Full Year 2024 Target Corp Earnings Call
The meeting is about to begin.
Good morning everyone and welcome to our 2025 Financial Community Meeting. I want to start by thanking all of you for spending some time with us today. Thank you very much.
Speaker Change: Brian will kick off in a minute. The 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. [inaudible]
Speaker Change: and second in today's remarks, we refer to non-depth financial measures, including adjusted earnings per share. [inaudible]
Speaker Change: Reconciliation of all non-GAAP measures to the most directly comparable gap 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: I've got no husband, no baby, and some free time, so let's go to Target I'm in this room, put it in my little bed seat, Simeon starts at 12 o'clock in the car and judge me One of the best options to me to call it in secret is Target, Target has so many amazing things right now
Speaker Change: Unbox this designer looked for less with me. It is nearly identical but a fraction of the cost. Finn started off strong as soon as I walked in, and I also grabbed these shoes which are absolutely gorgeous.
Speaker Change: They just released a ton of new arrivals for spring and show that to be on my favorite. Well look at his curves, I got there, look at his sweatshirt, you can go to Target, buy amazing stuff at affordable prices. These are brilliant when you are doing games for social skills, and that's it.
Speaker Change: Good morning, everyone, and thanks for being here today. As we put together this morning's presentation, we thought carefully about the themes we are hearing from investors so we can directly address what's on your mind.
Speaker Change: And as we walk through progress a date and plans to come, you'll hear us answer three important questions.
First, what is Target's unique place in retail? [inaudible]
Speaker Change: Second, Owl Target Bill, more engagement with even more consumers. [inaudible]
Speaker Change: And finally, how will we translate that engagement to more traffic, sales and profitability over the next five years? [inaudible]
Speaker Change: We believe the answer to those questions lie in the distinct world target plays in consumers' lives.
Speaker Change: We're not like other retailers, which is precisely what consumers have told us they value about target. We're the place they go to discover on trend affordable products that they can't find anywhere else. [inaudible]
Speaker Change: and this year, that translated to 350 million more guest trips compared to 2019.
Speaker Change: We're the place they know, we are welcome break in their day. [inaudible]
whether they're throwing the aisles or scrolling their feed. [inaudible]
Speaker Change: This is how we've grown by nearly $30 billion in the span of five years.
Speaker Change: and in a world where shopping has become less inspiring, consumers expect us to be the place they can recapture the joy of retail.
Speaker Change: which is why we expect to invest four to five billions of dollars in stores, supply chain.
and Technology this year. [inaudible]
in a world.
Speaker Change: Where we operate today, our guests are looking for Tarje. Thank you very much.
Speaker Change: Consumers coined that term decades ago to define how we elevate the everything every day to something special
How we had unexpected fun? [inaudible]
Speaker Change: In the shopping, there would be other lines for team. And across categories and platforms, we stayed true to that Cargé spirit by helping guests chunk off the essentials, or let's covering what's new and exciting.
Speaker Change: Target has always believed that shopping should be more than transactional. [inaudible]
Speaker Change: It should be in a binding experience that encourages people to stay, browse, discover and buy.
Speaker Change: Well, they get easy for those looking to quickly get what they want and get on with their day. [inaudible]
Speaker Change: We remain anchored to the vision of what shopping should be, but we're not beholden to what we've achieved in that vision in the past. In fact, we're leveraging the strengths we've gained from decades of growth and making changes in how we operate. To carry forward the magic of tarjet for today's consumer. And to carry forward the magic of tarjet for today's consumer.
Speaker Change: And in doing so, we're blazing a trail for long-term growth.
Speaker Change: Our expectation is to drive more than $15 billion in revenue growth over the next five years.
Speaker Change: But most of our categories, we see very positive momentum in this regard.
Speaker Change: We had announced standing year in beauty. We saw nearly 7% sales growth and share gains.
Speaker Change: and over the holiday season, we gain share in home and areas of hardlines, like books and toys.
Speaker Change: The sales decline in February , we reported this morning, reflects a mix of factors.
Speaker Change: Conservatives continue to show a willingness to splurge on Nunes. We saw this play out around Valentine's Day, where we saw record high sales.
Speaker Change: Yet, as we've discussed before, persistent economic uncertainty has consumers taking a conscious approach to spending, particularly in discretionary categories.
Speaker Change: Despite these near-term challenges, we are investing in multiple ways to hold and grow share across our merchandising portfolio and reach our goal of more than 15 billion dollars of growth in the years to come.
Speaker Change: New stores and remodels, supply chain enhancements, digital capabilities, units across our assortment, partnerships with well-loved brands, momentum and loyalty, chain-day delivery, our media business and more.
Speaker Change: Today, you'll hear about the investments we're making across the business to manage known environmental risks and lean into its ranks in areas we can firmly control.
