11 brands that generate a $1 billion or more in sales each year.

Speaker Change: A lineup that look much more modest a decade ago.

Brian C. Cornell: Clearly, Target has some strong assets and advantages and has cultivated a great team. But what will that mean for 2024 or 2034? I can tell you our team has been humble enough to ask that and many other related questions.

Speaker Change: And they laid a roster of target brands that contributed to more than $30 billion in annual sales.

Speaker Change: Plus outstanding margins for our bottom line.

Speaker Change: A steady cadence of brand launches like Sydney last year and deal worthy last month.

Speaker Change: Hell keep our edges sharp on the newness discovery and affordability consumers crave in the market.

Brian C. Cornell: We're not taking anything for granted. There's no complacency about our past success. And while we recognize that a rebound in discretionary spending will favor our brand and our business, we're not waiting for economic changes or a different consumer outlook. I've been on the road nonstop since November, walking our stores and distribution floors, and I can tell you the energy and initiative of our frontline team.

Speaker Change: And find a target.

Speaker Change: I believe our own brand capabilities will only become more prominent in the decade ahead.

Speaker Change: Which is why I will spend time. This morning, taking you behind the scenes on where we're headed with our own brands.

Speaker Change: Another area, where we'll continue to excel is our commitment to our team.

Speaker Change: In the last decade, we've taken a leadership position in both pay and benefits.

Brian C. Cornell: What they're bringing to our business this year simply can't be conveyed on the slides behind me. This team has shifted to their front foot, and they're changing the momentum of our business, which is why we've seen sequential improvement from Q2 to Q3 to Q4. However, discretionary declines moderated.

Speaker Change: And learning and development.

Speaker Change: And we'll continue to be a pacesetter as we ensure our team has all the support they need to.

Speaker Change: To take care of our guests themselves and their families.

Speaker Change: So as we started to pull all this together you might be saying Brian.

Brian C. Cornell: Traffic Trends Rebounded, our Q4 comp with a high end of our guidance. We drove major gains in efficiency and outperformed our guidance of a billion dollars in full year profit growth, recognizing that we needed to clear the volatility and the challenges of the last two years. Our team buckled down and said, "go time."

Speaker Change: Clearly target has some strong assets and advantages and cultivated a great team.

Speaker Change: But what does that mean for 2024.

Speaker Change: For 2034.

Speaker Change: I can tell you our team has been humble enough as that and many other related questions.

Brian C. Cornell: But in recent weeks, I've seen spelling expand by two letters, and I've seen ambition expand even more than that. What our team is talking about now is growth time. That's the mantra I hear bubbling up from the front line, all with a commitment to recapturing top-line growth, traffic, and share gains in the years immediately ahead. That starts with ensuring our team can deliver for our guests each and every day. A major step is coming soon with the upgrades we're launching in Target Circle, upgrades that will make it even easier to unlock the best of Target.

Speaker Change: We're not taking anything for granted.

Speaker Change: There is no complacency about our past success.

Speaker Change: And while we recognize that a rebound in discretionary spending will favor our brand and our business.

Speaker Change: We're not waiting for economic changes for a different consumer outlook.

Speaker Change: I've been on the road nonstop since November walking our stores distribution floors, and I can tell you the energy and initiative of our frontline team.

What they are bringing to our business this year simply can't be conveyed on the slide behind me.

Speaker Change: This team has shifted to their front Fletcher.

Brian C. Cornell: At the same time, a focused list of priorities, along with a continued concentration on retail fundamentals like affordability and in-stock reliability, will make our guest experience easy and dependable at every interaction. We'll continue to focus on delighting our guests with the products, partnerships, and value that make Target feel both elevated and accessible. The hallmarks here are expert curation. Style and Trend Authority

Speaker Change: And they're changing the momentum of our business.

Speaker Change: Which is why we've seen sequential improvement from Q2 to Q3 to Q4.

Speaker Change: Discretionary declines moderated.

Speaker Change: Traffic trends rebounded.

Speaker Change: Our Q4 comps with the high end of our guidance.

Speaker Change: We drove major gains in efficiency and outperformed our guidance of a $1 billion in full year profit growth.

Speaker Change: Recognizing that we needed to clear the volatility and the challenges of last two years, our team buckled down and said go time.

Brian C. Cornell: Nunes, great design and incredible value, will also accelerate our progress in omni-channel discovery. We've all seen how shopping is changing into an always-on activity that's integrated across several aspects of our lives, well beyond physical and digital stores. Discovery and inspiration have always been a hallmark of our shopping experience. We started by providing inspiration and easy access in our stores with no barriers between impulse and purchase. But we see an opportunity to do even more, to think differently about the intersection of physical, digital, and social, so consumers can discover Target products wherever they're spending their time. Until you hear from Christina and Cara this morning, we're going to keep building our capabilities in omni-channel discovery. Since we see this as an advantage that's ownable over our retail rivals, so I've thrown a lot on the table, and there's more definition and detail to come. Having tackled both industry and in-house challenges over the last couple of years, I can tell you I'm not satisfied, and our team is not satisfied with our recent top line results. We wanted to be even further along than we are today.

Speaker Change: But in recent weeks I've seen the spelling expand by two letters and I've seen the ambition expand even more than that.

Speaker Change: But our team is talking about now is grow time.

Speaker Change: That's the mantra I hear Bubbling up from the frontline.

Speaker Change: All of the commitment to recapturing topline growth traffic and share gains in the years immediately ahead.

Speaker Change: That starts with ensuring our team can deliver for our guests each and every day.

Speaker Change: A major step is coming soon with the upgrades were launching and target circle.

Speaker Change: Upgrades that will make it even easier to unlock the best of target.

Speaker Change: At the same time.

Speaker Change: Our focus list of priorities along with our continued concentration on retail fundamentals like affordability and in stock reliability.

Speaker Change: We'll make our guest experience easy and dependable and every interaction.

Speaker Change: We'll continue to focus on delighting, our guests with a products partnerships and value that they target field, both elevated and accessible.

Speaker Change: The hallmarks here our expert curation.

Style and trend authority.

Speaker Change: Eunice, great design and incredible value.

Speaker Change: We will also accelerate our progress and Omnichannel discovery.

Speaker Change: We've all seen how shopping is changing into an always on activity.

Brian C. Cornell: But we're confident in our path forward, and we're eager to share what's next. Target is not just a bigger company than it was 10 years ago. It's stronger, healthier, and more resilient.

Speaker Change: That's integrated across several aspects of our lives.

Speaker Change: Well beyond physical and digital stores.

Speaker Change: Discovery and exploration has always been a hallmark of our shopping experience.

Christina Hennington: A company that's flipping the switch from go time to growth time. Over the next hour or so, I'll ask Christina, Rick, Jill, Karen, and Michael to add some texture to those claims. Thanks again for being here. Christina, over to you.

Speaker Change: We started by providing inspiration and easy access to their stores with no barriers between impulse and purchase.

Speaker Change: But we see an opportunity to do even more to think differently about the intersection of physical and digital and social so consumers can discover target products wherever they are spending their time.

Christina Hennington: Thanks, Brian, and good morning, everyone. Continuing on from what you've heard so far this morning, I want to emphasize two key themes. First, we build a foundation for long-term growth with a strategy that is both unique to Target and durable. And second, we're committed to building on that foundation for years to come. So this morning, I'll walk through the ways we're leaning into our core strengths, capabilities, and differentiators we've built and refined over time to meet consumers where they are and drive long-term market share gains, sales growth, and profitability. I want to start with an outlook on the consumer, which remains mixed. While there are some encouraging signs in the economy, there are also stubborn pressures impacting families and retail.

Speaker Change: So you hear from Christina and Kara. This morning, we're going to keep building our capabilities in Omnichannel discovery.

Speaker Change: Since we see this as an advantage that's honorable over our retail rivals.

Speaker Change: So I've thrown a lot on the table and then theres more definition of detailed account.

Speaker Change: Having tackle both industry and in house challenges over the last couple of years I can tell you.

Speaker Change: On that satisfied.

Speaker Change: And our team is not satisfied with our recent top line results.

Speaker Change: We wanted to be even further along than we are today.

Speaker Change: But we're confident in our path forward.

Speaker Change: And we're eager to share what's next.

Speaker Change: Target is not just a bigger company than it was 10 years ago.

Speaker Change: It's stronger healthier and more resilient.

Speaker Change: A company that's flipping the switch from go time to grow time.

Speaker Change: Over the next hour or so I'll ask Kristina Rick Jill carry Michael.

Speaker Change: A texture to those claims.

Christina Hennington: Consumers say they still feel stretched, they are balancing a lot, and have to make trade-offs to meet the needs of their families while sprinkling in the occasional luxury. And yet, their affinity for style and newness, plus early signs of disinflation, contributed to a sequential uptick in discretionary category performance over the last two quarters, something we aim to build on and accelerate. At the same time, we expect consumers will remain highly value conscious, hunting for great promotions and seeking comprehensive value in their purchases. Consumers are also craving stability with small doses of everyday joy. After the volatility of the global pandemic, they're now coping with geopolitical tensions, social and political divisiveness, and uncertainty around personal finance.

Kristina: Thanks, again for being here Cristina over to you.

Speaker Change: [music].

Speaker Change: Yes.

Kristina: Thanks, Brian and good morning, everyone.

Cristina: Continuing and what you've heard so far this morning, I want to emphasize two key themes first we build the foundation for long term growth strategy that is both unique to target and durable and second we're committed to building on that foundation for years to come.

Cristina: So this morning, I'll walk through the ways, we're leaning into our core strengths capabilities and Differentiators, we've built and refined over time to.

Cristina: To meet consumers, where they are and drive long term market share gains <unk> growth and profitability.

Cristina: I wanted to start with an outlook on the consumer which remains next while there are some encouraging signs in the economy. There are also stubborn pressures impacting families in retail.

Christina Hennington: This all demonstrates that our purpose to help all families discover the joy of everyday life remains incredibly relevant, and the assets and capabilities we've built over time, like new and remodeled stores, investments in digital shopping, supply chain, and loyalty, have all increased consumers' view of us as an omni-channel powerhouse. Those enhanced strengths were built on long-established differentiators like design, curation, a well-balanced multi-category assortment, and outstanding value. And those are just some of the elements we'll build upon and amplify through our strategy as we move through 2024 and beyond. Think about the opportunities around something like omni-channel discovery.

Cristina: Consumers say, they still feel stretched they are balancing a lot and having to make trade offs to meet their needs of their families. While sprinkling in the occasional luxury.

Cristina: And yet their affinity for style and newness plus early signs of disinflation contributed to a sequential uptick in discretionary category performance over the last few quarters, something we aim to build on and accelerate.

Cristina: At the same time, we expect consumers will remain highly value conscious hunting for great promotions and seeking comprehensive value in their purchases.

Cristina: Consumers are also creating stability with small doses of everyday joy.

Christina Hennington: Designing experiences that support discovery has always been one of our strengths. Our stores are famous, or perhaps infamous, for inspiring guests to discover more than they expected. Millions of guests have experienced the joy of entering a Target store for a few items and ending up leaving with extra treasures they didn't anticipate. This is a key aspect of how we set ourselves apart from our competitors and something we'll continue to build on, regardless of where or how the shopping trip begins. After all, shopping looks very different now than it did a few years ago. It's no longer a point-in-time transactional event.

Cristina: After the volatility of the global pandemic, there are now coping with geopolitical tensions social and political divisiveness and uncertainty around personal finances.

Cristina: All demonstrates that our purpose to help all families to discover the joy of everyday life remains incredibly relevant.

Cristina: And the assets and capabilities, we called it over time like new and remodeled stores.

Cristina: Investments in digital shopping supply chain and loyalty.

Cristina: All increase consumers' view of us as an omnichannel powerhouse.

Christina Hennington: Consumers today are constantly taking in new information and seeking inspiration from influencers and trendsetters. Target is already a trend shaper, but there's an opportunity to accelerate this further on both the platforms we own and on external platforms like TikTok and Instagram. Cara will share more specifics later, so I'll just say that our team's energy and engagement in building these discovery-driven experiences is truly inspiring. It's indicative of an ambition to meet consumers where they are, so that wherever and however a shopping journey starts, the path leads back to Target as the destination. We have long been known for delighting guests through a carefully curated set of products and partnerships. We believe that a well-curated assortment isn't just good for managing inventory. It can be additive to the shopping experience too. Here's an extreme example.

Cristina: Those enhanced strengths were built on long established differentiators like design curation, a well balanced multi category assortment and outstanding value.

Cristina: And those are just some of the elements will build upon an amplified through our strategy as we move through 2024 and beyond.

Cristina: Think about the opportunities around something like Omnichannel discovery.

Cristina: Designing experiences that support discovery has always been one of our strengths.

Cristina: Our stores are famous or perhaps in fitness for inspiring guests to discover more than they expected.

Cristina: Millions of guests have experienced the joy of entering a target store for a few items and end up leaving with extra treasures they didn't anticipate.

Cristina: This is a key aspect of how we set ourselves apart from our competitors and something we'll continue to build on regardless of where or how the shopping trip begins.

Cristina: After all shopping looks very different now than it did a few years ago.

Christina Hennington: Imagine a restaurant with a seemingly infinite menu, with countless pages of every type of cuisine and no cohesive point of view. Endless choice creates decision fatigue, taking away from an otherwise joyful outing. Sometimes, less is truly more. We make choices that allow us to offer a menu of products designed to serve a wide variety of guest needs, helping to guide their shopping journey while ensuring a joyful and productive trip. Now to be clear, this does take a balance.

Cristina: It's no longer a point in time transactional event cause.

Cristina: <unk> today are constantly taking in new information and seeking inspiration from Influencers and Trendsetters.

Cristina: <unk> is already a trend shaper, but there's an opportunity to accelerate this further on both the platforms that we own and on external platforms like Tictoc in Instagram.

Cristina: Carol will share more specifics later, so I'll, just say that our team's energy and engagement and building. These discovery driven experiences are truly inspiring.

Christina Hennington: We don't offer an endless aisle, but we do offer a compelling range of choices and price points throughout our assortment. We think of our assortment like a three-legged stool. It works best when we develop our own brands that offer unmatched value and quality, provide the best industry-leading national brands, and cultivate partnerships that enhance our assortment. So let's start with our own brand. We've invested heavily over the past several years to continue to innovate and differentiate through our own brands, and we're not slowing down. Across the portfolio, we're launching new brands and expanding upon those already loved by our guests. In fact, own brands are so core to who we are, following my remarks, I've asked Jill Sando and Rick Gomez to join me and highlight how our unique skills and assets allow us to sustain and grow this massive own brand portfolio.

Cristina: It's indicative of an ambition to meet consumers, where they are so that wherever and however, a sharp shopping journey starts the past leads back to target as a destination.

Cristina: We have long been known for delighting guests through a carefully curated set of products and partnerships.

Cristina: We believe that a well curated assortment isn't just good for managing inventory.

Cristina: It can be additive to the shopping experience too.

Cristina: Here's an extreme example.

Cristina: Imagine a restaurant with a seemingly infinite menu with countless of pages of every type of cuisine and no cohesive point of view.

Cristina: Less choice creates decision fatigue, taking away from an otherwise joyful outing.

Cristina: Sometimes less is truly more.

Cristina: We make choices that allow us to offer a menu of products designing to serve a wide variety of guest needs, helping to guide their shopping journey, while ensuring a joyful and productive trip.

Christina Hennington: And it's because of these differentiated end-to-end capabilities that we're able to rapidly scale affordable owned brands without compromising quality. These capabilities also make us an attractive partner to some of the greatest designers around. Recently, we announced an upcoming partnership with iconic fashion designer Diane von Furstenberg. This collection will feature the signature patterns and colors that DVF is known for, along with her iconic wrap dress.

Cristina: Now to be clear this does take balance we don't offer an endless aisle, but we do offer a compelling range of choices and price points throughout our assortment.

Cristina: We think of our assortment like a three legged stool. It works best when we develop own brands that offer unmatched value and quality.

Christina Hennington: With a multi-generational appeal and offerings in extended sizes, as well as options for kids, this collection features more than 200 items spanning apparel, accessories, beauty, and home, combining timeless fashion with only Target prices and value. Our second priority is to extend our assortment with the best national brands consumers want from Target. Stanley Drinkware is a timely example.

Cristina: Provide the best industry, leading national brands.

Cristina: And cultivate partnerships that enhance our assortment.

Cristina: So let's start with our own brands.

Cristina: We've invested heavily over the past several years to continue to innovate and differentiate through our own brands and we're not slowing down.

Cristina: Across the portfolio, we're launching new brands and expanding upon those already loved by our guests.

Christina Hennington: Well before it became a cultural moment, we were early to recognize this brand's potential, allowing us to get a big jump on this trend. We secured great allocations across the portfolio and partnered with Stanley to create exclusive colors for our guests, both in the core line and through our only at Target brand, Hearth and Hand with Magnolia. Similarly, celebrity-founded beauty brands are taking over social media, and our guests say they want to find them a target. That's why we partnered with Ashley Tisdale on our exclusive-to-Target launch of Being Frenchy, a line of personal care products powered by mood-boosting scents and self-care rituals.

Speaker Change: In fact own brands are so core to who we are following my remarks, I've asked Jill Sando and Brookdale Mezz to join me and highlight how our unique skills and assets allow us to sustain and grow this massive own brand portfolio.

Speaker Change: And it's because of these differentiated end to end capabilities that we're able to rapidly scale affordable owned brands without compromising quality.

Jill Sando: These capabilities also make us an attractive partner to some of the greatest designers around.

Jill Sando: Recently, we announced an upcoming partnership with iconic fashion designer Diane von Furstenberg.

Christina Hennington: It's also why we recently added LEMI, Courtney Kardashian Barker's new line of vitamin and botanical supplements, to our assortment. These trending brands add to the credibility we built in the beauty space and will continue to support our leadership role in these categories. Our third priority is to round out our assortment with a focus on partnerships, which provide deeper expertise and brand recognition for our guests. We've had tremendous success attracting and cultivating these unique collaborations. And in the years ahead, we expect they'll play an even bigger role, given the incrementality they've delivered. We continue to expand the presence of Ulta Beauty at Target, Levi's, Apple, Disney, and more, bringing industry-leading offerings and continued differentiation for Target, and last year we launched a new partnership with Kendra Scott, and our guests couldn't get enough. These colorful jewelry and accessory pieces not only look good, but they do good, too.

Jill Sando: This collection will feature the signature patterns and colors that D V. F S known for along with her iconic wrap dresses.

Jill Sando: With a multi generational appeal and offerings and extended sizes as well as options for kids. This collection features more than 200 items spanning apparel accessories beauty and home.

Jill Sando: Combining timeless fashion with only at target prices and value.

Jill Sando: Our second priority is to extend our assortment with the best National brand consumers want from target.

Jill Sando: Stanley drink wear is a timely example.

Jill Sando: Before I became a cultural moment, we were early to recognize this brand's potential, allowing us to get a big jump on this trend we secured great allocations across the portfolio and partnered with Stanley to create exclusive colors for our guests both in the core line and through our only at target brand hearth and hand with Magnolia.

Christina Hennington: With a shared vision for philanthropy, this collaboration shines bright on multiple levels; expect plenty of new offerings in this partnership in 2024 and for years to come. Surrounding all our assortment choices is an unwavering focus on value, which starts with price but encompasses so much more. We continue to offer fantastic everyday low prices, and we're focused on clearly and effectively communicating our value proposition. One way we've done this is by simplifying our end caps to feature single price points and promotions. This allows us to clarify the incredible value we offer while helping our guests to effortless recognize the value. No games, no confusion.

Jill Sando: Similarly celebrity founded beauty brands are taking over social media and our guests say they want to find them a target.

Jill Sando: That's why we partnered with Ashley Tisdale on our exclusive to target launch of being Frenchie a line of personal care products powered by mood boosting sense and self care rituals.

Jill Sando: It's also why we've recently added Lemmy Courtney Kardashian, Barkers, new line of vitamin and botanical supplements to our assortment.

Jill Sando: These trending brands add to the stability, we built in the beauty space and will continue to support our leadership role in these categories.

Our third priority is to round out our assortment with a focus on partnerships, which provide deeper expertise and brand recognition for our guests.

Christina Hennington: Additionally, our efficiency efforts and the greater size and scale we've achieved in recent years have allowed us to further sharpen price points across our assortment. We continuously find ways to add quality and newness to our own brand portfolio without increasing prices. And, of course, our focus on retail fundamentals serves as a through line supporting guests on their shopping journey before, during, and after they make a purchase. These efforts are an always-on focus, and we continue to deliver a unique blend of physical and digital shopping.

Jill Sando: We've had tremendous success, attracting and cultivating these unique collaborations and in the years ahead, we expect they'll play an even bigger role given the Incrementals city they've delivered.

Jill Sando: We continue to expand the presence of Ulta beauty at target Levi's, Apple Disney and more bringing industry, leading offerings and continued differentiation for target.

Jill Sando: And last year, we launched a new partnership with Kendra, Scott and our guests couldn't get enough.

Jill Sando: These colorful jewelry and accessory pieces not only looked at but they do go to.

Christina Hennington: We'll further leverage our fleet of nearly 2,000 stores to serve as inspiring shopping destinations and a fulfillment hub for digital orders. And in the same way we focus on our store and digital assets, we continually invest in our... From providing world-class service to ensuring we're in stock, we want our guests to feel confident that they'll be cared for and find what they seek on every Target run. In fact, it was the dedication of our team that allowed us to maintain leaner, healthier inventory levels last year, which positions us well as we enter a new year. This led to stronger profit outcomes, improved stock performance, and perhaps most importantly, increased flexibility, allowing us to react quickly to changing trends.

Jill Sando: With a shared vision for philanthropy this collect collaborations shines bright on multiple levels.

Jill Sando: Expect expect plenty of new offerings in this partnership in 2024 and for years to come.

Jill Sando: Surrounding all of our assortment choices is an unwavering focus on value, which starts with price but encompasses so much more.

Jill Sando: We continue to offer fantastic everyday low prices and we're focused on clearly and effectively communicating communicating our value proposition.