Speaker Change: This road map of the road begins with today's tarjet, which lives at the intersection of product and experience and delivers everyday discovery and delight.
So let's start with product [inaudible]
Speaker Change: From the staples that serve as affordable basketball builders, to those unexpected finds, keep
Target's stand-up lend to brands and categories is well known.
Speaker Change: That strategic mix of products, what makes our assortment different? It's a key factor in driving traffic in our stores and online. That's why we continue to believe in the power of our discretionary categories to give consumers even more reasons to choose Target.
Speaker Change: You'll hear more from Rick on this today, but as merchants, we're focused on listening to consumers and keeping a pulse on what's relevant and trending.
Speaker Change: and we not only adapt to trends, we make them our own.
Now nothing better exemplifies this than our Taylor Swift exclusives. [inaudible]
The record-breaking event made Black Friday buzzword again.
Speaker Change: Guests lined up outside our stores, and drove huge online demand. They made Eris Tourbook, the highest-selling music book of all time, with nearly 1 million units sold in the first week alone. [inaudible]
Speaker Change: It's much fun as it was to see the crowds and deliver this one-of-a-kind experience for our guests. We're not content with one big moment per year. [inaudible]
Speaker Change: We have a steady stream of newness that flows into our assortment, so guests always have something to discover as they shop.
600 to which could be found only a target. [inaudible]
Speaker Change: representing a mix of own brands, national brands, and emerging brands.
Here are a few examples.
Speaker Change: Druggenny's for Target, an exclusive act of work collection developed with social media influencer Casey Holt
Speaker Change: or Biro, the new non-alcoholic beer brand co-founded by actor Tom Holland.
Speaker Change: We added new items to our own brand, Audie, and introduced Peloton, apparel to our Target Plus marketplace.
Speaker Change: That last mention is important. It reflects the steady expansion of our target plus portfolio to include products for more than 1500 trusted partners.
Speaker Change: Target Plus is a great example of how we're taking a fresh look at areas of our business, where we believe are right for growth. By ramping up our investment last year, we've grown Target Plus to a billion dollar marketplace that's growing at a double to the pace.
We're doing it away, that's true to Target. [inaudible]
Speaker Change: Getting consumers more choice within the broader umbrella of the trusted target brand.
Speaker Change: No compromise in quality or experience. Just more target for guests to enjoy.
Speaker Change: The Investment and Stewardship Weeks Ninja Target Plus applies the full scope of targets
Speaker Change: We have always been students of design and focus on the elements to make for a standout shopping experience.
Quality, Selection, Presentation and Service
Speaker Change: That's why you'll hear our investing in stores, supply chain and digital to elevate the total guest experience.
Speaker Change: Our stores have always been a consistent investment priority for years because they serve a dual role at shopping destinations and fulfillment hubs.
Speaker Change: Those investments have contributed to traffic gains and double digit growth in services like Briba and Stame Day Delivery with Target Circle 360.
Speaker Change: Our love and investment in stores will accelerate as we open more than 20 new stores and remodel many more across the chain
Speaker Change: Now behind the scenes, we'll continue to bring our supply chain and stores closer together. [inaudible]
Speaker Change: In tandem with our investments in visible shopping spaces, are the investments we're making in our digital experience?
Dink, socially inspired and AI enhanced.
Speaker Change: Target's digital ecosystem is all about anticipating consumer preferences and making the path to purchase easy and fun [inaudible]
Speaker Change: Our digital investment is always on. And you'll see us pushing even further in creating an immersive experience using search, social and data driven personalization.
Speaker Change: This gives consumers even more ways to discover the magic of our sortment and engage with our brand.
Speaker Change: One of the very best representations of how we tailor our experience to the needs of our guest is Target Circle.
What do they love about shopping at Target?
What did we do better? [inaudible]
What would build stronger connections with our brand? [inaudible]
The result was refreshed for you to join a program.
Open to All
Customize the benefits.
That match, how consumers like to shop?
Speaker Change: We started 2024 with other nations leading loyalty programs and added 13 million members over the course of the year.
Many of those members layered on extra benefits.
Speaker Change: like our target circle cart, which offers an extra 5% savings every day.
Speaker Change: and Target Circle 360 that offers same-day delivery services as part an annual subscription. Thank you.
Speaker Change: We're thrilled with the energy and engagement we've seen so far.
Speaker Change: and you'll hear from others, Target Circle is a critical lever for delivering a more personalized experience for our guests.
Speaker Change: As membership grows, we gather more insights about how guests prefer to stay and shop with us.
Speaker Change: We apply those learnings, everything for marketing and digital design to a sort of decisions and operational improvements.
It's how we'll drive relevance and even deeper loyalty.
Speaker Change: You'll see this come to life through our in-house media company, Ron Dell.
Delivering nearly two billion dollars in value last year. [inaudible]
Randell continues to generate significant profitable growth.
Speaker Change: Advertisers and vendors consistently cite the ease which are able to deliver creative campaigns that provide a strong return on the vessel.
Speaker Change: and with recent changes to bring Rondelle and our social commerce teams closer together?
Speaker Change: We see the potential of the double, the size of our media business over the next five years.
Speaker Change: of Company V's investments in our Heems commitment to deliver retail fundamentals that make or break out how gas experience target.
We know when items are at a stock. [inaudible]
Speaker Change: or Shipments or Lates for Lines for Long. We disappoint shoppers and sacrifice sales.
Speaker Change: You'll hear today how we're making progress in these areas so we can reliably serve our guests.
Reliability is a theme you'll hear throughout today's presentation.
Reliably in stock.
Speaker Change: So the schoolers can count on us for everything they need. [inaudible]
Speaker Change: Reliably easy, so shopping is more fun and less of burden. [inaudible]
Reliably Affordable. [inaudible]
Through a fully embracing, or expect more, pay less promise. [inaudible]
Speaker Change: and Reliably Target. With newness and selection, you can't find anywhere else. [inaudible]
Speaker Change: In every aspect of our business, we're investing and evolving to deliver a reliable, joyful experience to our guests.
Speaker Change: Today's Tarje is fueled by a different internet strategy that leads into delivering everyday discovery and delight.
Speaker Change: and speaks directly to consumers' preferences in areas of growth potential. Thank you.
Speaker Change: Our investments to execute with more speed, efficiency and reliability, it's why we're so confident in Target's future growth and profitability.
So...
Speaker Change: Now it's my turn to turn it over to the team to provide more details. [inaudible]
Michael, over to you. [inaudible]
Michael: Well thanks, Brian . I'm happy to take the baton and share a bit more about how we create the discovery and delight behind today's tarjet.
Michael: and Magnum Estate at the heart of that magic is an incredible, on-trend, affordable product. That combination of nudist and style that we deliver to our assortment makes us who we are.
Michael: It's our own brands that you can only find at Target. It's a well of disortment of national brand partners, both big established brands and the smaller emerging brands. [inaudible]
Michael: and it's those key limited time partnerships you'll find online and in our stores.
Michael: There are some forever truths in retail. One of them retails about product and the best product at the best value wins.
Michael: and when you can find that fantastic combination of new-ness style and value at Target, we win!
Michael: And there's a second retail truth. Experience is critical. And so, and operations were focused on how we bring those products to life, how we help our guests discover them in an elevated and easy way that's uniquely target.
Michael: We know that today consumers increasingly shop digitally. And that's why we've invested in a powerful digital experience to help them find product more often than not in the palm of their hand and social and on our app. Positioning target to win in a world where the consumer purchase funnel is changing.
Michael: and it's working. We have a $20 billion digital business that's hitting on all cylinders with nearly 9% growth in Q4. [inaudible]
Michael: But at Target, we coupled digital strength with a strong belief that the brick and mortar experience matters. [inaudible]
Michael: and a differentiated in-store experience that's powered by our incredible team is critical to bringing product and discovery to life for our guests.
Michael: It's that seamless combination of that elevated discovery experience across stores and digital that will power the more than $15 billion of growth that Brian shared we expect in the next five years.
Michael: And so, in the next 15 minutes, I'll explore some of the ways we're delighting consumers with an on trend assortment, how we're making it even easier for them to discover those great products whenever and however they want.
Michael: And then, Howard delivering ease, speed and reliability for a consumer whose expectations continue to rise.
Michael: So let's start by taking a look at the retail landscape.
Michael: Even as a $100 billion retailer, we make up less than 3% of a $4.2 trillion market.
Michael: In fact, together with the other nine biggest retailers, we make up less than 40% of that market.
Michael: So what's that tell us? There's a lot of market share up for grabs and we're well positioned to continue to grow our share of the pie on the strength of a strategy that uniquely ours. [inaudible]
Michael: and I'll go back to my opening remarks to highlight our first area of focus on our path to growth. Delighting consumers with on-term disortment, pack the style, mueness, and value.
Michael: One of my favorite examples is our all-in-motion line of activewear. It's become a staple for all five members of the Fiddelke household because it's comfortable, fashionable, and performs well at a fraction of the cost of the other brands. [inaudible]
Michael: Now, maybe this is just the inherent finance guy on me, but before my two daughters fell in love with all in motion, I'd win at the cost of an mass leisure outset for them.
Michael: Those leggings cost how much and they're going to fit you for how long but now they specifically ask for all the motion over those more expensive brands which I have to say is a proud dad moment for me.