Jill Sando: One way we've done this is by simplifying our end caps to feature single price points and promotions.

Jill Sando: This allows us to clarify the incredible value, we offer while helping our guests to effortlessly recognize the value no games no confusion.

Christina Hennington: We're also using technology to reduce costs, increase delivery speed, and improve consistency in our operations. Years ago, we took a bold stance when we outlined our plans to invest in stores at a time when the role of brick and mortar was in question. Investing to automate upstream replenishment and optimize last mile delivery, we developed new ways to increase our delivery speed and reduce operating costs. These technology investments, which increased the throughput of our existing store locations, helped to quiet the store versus digital debate as we pioneered the Stores as Hubs strategy in support of the omni-channel services we provide. We're excited about the impact of continued advancements in technology like generative AI and the additive ways these tools will empower our customers, but we also want to make sure that human connection remains at the center of the Target experience. This is why we'll continue to invest in technology, while never losing sight of what makes life rich, the relationships and interactions we have with one another.

Jill Sando: Additionally, our efficiency efforts and the greater size and scale. We've achieved in the recent years have allowed us to further sharpen price points across our assortment.

Jill Sando: We continuously find ways to add quality and newness to our own brand portfolio without increasing prices.

Jill Sando: And of course, our focus on retail fundamentals serves as a through line supporting guests on their shopping journey before during and after they make a purchase.

Jill Sando: These efforts are an always on focus and we continue to deliver a unique blend of physical and digital shopping will further leverage our fleet of nearly 2000 stores to serve to serve as an inspiring shopping destinations and as fulfillment hubs for digital orders.

Jill Sando: And in the same way, we focus on our store and digital assets, we continually invest in our team.

Jill Sando: We take care of our team so they can take care of our guests.

Jill Sando: From providing world class service to ensuring we're in stock we want our guests to feel confident that they'll be cared for and find what they seek out every target run.

Christina Hennington: Just as we uniquely saw the importance of combining physical stores and digital capabilities, we want to make sure we lean into emerging technologies and focus on placing them in the hands of our incredible Target team. And finally, we'll continue to invest in technology to support segmentation and personalization. We love it when guests walk into one of our nearly 2,000 locations and say, "This is my Target." In the same way, we want to design an experience in which a guest places an item in their cart and says, "This was made just for me."

Jill Sando: In fact, it was a dedication of our team that allowed us to maintain leaner healthier inventory levels last year, which positions us well as we enter a new year.

Jill Sando: This led to stronger profit outcomes improved in stocks and perhaps most importantly increased flexibility, allowing us to react quickly to changing trends.

Jill Sando: We're also using technology to reduce costs increase delivery speed and improved consistency in our operations.

Jill Sando: Years ago, we took a bold stance when we outlined our plans to invest in stores at a time when the role of brick and mortar wasn't question.

Christina Hennington: This balance of scale and personalization is unique in retail, something we do well and can continue to build on. After all, we have an enviable consumer base that is highly engaged with our brand, and they shop with us frequently across our multi-category assortments. This allows us to gain invaluable insights across nearly all retail segments, not just one or two. It's also why our Round Isle advertising business is so powerful.

Jill Sando: Investing to automate upstream replenishment and optimize last mile delivery, we develop new ways to increase our delivery speed and reduce operating costs.

Jill Sando: These technology investments, which increased through the throughput of our existing store locations helped to quiet the store versus digital debate as we pioneer the stores as hubs strategy in support of the Omnichannel services, we provide.

Christina Hennington: We're constantly listening and learning from our guest space, allowing us to offer rich insights to our vendors, offer compelling and personalized advertisements to our guests, and grow this aspect of the business in meaningful and lasting ways. You'll hear more from Cara on enhancements to our loyalty ecosystem, Roundel's growing reach, and our digital experience aimed at enhancing digital discovery. It's one thing to hear about these strategic initiatives, and it's another thing to see them in action. I'm often on the road to witness firsthand how our guests are experiencing joy through our assortment, shopping experience, and our team's dedication to serving them every day. On a recent trip to Orlando, I visited one of our smaller stores near Disney World. Our segmentation and assortment planning work let us focus on serving two very distinct segments in this market. One segment consists of the many Disney cast members who utilize this Target store to meet their everyday wants and needs on their way to and from work. The other segment is comprised of families who are visiting the area, looking to get everything they need to support their family vacation.

Jill Sando: We're excited about the impact of continued advancements in technology like generative AI and the additive ways. These tools will empower our teams.

Jill Sando: But we also don't want to make sure that human connection remains at the center of the target experience.

Jill Sando: This is why we will continue to invest in technology, while never losing sight of what makes life rich the relationships and interactions we have with one another.

Just as we uniquely solve the importance of combining physical stores and digital capabilities, we want to make sure we lean into emerging technologies and focus on placing them in the hands of our incredible target team.

Jill Sando: And finally, we will continue to invest in technology to support segmentation and personalization.

Jill Sando: We love it when guests walk into one of our nearly 2000 locations that says this is my target.

Jill Sando: In the same way, we want to design an experience in which a guest places an item in their cart and says this was made just for me.

Christina Hennington: These guest segments have very different target run missions, and yet we're able to provide a cohesive experience that satisfies both of them. Similarly, a few weeks ago, I traveled to Texas with members of my beauty and apparel team. We heard directly from guests about the love of finding all their styling needs under one roof. From cosmetics and skin care items in Ulta Beauty to apparel assortments only available at Target to bold jewelry pieces from Kendra Scott, these powerhouse brands have all come together to offer consumers at this store a sum that is greater than the individual parts. On another trip, I visited a store in Mississippi where we'd recently completed a wall-to-wall remodel.

Jill Sando: This balance of scale and personalization is unique in retail something we do well and can continue to build on.

Jill Sando: After all we have an enviable consumer base that is highly engaged with our brand and they shop us frequently across our multi category assortment, but allowing us to gain invaluable insights across nearly all retail segments, not just one or two.

Jill Sando: It's also why our round out advertising business is so powerful we're constantly listening and learning from our gas space, allowing us to offer rich insights tour vendors offer compelling and personalized advertisements to our guests and grow this aspect of the business in meaningful and lasting ways.

Christina Hennington: We elevated the shopping experience, refreshed the assortment, and even added a Starbucks, the first one ever in this area. Our local team is incredibly proud that their Target store has become the social hub of this tight-knit community. These examples illustrate the interplay of our strategies, assortment, experience, and capabilities, showing how we're positioning Target to play a unique role in American retail. Now, before I turn things over to Cara, I'm going to invite Jill and Rick to the stage for a discussion on the power of Target's own brand capabilities and how they help Target stand out in a crowded market. Okay, well, thanks for joining me.

You'll hear more from Kerr on enhancements to our loyalty ecosystem.

Jill Sando: Around Dallas growing reach and our digital experience aimed at enhancing digital discovery.

Jill Sando: It's one thing to hear about these strategic initiatives and it's another thing to see them in action.

Jill Sando: I'm often on the road to witness firsthand, how our guests are experiencing joy through our assortment shopping experience and our team's dedication in serving them every day.

Jill Sando: On a recent trip to Orlando I visited one of our smaller stores near Disney World.

Jill Sando: Our segmentation and assortment planning work, let us focus on serving two very distinct segments. In this market. One segment consists of the many Disney cast members, who utilize this target store to meet their everyday wants or needs on their way to and from work.

Christina Hennington: Why don't we start, Jill and Rick, by telling us a little bit about yourselves and your careers. Good morning. I am Jill Sando, and I lead the Apparel and Accessories, Home, and Hard Lines Merchandising Organization. I've been with Target for over 25 years; the majority of that time has been in merchandising, running different businesses across our discretionary portfolio. I also spent some time in planning and helping stand up our product design and development capabilities for our non-apparel businesses. Hello, good morning. I'm Rick Gomez.

Jill Sando: The other segment is comprised of families who are visiting the area looking to get everything they need to support their family vacations.

Jill Sando: These guest segments have very different target run missions and yet we're able to provide a cohesive experience that satisfies both of them.

Jill Sando: Similarly, a few weeks back I traveled to Texas with members of my beauty and apparel teams, we heard directly from guests about the love of finding all of their styling needs under one roof from cosmetics and skincare items and also duty to apparel assortments only available at target to bowl jewelry pieces from Kendra Scott. These.

Jill Sando: I lead Target's food, essentials, and beauty businesses. I've had the opportunity to lead a variety of different disciplines at Target, including marketing, digital, and strategy. And then, before Target, I spent over 20 years working in the CPG industry, developing, launching, and managing a bunch of different food and beverage brands. We're happy to have you here.

Jill Sando: Powerhouse brands have all come together to offer consumers at this store.

Jill Sando: <unk> that is greater than the individual parts.

Jill Sando: On another trip I visited a store in Mississippi, where we recently completed a wall to wall remodel.

Jill Sando: We elevated the shopping experience refresh the assortment and even added a starbucks the first one ever in this area.

Christina Hennington: Okay, our OMRAM portfolio on its own would be a Fortune 100 company, more than $30 billion in sales, nearly one-third of our total revenue, and even more of our gross margin. That's because we have amazing capabilities that allow us to produce brands our guests genuinely love. Jill, let's start with one I know you're particularly excited about, a new brand in toys called GiggleScape. Kids-related categories are huge for Target, and toys play a key role in keeping Target relevant with families. National brands like Lego and exclusive brands like Our Generation have made Target one of the biggest toy retailers in America, and the addition of GiggleScape gives consumers one more reason to shop for toys at Target.

Jill Sando: Our local team is incredibly proud that their target store has become the social hub of this tightknit community.

Jill Sando: These examples illustrate the interplay of our strategies assortment experiencing capabilities showing how we're positioning target to play a unique role in American retail sooner.

Jill Sando: So now before I turn things over to Kara I'm going to invite Julien right to the stage for a discussion on the power of targets owned brand capabilities and how they help target stand out in a crowded marketplace.

Jill Sando: [music].

Jill Sando: [noise], Okay, well thanks for joining me why don't we start Julien right by telling us a little bit about yourselves and your careers.

Jill Sando: Good morning, I am Jill Sando, and I lead the apparel and accessories home and hard lines merchandising organization I've been with target for over 25 years. The majority of that time has been in merchandising running different businesses across our discretionary portfolio also sent some time in planning and help stand up our product design and development capabilities.

Jill Sando: It's consumer-centric. It's our first-of-its-own brand designed specifically for Generation Alpha and their unique needs. It's filling white space in our own brand assortment, and it has us poised to drive growth in a high-margin category. And GiggleScape is priced to be accessible to all families. Just a few weeks ago, we launched our stuffed animals. Most are priced under $10, and soon we'll launch books, puzzles, and toys, with all items in our spring assortment priced under $20.

Jill Sando: For our non apparel businesses.

Jill Sando: Hello, Good morning, I'm, Rick Gomez I lead targets food essentials and beauty businesses.

Rick Gomez: I've had the opportunity to lead a variety of different disciplines that target, including marketing digital strategy.

Jill Sando: That kind of pricing makes it perfect for gifts and for spur-of-the-moment purchases because your child is being good today. This is a brand that makes our toy department a destination, even when your Target run was inspired by something else, and makes Target an even stronger destination for toys. I love them. They're super cute.

Rick Gomez: And then before target I spent over 20 years working in the CPG industry, developing launching and managing a bunch of different food and beverage brands.

Speaker Change: We're happy to have you here.

Speaker Change: Okay, our own brand portfolio a portfolio on its own would be a fortune 100 company more than 30 billion in sales nearly one third of our total revenue and even more of our gross margin.

Richard H. Gomez: Okay, Rick, our frequency categories play such a crucial role in driving trips. And with Up and Up and Dealworthy, we're giving our guests new reasons to choose Target. Can you tell us about that?

Speaker Change: That's because we have amazing capabilities that allow us to produce France, our guests genuinely love.

Richard H. Gomez: Well, as you know, Christina, we invest a lot of time listening to consumers to better understand their needs. And one of the themes that we are consistently hearing is the need for value and affordability. So to address this consumer need, we are relaunching Up and Up and introducing Dealworthy. Up and Up is one of Target's most popular brands, delivering nearly $3 billion in sales, offering over 2,000 everyday items at affordable prices.

Speaker Change: So let's start with one I know you were particularly excited about a new brand in toys called Giggle escape.

Speaker Change: Kids related categories are huge for target and toys plays a key role in keeping target relevant with families.

Speaker Change: <unk> brands like Lego and exclusive brands like our generation have made target one of the biggest toy retailers in America and the addition of Giga escape gives consumers one more only at target reason to shop toys Giggles scape is important for a few reasons its consumer centric. It's our first on brand design specific.

Richard H. Gomez: And now we are making it even bigger and even better. We have developed product improvements across 40% of the line. We are also introducing hundreds of new items. And we are offering great prices, with the average item price under $7.

Speaker Change: For generation Alpha and their unique needs.

Speaker Change: It's filling white space in our own brand assortment and it has us poised to drive growth in a high margin category.

Richard H. Gomez: We're also launching Dealworthy. It's our new low-priced brand with items across the store, ranging from socks, laundry detergent, phone charges, and I can't stress enough what a great value Dealworthy will be. Most items will be priced under $10, and some of those electronics items will be priced 50% lower than what was previously offered at Target.

Speaker Change: And giggle Giggle escape is price to be accessible to all families. Just a few weeks ago, we launched our stuffed animals. Most are priced under $10 and soon will launch books puzzles and toys with all items in our spring assortment priced under $20 that kind of pricing makes it perfect for gifts and for the spread the moment purchases because your.

Richard H. Gomez: Dealworthy will be the lowest-priced item in each category, offering absolutely incredible value. Indeed, our frequency businesses are an important part of driving trips to Target, meeting guest critical needs, but our discretionaries have the opportunity; categories have the opportunity to do that as well. Jill, can you tell us a little bit about Cat and Jack?

Speaker Change: <unk> has been good today.

Speaker Change: This is a brand that makes our toys destination or toys department a destination, even when your target run with inspired by something else and makes target an even stronger destination for toys.

Jill Sando: Yes. Kids Apparel is another area where we have outsized market share, and Cat and Jack is a big part of that. This is the kids brand that we launched in 2016. Today, it's a $3 billion brand, the biggest kids brand in America. To put that into perspective, consider this.

Speaker Change: I love them, they're super cute.

Speaker Change: Okay, Rick our frequency categories play such a crucial role in driving trips and with up and up and deal worthy, we're giving our guests new reasons to choose target can you tell us about that yes, well as you know Kristina we invest a lot of time listening to consumers to better understand their needs and one of the themes that we.

Jill Sando: We sell well over 300 million units of Cat and Jack a year, which comes out to about eight Cat and Jack items for every child in America under the age of 12. This is part of a discretionary category, but Cat and Jack is a brand that drives repeat business for Target because of great prices and great quality, which parents love, and great design that kids love. And when you think about kids' style, the success of Cat & Jack pays dividends across our portfolio. It drives trips and sales across the store, during key moments like back to school, and throughout the year as kids grow into new sizes. Cat and Jack also complements brands like Wild Fable, that's our juniors brand worn by millions of teens and tweens who started in Cat and Jack.

Rick Gomez: We're consistently hearing is the need for value and affordability. So to address this consumer need we are relaunching up and up and introducing deal where the up and up as one of targets most popular brands delivering nearly $3 billion in sales offering over 2000 everyday items at affordable prices.

Rick Gomez: And now we are making it even bigger and even better we have developed product improvements across 40% of the line. We are also introducing hundreds of new items and we are offering great prices with the average item price under $7.

Rick Gomez: We're also launching deal worthy, it's our new low price brand with items across the store ranging from Sox laundry detergent phone charges and I can't stress enough, what a great value deal worthy will be the most most items will be priced under $10 and some of those electronics.

Jill Sando: It's one of the biggest juniors brands in the country and one we just extended into SWIM. Wild Fable is a great brand on its own, one fueled by our speed to trend in a very dynamic category, but it also has an important advantage since families are already in the habit of turning to Target for clothes for their kids. Thank you, Jill. Rick, let's switch gears a little bit and talk about Good & Gather because that's a brand that's helped us reimagine our grocery space and experience and really build our credibility in food. Yeah, absolutely.

Rick Gomez: Items will be priced at 50% lower than what was previously offered at target.

Rick Gomez: Deal worthy will be the lowest priced item in each category offering absolutely incredible value.

Rick Gomez: Indeed, our frequency businesses are an important part of driving trips to target a meeting guests critical needs, but our discretionary as have the opportunity categories have the opportunity to do that as well Joe can you tell us a little bit about cat and Jack Yes. Our kids apparel is another area, where we have outsized market share in cat and Jack is a bit.

Richard H. Gomez: I'd love to talk about food and beverage. Our food and beverage business delivers over $20 billion in sales, and that's up $8 billion in sales since 2019. That's because over the last few years, we've been making big strides in improving the food and beverage experience. Now, I like to say that we have gone from being a retailer that just sells food to a retailer that truly celebrates food. And in doing that, we have made Target a destination for food. Now, Good & Gather has played a key role in that. At nearly $4 billion in sales, Good & Gather delivers a great value proposition with delicious products that the whole family will enjoy. High quality ingredients with no artificial colors, no artificial flavors, and no high fructose corn syrup.

Joe: Part of that.

Joe: This is the kids brand that we launched in 2016 today. It's a 3 billion dollar brand. The biggest kids brand in America to put that into perspective consider that we sell well over 300 million units of cat and Jack a year, which comes out to about eight cat and Jack items for every child in America.

Joe: Under the age of 12, and this is part of a discretionary category, but cat and Jack is a brand that drives repeat business for target because of great prices and great quality, which parents slop and great design that kids love and when you think about kids' style, the success of cat and Jack pays dividends across our portfolio.

Richard H. Gomez: And importantly, great prices with most items under $5. And we're not done growing the Good & Gather band. Last fall, we expanded Good & Gather into new incremental spaces that are important to our guests, like Good & Gather Baby and Toddler, creating another go-to target, another go-to category for parents with young children at Target. Well, it's abundantly clear that our guests rely on our own brands. Jill, you've been a part of these launches for so many years in your career. What makes us a leader in this?

Joe: Trips and sales across the store during key moments like back to school and throughout the year as kids grow into new sizes.

Joe: Jack also complements brands like Wild fable, that's our juniors brand one by millions of teens and Tweens, who started in cat and Jack It's one of the biggest juniors brands in the country and one we just extended into swim Wild fable is a great brand on it sound one fueled by our speed to trend in a very dynamic category.

Joe: It also has an important advantage since families are already in the habit of turning to target for clothes for their kids.

Jill Sando: We have unrivaled design capabilities, amazing talent across our team, hundreds of patents. It is no exaggeration to say that Target pioneered cheap. And what we're doing is so hard to replicate because we didn't decide to make a play and own brands five or even 10 years ago. We've been doing this for decades. We've had an in-house sourcing capability for 25 years now, and today, it spans 20 offices across 14 countries.

Speaker Change: Thank you jail break, let's switch gears, a little bit and talk about good and gather because that's a brand that's helped us re imagine our grocery space and experience and really build our credibility and food, yes, absolutely I'd love to talk about food and beverage.

Speaker Change: Our food and beverage business delivers over $20 billion in sales and that's up $8 billion in sales since 2019, that's because over the last few years, we've been making big strides in improving the food and beverage experience.

Speaker Change: To say that we have gone from being a retailer that just sells food to a retailer that truly celebrates food.

Jill Sando: Because we own our end-to-end sourcing business, we control our own destiny. When you think about issues like country of production and raw material costs, we are more cost effective, with far fewer intermediaries in our network, which allows us to grow our bottom line even as we pass savings on to our guests. We can adapt quickly to emerging trends, which keeps us relevant, and we're able to pursue bold sustainability goals, which is important to driving growth by delivering on something that matters so much to millions of consumers. And those sustainability goals will also help ensure both the resiliency of our business model through responsible stewardship of the resources that we rely on and our ability to deliver the quality that our guests rely on.

Speaker Change: And in doing that we have made target a destination for food now good and gather has played a key role in that at nearly 4 billion in sales good and gather delivers a great value proposition delicious products at the whole family will enjoy high quality ingredients with no artificial colors no art.

Speaker Change: Fishel flavors, no high fructose corn syrup, and importantly, great pricing with most items under $5.

Speaker Change: And we're not done growing the good and gather banned last fall, we expanded good and rather into new incremental spaces that are important to our guests like good and gather baby and toddler, creating another go to target.

Speaker Change: Another go to category for parents with young children a target.

Jill Sando: And these capabilities really do set Target apart, especially considering the scale at which we operate, delivering a steady drumbeat of newness to consumers. You know, in my previous role in the CPG industry, it was a big year if we launched a few dozen new products. But for our food scientists, there are, you know, that's a couple of weeks' worth of work in food and beverage alone.

Speaker Change: Well, it's abundantly clear that our guests rely on our own brands, Joe you've been a part of these launches for so many years in your career.

Speaker Change: What makes us a leader in this space.

Speaker Change: We have unrivaled design capabilities amazing talent across our team hundreds of patents. It is no exaggeration to say that target pioneered cheap chic and what we're doing is so hard to replicate because we didn't decide to make a play in owned brands five or even 10 years ago, we've been doing this for them.

Richard H. Gomez: This year, we'll add hundreds of new items to Good & Gather and Favorite Day, and that's on top of the hundreds of new items that we launched last year. We are delivering innovation at scale that is unmatched by others. Well, our capability is certainly first rate, but that human touch fueled by the power of insights can't be stressed enough. That's right.

Speaker Change: AIDS, we've had an in house sourcing capability for 25 years now today. It spans 20 offices across 14 countries.

Speaker Change: Because we own our end to end sourcing business, we control our own destiny. When you think about issues like country production and raw material cost were more cost effective with far fewer intermediaries in our network, which allows us to grow our bottom line, even as we pass savings on to our guest we can adapt quickly to emerging trends, which keeps us relevant and we're able to pull.

Jill Sando: When we designed All In Motion, our performance brand, the first thing that we did was to engage with 15,000 consumers. We talked to fitness experts, and we attended dozens of workout classes because if you're designing for the consumer, it starts with listening to the consumer. And we're not just consumer-led when we're launching a product; we're consumer-led in how we continue to grow and develop our own brands, because you can't mistake performance for potential. Cat & Zack has been a runaway success, but we also learned through listening that we had opportunities to make the brand more appealing to more guests, among other things that led to the adaptive items we created to help all kids look and feel their best and the expansions we made to our dressy and mid-dressy assortment, giving families more reasons to choose Cat and Jack and Target.

Speaker Change: <unk> bold sustainability goals, which is important to driving growth by delivering on something that matters. So much to millions of consumers and those sustainability goals will also help ensure both the resiliency of our business model through responsible stewardship of the resources that we rely on and our ability to deliver the koala.

Speaker Change: That our guests rely on and these are capabilities. They they really do set target apart, especially considering the scale at which we operate delivering a steady drumbeat of newness to consumers.

Speaker Change: In my previous role in the CPG industry. It was a big year, if we launched a few dozen new products.

Speaker Change: But for our food scientists. There's you know that's a couple of weeks' worth of work and food and beverage alone. This year, we'll add hundreds of new items to good and gather and favorite day and on top and that's on top of the hundreds of new items that we launched last year.

Speaker Change: We are delivering innovation at scale that is unmatched by others.

Speaker Change: Yeah.

Speaker Change: Well our capabilities certainly our first rate, but that human touch fueled by the power of insights can't be stressed enough.

Richard H. Gomez: You know, Consumer Insight has also helped to continue to develop and grow Favorite Day. We launched the brand during the pandemic, and we've seen it drive trips, build baskets, and deliver double-digit growth year after year. So as food and beverage has become a go-to category for Target during the holidays, we've expanded the role of Favorite Day to offer key seasonal items. You saw that in November and December with gingerbread kits, hot cocoa bombs, and a huge range of snack mixes. And just a few weeks ago, Valentine's Day was front and center for Valentine's Day.

Speaker Change: That's right when redesigned all in motion our performance brands. The first thing that we did was to engage with 15000 consumers. We talk to fitness coaches. We attended dozens of workout classes, because if you're designing for the consumer it starts with listening to the consumer and we're not just consumer led when we're launching a product where consumer lot in how we.

It continued to grow and develop our own brands because you can't mistake performance for potential cat and Jack has been a runaway success, but we also learned through lifting that we had opportunities to make the brand more appealing to our guests.

Speaker Change: On the other things that led to the adaptive items, we created to help all kids look and feel their best and the expansions we made to our dressy knit dressy assortment, giving families more reasons to choose cat and Jack and target.

Richard H. Gomez: And we'll continue to expand Favorite Day into those big seasonal moments that are so important to our guests and important to keeping Target relevant. Well, Jill, this leads to the enhanced approach we take to brand management, including a team under your leadership. We launched our brand management capability years ago and created an end-to-end process to successfully launch our own brands.

Speaker Change: No consumer insight has also helped to continue to develop and grow favorite day, we launched the brand during the pandemic and we've seen it drive trips build baskets delivering double digit growth year. After year, so as food and beverage has become a go to category for target during the holidays, we have expanded the role of favorite day.

Christina Hennington: And that has enabled an accelerated rollout of own brands over the past five years. And we've been evolving our capabilities and are now operating more like a CPG company, doing research, market analysis, looking hard at the white space. That's shaped our decision making around existing brands, like prioritizing Staples as our flagship home brand and then offering a range of styles within it. That's critical because Target is one of the biggest home retailers in the country, and this is making it easier for our consumers to navigate our assortment. And our brand management work was critical to the success of our new Kitsonware brand, Figment, which debuted last. This isn't the first time selling Kitchenware as part of an own brand, but it is our first own brand devoted solely to Kitchenware, and our guests love it. Baskets with Figment items are 25% larger than our previous own brand offering.

Speaker Change: To offer key seasonal items.

Speaker Change: Saw that in November and December with Gingerbread kits Hot cocoa bombs, a huge range of snack mixes and just a few weeks ago favorite day was front and center for Valentine's Day, and will continue to expand favorite day to those big seasonal moments that are so important to our guests and important to keeping target relevant.

Speaker Change: Well Jos listeners this leads to the enhanced approach, we've taken to brand management, including a team under your leadership.

Speaker Change: We launched our brand management capability years ago, and created an end to end process to successfully launch on brands and that has enabled an accelerated rollout of own brands over the past five years.

Speaker Change: Evolving our capabilities and are now operating more like a CPG company. The research the market analysis looking hard at the white space that shaped our decision making around existing brands like prioritizing threshold is our flagship home brand and then offering a range of styles within it that's critical because target is one of the biggest.

Christina Hennington: And Figment was one of several factors that helped us accelerate our Kitchenware business by more than 500 basis points between Q3 and Q4, taking us from a negative comp to a positive comp. Guests respond to newness and innovation and great design, and Figment is just one example of that. There's been a lot of work in food and beverage to sharpen the focus of our brand portfolio. The launch of a flagship brand, Good & Gather, was the first step. We focus Market Pantry on family favorites at our most affordable prices. And we've also retired our previous snack and dessert brand, Archer Farms, and replaced it with Favorite Day, a brand with a much stronger identity around indulgent treats for the whole family.

Speaker Change: Home retailers in the country and this is making it easier for our consumers to navigate our assortment and our brand management work was critical to the success of our new kitchen, where Brent pigment, which they do basketball. This isn't the first time selling kitchenware as part of an owned brand, but it is our first owned brand devoted solely to kitchen ware and our guests love it.

Speaker Change: [noise] baskets with pigment items are 25% larger than our previous owned brand offering and figment was one of several factors that helped us accelerate our kitchenware business by more than 500 basis points between Q3, and Q4, taking us from a negative comp to a positive comp guest respond to newness and innovation and great design.

Speaker Change: And pigment is just one example of that.

Speaker Change: There's been a lot of work in food and beverage to sharpen the focus of our brand portfolio. The launch of a flagship brand. Good <unk> gather was the first step.

Speaker Change: We focused market pantry on family favorites at our most affordable prices.

Speaker Change: And we've also retired our previous snacking dessert brand Archer farms and replaced it with favorite day, a brand with a much stronger identity around indulgent treats for the whole family.

Richard H. Gomez: All of this helps Target make consumer-centric decisions about our assortment, like the addition of 50 new F&B items for Easter and dozens more that we're launching just in time for the summer season, including a Favorite Day Soda. Now, it sounds simple, but the thoughtful, deliberate, holistic approach to designing, launching, and managing our brands is the difference between rolling out catch-all brands and building brands that consumers love because we're meeting their needs in a really meaningful way. Well, thank you both. I love that!

Speaker Change: All of this helps target make consumer centric decisions about our assortment like the addition of 50, new F&B items for Easter and dozens more that were launching just in time for the summer season, including a favorite day soda.

Speaker Change: Now it sounds simple, but the thoughtful deliberate holistic approach to designing launching in managing our brands. It's the difference between rolling out catch all brands and the difference between that and building brands that consumers love because we're meeting their needs in a really meaningful way.

Christina Hennington: And that's the perfect note to close on consumer centricity. That's a theme running through everything we've covered today. New brands like Gigglescape, Figment, and Dealworthy are relaunched, and powerhouses like Gather and Cat and Jack. So thank you, Rick and Jill, for giving us that insight into our own brand work. It really is incredible.

Speaker Change: Well. Thank you both I love that and that's a perfect note to close on consumer Centricity. That's the theme running through everything we've covered today, new brands like Eagle escape segment and deal worthy, a relaunched up and up and powerhouses like gather and cat and Jack So thank you Rick and Jill for what for that look into our own brand work.

Christina Hennington: When I think about Target's right to win in this environment and our ability to meet key consumer needs, our own brand's foundational to so many of our plans. That's because the investments we made in our capabilities and our team over more than two decades combined to form a competitive advantage that few retailers anywhere can match. And it's not just the competitive moat we're talking about here, because we're not hunkering down and playing defense

Speaker Change: It really is incredible.

Speaker Change: When I think about targets right to win in this environment and our ability to meet key consumer needs our own brands foundational to so many of our plants. That's because the investments we made in our capabilities and our team over more than two decades combined to form a competitive advantage that few retailers anywhere it can match.

Speaker Change: And it's not just a competitive moat, we're talking about here because we're not hunkering down playing defense. This work is our springboard into the future and through the incredible value.

Cara A. Sylvester: This work is our springboard into the future, and through the incredible value we've created through our own brand's offer across each of our key categories and the compelling newness they're adding to our entire assortment, will continue to deepen our relationships with our guests, and will give all consumers compelling reasons to choose Target. Now I'll hand it off to Cara Sylvester, who will tell us more about how we're getting these products in front of consumers and engaging with our guests and potential guests more broadly. Thank you. Cara.

Speaker Change: We value our own brands offer across each of our key categories at the compelling newness theyre, adding to our entire assortment will continue to deepen our relationships with our guests and will give all consumers compelling reasons to choose target.

Speaker Change: Now I'll hand, it off to cure Sylvester, who will tell us more about how we're getting these products in front of consumers and engaging with our guests and potential guests more broadly. Thank you.

Cara A. Sylvester: Thanks, Christina. And hello, everyone. Today, I'm excited to talk about our guest experience. And you might ask, Cara, how do we define guest experience at Target? Well, we think of it as the way we engage across America, from simply saying hello to consumers in a warm Target way to deepening the relationships we have with existing Target guests to how we create moments of discovery, connection, and joy that invite people to choose Target again and again. But before we look back at the previous year and preview what's ahead, I want to ground us from the consumer point of view. Because to understand how Target designs its guest experience, we should start with how people are shopping today. As you heard from Christina, gone are the days when people would follow a consistent and well-defined path from discovery to purchase.

Speaker Change: Sarah.

Speaker Change: Yes.

Cure Sylvester: [noise]. Thanks.

Sylvester: Christina and Hello, everyone.

Sylvester: I am excited to talk about our guest experience and you might ask Kara how do we define gas experienced a target well, we think of it as the way we engage across America from simply saying Hello to consumers in a warm target way to deepening the relationships, we have with existing target guests to how we create moments of discovery.

Sylvester: <unk> enjoy that invite people to choose target again and again.

Cara A. Sylvester: Today, shopping is nonlinear and simply a part of the general ecosystem of our lives. Instead of a stand-alone experience that feels planned or predictable, shopping has become immersive, always-on, and fully integrated into how we all go about our days. A large portion of U.S. consumers, about 40%, start their purchase online, and 20% start on social platforms, and those are just the people who are actively looking to shop. Many more are enticed to shop by the inspiration they find scrolling through their social feeds for hours every day.

Sylvester: But before we look back at the previous year and preview what's ahead I want to ground us in a consumer point of view.

Sylvester: Just to understand how target designs. Its guest experience, we should start with how people are shopping today.

Sylvester: As you heard from Christina gone are the days when people would follow a consistent and well defined path from discovery to purchase.

Sylvester: Today's shopping is non linear and simply a part of the general ecosystem of our lives instead of a standalone experience that feels planned or predictable shopping has become immersive always on and fully integrated into how we all go about our days.

Cara A. Sylvester: This is Expansive retail: non-traditional entry points, seamless transition between stores, online, and social, and fully in tune with what shoppers want and need. To meet these shoppers where they are, we spent a lot of time getting to know what matters to them and seeing the Target experience through their eyes. Our guest space is broad and diverse. In fact, 96% of U.S. adults have shopped Target at some point in their lives.

Sylvester: A large portion of U S consumers about 40% start their purchase online and 20% start on social platforms and those are just the people who are actively looking to shop.

Sylvester: Many more are enticed to shop by the inspiration they find scrolling their social feeds for hours every day.

Sylvester: This is expansive retail.

Sylvester: Non traditional entry points seamless transition between stores online and social and fully into and with what shoppers want and need.

Cara A. Sylvester: Yet, we know that your shopping experience and mine are going to look and feel very different based on a variety of factors. Our families, our interests, our budgets, our schedules, and simply what brings us joy. Expectations also differ by category. For example, if you're on a grocery run, you're looking for reliability and value. And if I'm shopping for one of my daughter's birthdays, I'm looking for

Speaker Change: To meet these shoppers where they are we spent a lot of time getting to know what matters to them and seeing the target experience through their eyes.

Speaker Change: Our guest base is broad and diverse in fact, 96% of U S. Adults have shop target at some point in their life.

Speaker Change: Yet we know that your shopping experience and mine are going to look and feel very different based on a variety of factors our families. Our interest our budgets are schedule and simply what brings us joy.

Cara A. Sylvester: These nuances are especially important for Target, given our diverse multi-category portfolio. Yet even though shopping journeys vary, after gathering feedback from millions of guests about what they care about and how Target fits into their lives, there are a few important truths that unite our guests and shape how we design our experience. First, Target guests love to shop. They consistently list shopping as one of their favorite activities, more so than your average consumer.

Speaker Change: Expectations also differ by category, if you're on a grocery Ron Youre looking for reliability and value and if I'm shopping for one of my daughters birthday, as I'm looking for inspiration and fun.

Speaker Change: These nuances are especially important for target given our diverse multi category portfolio.

Speaker Change: Yet, even though your shop, even though shopping journeys very after gathering feedback from millions of guests about what they care about and how target fits into their lives. There are few important truths that unite our guests and shape, how we design our experience.

Cara A. Sylvester: 90% of guests tell us they're looking for quality products. They also want a meaningful connection with the brand, and they're ahead of the curve when it comes to keeping up with trends. Second, our guests are whenever, wherever, however shoppers, using multiple channels to create the experience that fits into their lives. They're in the driver's seat when it comes to creating the experience that works best for them. And we have to meet them where, when, and how they need us.

Speaker Change: First target guests love to shop.

Speaker Change: They consistently with shopping as one of their favorite activities more so than your average consumer.

Speaker Change: 90% of guests tell us they're looking for quality products. They also want a meaningful connection with the brand and they're ahead of the curve when it comes to keeping up with trends.

Speaker Change: Second our guests are whenever wherever however, shoppers using multiple channels to create the experience that fits into their lives.

Cara A. Sylvester: Finally, one more important fact that defines Target guests: they are loyal, really loyal. Our most engaged guests account for a greater share of sales than we see at other competitors, showing that the connection we have with guests is sticky and drives growth and profitability. Quite simply, guests look to Target for inspiration, to find on-trend, high-quality items at a great price, and to have some fun. Are we affordable? Yeah.

Speaker Change: They are in the driver's seat when it comes to creating the experience that works best for them and we have to meet them, where when and how they need us.

Speaker Change: Finally, one more important fact that a defined target guest they are loyal really loyal our most engaged guests account for a greater share of sales that we see at other competitors showing that the connection we have with guests is sticky and drive growth and profitability.

Speaker Change: Quite simply Gaslog to target for inspiration defined on trend high quality items at a great price and to have some fun.

Cara A. Sylvester: Are we fast and convenient? Absolutely. Can you check off everything on your list, no matter how you prefer to shop?

Cara A. Sylvester: You bet. But there are other retailers who can say the same. What makes Target different, what makes guests consistently choose us over any other retailer, is how we make them feel when they interact with us. How we design our experience to elevate ordinary moments into extraordinary ones with a carefully curated assortment, bursts of discovery and delight, and plenty of human connection along the way. There, of course, are the big splashes of the Target brand that grab headlines, generate buzz, and make people smile, like our Halloween ghoul, Lewis, who took the season by storm, or the ugly squirrel sweater that we created in 48 hours to pay homage to the version worn by Taylor and Travis over the holidays, or turning the Las Vegas sphere into a huge holiday snow globe complete with bullseye in residence.

Speaker Change: Are we affordable yes are.

Speaker Change: We fast and convenient absolutely can you check off everything on your left no matter, how you prefer to shop you bought.

Speaker Change: But there are other retailers, who can say the same.

Speaker Change: What makes target different what makes guests consistently choose us over any other retailer is how we make them feel when they interact with us.

Speaker Change: How we design our experience to elevate ordinary moments into extraordinary ones with a carefully curated assortment burst of discovery and delight and plenty of human connection along the way.

Speaker Change: There are of course, other big splashes of the target brand that grabbed headlines generate pause and make people smile.

Speaker Change: Like our Halloween go Lewis, who took this season by storm.

Speaker Change: Or the ugly squirrel sweater that we created in 48 hours to pay homage to the version worn by Taylor and Travis over the holidays.

Speaker Change: Or turning the Las Vegas sphere into a huge holiday snow globe complete with bullseye and residents.

Cara A. Sylvester: But there are also millions of smaller everyday moments that strengthen the bonds we have with our guests, making their lives a little bit easier and a little bit brighter. So when I visited one of our stores in San Antonio, Texas last year, I kept hearing about a team member who I needed to meet. In fact, even some guests stopped me and said I absolutely needed to meet her, and they were right.

Speaker Change: But there are also millions of smaller everyday moments that strengthen the bonds, we have with our guests, making their lives a little bit easier and a little bit brighter.

Speaker Change: So when visiting one of our stores in San Antonio, Texas last year I kept hearing about a team member who I needed to meet.

Speaker Change: In fact, even some gas stop me and said I absolutely needed to meet her.

Cara A. Sylvester: She was somebody I absolutely needed to meet, and I wanted you to meet her too. Let me introduce you to Amelia. Good afternoon. How are you doing?

Speaker Change: And they were right. She was somebody I absolutely needed to meet and I wanted you to meet her two let me introduce you to Amelia.

Amelia: Good afternoon.

Amelia: How you doing.

Cara A. Sylvester: How are you doing, Sunshine? I'm back to see Miss Amelia. Just her smile, her presence, makes us feel really warm. She's just really kind and nice. Hi, Sunshine. What's your name? When I think of Amelia, I definitely think of somebody that's warm, that's genuine, and caring. She even started calling me Sunshine almost the first day that I met her.

Amelia: Are you doing.

Amelia: A magazine in the mail.

Amelia: Just her smile her presence she makes us feel really warm he is really kind of nice.

Amelia: Okay.

Amelia: When I think of a myriad definitely thing is so many events warm that's genuine caring she even started calling me sunshine almost through the first day that I met her how're you doing.

Cara A. Sylvester: How are you doing, Sunshine? With Amelia, she definitely has such an impact on the store that she starts to affect how you feel being here. She just brings the light out of me. It's just amazing how she can connect with anybody. I see you looking at Miss Amelia. To make somebody leave with a smile makes my day. Making them feel like they are important, and they are important to us. Thank you so much.

Amelia: With the Emilia she definitely has such an impact on the store that she starts to affect how you feel being here. She just brings the line out of me. It's just amazing how she can connect with anybody.

Amelia: Journalism failure to meet somebody leave with a smile makes reminder, making them feel like they are important and they are important to us. Thank you all might have a great day I would say 50% of our surveys are all about $1 million Amazing service that she gives people come here they need they need hope enjoy and a positive attitude.

Cara A. Sylvester: Have a great day! I would say 50% of our surveys are all about Amelia and the amazing service that she gives. People come here, they need hope and joy and a positive attitude somewhere, and that lady gives it consistently day after day after day. She knows the names of my grandchildren.

Amelia: Two somewhere in that Lady gives it consists.

Amelia: Currently.

Amelia: After day after day, she knows the names and my grandchildren. She remembers that when we come here community and unity of everything So I believe it helps people want to come back to your in house My mom when she can't work the machine.

Cara A. Sylvester: She remembers them when we come here. Community and unity is everything, so I believe it helps people want to come back. She even helps my mom when she can't work the machine.

Cara A. Sylvester: She's just a really bright target. We can all make a difference by treating our guests like family, being kind to them, and speaking to them. We're losing touch with human connection, and I feel like having people like Amelia really solidifies what it should be. It makes a much bigger impact than I think anyone realizes. I feel that I'm changing lives and I'm sowing good seeds of love and kindness in them. Show the love; let the love flow, so it goes on to the next person. Everybody walks through that door, somebody, and everybody is special to me. It makes me emotional because I just, I love people.

Amelia: He's just really brightened target.

Amelia: Can make a difference by treaty, our guest's life family being kind to them speaking to them, we're losing touch of human connection and I feel like having people like Amelia really solidify what it should be it makes it a much bigger impact than I think anyone realizes I feel that I'm changing alive and I'm feeling good seed and love and kindness.

Amelia: Them Sheldon love not the loan flow. So it goes on to the next person everybody wants to get doors somebody made bodies notion to me and makes me emotional because obviously the unknown people. She is most amazing person I've met in this business you know I'll just wish I could go into every target and just show them loving the compassion that it would be.

Cara A. Sylvester: She's just the most amazing person that I've met in this business. You know, I just wish I could go to every target and just show the love and the compassion that if you show your guests, what an impact they have. I know we do it here. Are you recording that?

Amelia: So your guess would it impact although we do it here.

Speaker Change: I don't recall.

Speaker Change: Yeah.

Cara A. Sylvester: So I love that video because it captures who we are as a brand and what we aim to deliver across our entire guest experience. Our team brings so much empathy to their work. And it's not just the face-to-face interactions at checkout or in the aisles. Empathy is infused into how we design every part of the guest experience. Drive-ups are a perfect example. The reason guests love drive-up at Target is because it's a service that reflects what's most important to them. It's easy.

Speaker Change: Yeah.

Speaker Change: So I love that video because it captures who we are as a brand and what we aim to deliver across our entire guest experience.

Speaker Change: Our team brings so much empathy to their work and.

Speaker Change: And it's not just a face to face interactions at checkout or in the aisles empathy is infused into how we design every part of the guest experience.

Speaker Change: Drive up the perfect example.

Speaker Change: The reason guests love drive up the target because its a service reflects what's most important to them.

Cara A. Sylvester: Swing by; we'll bring out your order to you or even pick up your return. Fast. Just tell us you're on your way. We'll be ready when you are.

Speaker Change: It's easy swing by will bring out your order to you or even pick up your return.

Speaker Change: It's fast just tell us you're on your way will be ready when you are no pick up windows to worry about because we work on your schedule.