Michael: and a lot of guests have responded to the quality and value with the same enthusiasm. All in motion is more than a $1 billion brand and grew over 10% in 2024.
Michael: It's only a target, of course, part of a long list of exclusive brands that consumers love.
Michael: Combined with our world of national brands, and the way our team leans in to seasonal moments and special partnerships, we have a team who makes moments memorable and turns products into must-hats
Michael: and NASA winning formula for relevance in growth. You'll hear more from Rick on this shortly.
Rick: So regardless of how guests come across those gotta-have-it items, as part of their discovery process, whether browsing our store while sipping a Starbucks,
Rick: Scrolling our app over Saturday morning coffee or clicking to buy via social from their couch, camp chair or anywhere in between we're making it easier for them to shop whenever and however they want to an elevated experience that only target can deliver. [inaudible]
Rick: And that discovery experience is our second area of focus as we work to earn an even greater share in the market opportunity I laid out at the top.
Rick: We're investing in stores to bring the best of Target closer to more consumers, making it even easier for them to fall in love with our products and experience and to visit Target more frequently.
Rick: 3 out of 4 Americans live within 10 miles of a target store. We call that a good base on which to build.
Rick: Last year we shared plans to add 300 stores over 10 years and we feel great about the fact that in 2024 we open 23 of those new stores and plan to open another 20 this year while remodeling many more across the country. [inaudible]
Rick: Increasingly, these new locations will be full-size targets, giving us the space and flexibility to offer the very best target experience.
Rick: Consumers are overjoyed to have these stores in their backyards as we see in our new store performance metrics
Rick: And we continue to gain traction with consumers as a destination for discovery. [inaudible]
Rick: You can see that traction in our 2% plus traffic growth in 2.4% and our 20% uptick and traffic since 2019.
Rick: Numbers that translate into 350 million more guest trips to Target in 2024 than 2019. Let me say that again. 350 million more guest trips
Rick: And while we're not satisfied with our growth over the last two years, rising traffic clearly demonstrates the power of our strategy to drive continued relevance and growth over time.
Rick: and in adding stores, we're not just making it easier to discover and take advantage of the target store experience. Let's move on to the next one.
We're adding horsepower to the engine for our digital business. [inaudible]
Rick: because our stores are the fulfillment power plant behind drive up, same-day delivery via Target Circle 360, and fast brown box shipping. For those times when a guest shopping mission isn't an in-store trip.
Rick: And that interplay between stores and digital is critically important to our strategy. If Cara will discuss in a bit, they aren't separate businesses. They're the business.
Kara: When we make it for easy for guests to shop digitally, to swing by our drive-up lane on the way home from soccer practice or schedule doorstep delivery via target circle 360, guests repay that easy convenience by spending a lot more at target.
Kara: 20 plus percent more after they start using drive-up or same-day delivery. And perhaps surprisingly the sum, they spend more in-store as well.
Swarth Third Area Focus
Kara: on our roadmap for growth underpins the others. We have to deliver, and we come at this challenge from an inviable position.
Kara: Guests love our stores, an assortment full of newness and value, an elevated shopping experience with the key reason why consumers pick target, and at the heart of it, the best team in retail.
Kara: Our team's crushing it with real progress made in 2024. But as we assess where we're at, we know two things can be true. We start with a great guest experience.
Kara: and we aren't where we aspire to be. In a world where consumer expectations continue to rise, we have to deliver even higher levels on things like ease, speed and reliable in stocks.
Kara: We know there's no Tarje Magic if you can't find the item you were looking for because we were out of stock or we didn't delight you in store. [inaudible]
Inventory Reliability is an area where we've made considerable progress.
Kara: In fact, our out of stocks were lower in every quarter of last year than the year before, and the year before that [inaudible]
Kara: But we're not settling for progress. We're confident that we will continue to improve in 2025 and beyond.
Speaker Change: Along with Chief Supply Chain and Logistics Officer, Gretchen McCarthy and her team, we have a lot of work in flight to support this goal. And I'll highlight a few of the key elements.
Speaker Change: First, we're changing how we measure success to give us an even better read on exactly how we're performing.
Speaker Change: to illustrate what I mean. The graph I just showed highlights a very real improvement for us, on average, for the Enterprise. [inaudible]
Speaker Change: But if you're a guest shopping on Sunday night, who discovers that we're out of stock on the item you came to get, you don't care about the enterprise average. You just want to know why we don't have your milk. [inaudible]
Speaker Change: and so we've rolled out a new suite of measures to help us get more granular and our assessment of our Instaq performance.
Speaker Change: These metrics tell us with greater precision than ever by channel and by hour how we're actually showing up for our guests.