Cara A. Sylvester: No pickup windows to worry about because we work on your schedule. It's fun at a Starbucks to make your trip that much more relaxing, and it's all free. This is what we mean by designing an experience for our guests, looking at a service through their eyes, using Target technology to rapidly iterate and introduce new capabilities, and finding ways to not only meet their needs but add something extra to make their day. That's the Target experience. You saw that from us in 2023 as we continued on our path to be America's favorite discovery destination. Our stores are known as a getaway spot, somewhere you can go and enjoy a few minutes or a few hours browsing the aisles with friendly team members to help you find just what you need.

Speaker Change: It's fun out of Starbucks to make your trip that much more relaxing and it's all free.

Speaker Change: This is what we mean by designing an experience for our guests looking at a service through their eyes, using target technology to rapidly iterate and introduce new capabilities and finding ways to not only meet their needs, but add something extra to make their day, that's the target experience.

Speaker Change: You saw that from us in 2023, as we continued on our path to be Americas favorite discovery destination.

Speaker Change: Our stores are known as a getaway spot somewhere you can go and enjoy a few minutes or a few hours browsing the aisles with friendly team members to help you find just what you need.

Cara A. Sylvester: We're bringing that same sense of exploration and relaxation to guests who walk through our digital front door. Last year, shoppers visited us more than six billion times on our digital channels, looking for the same warmth, newness, and discovery that greets them when they walk into one of our front doors. In fact, more than half of guests who make a purchase in our stores have visited our app or our site that very same day, reinforcing how shoppers move fluidly from physical to online and back again. And Target's uniquely suited to be there for our guests when inspiration strikes because of our agile technology and the pathways we create between stores, digital, social, marketing, and more. The experience we created this past holiday season is a great example. This year, there was clear connectivity across our experience to create a memorable and meaningful visit no matter how you chose to shop with us. Holiday Gateways in-store and online, digital gifting stations, product packaging to make you smile, in-store playlists to set the mood, festive TikTok content, and Target Wonderland community pop-up events.

Speaker Change: We're bringing that same sense of exploration and relaxation to gas to walk through our digital front door.

Speaker Change: Last year shoppers visited us more than 6 billion times on our digital channels looking for the same warmth newness and discovery that greets them when they walk into one of our front doors.

Speaker Change: In fact more than half of gas to make a purchase in our stores have visited our app or our site that very same day, reinforcing how shoppers move fluidly from physical to online and back again.

Speaker Change: [noise] targets uniquely suited to be there for our guests when inspiration strikes because of our agile technology and the pathways, we create between stores and digital social marketing and more.

Speaker Change: The experience we created this past holiday season is a great example of.

Speaker Change: This year, there was clear connectivity across our experience to create a memorable and meaningful visit no matter, how you chose to shop with us.

Speaker Change: Holiday gateways in store and online.

Speaker Change: Digital gifting stations product packaging to make you smile in store playlists to set the mood festive tictoc content and target Wonderland community pop up events. These all work together to celebrate the holidays with our guests in a way that only target can.

Cara A. Sylvester: These all work together to celebrate the holidays with our guests in a way that only Target can. Our ongoing investment in our digital capabilities has enabled this year's fully connected holiday celebration. In 2023, we transformed our digital experience from a utilitarian shopping platform that was one size fits all to one that is filled with warmth, greets you personally, just like Amelia would, and delivers a custom blend of newness, trend, value, and ease just for you. And it's not just what the guests see, but what's happening behind the scenes to power these personalized experiences. We're using generative AI to power our product detail pages to provide more friendly and relevant explanations of what guests want to know about our assortment. AI also powers features like shop the look and our get it now assistant, which lets you know when items in your cart are available for pickup at a nearby store.

Speaker Change: Our ongoing investment in our digital capabilities enabled this year's fully connected holiday celebration.

Speaker Change: In 2023, we transformed our digital experience from a utilitarian shopping platform that was one size fits all.

Speaker Change: That is filled with warmth greets you personally just like Amelia wood and delivers a custom blend of newness trend value and he's just for you.

Speaker Change: And it's not just what the guests see but what's happening behind the scenes to power these personalized experiences.

Speaker Change: We're using generative AI to power our product detail pages to provide more friendly and relevant explanations of what guests want to know about our assortment.

Speaker Change: AI also powers features like shop, the look and our get it now assistant which lets you know and items in your cart are available for pickup at a nearby store.

Cara A. Sylvester: It's also the engine behind the insights we use to give guests more personal experiences and rewards through our loyalty program, Target Circle. And it's a key element of how we create thoughtfully curated campaigns for consumers through our Advertising Business Roundout. This might be a good time to talk about how Rondell seamlessly integrates into the guest experience and continues to drive more than $1.5 billion in value for our business. Growing more than 20% in 2023, Roundel is the powerful bridge between our guests and the brands they love. Rondell works with more than 2,600 vendors to deliver creative that is responsive and wholly consistent with the Target experience.

Speaker Change: It's also the engine behind the insights we use to guess give guests more personal experiences and rewards through our loyalty program target circle.

Speaker Change: And it's a key element of how we create thoughtfully curated campaigns for consumers through our advertising business round out.

Speaker Change: It might be a good time to talk about how round Dallas seamlessly integrates into the guest experience and continues to drive more than $1 5 billion in value for our business.

Speaker Change: Growing more than 20% in 2023 round al is the powerful bridge between our guests and the brands They love.

Speaker Change: <unk> works with more than 2600 vendors to deliver creative that is resonant in wholly consistent with the target experience in return.

Cara A. Sylvester: In return, our guests receive content that speaks directly to their interests and preferences. For example, take our holiday campaign with Apple. Tech products top many guests' holiday gift lists, so we work with Apple on a comprehensive campaign to keep their products front and center for our guests this holiday season, with custom content designed to reach our guests across a number of platforms, including connected TV, YouTube, and social media. Our co-created holiday video ad made us the first Apple partner to highlight the new double-tap feature on its Watch Series 9 in a spot.

<unk> received content that speaks directly to their interests and preferences.

Speaker Change: Take our holiday campaign with Apple.

Speaker Change: Tech products topped many guest holiday gift list. So we worked with Apple on a comprehensive campaign to keep their products front and center for our guests. This holiday season with custom content designed to reach our guests across a number of platforms, including connected TV Youtube and social media.

Speaker Change: Our co created holiday video AD made us the first Apple partner to highlight the new double tap feature on its watch series nine in a spot.

Cara A. Sylvester: To add relevance, we used AI on our site to position the right products at the right moment. Think serving up promotions to red card holders so they get the best deal plus an extra 5% off by using their card, or helping a guest find the perfect gift for their teenager. Hint: go for the AirPods Pro.

Speaker Change: To add relevance, we used AI on our site to position the right products in the right moments.

Speaker Change: Serving up promotions to Red card holders so they get the best deal plus extra 5% off by using their card.

Speaker Change: Or helping our guests find the perfect gift for their teenager pinch go for the Airpods problem.

Cara A. Sylvester: This integrated campaign tapped into our powerful ecosystem of digital, social, marketing, and merchandising and absolutely resonated with shoppers. We deepened relationships with existing fans and attracted new ones with a significantly higher new guest rate compared to prior Apple campaigns at Target. In addition to the way Roundel powers the guest experience when guests are browsing, our app or website unique to Target is our media mix, with 35% of revenue being generated outside of our own properties.

Speaker Change: This integrated campaign tapped into our powerful ecosystem of digital social marketing and merchandising and absolutely resonated with shoppers.

Speaker Change: We deepen relationships with existing fans and attracting new ones with a significantly higher new gas rate compared to prior apple campaigns that target.

Speaker Change: In addition to the way round L powers. The guest experience when guests are browsing, our app or website unique to target is our media mix with 35% of revenue being generated outside of our own properties that means that we're able to connect with consumers wherever they are like on social or streaming platforms driving more than 250.

Cara A. Sylvester: That means that we're able to connect with consumers wherever they are, like on social or streaming platforms, driving more than 250 million visits to Target properties in 2023. And social is increasingly where our guests are. We have more followers than any other mass retailer on TikTok, with incredibly high engagement, which underscores our opportunity to connect the love that guests have for us on social to a smooth path to purchase in stores and on our digital property. Our guests use social to stay in touch with the latest trends in a way that feels specifically designed for them.

Speaker Change: Million visits to target properties in 2023.

Speaker Change: And social is increasingly where our guest star we have more followers than any other mass retailer on tick tock with incredibly high engagement, which underscores our opportunity to connect the loved that guests have for us on social to a smooth path to purchase in stores and on our digital properties.

Speaker Change: Our guests use social to stay in touch with the latest trends in a way that feels specifically designed for them. So.

Cara A. Sylvester: So we're working across the spectrum of social, from user-generated content and Target creators to our talent partners and Target-owned platforms to make it easier for guests to maintain that discovery mindset as they shop. Over the coming year, you'll see us experimenting with bringing off-platform content onto our digital properties so guests can find inspiration right on our site and our app, and we will blend social and commerce to create an experience that taps into real-time trends and makes offline inspiration to online purchase intuitive and easy. So imagine a guest looking for just the right things for a housewarming celebration.

Speaker Change: So we're working across the spectrum of social from user generated content in target creators to our talent partners and target owned platforms to make it easier for guests to maintain that discovery mindset as they shop.

Speaker Change: Over the coming year, you'll see us experimenting to bring off platform content onto our digital properties. So guests can find inspiration right on their site and our app.

Speaker Change: And we'll blend social and commerce to create an experience that taps into real time trends and makes offline inspiration to online purchase intuitive and easy.

Speaker Change: So imagine a gas looking for just the right things for our housewarming celebration.

Cara A. Sylvester: They open our app, which is personalized just for them, and type in housewarming party ideas. Then, using generative AI search, they see the latest products that fit their style and preferences, including delicious snacks from Good & Gather, chic party supplies, modern glassware, and even some new party outfits. We brought the fun of wandering the aisles of our stores alongside inspiration from lifestyle influencers to spark new finds, like beautiful living room decor. Our guests use 3D visualization to see it in their space and AI-powered reviews to learn more. They love it and snap it up along with their must-have party supplies.

Speaker Change: They open our App, which is personalized just for them and type in Housewarming Party ideas.

Speaker Change: Using generative AI search they see the latest products that fit their style and preferences, including delicious snacks from good and gather chic party supplies modern glassware, and even some new party outfits.

Speaker Change: We brought the fun of wandering the aisles of our stores alongside inspiration from lifestyle Influencers to spark new findings like beautiful living room decor.

Our guests uses three D visualization to see it in their space and AI powered reviews to learn more.

Speaker Change: They love it and snap it up along with their must have party supplies.

Cara A. Sylvester: Within a few hours, their haul arrives thanks to same-day delivery. They love the item so much, they share their finds on social media, inspiring other guests to shop Target. This is the future our teams are working on today, a seamless, fluid shopping experience across stores, digital, and social, centered on what our guests want and need. Deepening our connection with them and making millions of guests feel that every visit is made just for them is at the heart of our loyalty program, Target Circle. We introduced the program in 2019 as a way to say thank you to guests with deals, rewards, and perks. Today, we have more than 100 million members who have earned $2 billion in rewards.

Speaker Change: Within a few hours there haul arrives thinks the same day delivery.

Speaker Change: They love the items so much they share their finds on social media inspiring other guests to shop target.

Speaker Change: This is the future our teams are working on today seamless fluid shopping experience across stores digital and social and centered on what our guests want and need.

Speaker Change: And knowing what our guests want and need.

Speaker Change: Deepening our connection with them and making millions of guests feel that at every visit is made just for them is at the heart of our loyalty program target circle.

Speaker Change: We introduced the program in 2019 as a way to say, thank you to gas with deals rewards and perks.

Speaker Change: Today, we have more than 100 million members, who have earned $2 billion in rewards.

Cara A. Sylvester: Members have told us how much they value the program, and it shows. Last year, they visited us 5 times more often and spent 5 times more than guests who aren't members of Target's circle. Yeah, and our personalized deals and bonus offers powered by our proprietary technology drove 1.5 billion dollars in incremental sales last year. But members have also told us that it could be even easier to save and know how much they're saving.

Speaker Change: Members have told us how much they value the program and it shows last year. They visited US five times more often and spent five times more than guests who aren't members of target circle.

Speaker Change: Yep.

Speaker Change: And our personalized deals and bonus offers powered by our proprietary technology drove $1.5 billion in incremental sales last year.

Speaker Change: Yeah members have also told us that it could be even easier to save and know how much they are saving so.

Cara A. Sylvester: So we took this opportunity not just to improve our program but to reimagine how we think about loyalty across the entirety of our experience. And today, I am thrilled to introduce a new Target circle, one that brings the best of Target together under one loyalty program. Here's a short video that we created to sum up what's new and what's next. Since Target's inception, we've been focused on loyalty and really deepening the relationships that we have with our guests. More than 30 years ago, we debuted our Target Red Card credit card.

Speaker Change: So we took this opportunity not just to improve our program, but to re imagine how we think about loyalty across the entirety of our experience.

Speaker Change: So today I am thrilled to introduce a new target circle, one that brings the best of target together under one loyalty program. Here's a short video that we created to sum up what's new and what's next.

Speaker Change: Since targets infection, we've been focused on loyalty and really deepening the relationships that we have with our guests more than 30 years ago. We debuted our target Red card credit card. We took another step forward in 2019, introducing our formal royalty program target circle target circle allows us to connect with guests and have a two way relationship where we're really get to.

Cara A. Sylvester: We took another step forward in 2019, introducing our formal loyalty program, Target Circle. Target Circle allows us to connect with guests and have a two-way relationship where we really get to understand you. And we're able to deliver personalized deals and offers and an experience that's just right for you. We knew we needed to evolve Target Circle by listening directly to our guests. And we listen deeply. And the reality is that we have some friction in the program today. And so we are leaning into ease.

Speaker Change: And Hugh and we're able to deliver personalized deals and offers and an experience that suggests right for you. We knew we needed to evolve target circle by listening directly to our guests and we listen deeply and the reality is that we have some friction in the program today and so we are leaning into Es, we want all of our guests to feel welcome and.

Cara A. Sylvester: We want all of our guests to feel welcome and appreciated each and every time that they shop with us, and the upgraded Target Circle experience allows us to do just that. So we know our guests like Target Circle, but our ambition is to have our guests love Target Circle. And that is why we're bringing three programs together. We are investing in ease and simplicity within Target Circle. Scan your app at checkout, and you get deals automatically.

Speaker Change: <unk>, each and every time, they shop with us and the upgraded target circle experience allows us to do just that.

Speaker Change: So we know we're against life targets, our call, but our ambition is to have our guests love target circle and that is why we're bringing three programs together, we are investing an ease and simplicity within targets of our fall scan your app at checkout and you get deals automatically.

Cara A. Sylvester: We are investing in instant 5% savings, free two-day shipping, and extended return windows in Target Circle card. And then we are bringing unlimited same-day delivery in as little as an hour to our guests within Target Circle 360. By evolving and upgrading our experience, we're going to make it even easier for our guests to interact with Target in a way that feels right for them. We're confident with the relaunch of Target Circle that not only will our current guests shop with us more often, but we're well positioned to welcome even more new shoppers to Target. It really is the best way to get more Target.

Speaker Change: We are investing in instant 5% thieving free two day shipping extended return windows in targets for cars and then we are bringing unlimited same day delivery in as little as an hour sure guests within target Circle 360.

Speaker Change: By evolving and upgrading our experience, we're going to make it even easier for our guests to interact with target in a way that feels right for them. We're confident with the relaunch of target circle, but not only will our current guests shop us more often but we're well positioned to welcome even more new shoppers to target really is the best way to get more target Reimagining target circle is.

Cara A. Sylvester: Reimagining Target Circle is one of the biggest initiatives for us as a company in the next year and really accelerates the company's next phase of growth. So bringing together Target Circle, Target Circle Card, and Target Circle 360 simplifies and expands how we deliver value to our guests. And as we've been talking about, we designed the program to give guests flexibility and control in how they shop. There is the Target Circle our guests know and love today that gives every member access to the best deals and rewards at Target. There's absolutely no cost to join.

Speaker Change: One of the biggest initiatives for us as a company in the next year and really accelerates the company's next phase of growth.

Speaker Change: So, bringing together target circle target circle card and target circle, III 60, simplifies and expands how we deliver value to our guests.

Speaker Change: And as we've been talking about we designed the program to give guests flexibility and control in how they shop.

Speaker Change: Theres a target circle, our guests know and love today that gives every member access the best deals and reward the target Theres absolutely no cost to join.

Cara A. Sylvester: What's new is they can now shop Target without having to search for and add offers. Deals are automatically applied at checkout, plus they'll continue to receive partner perks with Ulta Beauty and Apple and even more rewards through personalized bonuses based on their shopping behavior. For those guests who want to save even more, the Target Circle Card offers an extra 5% off each trip. This is on top of the automatic savings they receive as Target Circle members, plus free two-day shipping, extended time for returns, and no annual fee. And with credit card, debit card, or reloadable card options, consumers can find the product that's right for them. And finally, for those who want the magic of Target delivered to their door in as little as one hour, there's Target Circle 360. An extension of the same-day capabilities we've built since our acquisition of SHIPT in 2017, Target Circle 360 members can order everything from groceries to household essentials to the newest must-have item with Members even have access to SHIP's multi-retailer marketplace, which gives them access to even more items from their favorite local stores. No waiting for days for boxes to arrive at your doorstep; just unlimited same-day delivery that we're rolling out to guests at the promotional price of $49, which will be the standard price for Target CircleCard holders.

Speaker Change: What's new is they can now shop target without having to search for an AD offers deals are automatically applied at checkout, plus they'll continue to receive partner perks with Ulta beauty and Apple and even more rewards through personalized bonuses based on their shopping behavior.

Speaker Change: For those gas do you want to save even more target circle card offers an extra 5% off each trip. This is on top of the automatic savings they receive as target circle members plus free two day shipping extended time for returns and no annual fee.

Speaker Change: And with credit card debit card or reloadable card options consumers can find the product that's right for them.

Speaker Change: And finally for those who want the magic of target delivered to their door in as little as one hour there's target circle 360.

Speaker Change: An extension of the same day capabilities, we've built since our acquisition of shipped in 2017 target Circle III 60 members can order everything from groceries to household essentials to the newest must have item with no additional fees no markups and support from our preferred shopper.

Speaker Change: Members, even have access to ships multi retailer marketplace, which gives them access to even more items from their favorite local stores.

Speaker Change: No waiting for days for boxes to arrive on your doorstep just unlimited same day delivery that we're rolling out to guests at the promotional price of $49, which will be the standard price for target circle cardholders.

Cara A. Sylvester: Guests will have access to the new Target Circle starting April 7th, and we can't wait for them to feel the difference. This is just the beginning for Target. Our AI-powered models will continue to deepen our relationship with guests and enable us to deliver one-on-one personalization at scale. And with this new foundation in place, we'll continue adding benefits and perks based on what matters most to our guests, like exclusive partnerships, product offers, and more so they can get the most out of shopping at Target. This goes back full circle, pun intended, to how people are shopping today.

Speaker Change: Guests will have access to the new target circle, starting April 7th we can't wait for them to feel the difference.

This is just the beginning for target circle.

Our AI powered models will continue to deepen our relationship with guests and enable us to deliver one on one personalization at scale.

Speaker Change: And with this new foundation in place, we'll continue adding benefits and perks based on what matters most to our guests like exclusive partnerships product offers and more so they can get the most out of shopping at target.

Speaker Change: This goes back full circle pun intended to how people are shopping today shopping is dynamic and so are we the investments, we're making reflect our focus on consumers' preferences and needs. So we continue to be their first choice for discovery delight and experiences that make them smile.

Cara A. Sylvester: Shopping is dynamic, and so are we. The investments we're making reflect our focus on consumers' preferences and needs. So we continue to be their first choice for discovery, delight, and experiences that make them smile. That's Target's guest experience at its best.

Speaker Change: That's targets guest experience at its best building connection and celebrating everyday moments in meaningful and memorable ways moving with our guests through their lives. So we're able to bring joy whenever we can.

Michael J. Fiddelke: Building Connection and Celebrating Everyday Moments in Meaningful and Memorable Ways. Moving with our guests through their lives so we're able to bring joy whenever we can. That's the Target magic, and it's what fuels our future. Now I'd like to welcome a familiar face with an expanded title to the stage, Michael Fiddelke. Thanks and good morning, everyone.

Speaker Change: That's the Taj a magic and it's what fuels our future.

Speaker Change: Now I'd like to welcome a familiar face with an expanded title to the stage Michael said I'll keep.

Speaker Change: [music].

Michael: Thanks, and good morning, everyone as Cara just mentioned I've recently taken on a new role and while I'll be staying on as CFO for a little while longer I'm honored and excited to be leading our incredible operations team as chief operating officer.

Michael J. Fiddelke: As Cara just mentioned, I've recently taken on a new role, and while I'll be staying on as CFO for a little while longer, I'm honored and excited to be leading our incredible operations team as Chief Operating Officer. As an engineer by training, I've always had a passion and respect for the work of my new team, and I've learned a lot working with them and alongside them during my 20-plus years at Target. As John Hulbert would tell you, over the years, I've often added complexity to our investor travel so we could squeeze in just one more store visit.

As an engineer by training I've always had a passion and respect for the work of my new team and I've learned a lot working with them and alongside them. During my 20 plus years at target.

Michael: As John Hulbert would tell you over the years I've often added complexity to our investor travel. So we could squeeze in just one more store visit.

Michael J. Fiddelke: And throughout the recent holiday season and so far this new year, it's been great to have an opportunity to spend even more time with teams in both our stores and supply chain facilities. While our financial conversations often focus on the metrics we use to assess our performance, there's no substitute for seeing firsthand the strength of our operations, the benefits that come from well-managed inventory and newness, and hearing what our talented team is focused on building for the future. So before I move into the financial portion of my remarks, I'm gonna spend a few minutes on my priorities as I move into this new role. And, as I've mentioned to my new team, I'm coming into this job at a time when our operations are in a very strong position. As such, my top priority is to build on the foundation that John Mulligan and the team have already established, and I'm fortunate to have an outstanding group of leaders already in place.

Michael: And throughout the recent holiday season, and so far this new year, it's been great to have an opportunity to spend even more time with teams in both our stores and supply chain facilities.

Michael: While our financial conversations often focus on the metrics, we use to assess our performance. There is no substitute for seeing firsthand the strength of our operations the benefits that come from well managed inventory of newness and hearing what our talented team is focused on building for the future.

Speaker Change: So before I move into the financial portion of my remarks, I'm going to spend a few minutes on my priorities as I move into this new role.

Speaker Change: And as I've mentioned to my new team I'm coming into this job at a time when our operations are in a very strong position as.

Speaker Change: As such my top priority is to build on the foundation that John Mulligan and the team have already established and I'm fortunate to have an outstanding group of leaders already in place.

Michael J. Fiddelke: As you've heard from John over the years, the operations team is focused on advancing multiple long-term initiatives to expand our footprint, modernize how we support our business, and advance our company strategy. These efforts begin with investments in our store network, developing new locations, remodeling existing ones, supporting key partnerships like Ulta Beauty, enhancing our same-day services, and more. We're also transforming our supply chain. This includes our journey to automate upstream replenishment with a focus on reducing store workload and increasing reliability. It also includes the build out of our Certification Center Network, which offers faster delivery times while meaningfully reducing the cost of last mile delivery.

Speaker Change: As you've heard from John over the years. The operations team is focused on advancing multiple long term initiatives to expand our footprint modernize how we support our business and advance our company strategy.

Speaker Change: These efforts begin with investments in our store network developing new locations remodeling existing ones supporting key partnerships like Ulta beauty enhancing our same day services and more.

Speaker Change: We're also transforming our supply chain. This includes our journey to automate upstream or punishment with a focus on reducing store workload and increasing reliability.

Speaker Change: It also includes the Buildout of our Sortation Center network, which offers faster delivery times, while meaningfully reducing the cost of last mile delivery.

Michael J. Fiddelke: Beyond this investment in our infrastructure, we're partnering with teams across the company to enhance our inventory positioning and demand forecasting, leveraging AI and machine learning to enhance our speed, consistency, and efficiency. And, of course, we're focused on the support and development of our team, including their pay, benefits, training, and well-being. As I've said consistently during my time as CFO, our team is our most valuable asset, and I'm bringing that perspective into my new role. As Christina mentioned earlier, beginning last year, our team renewed its focus on retail fundamentals after several years of managing through unusually high volatility. These efforts focused first on in-stocks but encompassed a broad array of measures relating to the guest experience.

Speaker Change: Beyond this investment in our infrastructure, we're partnering with teams across the company to enhance our inventory positioning and demand forecasting.

Speaker Change: Leveraging AI and machine learning to enhance our speed consistency and efficiency.

Speaker Change: And of course, we're focused on the support and development of our team, including their pay benefits training and wellbeing.

Speaker Change: As I've said consistently during my time as CFO. Our team is our most valuable asset and I'm, bringing that perspective into my new role.

As Kristina mentioned earlier, beginning last year, our team renewed their focus on retail fundamentals after several years of managing through unusually high volatility.

Speaker Change: These are first focus first on in stocks, but encompassed a broad array of measures relating the guest experience.

Michael J. Fiddelke: In total, last year, our store teams rolled out new training on 25 separate best practices, and we've seen the benefit in our recent guest surveys. While those initial improvements are encouraging, we'll continue on that journey throughout this year to ensure we're setting the standard for the shopping experience in the U.S. So now, let me turn to our financial results. And while our focus today is on the future, I'm also going to give a look back for perspective on our longer-term trajectory. I'll begin with a review of last year's financial performance and then compare and then examine how it compares with a decade ago. With that in mind, I'll look ahead to our aspirations over the next 10 years and conclude with our outlook for 2024. It's clear that last year was unusual, as top-line results came in below our guidance.

Speaker Change: In total last year, our store teams rolled out new training on 25 separate best practices and we've seen the benefit in our recent guest service.

Speaker Change: While those initial improvements are encouraging we will continue on that journey throughout this year to ensure we're setting the standard for the shopping experience in U S retail.

Speaker Change: So now let me turn to our financial results and while our focus today is on the future I'm also going to give a look back for perspective on our longer term trajectory.

Speaker Change: I'll begin with a review of last year's financial performance and then compare and then examine how it compares with a decade ago.

Speaker Change: With that context, I'll look ahead to our aspirations over the next 10 years and conclude with our outlook for 2024.

Speaker Change: It's clear that last year was unusual as topline results came in below our guidance, but our bottom line performance came in well ahead of expectations.

Michael J. Fiddelke: But our bottom line performance came in well ahead of expectations. For the full year, we saw a 3.7% decline in our comparable sales, reflecting quarterly traffic trends that varied widely from the strongest performance in Q1 to the softest in Q2 and an improving trend in Q3 and Q4. As traffic improved, we saw a better comp sales trend, better digital sales, and a dramatic improvement in discretionary categories. On the operating margin line, our business delivered dollar growth of nearly two billion dollars last year, well beyond our initial guidance of a billion dollars or more. This was driven by a rebound in our operating margin rate from historic lows in 2022, a year where we faced unusually high markdown rates, sky-high freight and transportation costs, and rising rates of inventory shrink.

For the full year, we saw a three 7% decline in our comparable sales, reflecting quarterly traffic trends that varied widely from the strongest performance in Q1 to the softness in Q2, and an improving trend in Q3 and Q4.

Speaker Change: As traffic improved we saw a better comp sales trend better digital sales and a dramatic improvement in discretionary categories.

On the operating margin line, our business delivered dollar growth of nearly $2 billion last year, well beyond our initial guidance of $1 billion or more.

Speaker Change: This was driven by a rebound in our operating margin rate from historic lows in 2022, a year, where we faced unusually high markdown rates Sky high freight and transportation costs and rising rates of inventory shrink.

Michael J. Fiddelke: Last year, as the team managed inventory really well, markdown rates improved dramatically, and we saw a huge reduction in freight and transportation costs, more than we expected as we entered the year. Healthy inventory levels also helped our operations. Without the need to manage overfilled back rooms, store teams were able to flow product onto their sales floor more easily and increase their focus on guest-facing work. Similarly, our supply chain facilities were able to operate more smoothly without the necessary labor hours and extra touches required to manage overly full buildings.

Speaker Change: Last year as the team managed inventory really well markdown rates improved dramatically and we saw a huge reduction in freight and transportation costs more than we expected as we entered the year.

Speaker Change: Healthy inventory levels also helped our operations without the need to manage Overfilled backrooms store teams were able to flow product onto their sales floor more easily and increase their focus on guest facing work.

Speaker Change: Similarly, our supply chain facilities, we're able to operate more smoothly without the necessary labor hours and extra touch is required to manage overly full buildings.

Michael J. Fiddelke: Last year, we also benefited meaningfully from the efficiency efforts we launched about a year ago. When we began this work, we said we expected to realize $2 to $3 billion in permanent efficiency gains over a three-year period. And with the first of those three years behind us, we continue to feel very good about our progress. More specifically, we estimate that these efforts delivered savings of more than half a billion dollars last year, helping to offset other profit pressures, including the deleveraging effect of a soft top line, continued investments in pay and benefits for our team, and higher inventory shrinkage. And finally, last year we continued to benefit from our Roundel ad business, which grew more than 20% in a year when we were facing challenging trends on the top line. Altogether, last year's profit performance led to growth in our GAP and adjusted EPS of nearly $3, or just under 50% compared with the prior year. In addition, cash from operations more than doubled from $4 billion in 2022 to $8.6 billion last year.

Last year, we also benefited meaningfully from the efficiency efforts, we launched about a year ago.

Speaker Change: When we began this work we spud, we said, we expected to realize $2 billion to $3 billion and permanent efficiency gains over a three year period.

And was the first of those three years behind US we continue to feel very good about our progress.

Speaker Change: More specifically, we estimate that these efforts delivered savings of more than half a billion dollars last year, helping to offset other profit pressures, including the deleveraging effect of a soft topline continued investments in pay and benefits for our team and higher inventory shrink.

Speaker Change: And finally last year, we continued to benefit from a round all AD business, which grew more than 20% in a year when we were facing challenging trends on the topline.

Speaker Change: Altogether last year's profit performance led to growth in our GAAP and adjusted EPS of nearly $3 or just under 50% compared with the prior year.

Speaker Change: In addition, cash from operations more than doubled from $4 billion in 2022 to $8 $6 billion last year.

Michael J. Fiddelke: And finally, after-tax return on invested capital expanded by well over three percentages, from 12.6% in 2022 to 16.1% last year. Before I include my recap of 2023, I want to provide an update on inventory shrink, which includes the impact of retail sales. Last year, consistent with expectations, shrink cost increased to more than $500 million compared with 2022, representing about 50 basis points of incremental rate pressure.

And finally after tax return on invested capital expanded by well over three percentage points from 12, 6% in 2022 to 16, 1% last year.

Speaker Change: Before I conclude my recap of 2023 I want to provide an update on inventory shrink which includes the impact of retail theft.

Speaker Change: Last year, consistent with expectations shrink cost increased more than $500 million compared with 2022, representing about 50 basis points of incremental rate pressure.

Michael J. Fiddelke: Even more notable, compared with 2019, shrink costs have reduced our operating margin rate by a cumulative 1.2 percentage points over a four-year period. Fortunately, we've seen some encouraging trends recently, resulting from both the actions we've taken and the community efforts we're seeing across the country. I want to pause and give a quick shout out to our asset protection and information security teams who are working around the clock to protect the safety of our team and our guests. I'll add, however, that because it's a lagging metric, we're planning for shrink rates to remain approximately flat in 2020.

Speaker Change: Even more notable compared with 2019 shrink costs have reduced our operating margin rate by a cumulative one two percentage points over a four year period.

Speaker Change: Happily we have seen some encouraging trends recently, resulting from both the actions we've taken and our community efforts, we're seeing across the country.

Speaker Change: I want to pause and give a quick shout out to our asset protection and information security teams, who are working around the clock to protect the safety of our team and our guests.

Speaker Change: I'll add however that because it's a lagging metric we're planning for shrink rates remained approximately flat in 2024.

Michael J. Fiddelke: So now, with last year in the books, I want to briefly pull back the lens and look back over the last decade, which is a very long time in retail. This will help to highlight the journey we've been on and the capabilities we've developed, serving as the foundation for the next decade of profitable growth. As you all know, the last 10 years have been a time of rapid change in retail. This led to some sluggish results at Target in the early years as our business faced some significant challenges.

Speaker Change: So now with last year in the books I want to briefly pull back the lens and look back over the last decade, which is a very long time in retail.

Speaker Change: This will help to highlight the journey, we've been on and the capabilities. We've developed serving as the foundation for the next decade of profitable growth.

Speaker Change: As you all know the last 10 years, where a time of rapid change in retail.

Speaker Change: This led to some sluggish results at target and the earlier is our business faced some significant challenges.

Michael J. Fiddelke: Those periods were followed by rapid progress in later years based on the steps we took to address those challenges. Let's start with the top line. In 2013, our US business generated about $71 billion in sales, while in 2023, sales were about $34.5 billion higher, representing an average growth rate of about 4% per year. Breaking down that growth by channel, about $16.5 billion occurred in our stores, while digital sales grew by another $18 billion, becoming nearly 13 times larger over that decade. Within our digital sales, same-day services, which didn't exist 10 years ago, accounted for $12.5 billion, or 70% of our digital growth between 2013 and 2023. On the bottom line, our adjusted EPS in the U.S. grew by an average of about 7.6 percent per year from $4.29 in 2013 to $8.94 last year, while GAAP EPS from continuing operations grew slightly faster.

Speaker Change: Those periods were followed by rapid progress in later years based on the steps we took to address those challenges.

Speaker Change: Let's start with the topline.

Speaker Change: In 2013, our U S business generated about $71 billion in sales, while 2023 sales were about $34 $5 billion higher representing an average growth rate of about 4% per year.

Speaker Change: Breaking down that growth by channel about $16 $5 billion occurred in our stores, while digital sales grew by another $18 billion, becoming nearly 13 times larger over that decade.

Speaker Change: Within our digital sales same day services, which didn't exist 10 years ago accounted for $12 $5 billion or 70% of our digital growth between 2013 and 2023.

Speaker Change: On the bottom line, our adjusted EPS in the U S. Scribe grew by an average of about seven 6% per year from $4.29 in 2013 to $8 94 since last year, while GAAP EPS from continuing operations grew slightly faster.

Michael J. Fiddelke: On top of those EPS gains, our per share dividend grew at an average rate of 10.7% per year, from $1.58 in 2013 to $4.36 last year. I'd note that these bottom-line returns were delivered during a decade in which our operating profitability experienced a meaningful amount of compression from a 6.7% operating margin rate in 2013 to 5.3% last year, as we experienced significant pressure from inventory shrink and higher digital penetration. Going forward, we expect to offset at least a portion of this decline over time as we work to achieve an optimal and sustainable operating margin. Turning to capital deployment, our priorities have remained consistent for decades, so I'll briefly reiterate them here.

Speaker Change: On top of those EPS gains our per share dividend grew at an average rate of 10, 7% per year from $1.58 in 2013 to $4 36 since last year.

Speaker Change: I'd note that these bottom line returns were delivered during a decade in which our operating profitability experienced a meaningful amount of compression.

Speaker Change: From a six 7% operating margin rate in 2013 to five 3% last year as we experienced significant pressure from inventory shrink and higher digital penetration.

Speaker Change: Going forward, we expect to offset at least a portion of this decline overtime as we work to achieve an optimal and sustainable operating margin rate.

Speaker Change: Turning to capital deployment, our priorities have remained consistent for decades, so I'll briefly reiterate them here.

Michael J. Fiddelke: We first look to reinvest capital in our business and projects that meet our strategic and financial criteria. Second, we look to support the dividend and build on our 52-year record of annual increases in the dividend per share. And finally, we deploy any excess cash after these first two uses to repurchase shares within the limits of our middle-A credit rating. In the last decade, our operations generated just over $67 billion of cash. And during that time, the lowest level of any single year was still more than $4 billion.

Speaker Change: We first look to reinvest capital in our business in projects that meet our strategic and financial criteria.

Speaker Change: Second we look to support the dividend and build on our 52 year record of annual increases in the dividend per share.

Speaker Change: And finally, we deploy any excess cash after these first two uses to repurchase shares within the limits of our middle a credit ratings.

Speaker Change: Over the last decade, our operations generated just over $67 billion of cash.

Speaker Change: And during that time, the lowest level of any single year was still more than $4 billion.

Michael J. Fiddelke: These cash returns demonstrate the durability of our business as we have navigated through several challenging periods over those 10 years. They also give us a lot of confidence in our prospects for making continued productive investments in the years ahead. Throughout that entire decade, the deployment of cash was consistent with our long-term priorities. Just over $30 billion was devoted to CapTex, accounting for about 45% of the total. Another $14.5 billion was paid as dividends, and Cumulative Share Repurchases accounted for the remainder of just over $22 billion as we retired more than 206 million shares at an average price of about $108, all while maintaining our middle A ratings over the entire period.

Speaker Change: These cash returns demonstrate the durability of our business as we navigated through several challenging periods over those 10 years.

Speaker Change: They also give us a lot of confidence in our prospects for making continued productive investments in the years ahead.

Speaker Change: Throughout that entire decade deployment of cash was consistent with our long term priorities.

Speaker Change: Just over $30 billion was devoted to capex accounting for about 45% of the total.

Speaker Change: Another $14 $5 billion was paid as dividends.

Speaker Change: And cumulative share repurchases accounted for the remainder of just over $22 billion. As we retired more than 206 million shares at an average price of about $108, all while maintaining our middle a ratings over the entire period.

Michael J. Fiddelke: So now, with that long-term look back as context, I want to turn to what we expect to achieve over the next 10 years, beginning with the top line, where we're focused on three separate growth drivers: Comparable Sales, New Stores, and Other Revenues. Comps are expected to be the primary source of growth, with increases in the low to mid-single digit range in a normal year, consistent with our average over the last decade, will support this comp growth with continued investments in our business in remodels, own brands, national brands, signature partnerships, and value-added services across all channels. Turning to remodels, we plan to invest in the vast majority of our nearly 2,000 store feet fleet over the next Each year, projects will range from full-scale remodels, in which we touch the entire store, to more surgical investments, including the addition of Ulta beauty locations, fixture upgrades, support of our same-day services, and more.

Speaker Change: So now without long term lookback as context, I want to turn to what we expect to achieve over the next 10 years, beginning with the top line, where we're focused on three separate growth drivers.

Speaker Change: Parable sales new stores and other revenue.

Speaker Change: Comps are expected to be the primary source of growth with increases in the low to mid single digit range in a normal year consistent with our average over the last decade.

Speaker Change: We will support this comp growth with continued investments in our business and Remodels owned brands National brands signature partnerships and value added services across all channels.

Speaker Change: Turning to Remodels, we plan to invest in the vast majority of our nearly 2000 store feet fleet over the next 10 years.

Speaker Change: Each year projects will range from full scale remodels in which we touch the entire store to more surgical investments, including the addition of Ulta beauty locations fixture upgrades support of our same day services and more.

Michael J. Fiddelke: On top of existing stores, we'll continue opening new locations based on the strong financial returns they generate. As Brian mentioned, most of these new stores will be larger on average than we've opened in recent years. Based on the opportunities we've already identified, we expect to open more than 300 additional stores over the next decade, meaningfully extending our reach into new neighborhoods. By the end of those 10 years, we expect those new stores will be generating incremental sales of around $15 billion annually.

Speaker Change: On top of existing stores will continue opening new locations based on the strong financial returns they generate.

Speaker Change: As Brian mentioned most of these new stores will be larger on average than we've opened in recent years.

Speaker Change: Based on the opportunities we've already identified we expect to open more than 300 additional stores over the next decade meaningfully extending our reach into new neighborhoods.

Speaker Change: By the end of those 10 years, we expect those new stores will be generating incremental sales of around $15 billion annually.

Michael J. Fiddelke: Beyond our buildings, we'll continue to focus on the well-being of our team members who enable our growth and serve as the face of Target every day. As Christina and Cara highlighted earlier, the human element, as exemplified by our team, is a continued differentiator for Target in a world where commerce is becoming increasingly mechanized and impersonal. Finally, over the next decade, we expect to continue seeing outsized growth in other revenues. This has been driven in recent years by our Roundel ad business, which contributed more than $1.5 billion of value to Target last year for the benefit of both gross margin and other revenues. On top of Roundel, we also expect our digital marketplace, Target Plus, to make a more meaningful contribution over the next 10 years.

Speaker Change: Beyond our buildings will continue to focus on the well being of our team members, who enable our growth and serve as the face of target every day.

Speaker Change: As Christina and Tara highlighted earlier, the human element as exemplified by our team as a continued differentiator for target in a world, where commerce is becoming increasingly mechanized and in personal.

Speaker Change: Yeah.

Speaker Change: Finally over the next decade, we expect to continue seeing outsized growth in other revenue.

Speaker Change: This has been driven in recent years by a round El AD business, which contributed more than $1 $5 billion of value to target last year to the benefit of both gross margin and other revenue.

Speaker Change: On top of Roundup, We also expect our digital marketplace target plus to make a more meaningful contribution over the next 10 years.

Michael J. Fiddelke: Putting this all together, we expect our total revenue to grow by an average rate of roughly 4% per year for the next 10 years. If we attain that goal, our business will add more than $50 billion in revenue, on top of the $107 billion we delivered in 2020. That growth will enable our business to further benefit from scale efficiencies as we continue to extend our reach in the U.S. market. On the operating margin line, our ambition is to reach the optimal rate to maximize profit dollar growth over time. Well, we don't yet know what that rate will be, but we believe it will be at least the size of our pre-pandemic rate of 6%.

Putting this all together over the next decade, we expect our total revenue will grow by an average rate of roughly 4% per year over the next 10 years.

Speaker Change: If we obtain that goal our business will add more than $50 billion of revenue on top of a $107 billion, we delivered in 2023.

That growth will enable our business to further benefit from scale efficiencies as we continue to extend our reach in the U S market.

Speaker Change: On the operating margin line, our ambition is to reach the optimal rate to maximize profit dollar growth over time.

Speaker Change: While we don't yet know what that rate will be we believe it will be at least the size of our prepaid demonstrate a 6%.

Michael J. Fiddelke: We made enormous progress and moved back toward 6% last year and expect to make continued progress in 2024 and beyond. Once we reach that 6% milestone, we'd be happy to continue moving higher as long as we're seeing appropriate dollar rates. For example, if we're successful in reducing shrink over the next few years, that might support our ability to sustainably operate above 6% over time. Regarding CapEx, we don't apply a rule of thumb to determine annual spending.

Speaker Change: We made enormous progress in moving back towards 6% last year and expect to make continued progress in 2024 and beyond.

Speaker Change: Once we reach that 6% milestone we'd be happy to continue moving higher as long as we're seeing appropriate dollar growth.

Speaker Change: For example, if were successful in reducing shrink over the next few years that might support our ability to sustainably operate above 6% overtime.

Speaker Change: Regarding capex, we don't apply a rule of thumb to determine annual spending.

Michael J. Fiddelke: Rather, we maintain a bottom-up plan and allocate capital to all the projects that meet our strategic and financial criteria. As you've seen in recent years, annual budgets will vary based on the external backdrop, and individual project investments, which naturally follow the evolving needs of the business, will vary as we snap the chalk line in a specific year. For example, while in 2022, we needed to rapidly expand our upstream replenishment capacity, we're no longer feeling that same urgency today. Similarly, while we love what we're seeing in our sortation centers, and we expect to meaningfully grow their capacity over time. The pace of sort center investments has slowed somewhat in the near term given that Brown Box last mile delivery volumes declined significantly last year.

Rather we maintain a bottom up plan and allocate capital all the projects that meet our strategic and financial criteria.

Speaker Change: As you've seen in recent years annual Capex will vary based on the external backdrop.

Speaker Change: An individual project investments, which naturally follow the evolving needs of the business will vary as we snap the chalk line in a specific year.