Speaker Change: We're doubling down on this work with a focus on the items that matter most. Think the thousands of items that are most frequently purchased, where it's most critical, critical that we're at the top of our game in every store on every day open to close. [inaudible]
Speaker Change: We have the entire enterprise rallied around this work including implementing changes like designing our merchandising displays to have more capacity for those critical items.
Speaker Change: Now I want to pause here for a moment to offer a bit of context regarding our inventory levels at the end of the year [inaudible]
Speaker Change: Q4 ending inventory at cost was up a little over 7% to last year due to several factors. First, we pulled forward receipts to introduce greater newness in key categories like apparel and hardlines.
Speaker Change: Second, we added two new food distribution centers and made some intentional investments to improve product availability as you just heard me share. And third, we also saw some receipt timing volatility. Thank you very much for your time.
Speaker Change: We'll continue to monitor our inventory levels closely, always with an eye having the right assortment at the right time.
Unknown Speaker 0
Speaker Change: And again, this is why we're focused on shorter lead times.
Speaker Change: because shorter lead times not only help us reduce inventory risk, they also help keep us in step with the latest trends, something I know Rick will talk more about.
Speaker Change: As part of our work to improve our end-to-end replenishment execution, we're also midstream on a multi-year journey to modernize, with tools powered by AI, our core inventory management systems.
Speaker Change: These are the tools that enable more accurate forecasting, help us better position inventory to drive
Speaker Change: These new systems are now used by about 40% of the assortment. That's more than double the percentage that used them in 2023. Progress, we expect to continue in 2025 and beyond.
Speaker Change: Of course, that's only one ingredient in an exceptional guest experience, delivering an elevated story experience as another, and that's a place where we have momentum on which to build.
Speaker Change: Take our guest's experience at checkout. We've invested in more staffing in our built-in checkout lands and made changes to speed up the self-checkout process.
Speaker Change: We know how hard it is to move those numbers and couldn't be prouder of our team's progress [inaudible]
Speaker Change: But, and I'll say it again, our aspirations don't end there. Let's take a closer look at that graph.
Speaker Change: Here again, these measures of progress represent averages. And that means in some stores on some days we're truly delighting our guests. While in other stores on other days we can be falling short of expectations.
Adrian Costanzo: That's why in 2025, you'll see me and our new Chief Stores Officer, Adrian Costanzo, focused on this progress to help our team deliver a more consistently excellent guest experience.
Adrian Costanzo: Now we know we won't be perfect in every store at every hour of every day, but I know I speak for Adrian when I say we aspire to be and I'm confident we'll build on this momentum with another step forward in 2025.
Adrian Costanzo: We're at our best when process improvements, like those we've seen at checkout, give our team time to add that extra personal touch through interactions with our guests. [inaudible]
Adrian Costanzo: After all, our team is the best expression of our brand, and when we make it easier for them to prioritize time with our guests, it leads to higher guest satisfaction and loyalty.
Adrian Costanzo: and Speaking of Loyalty, our team members were instrumental in helping attract 13 million new target circle members in 2024.
Speaker Change: and the words of California store director Andy Fung, who's stored with a standout and finding up new target circle members. It's all about demonstrating care and making connections with guests.
Speaker Change: I love that, Andy. And knowing a great guest experience starts with a great team member experience, we continue to make investments in our team that allow them to show up even better for our guests, including technology advancements and improving the team member and guest experience.
from the GNAI Powered Store Companion used to answer hundreds of thousands of questions last year.
Speaker Change: to advancements that make our self-checkout lanes easier for visually impaired guests to navigate.
Speaker Change: And while we, of course, love that in-store trip and will continue to invest in elevating the store experience.
Speaker Change: Sometimes a store trip isn't in the cards, and for a busy family, the mission of the moment is all about speed and ease.
For us, speed starts with our same day shopping options. [inaudible]
Speaker Change: There's nothing faster than driver or same day delivery powered by Circle 360, both of which we guess needs within a few hours.
Speaker Change: Guests, Lovedly Services, something that shows in their continued growth in sky-high net promoter scores.
Speaker Change: and if you need a box shipped to your home, we've got you covered too.
Speaker Change: Brownbox shipping is specifically a place within our supply chain where we're making meaningful progress on speed and where we expect more to come.
Speaker Change: We're over 11% faster in average delivery time in 2024. Nearly doubling our packages delivered next day over last year. A key factor in driving the healthy growth in total shipped package volume, which is more than doubled since 2019.
Speaker Change: We know speed matters to our guests and that with increased speed comes more sales.
Speaker Change: We've shared house rotation centers that helped us drive speed and efficiency and we expect them to continue to grow volume while making us faster and less expensive.