For example, while in 2022, we needed to rapidly expand our upstream replenishment capacity.

Speaker Change: We're no longer feeling that same urgency today.

Speaker Change: Similarly, when we love, while we love what we're seeing in our sortation centers and expect to meaningfully grow their capacity over time, the pacing of sort center investments has slowed somewhat in the near term given the brown box last mile delivery volumes declined significantly last year.

Michael J. Fiddelke: When we put together all of those considerations, along with our long-term growth ambitions, we believe annual CapEx will typically range between $3.5 billion and $5.5 billion in 2025 and beyond. Regarding our second capital priority, we expect to continue growing the per share dividend over the next decade and will manage the rate of annual increases with a goal of reaching a 40% payout ratio over time. As for our third capital priority, we expect Sherry purchases will continue to play a meaningful role in our EPS growth in years ahead. Additionally, our strong balance sheet successfully absorbed a number of powerful shocks in 2022. And last year, we made significant progress in moving our debt metrics back to appropriate levels.

Speaker Change: When we put together all of those considerations along with our long term growth ambitions. We believe annual Capex will typically range between $3 5 billion and $5 5 billion in 2025 and beyond.

Speaker Change: Regarding our second capital priority, we expect to continue growing the per share dividend over the next decade and will manage the rate of annual increases with a goal of reaching a 40% payout ratio over time.

Speaker Change: As for our third capital priority, we expect share repurchases will continue to play a meaningful role in our EPS growth in years ahead.

Speaker Change: Our strong balance sheet successfully absorbed a number of powerful shocks in 2022 and.

Speaker Change: And last year, we made significant progress in moving our debt metrics back to appropriate levels.

Michael J. Fiddelke: This sets the stage for a potential resumption of and repurchase activity later this year. Altogether, we believe we can deliver high single-digit growth in earnings per share in a typical year, at or above the average you've seen over the last 10 years. And lastly, we believe our after-tax ROIC can continue to move higher into the teens over the next decade, into the high teens over the next decade. So now, let me turn briefly to our expectations for 2024. On the top line, we're still planning cautiously, given the consumer spending patterns we've seen for two full years.

Speaker Change: This sets the stage for a potential resumption in repurchase activity later this year.

Speaker Change: Altogether, we believe we can deliver high single digit growth in earnings per share in a typical year at or above the average we've seen over the last 10 years.

Speaker Change: And lastly, we believe our after tax ROIC can continue to move higher into the teams over the next decade.

Speaker Change: Into the high teens over the next decade.

Speaker Change: So now let me turn briefly to our expectations for 2024.

Speaker Change: On the top line, we're still planning cautiously given the consumer spending patterns, we've seen for two full years now.

Michael J. Fiddelke: More specifically, on the discretionary side of our business, even as we've seen improving trends over the last two quarters, overall demand remains soft as spending patterns continue to normalize from the pandemic peak. And in our frequency businesses, we're anticipating a further recovery in unit trends this year as inflation continues to moderate. All together, we're planning for a modest increase in comparable sales in the 0-2% range for the year. Within the year, our top line will face the highest turtle in the first quarter, while over the remainder of the year, we'll be comparing notably softer results.

Speaker Change: More specifically on the discretionary side of our business, even as we've seen improving trends over the last two quarters overall demand remains soft spending patterns continue to normalize from pandemic peaks.

Speaker Change: And our frequency businesses, we are anticipating a further recovery in unit trends this year as inflation continues to moderate.

Speaker Change: Altogether were planning for a modest increase in comparable sales in the zero to 2% range for the year.

Speaker Change: Within the year, our topline will place the highest hurdle in the first quarter, while over the remainder of the year, we'll be comparing over notably softer results.

Michael J. Fiddelke: As a result, while we're looking to build on the momentum we've seen in recent quarters, our plans anticipate a comp decline in the first quarter. After that, we're planning for a resumption of top line growth over the remaining three quarters of the year. On the operating margin line, we expect the impact of inventory shrink to be roughly flat to last.

Speaker Change: As a result, while we're looking to build on the momentum we've seen in recent quarters, our plans anticipate a comp decline in the first quarter.

Speaker Change: After that we're planning for a resumption of top line growth over the remaining three quarters of the year.

Speaker Change: On the operating margin line, we expect the impact of inventory shrink will be roughly flat to last year.

Michael J. Fiddelke: In addition, given our cautious top-line expectations and continued investments in long-term growth, we'll likely see some deleveraging on the SG&A line. In terms of tailwinds, we're planning for modest improvement and modest rate improvement in shipping and transportation as we annualize the benefit of the lower rate contracts negotiated throughout 2023. We're also planning for continued outsized growth in our Roundel ad business, contributing to both gross margin and other revenues. And, of course, we expect our efficiency work will benefit both our gross margin and SG&A expense rate. All together, in 2024, we're planning for a modest increase from last year's 5.3% operating margin rate as we continue moving toward our 6% goal. On the bottom line, our 2024 expectations translate to a full year range for both GAP and adjusted EPS of $8.60 to $9.60.

Speaker Change: In addition, given our cautious top line expectations and continued investments in long term growth will likely see some deleveraging on the SG&A line.

Speaker Change: In terms of tailwind, we're planning for modest improvement modest rate improvement and shipping and transportation as we annualize the benefit of the lower rate contracts negotiated throughout 2023.

We're also planning for continued outsized growth in our round El AD business contributing to both gross margin and other revenue.

Speaker Change: And of course, we expect our efficiency work will benefit growth on both our gross margin and SG&A expense rates.

Speaker Change: Altogether in 2024, we're planning for a modest increase from last year's five 3% operating margin rate as we continue moving toward our 6% goal.

Speaker Change: On the bottom line or our 2024 expectations translate to a full year range for both GAAP and adjusted EPS of $8 60 to $9 60.

Michael J. Fiddelke: On first glance, the midpoint of this range represents growth of just under 2% versus 2023. However, I'd note that it's equivalent to a mid-to-high single-digit increase on a 52-to-52-week basis, given that last year had an extra week. Regarding the first quarter, our full-year plans translate to a range of $1.70 to $2.10 for both gap and adjusted EPS on an expected 3-5% decline in comparable sales.

Speaker Change: On first glance the midpoint of this range represents growth of just under 2% versus 2023.

Speaker Change: However, I'd note that it's equivalent to a mid to high single digit increase on a 52 to 52 week basis, given that last year had an extra week.

Speaker Change: Regarding the first quarter, our full year plans translate to a range of $1 70 to $2 10 for both GAAP and adjusted EPS on an expected 3% to 5% decline in comparable sales.

Speaker Change: Yeah.

Speaker Change: Turning to our balance sheet and capital deployment, we continue to expect our Capex range of $3 billion to $4 billion for the year and are planning for another strong year of cash generation.

Michael J. Fiddelke: Turning to our balance sheet and capital deployment, we continue to expect a CapEx range of $3 to $4 billion for the year and are planning for another strong year of cash generation. Later in the year, we'll recommend that our board approve another increase in our per share dividend. And finally, while we don't expect to repurchase any shares in Q1, we may be able to resume that activity later in the year within the limits of our middle A rating. As I get ready to close, I want to pause and thank the entire Target team, with a particular call out to my colleagues in finance. It's been an honor to serve as your Chief Financial Officer for the last four and a half years. Just as I have been, I'm confident my successor will be incredibly grateful for the leadership, integrity, passion, and discipline you bring to your work every day. Until a successor is named, I'll continue to fully occupy the CFO role and partner with all of you on behalf of Target and our stakeholders.

Speaker Change: Later in the year, we'll recommend that our board approved another increase in our per share dividend.

Speaker Change: And finally, while we don't expect to repurchase any shares in Q1, we may be able to resume that activity later in the year within the limits of our middle a ratings.

Speaker Change: As I get ready to close I want to pause and thank the entire target team with a particular callout to my colleagues in finance.

Speaker Change: It's been an honor to serve as your Chief Financial Officer for the last four and a half years.

Speaker Change: Just as I have done I'm confident my successor will be incredibly grateful for the leadership integrity passion and discipline you bring to your work everyday.

Speaker Change: Until a successor is named I'll continue to fully occupy the CFO role and partner with all of you on behalf of target and our stakeholders.

Speaker Change: To my new team I'm incredibly excited to be working with all of you.

Speaker Change: As I set out earlier, our operations are already in great shape, and I'm fortunate to be working with a strong set of leaders.

Michael J. Fiddelke: To my new team, I'm incredibly excited to be working with all of you. As I said earlier, our operations are already in great shape, and I'm fortunate to be working with a strong set of leaders. I can't wait to see what we can accomplish together as we build and sustain the foundation for another decade of profitable growth at Target. Thank you.

Speaker Change: I can't wait to see what we can accomplish together as we build and sustain the foundation for another decade of profitable growth at target.

Speaker Change: Thank you now I'll turn it over to Brian for some closing remarks.

Brian C. Cornell: Now I'll turn it over to Brian for some closing remarks. Michael, thank you. As we get ready to take your questions, I might start with some of the questions I can imagine are on your mind this morning. First, are the updates we shared enough to get Target back to growth? The answer is absolutely.

Speaker Change: Okay.

Speaker Change: Okay.

Brian: Michael Thank you.

Brian: As we get ready to take your questions I might get started with some of the questions I can imagine are on your mind. This morning.

Brian: First are the updates we shared enough to get target back to growth the.

Speaker Change: The answer is absolutely.

Brian C. Cornell: We're confident that the roadmap we've outlined today puts our core strengths, capabilities, and points of difference to work in new ways with even greater value, relevance, and ease for our current guests and U.S. consumers more broadly. This roadmap will help us meet consumers where they are, to drive traffic. Another question might be, can Target keep building on the profit improvement it put up last year? You just heard it from me... nearly $2 billion in operating income growth in 2023, far outpacing our guidance, more than a half billion dollars in cost savings from ongoing efficiency efforts, giving us a fast start on our multi-year efficiency goals, and realistic expectations for additional improvement in our operating margin rate this year as we move towards our 6% goal. Ultimately, I'm sure you're asking, what does this mean for shareholders? And that brings us back Again, you heard it from Michael.

Speaker Change: We're confident that the roadmap we've outlined today puts our core strengths capabilities and points of difference to work in new ways with even greater value relevance ease for our current guests and U S consumers more broadly.

Speaker Change: This roadmap will help us meet consumers, where they are to drive traffic Brussels.

Speaker Change: <unk> sales growth and long term market share gains.

Speaker Change: Another question might be.

Speaker Change: Can target keep building on the profit improvement you put up last year.

Speaker Change: You just sort of for Michael.

Speaker Change: Nearly $2 billion in 2023 of operating income growth.

Speaker Change: Far outpacing our guidance.

Speaker Change: More than a $5 billion in cost savings for our ongoing efficiency efforts, giving us a fast start or a multi year efficiency goals.

Speaker Change: Realistic expectations for additional improvement in our operating margin rate this year as we move towards our 6% goal.

Speaker Change: Ultimately I'm sure you're asking what does this mean for shareholders over time.

Speaker Change: And that brings us back to our emphasis on long term horizons and the durability of our business model.

Speaker Change: Again, you heard it from Michael from.

Brian C. Cornell: From 2013 to 2023, revenue grew by almost 50%, while earnings per share in the annual dividend more than doubled. The progress we made last year in shifting the momentum of our business, defining our roadmap for growth, and improving our profit performance has set us up to resume share repurchase, potentially later this year. We know that's been an important source of shareholder returns over time, but, Since most of you know our capital priorities as well as we do at this point, I'm guessing you notice that I'm ending with a priority that's been on top of the Simply put, investing in the right strategies and capabilities for our consumers and our business is the surest way to deliver outstanding shareholder returns over decades. But, as you've seen in the last decade, there's a lot we can't control in the operating environment.

Speaker Change: From 2013 to 2023.

Speaker Change: Revenue grew by almost 50%.

Speaker Change: While earnings per share in the annual dividend more than doubled.

Speaker Change: The progress we made last year and shifting momentum of our business defining our roadmap for growth and improving our profit performance has set us up to resume share repurchase.

Speaker Change: <unk> later this year.

Speaker Change: We know that's been an important source of shareholder returns over time.

Speaker Change: But since.

Speaker Change: Since most of you know our capital priorities as well as we do at this point.

Speaker Change: And you notice that I'm ending with the priority that's been on top of the list for decades.

Speaker Change: Simply put investing in the right strategies and capabilities, where consumers and our business is assures way to deliver outstanding shareholder returns over decades.

Speaker Change: As you've seen in the last decade, there's a lot we can't control and the operating environment.

Brian C. Cornell: But we are in charge of our financial decisions and the business plans and investments that drive our performance. We know that if we perform well for consumers... Their market will reward investors who are fueling those efforts. That's why you've seen us highlight our roadmap this morning. It reflects our team's eagerness to grow.

Speaker Change: But we are in charge of our financial decisions and the business plans and investments that drive our performance.

Speaker Change: We know that if we perform well for consumers.

Speaker Change: The market will reward investors, who are fueling those efforts.

Speaker Change: That's why you've seen us highlight our roadmap this morning.

Speaker Change: It reflects our team's eagerness to growth and more importantly, our plan to execute on that ambition.

Brian C. Cornell: And more importantly, our plan to execute on that ambition. It's how we're putting the assets and capabilities we've built in the last decade to work in ways that are inspiring and in step with how consumers will be shopping in the next decade. It combines strengths that are unique to us into a comprehensive, competitive position. A position that's difficult to replicate because no one can put it all together like Target.

Speaker Change: It's how we're putting the assets and capabilities. We built in the last decade to work in ways that are inspiring and in step with how consumers will be shopping in the next decade.

Speaker Change: The combined strength through unique to us.

Speaker Change: Comprehensive competitive position.

Speaker Change: A decision that's difficult to replicate because no one can put it altogether like target.

Brian C. Cornell: We've said it before, it's the power of and, from our stores and digital experiences, to our fulfillment options, our multi-category portfolio, our signature brand partnerships, our own Brandamus, and above all, our global team. We have 400,000 Target team members and a talented and dedicated and determined leadership team who have led and will keep leading our team through go time. But make no mistake, everyone at Target, from the check lane to the c-suite, is committed to the next era of growth. Now, we look forward to hearing from you. I'll ask Christina, Karen, and Michael to join me back on stage so we can take your questions. We will now transition into taking questions from our audience. If you have a question, please raise your hand, and a member of our team will hand you a microphone to use.

Speaker Change: We've said it before this is the power band.

Speaker Change: From our stores and digital experiences.

Speaker Change: Through our fulfillment options.

Speaker Change: Our multi category portfolio.

Speaker Change: Our signature brand partnerships.

Speaker Change: Our own brand ominous and above all our global team.

Our 400000 target team members and a talented and dedicated and determined leadership team.

Speaker Change: Led and we'll keep leading our team through <unk>.

Speaker Change: But make no mistakes.

Speaker Change: Everyone at target and the check lane to the C. Suite is committed to the next era of grow time.

Speaker Change: Now we look forward to hearing from you all as Christina carry Michael the join me back on stage. So we can take your questions.

We will now transition into taking questions from our audience. If you have a question. Please raise your hand and a member of our team will hand, you a microphone to use when you finished asking your question. Please hand, the microphone back to our team. This will help us get to as many people in the audience as possible. Thank you.

Unknown Executive: When you've finished asking your question, please hand the microphone back to our team. This will help us get to as many people in the audience as possible. Thank you.

Speaker Change: Our hands are going up why don't we start right here.

Simeon Ari Gutman: Why don't we start right here? Thanks. Simeon Gutman from Morgan Stanley.

Speaker Change: Thanks.

Speaker Change: Simeon Gutman from Morgan Stanley of.

Brian C. Cornell: My first question is about buying discipline. So Target makes a lot of its profit on discretionary products. Do you think you've developed new muscle over the last year or so, or you just reacted to the environment, and we'll see some of this go back?

Simeon Ari Gutman: My first question is on the buying discipline. So target makes a lot of its profit on discretionary products do you think you've developed new muscle over the last year or so or are you just reacted to the environment and we'll see some of those go back.

Christina Hennington: Christine, that's a great place to start. And you can talk about the work we've done with our global sourcing teams to make sure we are evolving the way we buy goods across the country. Yeah. Thank you for the question. We have evolved significantly over the last year and a half. Plus, what we've been living through over the last couple of years really has been quite unprecedented.

Simeon Ari Gutman: Kristina I think that's a great place to start and you can talk about the work we've done with our global sourcing teams to make sure. We are evolving the way we buy goods across the country. Yeah. Thank you for the question we have evolved significantly over the last year and a half plus what we've been living through over the last couple of years really has been quite unprecedented and the.

Michael J. Fiddelke: And the opportunity has been to infuse more agility and flexibility into our model. So in 2023, we bought with the intention of putting back the things that we were most excited about innovation, newness, our own brands where we saw the business trends were. But we also wanted to make sure that we created flexibility in the model. And so overall, we certainly bought less in those downtrending categories to manage the inventory.

Kristina: Opportunity has been to infuse more agility and flexibility into our model. So in 2023, we bought with the intention of placing bets on the things that we were most excited about innovation newness our own brands, where we saw them that the the business trends were but we also wanted to make sure that we crew.

Kristina: <unk> flexibility in the model and so overall, we certainly bought less in those down trending categories to manage the inventory, but by buying less but led to swift our operations Ethan and.

Christina Hennington: But by buying less, it led to swifter operations, ease, and just clarity in how to operate within this environment. We were also able to introduce levers through dual sourcing capabilities, a country of production diversification, and more domestic backup. So in categories like apparel, where it's really important that we're on trend and we're able to get the things that we need quickly based on what we're seeing in the market, we have increased our flexibility levers many times and are using reserve open to buy basically receipts that we haven't spent, as well as other flexibility levers to buy into the things that are working. And it is really paying off. Not only did we manage our inventory levels significantly lower, but it led to a significantly increase in stocks, the best we've had in four years, as well as being able to chase into the things that mattered. Our apparel business is perhaps the best example of that, where we've seen green shoots of acceleration quarter by quarter, and not totally visible when you look at the aggregate comp. Our discretionary comps were the best in the fourth quarter. They were better than in the first quarter.

Kristina: Just clarity in how to operate within this environment. We were also able to introduce levers through dual sourcing capabilities a country of production diversification Uh huh.

Kristina: Having more domestic backup so in categories like apparel, where it's really important that we are on trend and were able to get the things that we need quickly based on what we're seeing in the market we have increased our flexibility levers.

Kristina: Many fold and are using reserve opened five basically receipts that we havent spend as well as other flexibility levers to buy into the things that are working and it is really paying off not only did we manage.

Kristina: Manage our inventory levels significantly lower led to significantly increase in stocks. The best we've had in four years as well as being able to chase into the things that matter. Our apparel business is perhaps the best example of that where we've seen green shoots of acceleration quarter by quarter and.

Kristina: Not totally visible when you look at the aggregate comp our discretionary comps were the best in the fourth quarter they were better than in the first quarter. So we've seen that discretionary comp acceleration through through the year. That's what we plan to build on in 2024.

Cara A. Sylvester: So we've seen that discretionary comp acceleration through the year. And that's what we plan to build on in 2024. I'd only add that even in 2023, as we took a more conservative approach in discretionary categories, Christina, Rick, and Jill's teams certainly leaned into key seasonal moments to make sure that we had the right newness, the right affordability, as guests continued to celebrate those key seasonal moments. We'll do more of that in 2024, as we continue to make sure we adjust our flexibility to meet the needs of guests as they continue to change their shopping I'll go over on this side. Michael.

Kristina: I'd only add that even in 2023 as we took a more conservative approach in discretionary categories.

Kristina: Dana Rick and Bill's teams, certainly leaned into key seasonal moments to make sure that we had the right newness the right affordability as guests continue to celebrate those key seasonal moments, we'll do more of that in 2024 as we continue to make sure we are.

Kristina: Adjust our flexibility to meet the needs of our guests as they continue to change her shopping patterns.

Kristina: Well go over on the side.

Michael J. Fiddelke: Thank you. I have two questions. It seems like if we were to characterize the strategy today, it would be to remodel the stores, introduce new products, and leverage some of the relationships that you have with your customers through a reintroduced circle program. You have a lot of experience with those strategies. Is it right for us to think that each one of those could contribute 100 basis points to your comp? And that's how you build to get a low to mid single-digit comp over the long term?

Speaker Change: Thank you I have two questions. One it seems like if we were to characterize the strategy today you'd be remodel the stores introduce new products.

Speaker Change: Leverage some of the relationships that you have with your customers through our reintroduced circle program you have a lot of experience with those strategies is it right for us to think that each one of those could contribute 100 basis points to your comp and that's how you build to getting a low to mid single digit comp over the long.

Brian C. Cornell: And then a more near-term question, you're guiding to a three to 5% comp decline for the first quarter, flat to up to. How do you get from point A to point B? And how have you factored in some of the uncertainties like, you know, changes in credit card fees and the overall uncertain environment given that this is an election year in the year ahead? Thank you very much.

Speaker Change: <unk> term and then a more near term question, you're guiding to three years to 5% comp decline for the first quarter flat to up to.

Speaker Change: How do you go from point, a to point B and how old you factored in some of the uncertainties like.

Speaker Change: Changes in credit card fees.

Speaker Change: Overall uncertain environment, given that these little election year.

Speaker Change: In the year ahead, thank you very much.

Michael J. Fiddelke: I'm happy to start, Michael, and we're not going to provide you with a waterfall today that breaks all those components apart. But everything you've talked about is baked into our plans. We certainly expect new stores to be a major contributor as we go forward. Michael talked about how over a decade, we expect those 300 new stores to generate about $15 billion in incremental revenue. And we'll continue to invest in remodels. And we've got a long track record of seeing those remodels deliver really good returns.

Speaker Change: I'm happy to start Michael and we're not going to provide you. The waterfall today that breaks all of those components apart, but everything you've talked about is baked into our plans. We certainly expect new stores to be a major contributor as we go forward Michael talked about over a decade, we expect those 300, new stores to generate about 15 billion.