Speaker Change: But we also plan to speed up delivery to guests that don't happen to have a rotation center in their backyard.
Speaker Change: by allowing drivers with shipped to work delivery routes handed off directly from stores.
Speaker Change: While we're in the early stages of expanding this test to more markets, we're very encouraged by the early results, and it's making us faster and more cost-efficient.
Speaker Change: It's yet another example of the power of our store's hub strategy coupled with the delivery powered by shoppers and drivers with shipped.
Speaker Change: and it's one of the many reasons we're excited about our work across our network to speed up package delivery in 2025 and beyond.
Speaker Change: As you can see, we plan to accelerate this year in more ladies than one.
Speaker Change: and whose focus and dedication continues to raise the bar on guest experience.
Speaker Change: You've heard a lot from me today, so I'll leave you with what's most important. And I'll do that by going back to those 350 million guest trips.
Speaker Change: What are those guest visits tell us? They demonstrate the power of our strategy, the 350 million more guest trips last year than in 2019, show how our strategy continues to gain relevance, and how it will power our next $15 billion in growth.
Speaker Change: and we're clear-eyed about our strategy and what it will take to realize those expectations.
Speaker Change: We then bring that incredible product to life with an elevated discovery experience that for us is equal parts digital in store.
Speaker Change: and as you might expect the COO to say, the Fundamentals matter.
Speaker Change: All that strategy is just words on a page, if we aren't delivering a great shopping experience every day. And you're going to see us make progress in our inventory reliability and modernize our course supply chain while reducing lead times.
Speaker Change: You'll see us bring greater consistency to our store experience and continue to improve our package delivery speed.
Speaker Change: I'm confident in our ability to deliver on that progress to be faster, more reliable and more consistent than before in 2025 and in the years to come. As we continue to elevate the discovery and delight behind today's tarjet.
Speaker Change: and it's my pleasure now to introduce Rick, who will take you deeper into the product and merchandising piece of the strategy.
Rick,
Thanks Michael.
Speaker Change: I'm excited to be here and to share glimpses into what's coming at Target It's all grounded in an idea you've heard this morning Every day discovery and delight which is at the heart of today's Tarje I'm excited to be here and to share glimpses into what's coming at the heart of today's
Speaker Change: For consumers, Tarjay is a term they created. A statement of love for this brand and a unique spin we put on the intersection of product and experience. [inaudible]
For our team, delivering today's tarjet is a responsibility.
and our discretionary categories, home apparel, hardlines. [inaudible]
and our Frequency Categories, Food and Beverage and Essentials.
Speaker Change: and in beauty, which sits at the intersection of frequency and discretionary. [inaudible]
Speaker Change: Because there's not one entry point into the target experience. There are six and countless paths to reach them which means our team is relentless and looking for ways to spur discovery and make every shopping trip special.
Speaker Change: Because ease, affordability, and reliability are things we must achieve to stay relevant. [inaudible]
Speaker Change: But to truly win, we have to chart a course that is distinctly target. So across our business, six categories that don't necessarily have a lot in common actually serve the same purpose for us. [inaudible]
Speaker Change: Creating a kind of everyday discovery and delight that sets target apart. [inaudible]
Speaker Change: Our commitment to the consumer, and to differentiation in a competitive environment, comes through in each of the three components of our sortment strategy.
Speaker Change: That includes national brands that consumers love, and a $31 billion-dollar-owned brand portfolio.
Speaker Change: and more than 40 beloved brands, you can only find at Target, roughly one quarter of which are delivering at least a billion dollars a year in sales. [inaudible]
Speaker Change: Light Cat and Jack, one of the top kids apparel brands in America.
Threshold, Goodie Gather, and Up and Up.
Speaker Change: All of which are approaching or exceeding $3 billion in annual sales.
Speaker Change: and then there's our special partnerships with national brands and world famous designers, as well as small, independent brands that consumers love discovering at target.
Speaker Change: There's a lot of power for us in this mix, but we know we can't stand still . . . .
We have to earn every trip.
Speaker Change: We grew traffic in stores and digital last year, and we're committed to building on that.
Speaker Change: That means as we look across our business, we're having honest conversations about where we need to make investments. [inaudible]
Build capabilities and deliver improved performance.
Speaker Change: An exciting conversation about how we can leverage our signature strength to set Target apart.
Speaker Change: Now, we've grown our food and beverage essentials and beauty categories by nearly $20 billion since 2019, making Target the fifth largest frequency player in US retail. [inaudible]
Speaker Change: and as we look to drive these businesses forward, we're focused on two key priorities. [inaudible]
Speaker Change: The first is continued improvement in reliability particularly within food and beverage .
Speaker Change: This is a business that's grown by almost $9 billion over the last five years and during that time Target has become the fifth biggest digital grocer in America America.
Speaker Change: So, to keep up with a surge in demand, we've opened three new food distribution centers over the last two years, expanding our network to eight facilities nationwide, and we have another one opening in 2026.
And while we've made big strides within stocks, [inaudible]
Speaker Change: We know that high in-starts on average are only part of the equation. [inaudible]
Speaker Change: There's still an important opportunity for us during peak shopping periods, including Sunday afternoon and weekday evenings because these are times where being out of stock on a key item can cost sales on related items or even the entire trip. [inaudible]
Speaker Change: And across our frequency businesses and beauty, we're focused on delivering the kind of consistent newness that has helped transform these categories.
Speaker Change: That will be led by our flagship Food and Beverage Own Brand, Good and Gather, which is one of the biggest and fastest growing grocery owned brands in the US.
Speaker Change: and on the brink of becoming target first, $4 billion own brand. [inaudible]
Speaker Change: This year, we'll add 600 new items across Good & Gather and our Powerhouse snack and dessert brand favorite day.
Speaker Change: To put that in perspective, for many CPG brands, a dozen new items represents a big year. But for our food and beverage team,
That's what we'll average in one week.
Speaker Change: with James Beard Award-winning chef Anne Kim. It sets at almost 1800 stores nationwide next week. Starting at just under seven dollars, we'll have seven items from chef Anne with flavors representing her Korean heritage, including four frozen pizzas.
Speaker Change: In styles that she's made famous in her Minneapolis restaurant, Pizzeria Lola. This is another example of delivering everyday discovery and delight in our grocery aisles. A big step forward in our journey to make Target a retailer that doesn't just sell food, but celebrates food.
Speaker Change: And within essentials, we've seen how taking a fresh look at a legacy brand can make a big difference for consumers.
Speaker Change: Last year, we relaunched up and up, reformulating about 40% of the assortment to make it even better for consumers and adding hundreds of new items that we knew guests wanted.
Speaker Change: Today, with more than 2,000 items, up and up is closing in on becoming a $3 billion brand.
Speaker Change: Part of an everyday essential assortment that also includes deal worthy, a lowest price brand we launched last year that spans several category store wide and ever spring are elevated sustainable offering.
Speaker Change: New brands and brand refreshes are a key tool for helping us meet consumer needs, which is why our relaunch of boots and barkley our pet accessories brand is so exciting. Pet Care is a big growth opportunity.
Speaker Change: New Product just set in stores on Sunday, and it's everything an animal lover could want. [inaudible]
Speaker Change: and will continue delivering newness across essentials, adding 14 new brands in nutrition this spring to build on consumers' interest in wellness. [inaudible] I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Speaker Change: and more than 2,200 new baby and toddler items, 50% of which will be exclusive to Target.
Speaker Change: including 200 new items from our Baby Own Brand Cloud Island.
Speaker Change: Now, we've nearly doubled the size of our beauty business since 2019. [inaudible]
Speaker Change: Amazing in-store presentation and a great digital experience, our partnership with Ulta Beauty and our sortment that includes some of the leading brands in the industry have combined to make target and undisputed beauty destination.
Speaker Change: and we are not resting on our laurels. That's why we just announced the addition of 2,000 new products to our assortment, 90% of which will be priced under $20.
Speaker Change: That includes an expansion in our offering in brands like EOS, NICS.
Speaker Change: Native, Alodia, Camille Rose, and the addition of nearly 50 new brands like Bubble and Days.
Speaker Change: Plus more newness within ultra beauty at target to further cement target status as a go-to for all things beauty.
Speaker Change: Now, when we consider our discretionary categories, hard lines, home, and apparel, these are the businesses that made Target famous, and while no denying after massive growth during the pandemic, they've been challenged in recent years.
Speaker Change: There's still generating more than $50 billion in sales. They're a huge part of what differentiates Target, and we saw meaningful acceleration across our discretionary portfolio in Q4. [inaudible]
Speaker Change: So, to turn that acceleration into sustained growth, there are three big opportunities in front of us [inaudible]
Speaker Change: First, we're being bold and transforming our hard lines and home businesses based on consumer insights and changing trends.
Speaker Change: Second, we're making changes to get faster, cutting the time it takes to move products from sketch pad to factory to a consumers basket.
Speaker Change: And finally, we're moving with a sense of urgency to deliver the kind of compelling newness that makes Target a place for discovery, delight, and joy.
Speaker Change: When it comes to being bold, I love how our hardlines team is embracing the spirit of what they're calling Fund 101 as they reimagine what this business can do for consumers.