Speaker Change: $1 of incremental revenue will continue to invest in Remodels and we've got a long track record of seeing those remodeled deliver really good returns we will continue to lean into.

Brian C. Cornell: We'll continue to lean into our own brands, our national brands, and those great brand partnerships to make sure we're providing our guests with the newness and inspiration they're looking for. We're very excited, as you heard from Cara, about the new Target Circle program, the benefits of that base program, the Circle Card, and the excitement around Target 360 and how that will extend our same-day offering to guests and bring it right to their home within an hour. So each one of those elements plays a key role.

Speaker Change: Our own brands, our national brands and those great brand partnerships to make sure we're running our guests with the newness and inspiration Theyre looking for.

Speaker Change: We're very excited as you heard from Kara about the new target Circle program. The benefits of that base program circle card and the excitement around target 360, and how that will extend our same day offering to guests bring it right to their home within an hour. So each one of those elements plays a key role where.

Michael J. Fiddelke: We're very excited about the enhancements we've made from an overall digital standpoint to provide more ease, inspiration, and discovery for our guests, and both Michael and Cara talked about the upward potential we see in Rondell. So they'll all play a key role as we go forward. But I think it fundamentally starts with us understanding consumer trends, how consumers are shopping today and will shop differently going forward, and continuing to meet their needs no matter how they want to shop with Target, either in a physical store, in a digital environment, whether it starts with social media, or they're just walking into a great neighborhood Target store. So each element is going to contribute to our roadmap for growth. And underneath all of that is that continued focus on retail fundamentals, the blocking and tackling that makes sure we provide our guests a great physical and digital experience, making sure we're always in stock, that we leverage our proximity, that we provide great affordability. And we're there to provide a great guest experience no matter how you shop with our brand. Yeah, I maybe just want to add to that by kind of reinforcing a point Brian made. I love the fact that you can't decompose our strategy into discrete things.

Speaker Change: We're very excited by the enhancements we've made from an overall digital standpoint to provide more ease in inspiration and discovery for our guests and both Michael and <unk> talked about the upward potential we see in Rondell. So they'll all play a key role as we go forward, but I think it's fundamentally starts with us understanding consumer trends.

Speaker Change: Consumers are shopping today and will shop differently going forward and continue to meet their needs no matter, how they want to shop with target either in a physical store in a digital environment, whether it's sars with social where they're just walking into a great neighborhood target store. So each element is going to contribute to our roadmap for growth and underneath all of that.

Speaker Change: Is that continued focus on retail fundamentals, the blocking and tackling that make sure we provide our guests a great physical and digital experience, making sure. We're always in stock that we leverage our products that we provide greater affordability and we're there to provide a great guest experience no matter, how you shop with our brand.

Speaker Change: And maybe just add.

Speaker Change: Add on that by kind of reinforcing the point Brian made.

Speaker Change: The fact, you can't decompose our strategy into discrete things and how they work together our guests engaging with circle that finds discretionary category discovery within that experience and so it's never one plus one equals two we're hoping one plus one plus one equals 10, and it's how all of it.

Brian C. Cornell: It's how they work together. A guest engaging with Circle finds, you know, discretionary category discovery within that experience. And so it's never one plus one equals two.

Comes together you asked a question specifically on the cadence as we move through the year I touched on it a little bit in my remarks, we anniversary some of the strongest business last year in Q1, and so we would expect to see a build as we move through 2024.

Michael J. Fiddelke: We're hoping, you know, one plus one plus one equals ten. And that's how all of it comes together. You asked a question specifically about the cadence as we move through the year. I touched on it a little bit in my remarks. We anniversary some of the strongest business last year in Q1. And so we would expect to see a build as we move. How about right back here? Scot Ciccarelli with Truist

Speaker Change: Right right.

Speaker Change: Right back here.

Speaker Change: Scot Ciccarelli with truest can you guys provide any more color on your most recent shrink results and you can can you help us understand what happens with the sales velocity of products when you put them behind them locking key.

Speaker Change: Michael I'm happy to start because I know, it's a topic on everyone's mind and when I think about shortage when I think about shrink I'll start with the word progress I think we're seeing really solid progress and greater awareness at the national state and local level and certainly our teams have been working to ensure we provide a great guest.

Michael J. Fiddelke: Can you guys provide any more color on your most recent shrink results? I mean, can you help us understand what happens to the sales velocity of products when you put them behind lock and key? Michael, I'm happy to start because I know it's a topic on everyone's mind. And when I think about shortage, when I think about shrink, I'll start with the word progress. I think we're seeing really solid progress and greater awareness at the national, state, and local levels. And certainly, our teams have been working to ensure we provide a great guest experience and provide an experience that's safe for our team and safe for our guests. And Michael, I think our teams have made significant progress, but there is a lot more to come. Yeah, I mean, I can't say enough about the hard work of the teams that have led to that tone of progress that Brian hit on. And the way that rolls into our guidance is we're expecting shrink to be flat year over year. We'll learn a lot in the first quarter.

Speaker Change: His experience and provider experience that safer our team and safety of our guests and Michael I think our teams have made significant progress, but a lot more to come yeah, I mean, I can't say enough about the hard work of the teams that have led to the tone.

Speaker Change: Tone of progress that Brian hit on in the way that Rolls Indoor Garden says, we're expecting shrink to be flat year over year, well learn a lot in the first quarter, we inventory a lot of stores in Q1, and so we'll be smarter a quarter from now but that progress has us expecting for a lagging metric flat and we'll see what we learn as we go through the year.

Speaker Change: Alright.

Speaker Change: I was worried about here.

Speaker Change: Hi, Mike Baker from D. A Davidson I wanted to talk about your efficiency efforts and the $500 million that you achieved this year, how do we think about that over the next few years is that linear or does it sort of.

Michael J. Fiddelke: We inventory a lot of stores in Q1, and so we'll be smarter a quarter from now, but that progress has us expecting a lagging metric flat. And we'll see what we learn as we go through the year. We'll be right back here. Thank you. Hi. Mike Baker from D.A.

Michael J. Fiddelke: Sort of roll downhill and get better what is assumed in your 2024 hour work. Thanks.

Speaker Change: I'm happy to start.

Speaker Change: The teams work against a tough top line to deliver that efficiency progress. This year. Its a great start and I can view that as a downpayment toward that $2 billion to $3 billion that we expect to get over time and all the other things a little closer in that were highlights of that this year I'd call out the continued benefits of something like our Sortation Center.

Michael J. Fiddelke: Davidson, I wanted to talk about your efficiency efforts in the $500 million that you achieved this year. How do we think about that over the next few years? Is that linear?

Michael J. Fiddelke: Does it sort of roll downhill and get better? What is assumed in your 2024 outlook? Yeah, well, I'm happy to start. The team's working against a tough top line to deliver that efficiency progress this year.

Speaker Change: And when we have a sortation center in a market where faster and were cheaper than other forms of delivery I also and we've touched on a little bit in the conversation already but it warrants another shout out the benefit of exceptionally well managed inventory just shows up everywhere. We're so much more productive in store and Nrdc's.

Michael J. Fiddelke: It's a great start, and I can view that as a down payment toward that two to three billion that we expect to get over time. And the, you know, the things a little closer in that were highlights of that this year, I'd call out the continued benefits of something like our sortation centers. We have a sortation center in every market, we're faster, and we're cheaper than other forms of delivery. And also, and we touched on a little bit in the conversation already, but it warrants another shout out, the benefit of exceptionally well managed inventory just shows up everywhere. We're so much more productive in store and in our DCs when inventory is well managed. And so I feel really good about the team's work there in 2023, and I feel great about our inventory position as we step into 2024. And I would expect our teams to continue taking the growth we've seen and the growth we expect to translate that more into more efficiency over time. Michael, I'd only add that we're taking a very measured approach to setting priorities year by year.

Speaker Change: When inventory is well managed and so feel really good about the team's work there in 2023 feel great about our inventory position as we step into 2024 and I would expect our teams to continue taking the growth we've seen in the growth we expect to translate into that more into more efficiencies overtime, yes, Michael I'd only add that taking a very measured approach to setting priorities.

Speaker Change: <unk> year by year.

See opportunities in stores and supply chain opportunities to better leverage technology to continue to build on that efficiency roadmap. So year. After year, we'll reset priorities to make sure. We're laser focused on delivering those results and they'll build overtime.

Speaker Change: Alright.

Speaker Change: Here.

Speaker Change: Hi.

Speaker Change: Congratulations on the presentation, Danny Bretthauer with HSBC question to Cara on the new target Circle program I mean is $49, obviously like an introductory price.

Danny Bretthauer: How long are you willing to sustain at that price level because.

Danny Bretthauer: I think it's hard to make the math with the same day, one hour delivery at $49 an.

Danny Bretthauer: How do you plan to compete with the other programs loyalty programs out there what would be some of the key differentiators other than this entry of $49 price point. Thank you Carol let you take it away Hagen away, we're really excited to talk about it and I think it's really important that we really anchor on the entire target circle ecosystem that was really important.

Michael J. Fiddelke: We see opportunities in stores, in the supply chain, opportunities to better leverage technology, to continue to build on that efficiency roadmap. So, year after year, we'll reset priorities to make sure we're laser focused on delivering those results, and they'll build over time. All right, so how about back here?

Hagen: And to us and the notion of accessibility and for all is really really important. That's why we first are re imagining how we're thinking about delivering value our guests it really clear they want value affordability and they want us and so we're making even easier for our 100 million members to actually be able to get the deals and rewards that they want with automatic savings apply to checkout.

Hagen: I'll hit on your question around pricing in just a minute, but I think it's really important to talk about our cardholders as well today. The cardholders that program doesn't work with target circle and so what we're doing is we're actually bringing these two things together so that not only do you get 5% off every trip and extended returns and free shipping you also get all the bench.

Michael J. Fiddelke: Hi. Congratulations on the presentation. Danny Bradt-Howard with HSBC.

Michael J. Fiddelke: Question to Cara on the new Target Circle program. I mean, is $49 obviously like an introductory price? How long are you willing to sustain at that price level?

Cara A. Sylvester: Because I think it's hard to make the math with the same-day, one-hour delivery at $49. How do you plan to compete with the other programs, loyalty programs out there? What would be some of the key differentiators other than this entry-level $49 price point? Thank you. Cara, I'll let you take it away.

Hagen: <unk> of the base target Circle program, which are those deals that our guests love and those personalized rewards that are based specifically on your shopping behavior. The other thing that we're adding for our our cardholders is an evergreen price of $49 four target circle III <unk>. So if you are a cardholder for us are always on price will be for.

Cara A. Sylvester: We're really excited to talk about it, and I think it's really important that we really anchor on the entire Target Circle ecosystem. That was really important to us. And the notion of accessibility for all is really, really important. That's why we first are reimagining how we're thinking about delivering value. Our guests are really clear.

Hagen: $9, which is an amazing price and it's less than a dollar a week of the magic of target delivered to your door for.

Hagen: Target. Several 360, we're really excited to build on our strength in same day deliveries since our acquisition of shipped in 2017, you will get the magic of target delivered to your door in less than an hour. You will also have access to the ship marketplace of benefits. You will also have access to all of those deals and rewards and personalized perks as part of the base Circle program. It's just the beginning for us.

Cara A. Sylvester: They want value, affordability, and ease. And so we're making it even easier for our 100 million members to actually be able to get the deals and rewards that they want with automatic savings applied at checkout. I'll hit on your question about pricing in just a minute, but I think it's really important to talk about our cardholders as well. Today, those cardholders, that program doesn't work with Target Circle, and so what we're doing is we're actually bringing these two things together so that not only do you get 5% off every trip and extended returns and free shipping, but you also get all the benefits of the base Target Circle program, which are those deals that our guests love and those personalized rewards that are based specifically on your shopping behavior.

Hagen: That $49 is an introductory promotional price for target circle III 60 of them.

Speaker Change: I just wanted to take this moment and I hope many of our leaders back home are listening and just thank the circle team.

Speaker Change: The teams have been working on this program for months and months, our tech teams had been supporting them and the entire effort the organizations put behind bringing this forward today as you can tell we're really excited about the future target circle and think it's going to be a major growth driver and deepen guest relevance and bring new consumers into the target franchise.

Speaker Change: Alright back up front.

Doug: Hi, it's Doug.

Doug: Greg <unk> with Evercore ISI.

Doug: Two questions one was Ah Michael could you just you.

Doug: He said Rhonda will be up again like it was 20% last year for guidance. This year or are you thinking that offsets any pressure on credit and just tell us how credits going and then my other question goes back to traffic great to hear all the initiatives and the target circle.

Cara A. Sylvester: The other thing that we're adding for our cardholders is an evergreen price of $49 for Target Circle 360. So, if you are a cardholder for us, the always-on price will be $49, which is an amazing price, and it's less than a dollar a week of the magic of Target delivered to your door. For Target Circle 360, we're really excited to build on our strength and same-day delivery since our acquisition of the ship in 2017. You will get the magic of Target delivered to your door in less than an hour.

Doug: In the guidance what are we thinking about with AUR and average ticket given that this is a value focused consumer revert all the products that are under $10 on all this so in that zero to two comp how much would traffic be up three while AUR is down something like that.

Speaker Change: So if I start with the questions on the credit side of things. We've seen I think we've characterized them throughout the year kind of an expected return to normal and a lot of those underlying credit metrics and so you've seen a little bit of softness year over year. There that in 2023, you know was offset nicely and then some by the incredible growth we've seen in.

Cara A. Sylvester: You'll also have access to the Ship marketplace of benefits. You will also have access to all of those deals and rewards and personalized perks as part of the Base Circle program. It's just the beginning for us. That $49 is an introductory promotional price for Target Circle 360.

Speaker Change: The Roundup business and as a reminder, I think I said this twice in remarks round holes, both a little other revenue and a lot of gross margin and so it benefits to places to get to that 1 billion and a half of value in total, but we've seen outsized growth there and we would expect that to continue here, we're really confident about our prospects to continue grow.

Christina Hennington: I just want to take this moment, and I hope many of our leaders back home are listening, and just thank the circle team. The teams have been working on this program for months and months. Our tech teams have been supporting them and the entire effort the organization has put behind bringing this forward today. As you can tell, we are really excited about the future of Target Circle and think it's going to be a major growth driver and deepen guest relevance and bring new consumers into the Target franchise. All right, back up front.

Speaker Change: <unk> are around Dell business to the benefit of the guests that get strong engagement with all of those offers another example of how the strategy fits together the more engagement, we have with circle the better we know our guests the better we know our guests the better we can serve them through round Dell and so we're excited about what growth looks like there.

Speaker Change: The your second question Gregg refresh my memory traffic.

Brian C. Cornell: Hi, it's Greg Melich with Evercore ISI. I had two questions. One was, Michael, could you just say RONDEL will be up again? I think it was 20% last year. For guidance this year, are you thinking that offsets any pressure on credit and just, you know, tell us how credit's going? And then my other question goes back to traffic.

Speaker Change: Traffic Ah Yeah, we won't breakout ticket versus traffic, but the theme I will talk about that we've seen this year is a moderation of inflation I think what disinflation is the word of the quarter in retail that's a good thing for the consumer you have heard for the consumer you've heard us talk about that being one of the inputs to some.

Speaker Change: Share of wallet recovery on the discretionary side of things and so we're pleased to see that that ticket pressure because we think it's a good thing for the U S consumer.

Speaker Change: Right.

Michael J. Fiddelke: Great to hear all the initiatives in the Target Circle. In the guidance, what are we thinking about with AUR and average ticket, given that it is a value-focused consumer? We heard about all the products that are under $10 and all this. So in that zero to two comp, how much would traffic be up? Three while AUR is down?

Speaker Change: Hi, Thanks, Eddy room of Piper Sandler you spent much of the last decade kind of opening atypical stores small boxes urban locations and it sounds like you're pivoting back to kind of traditional large boxes and essentially the suburban areas, we'd love to understand kind of what that what that small box portfolio looks like have you been pleased with the returns given some.

Speaker Change: The changes in the urban dynamic and then as you look to these larger stores or how should we think about the role of food and some of these bigger boxes.

Speaker Change: That is a great question and I'm happy to start and actually over the last couple of years, you've seen us move from a focus on small stores and we can talk about the performance. There so more larger sized stores as we see new opportunities in catchments, where we haven't competed in the past and we've been very pleased with the performance of these new full size stores.

Michael J. Fiddelke: So if I start with the questions on the credit side of things, we've seen, I think we've characterized it throughout the year, kind of an expected return to normal in a lot of those underlying credit metrics. And so you've seen a little bit of softness year over year there that in 2023 was offset nicely and then some by the incredible growth we've seen in the Roundel business. And as a reminder, I think I said this twice in my remarks, Roundel's both a little other revenue and a lot of gross margin, and so it benefits two places to get to that, you know, billion and a half of value in total.

Speaker Change: As well as the continued performance in urban centers and oncology campuses. So as we look at our pipeline going forward, we recognize theres opportunities for more full size stores extend our proximity bring the best of the target into some new trading areas.

Speaker Change: And as part of that you will see us continue to expand our food and beverage offering Rick talked about the progress we've seen in food and beverage.

Michael J. Fiddelke: But we've seen outsized growth there, and we expect that to continue this year. We're really confident about our prospects to continue growing our Roundel business to the benefit of the guests that get, you know, strong engagement with all of those offers. Another example of how the strategy fits together; the more engagement we have with Circle, the better we know our guests. The better we know our guests, the better we can serve them through Roundel. And so we're excited about what growth looks like there. Your second question, Greg. Refresh my memory.

Speaker Change: Were $8 billion in the last couple of years and the strength of our brand like good and gather.

Speaker Change: For many of you who are tracking the consumer packaged goods industry, there aren't a lot of $4 billion brands out there and we launched that brand just prior to the pandemic and we just continue to see the steady growth and how our guests react to the quality and value we bring with them together. So we're excited about the pipeline it will.

Speaker Change: More larger sized stores, there will be a broader food offering and we're gonna be moving into trade areas, where we can pick up incremental volume and market share because we in many cases just haven't competed in these trade areas in the past.

Michael J. Fiddelke: Traffic. Yeah, we won't break out ticket versus traffic, but the theme I'll talk about that we've seen this year is, you know, a moderation of inflation. I think disinflation is the word of the quarter in retail, and that's a good thing for the consumer. You've heard us talk about, you know, that being one of the inputs to some share of wallet recovery on the discretionary side of things. And so we're pleased to see that ticket pressure because we think it's a good thing for the U.S. All right. Hi, thanks. Ed Yruma and Piper Sandler.

Speaker Change: Mike do you want to talk about some of the returns we're seeing with some of our smaller stores that we feel really good about the returns of those small stores and it's great to have that flexibility in kind of our toolbox of what's the right thing to build for the opportunity in a specific market and to be clear going forward. If the right opportunity can be felt fit with a 25000 square foot box.

Speaker Change: That brings us closer to a college campus or in an urban center, we know how to do that we like the returns and we'll lean in there, but as we step back and look at what that pipeline looks like in total it's actually the big box stores, where we're able to bring the best of target that are bubbling to the top in terms of where we expect returns to be strongest in so lean.

Brian C. Cornell: You spent much of the last decade kind of opening atypical stores, small boxes, urban locations, and it sounds like you're pivoting back to kind of traditional large boxes in a sense of suburban areas. We'd love to understand kind of what that small box portfolio looks like. Have you been pleased with the returns given some of the changes in the urban dynamic? And then, as you look at these larger stores, well, how should we think about the role of food in some of these bigger boxes? Thanks, Ed.

Speaker Change: In to that shift over time, and if our if our properties team was here on the stage with us they can roll out a map of the U S and show a bunch of main and main locations, where we'd love to bring targets to new communities and we feel good about what that pipeline looks like and I would add three more points as we think about small formats and now we're here in Manhattan.

Speaker Change: 10 years ago, we really didn't have a brand presence in Manhattan today, we have over a dozen locations and we're in many of the different neighborhoods across the city. We have now been connecting with a consumer that we couldnt reach in the past and we're going to build a long term relationship there.

Michael J. Fiddelke: It's a great question. I'm happy to start. And actually, over the last couple of years, you've seen us move from a focus on small stores, and we can talk about the performance there, to more larger-size stores as we see new opportunities and markets where we haven't competed in the past. And we've been very pleased with the performance of these new full-size stores, as well as the continued performance in urban centers and on college campuses. So as we look at our pipeline going forward, we recognize there are opportunities for more full-size stores, to extend our proximity, and to bring the best of Target into some new trading areas. And as part of that, you will see us continue to expand our food and beverage offering.

Speaker Change: Run many college campuses across the country, we know the value of building a connection with college students, while they're on campus and low lifelong benefits that's going to provide for our brand as they move into their first apartment or have their first child and start their families and one of the other things that all at Christina build on it is.

Speaker Change: The work, we've done with smaller formats.

Speaker Change: Has allowed us to understand a lot more about segmentation and getting the assortment right geography by geography, so as we move into new markets, bringing it much better at segmentation, having the right assortment that reflects the demand in those local markets. So there've been three really important benefits of our small format journey.

Michael J. Fiddelke: Rick talked about the progress we've seen in food and beverage and adding over $8 billion in the last couple of years and the strength of a brand like Good & Gather. And for many of you who are tracking the consumer packaged good industry, there aren't a lot of four billion dollar brands out there. And we launched that brand just prior to the pandemic.

Speaker Change: We're touching new cities, where we didn't have a presence in the past, we'll build a lifelong connection with college students and we've learned a lot more about segmenting our assortment yeah. The only thing I'd add even lifelong relationship with college students you heard youll be very intentional we actually would seek to make sure that we are really relevant at certain of life.

Brian C. Cornell: And we just continue to see steady growth and how our guests react to the quality and value we bring with Good & Gather. So we're excited about the pipeline. It will be more larger-size stores. There will be a broader food offering, and we're going to be moving into trade areas where we can pick up incremental volume and market share because we, in many cases, just haven't competed in these trade areas in the past. Michael, you want to talk about some of the returns we're seeing with some of our smaller stores? Yeah, we feel really good about the return to the small stores.

Stages, especially early on in our consumers' lives think about the strength that we have in a business like baby and we migrate them to toys, then we migrate them into video games and or into.

Speaker Change: Juniors and then.

Speaker Change: Having then presence, but we do very well at back to school and back to college, Timeframes, very intentional and making sure that our brand stays in touch with families. Through every life stage College is the natural next step in that phase and then of course after childbirth.

Michael J. Fiddelke: And it's great to have that flexibility in kind of our toolbox of what's the right thing to build for the opportunity in a specific market. And to be clear, going forward, if the right opportunity can be filled with a 25,000 square foot box that brings us closer to a college campus or an urban center, we know how to do that. We like the returns, and we'll lean in there.

Speaker Change: Afterwards mm mm and so that's been very intentional, but then to build back on segmentation opportunities. Yeah. We've learned a lot I mean these boxes are small they're difficult to operate them. We certainly have to cut the SKU count intensively and we have to study the macro or the microenvironment of competitor.

Michael J. Fiddelke: But as we step back and look at what that pipeline looks like in total, it's actually the big box stores where we're able to bring the best of Target that are bubbling to the top in terms of where we expect returns to be strongest. And so we'll lean in to that shift over time. And if our properties team was here on the stage with us, they could roll out a map of the U.S. and show a bunch of big and small locations where we'd love to bring Target to new communities. And we feel good about what that pipeline looks like. And I'd add three more points as we think about small formats. And we're here in Manhattan.

Speaker Change: And so disability to formulate the right assortment strategies for that community has taught us a lot about the potential to expand that further into our larger size boxes, and we see tons of upside and potential in.

Speaker Change: More sophisticated segmentation and allocation strategies that allow us to optimize the the local potential.

Speaker Change: The things you and I've talked a lot a lot is as we open up new stores Theres, certainly a physical store component, we drive a lot of new revenue, but there's also benefits from a digital standpoint, as we introduce the brand to new communities, we want to expand on some of the things. We've learned absolutely. We see we talk a lot about digital influence sales we know.

Brian C. Cornell: Ten years ago, we really didn't have a brand presence in Manhattan. Today, we have over a dozen locations, and we're in many of the different neighborhoods across the city. You know, we've now been connecting with a consumer that we couldn't reach in the past, and we're going to build a long-term relationship there. We're on many college campuses across the country.

Speaker Change: How consumers are shopping today and so many of us rate are starting even if you love shopping in only purchases in stores using our app to check out what's new to see if something is in stock et cetera. So we understand the power of digitally influenced store sales well. We also see though is the power of store.

Christina Hennington: We know the value of building a connection with college students while they're on campus and the lifelong benefits that it will provide for our brand as they move into their first apartment or have their first child and start their families. And one of the other things, and I'll let Christina build on it, is that the work we've done with smaller formats has allowed us to understand a lot more about segmentation and getting the assortment right, geography by geography. So as we move into new markets, we're going to get much better at segmentation, having the right assortment that reflects the demand in those local markets. So there have been three really important benefits of our small format journey. We're touching new cities where we didn't have a presence in the past.

Speaker Change: Digital sales because we know some guests are browsing and stores and actually are pulling up their app right, while they're in the store and having a impact digitally we certainly also see as we enter new markets. The power of our same day services that has been a shining star for us across the entire digital portfolio I talked in my remarks about why that is in terms of the.

Speaker Change: And ship that we have and once a guest try our same day services. They love. It. It is sticky in their lives we are literally making their lives better. So we'll continue to build on that but that's another great example, right. We've got time for couple more questions lets go up here.

Brian C. Cornell: We'll build a lifelong connection with college students, and we've learned a lot more about segmenting our assortment. Yeah, the only thing I'd add is even the lifelong relationship with college students. You heard Jill be very intentional.

Speaker Change: Hi, it's Bob durable Guggenheim Securities.

Bob: I'm just wondering if we could spend a few minutes on gross margin, maybe Q4 buckets and the performance detail around that your assumptions in 'twenty for you know for the full year and then curious if you could share the financial implications, especially around gross margin on target 360, your assumptions for the rollout for this year well Michael This is a surprise we've made it all the way.

Christina Hennington: We actually seek to make sure that we are really relevant at certain life stages, especially early on in our consumers' lives. Think about the strength that we have in a business like Baby. Then we migrate them to toys. Then we migrate them into video games and, or into juniors. And then having them presence; we do very well at the back to school and back to college timeframes, very intentional, making sure that our brand stays in touch with families through every life stage. College is the natural next step in that phase, and then, of course, back to childbirth.

Bob: The last few minutes of our conference today and this is the first time, we've had a question about gross margin.

Speaker Change: Excited to get the question is always rollout I can start by talking a little bit what we saw in Q4 and there is some consistent themes. So what we saw in the broader part of the year because the theme of gross margin recovery. This year and I think Q4 and the year. We were just shy of three percentage points of improvement in gross margin better inventory management.

Brian C. Cornell: So afterwards, and so that's been very intentional. But then to build back on segmentation opportunities, yeah, we've learned a lot. I mean, these boxes are small, and they're difficult to operate.

<unk>, we saved a lot of markdowns and costs that were associated with some of the inventory challenges that we had a couple of years ago. So on a year over year basis. That's a big source of improvement you know within their two freight transportation is in a much better place today from a cost perspective, not all the way back to 2019 levels, but on a year over year base.

Christina Hennington: We certainly have to cut the skew count intensively, and we have to study the macro or the micro environment of competitors. And so this ability to formulate the right assortment strategy for that community has taught us a lot about the potential to expand that further into our larger size boxes. And we see tons of upside and potential in more sophisticated segmentation and allocation strategies that allow us to optimize local potential.

Speaker Change: Basis, another significant source of improvement.

Speaker Change: In addition, we also see benefit from digital and supply chain I mean to the tune of I think 50 basis points in the right direction for the quarter and the year and that's a combination of being more productive as inventory levels have been better managed and a little bit of tailwind from fewer brown boxes shipped with our brown box business being down on a year over year basis.

Brian C. Cornell: One of the things you and I have talked about a lot is as we open up new stores, there's certainly a physical store component. We drive a lot of new revenue, but there are also benefits from a digital standpoint. As we introduce the brand to new communities, would you like to expand on some of the things we've learned? Absolutely.

Speaker Change: As we look ahead to next year, you know all of our best assumptions are wrapped into the the EPA at the EPS guidance, we've given and you know a little bit of deleveraging given our cautious view on the top line with some continued improvement in gross margin. We think is going to be the right recipe going forward.

Christina Hennington: We see, and we talk a lot about digital influence sales. We know how consumers are shopping today. And so many of us, right, are starting to, even if you love shopping and only buy in stores, you're using our app to check out what's new, to see if something is in stock, et cetera. So we understand the power of digitally influenced store sales. What we also see, though, is the power of store-influenced digital sales, because we know some guests are browsing in stores and actually are pulling up their app right while they're in the store and having an impact digitally.

Speaker Change: When it comes to target circle, instead of speaking to any specific.

Speaker Change: Civic assumption within that business case, I'd think of target circle is about growth when we meet our guests with the right value proposition and our and our free loyalty program and the right value proposition and targets the liver to your doorstep through target 360, and if youre looking for 5% more of.

Brian C. Cornell: We certainly also see, as we enter new markets, the power of our same-day services. That has been a shining star for us across the entire digital portfolio. I talked in my remarks about why that is in terms of the relationship that we have. And once guests try our same-day services, they love them. It is sticky in their lives. We are literally making their lives better, so we'll continue to build on that. But that's another great example.

Speaker Change: Every day, we have got a target circle card for you all of that's about stronger relevance and growth and so the the the line of the P&L I'm. Most excited about from a target circle standpoint is growth.

Speaker Change: Time and time again, if we think about the P&L through the lens of the guests we get to the right decisions.

Speaker Change: It costs us a little bit more to serve a drive up order that it does and in store trip.

Brian C. Cornell: All right. We've got time for a couple more questions. Let's go up here.

Speaker Change: When guests start using drive up we've described it before it continues to be true they spend 20% to 30% more target thereafter, and so we're making decisions with what we think drives the most value and growth in total okay.

Brian C. Cornell: Hi, it's Bob Drbul from Guggenheim Securities. I just wondered if we could spend a few minutes on gross margin, maybe Q4 buckets and the performance detail around that, your assumptions in 24, you know, for the full year. And then, curious, if you could share the financial implications, especially around gross margin on Target 360, your assumptions for the rollout this year. Well, Michael, this is a surprise.

Speaker Change: Go back here.

Speaker Change: I haven't found sort of tigress financial partners. Thank you for taking my question and congratulations on the great results out. This morning. Thank you I have three questions first terror in.

Speaker Change: Thinking about load store layout and remodel like for example in my local target food is on the left side, but yet cookware was all the way on the other side of the store and sometimes in O&M purchasing food I find the need I may need some cookware to do the dish I'm looking to Cook as an example, one.

Michael J. Fiddelke: We've made it all the way to the last few minutes of our conference today, and this is the first time we've had a question about gross margin. I'm excited to get the question, as usual. I can start by unpacking a little bit what we saw in Q4, and there are some consistent themes to what we saw in the broader part of the year, because the theme of gross margin recovery this year, and I think in Q4 and the year, we were just shy of three percentage points of improvement in gross margin. Better inventory management, we saved a lot of markdowns in cost that were associated with some of the inventory challenges that we had a couple Within that, too, freight and transportation is in a much better place today from a cost perspective, not all the way back to 2019 levels, but on a year-over-year basis, another significant source of improvement.

Speaker Change: Second is information that you get from using shipped were shipped customer will go outside to other retailers and how much do you take that information to decide what you're going to carry in the stores and then if they're using let's say buying premium brand.

Speaker Change: Hi have a premium product point do you see yourself going because there are some of your competitors sort of using value price food to bring in customers, but those customers are buying premium priced products and then third on the partnership what other areas do you see and how far of a premium level would you go and adding partnerships.

Speaker Change: Within your store.

Speaker Change: There's a lot there.

Speaker Change: Why don't you start with partnerships and Christina once you talked about some of the learning that we have around how we build assortments absolutely and so as I think about the introduction of target circle briefly we are absolutely looking at a wide range of what partnerships could look like to add benefits importantly, though we are always going to be listening to our guests that is how we actually.

Michael J. Fiddelke: In addition, we also see benefit from digital and supply chain, I mean, to the tune of, I think, 50 basis points in the right direction for the quarter and the year, and that's a combination of being more productive as inventory levels have been better managed and a little bit of tailwind from fewer brown boxes shipped, with our brown box business being down on a year-over-year basis. As we look ahead to next year, all of our best assumptions are wrapped into the EPS guidance we've given, and, you know, a little bit of deleveraging, given a cautious view on the top line, with some continued improvement in gross margin, we think is going to be the right recipe going forward.

Christina Hennington: Struck up our conversation in partnership with Ulta beauty as well as what we offer in our base program today with Apple and so we'll be guest led not target led as we think about the types of partnerships that will add value to our guests' lives I do want to hit on specifically your question around shipped we do not leverage any data of shipped on their marketplace internally at <unk>.

Christina Hennington: As we think about our assortment.

Christina Hennington: More specifically on how we build assortment and premium prices to answer some of your questions. Our goal is to make sure that we are meeting our guests' needs across a wide range of shopping occasions, and so we look at you you've heard us describe this especially when we talk about AUM ranch right, we look for unmet need states and white spaces Janus.

Michael J. Fiddelke: When it comes to Target Circle, instead of speaking to any specific assumption within, you know, that business case, I think of Target Circle as about growth. When we meet our guests with the right value proposition in a free loyalty program and the right value proposition in Target delivered to your doorstep through Target 360. And if you're looking for 5% more every day, we've got a Target Circle card for you.

Christina Hennington: Against them over the last year, we spent a lot of time, making sure that we have our value equation shored up and the introduction of deal worthy is a big deal for US. It is an opening price point brand across the entirety of the portfolio outside of food and beverage, where we already have market pantry. So just make sure we really have value at.

Michael J. Fiddelke: All of that's about stronger relevancy and growth. And so the line of the P&L I'm most excited about from a Target Circle standpoint is growth. Time and time again, if we think about the P&L through the lens of the guest, we get to the right decision. You know, it costs us a little bit more to serve a drive-thru order than it does to take an in-store trip. We've described it before, and it continues to be true. They spend 20 to 30 percent more at Target thereafter. And so we're making decisions based on what we think drives the most value and growth. Go back here. Ivan Feinseth, Tigris Financial Partners.

Christina Hennington: <unk> for all consumers so that they can meet their budgets on the flip side, we do really well with Ulta beauty, which is premium beauty and it's based on the insight that we've known for years and beauty almost all beauty shoppers shop, both they shop mass and he starts shop premium and for us to be able to service the gas.

Costs and service all the trips in that category, we needed a solution for all of which allowed us to build this partnership with Ulta, which we're really really happy about and we do that across the if we do that across the.

Michael Lasser: Thank you for taking my question and congratulations on the great results out this morning. Thank you. I have three questions. First, Cara, when you think about store layout and remodel, like, for example, in my local Target, you know, food is on the left side, but cookware is all the way on the other side of the store. And sometimes, you know, when I'm purchasing food, I find the need; I may need some cookware to make the dish I'm looking to cook, for example.

Christina Hennington: Folio to say Where's the opportunity for target to serve a unique need and where the unmet needs in the category and our guests has given us a lot of freedom to say you know I'll I'll spend $600 on this item and by the way I don't want to spend more than $2 on my body wash and that's fine whatever works for them.

Christina Hennington: You know I just finish up that discussion by saying I think we've learned time and time again, we make really good decisions when we listen to the guests and listened to the broader consumer trends some of the things we were rolled out recently.

Cara A. Sylvester: And second, is information that you get from using Shipt where a Shipt customer will go outside to other retailers. How much do you take on that information to decide what you're gonna carry in the stores? And then if they're using, let's say, buying a premium brand, how high of a premium product point do you see yourself going? Because there are some of your competitors that are using value priced food to bring in customers, but those customers are buying premium priced products.

Christina Hennington: Starbucks for our drive up guests.

Christina Hennington: We didnt come up with that there was the guests, saying boy if targeted only provide me with my favorite Starbucks product I'd enjoy this drive experience even more.

Christina Hennington: If you could take my returns I would really be pleased so we respond to what the guests and the consumer tells us and that's going to guide us for years to come right. We've got time for one final question. So.

Christina Hennington: And then, thirdly, on partnership, what other areas do you see and how far of a premium level would you go in adding partnerships within your store? There's a lot there. Yeah.

Christina Hennington: We're going right over here.

Cara A. Sylvester: So... Cara, why don't you start with partnerships? And Christina, why don't you talk about some of the learning that we have around how we build assortments? Absolutely.

Speaker Change: Thanks, Chris will receive the Caribbean nice to see you. Thank you for the presentation. So two questions. The first question as you think about the performance in the fourth quarter. How do you think about share do you think gets more get back from the Covid.

Cara A. Sylvester: And so, as I think about the introduction of Target Circle 360, we are absolutely looking at a wide range of what partnerships could look like to add benefits. Importantly, though, we are always going to be listening to our guests. That is how we actually struck up our conversation and partnership with Ulta Beauty, as well as what we offer in our base program today with Apple. And so, we'll be guest-led, not target-led, as we think about the types of partnerships that will add value to our guests' lives. I do want to hit on specifically your question around SHIPT. We do not leverage any data on SHIPT in their marketplace internally at Target, as we think about our assortments.

Speaker Change: Do you think it's the consumers just so focused on food and value and you're just not getting the trip. So it is not resonating through the power of the target box.

Speaker Change: And how you think about recapturing that share going forward and then my second question is for Michael and as you look at like just the seasonality of our business, which seemed to imply you're you're implying a step down in operating margin in the first quarter relative to the fourth quarter was two was there anything unique either in the fourth quarter what are the first quarter.

Speaker Change: That making that's the case. Thank you Michael why don't you start with the second half and I'll wrap up with some Christmas first question.

Cara A. Sylvester: More specifically, on how we build our assortment and premium prices to answer some of your questions. Our goal is to make sure that we are meeting our guests' needs across a wide range of shopping occasions. And so we look at, you heard us describe this, especially when we talk about OMRAs, right?

Michael: So as we look at the first quarter I think the key thing there is our cautious approach on the top line and there are some differences year over year and what we anniversary, but that's a source of pressure in the first quarter as we get back to growth deeper in the year, we'll see some of that pressure substance subside. So that's the headline on that one Chris and Chris from a market share standpoint, I can assure ebb.

Christina Hennington: We look for unmet needs and white spaces to innovate against. Over the last year, we've spent a lot of time making sure that we have our value equation shored up. And the introduction of Dealworthy is a big deal for us. It is an entry price point brand across the entirety of the portfolio, outside of food and beverage, where we already have Market Pantry, to just make sure we really have value options for all consumers so that they can meet their budgets. On the flip side, we do really well with Ulta Beauty, which is premium beauty. And it's based on the insight that we've known for years in beauty. Almost all beauty shoppers shop for both.

Speaker Change: One here, we look at market share in a very granular way every single week across our entire portfolio and we're going to be very focused on taking market share as we go forward.

Speaker Change: I'll step back and not just look at the last year for the last several years and if I go all the way back to the pre pandemic, we've added billions and billions of dollars of revenue growth I think Michael over $30 billion, and we deepened our relationship with guests along the way we've added more capabilities and features we've deepened partnerships and those are going to guide.

Speaker Change: To be even a more relevant retailer and partner for consumers and guests for years to come. So we are very focused right now over not just the next year, but the next 10 years to continue to drive even more traffic to our stores and visit store site to make sure. We are a company that's driving top line growth because we know that's the best way to reward.

Christina Hennington: They shop mass, and they shop premium. And for us to be able to service the guests and service all the trips in that category, we needed a solution for both, which allowed us to build this partnership with Ulta, which we're really, really happy about. And we do that across the portfolio to say, where's the opportunity for Target to serve a unique need? And where are their unmet needs in the category? And our guests have given us a lot of freedom to say, you know, I'll spend $600 on this item. And, by the way, I don't want to spend more than $2 on my body wash. And that's fine.

Speaker Change: Third our shareholders and we are absolutely going to be razor focused on taking market share as we go forward and sitting here today. We know there are significant opportunities across virtually every aspect of our portfolio, whether it's the work that Jill is leading in apparel and home or the work ricks doing from a food and beverage standpoint in the beauty.

In our central standpoint, whether it's physical stores or digital we see a pathway for continued market share growth and we will look at that every single week and talk about it every quarter because we know that's critically important to our roadmap for growth. So I appreciate everyone, who joined US in person today those of you who have joined us through the.

Brian C. Cornell: Whatever works for them. I just finished that discussion by saying, I think we've learned time and time again that we make really good decisions when we listen to the guests and listen to broader consumer trends. Some of the things we rolled out recently are Starbucks for our drive-up guests. We didn't come up with that. There was a guest saying, "boy, if Target could only provide me with my favorite Starbucks product, I'd enjoy this drive experience even more. If you could take my returns, I would really be pleased."

Speaker Change: The video in the conference.

Speaker Change: Thanks, So much we'll look forward to seeing you and hearing from you during our first quarter earnings reports. So thank you so much.

Speaker Change: Thank you for joining us.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Mhm.

Speaker Change: Okay.

Brian C. Cornell: So we respond to what the guest and the consumer tells us, and that's going to guide us for years to come. All right. We've got time for one final question. So, I guess we're going right over here. Chris, thanks. Chris Horvers, J.D.

Speaker Change: [music].

Speaker Change: Yes.

[noise].

Michael J. Fiddelke: Morgan. Nice to see you. Thank you for the presentation. So I have two questions.

Brian C. Cornell: The first question is, what do you think about the performance in the fourth quarter? How do you think about share? Do you think it's more give back from the COVID bump? Do you think it's the consumer's just so focused on food and value, and you're just not getting the trip, so it's not responding to the power of the target box?

Michael J. Fiddelke: And how do you think about recapturing that share going forward? And then my second question is for Michael. You know, as you look at just the seasonality of your business, which seems to imply you're implying a step down in operating margin in the first quarter relative to the fourth quarter. So was there anything unique either in the fourth quarter or the first quarter that made that the case? Michael, why don't you start with the second half, and I'll wrap up with Chris's first question.

Speaker Change: Okay.

Speaker Change: Okay.

Michael J. Fiddelke: Yeah, so as we look at the first quarter, I think the key thing there is our cautious approach on the top line. And there are some differences year over year in what we anniversary, but that's a source of pressure in the first quarter. And as we get back to growth later in the year, we'll see some of that pressure subside. So that's the headline.

Speaker Change: Okay.

Speaker Change: [noise].

Michael J. Fiddelke: And Chris, from a market share standpoint, I can assure everyone here that we look at market share in a very granular way every single week across our entire portfolio, and we're going to be very focused on taking market share as we go forward. I'll step back and not just look at the last year, but the last several years. And if I go all the way back to pre-pandemic, we've added billions and billions of dollars of revenue growth. I think, Michael, over 30 billion.

Brian C. Cornell: And we've deepened our relationship with guests along the way. We have added more capabilities and features. We've deepened partnerships, and those are going to guide us to be even more of a relevant retailer and partner for consumers and guests for years to come. So we are very focused right now on not just the next year but the next 10 years to continue to drive even more traffic to our stores and visit store sites to make sure we are a company that's driving top line growth because we know that's the best way to reward our shareholders. And we are absolutely going to be razor focused on taking market share as we go forward. And sitting here today, we know there are significant opportunities across virtually every aspect of our portfolio, whether it's the work that Jill's leading in apparel and home or the work Rick's doing from a food and beverage standpoint and a beauty and essentials standpoint, whether it's physical stores or digital.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [noise].

Brian C. Cornell: We see a pathway for continued market share growth, and we'll look at that every single week and talk about it every quarter because we know that's critically important to our roadmap for growth. So I appreciate everyone who joined us in person today, and those of you who joined us through the video and the conference. Thanks so much. We'll look forward to seeing you and hearing from you during our first quarter earnings report. So thank you so much. Thank you for joining us. Thanks for watching!

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.