Speaker Change: Words matter and what fun 101 is all about is realizing the untapped potential of a category that includes toys, video games, music and books, sporting goods and technology. [inaudible]
Speaker Change: We have significant strengths in businesses like toys and video games and nobody does pop culture better than Target. [inaudible]
Speaker Change: Ultimately, this will impact how we show up in store and online and it's already having an impact on our approach to product.
Just consider a few examples. [inaudible]
Speaker Change: Like how we're making Target a go-to for big moments in culture. You saw that on Black Friday with a huge Taylor Swift release that Brian mentioned. We were one of the top retailers for Wicked with 60% of our Wicked Assortment exclusive to Target. [inaudible]
Speaker Change: In January , Target was the place to be for the launch of Rebecca Yarrow's latest book, OnyxStorm.
Speaker Change: Books are so important to the families we serve, and I love how our team has responded. We're gaining share because we've made Target a destination for the top titles.
Speaker Change: And that work paid off with Onyx Storm. We were the number one retailer on its release date with a 30 share in route to blowing past all of our goals for the launch.
Speaker Change: We're also betting big on emerging brands, like the next gaming tube.
Speaker Change: A system that's great for the entire family, including children who aren't ready for the more advanced controllers.
Speaker Change: By partnering early with next, before they really took off in the fall, we had the inventory needed to support a surge in demand in November and in December . [inaudible]
and we're also leading into sports.
Speaker Change: Particularly in getting children ready for their first sport. Building on the role we play for families in other areas of our assortment.
Speaker Change: That's a small sample of what Fun 101 means, and I love how it's distinctly Target. It has so much potential to grow this entire business.
Speaker Change: in Home, in Home we have been on a journey and as you know this is an industry that's been challenged over recent years but we are not using that as an excuse.
Speaker Change: We must do better. And we believe Target can be the destination for great home style to help create spaces and moments families will love.
Speaker Change: So we're building a channel strategy for home that gives consumers the range of choice they want, along with the joy that comes with shopping at Target [inaudible]
Speaker Change: That starts with doubling down on target's legacy when it comes to style, design and affordability. [inaudible]
Speaker Change: So, through our design capabilities, we are focusing on the brands and products where we've seen Target make the biggest difference for consumers. [inaudible]
Helping them layer in thoughtful, trend forward updates over time [inaudible]
Speaker Change: Like Threshold, and hearth and hand with Magnolia, beloved brands that are part of millions of homes across the US.
Speaker Change: We are also incredibly excited about what we've seen since relaunching our Casa Luna bedding brand this year. With new prints and patterns and bamboo materials, the product is beautiful and great design is also driving improved performance.
Speaker Change: Over the last couple of months of the year, Hasseluna sales were up nearly 6 percent.
Speaker Change: And over the last two years, our new kitchenware brand, Figment, has become a guest favorite. Thanks to incredible style and can't miss pricing it is competing directly against some of the biggest players in the industry.
Speaker Change: We're also committed to being first to mass, like we've done with great brands like Stanley and Espresso, and influential designers like Shay McGee. [inaudible]
Speaker Change: and we're going big on seasons and holidays in the role we play in major life moments like back to college, where we'll deliver even more of the newness and elevated experiences that separate target.
Speaker Change: At the same time, we continue to expand our third party marketplace, Target Plus, which is contributing to the acceleration of home and represents a significant opportunity to grow this business.
Speaker Change: What sets Target Plus apart from other marketplaces is that it's consumer led.
Speaker Change: Rather than opening the doors to any seller, we're focused on building relevance and trust by working with partners that compliment our assortment.
Speaker Change: and also help us provide more of the breadth consumers are looking for.
Speaker Change: Ensuring we're strong, an option in categories where we wouldn't otherwise have a big presence. [inaudible]
Speaker Change: That includes great brands like DuPray and Modern Luxe, and there's a lot more potential for Target Plus to grow our home business, while freeing up our teams to focus on creating the kind of tarjet experience consumers can't find anywhere else.
Speaker Change: Now I want to talk a little bit about our apparel business. [inaudible]
Speaker Change: Consales and apparel were up by more than 3% in the fourth quarter and driving share games across almost all demographic groups, including families and those making more than $100,000 a year.
Speaker Change: A lot have gone into this, but I'm especially proud of what our team is doing when it comes to increasing our speed to market.
Speaker Change: This helps ensure consumers can find what they want, when they want it. We saw that last year when the mob wives, leopard print aesthetic, it took off on TikTok, loosely inspired by the 25th anniversary of the sopranos.
Speaker Change: Within days, we were able to work with our vendors to get product available online, and within weeks we had product in store.
Cara: In today's environment, this kind of speed goes hand in hand with being a discovery destination, and driving some of the experience enhancements you'll hear about from Cara.
Cara: And in our own brands, our team can get products from design to a shoppers basket in a little less than eight weeks on our fastest calendar.
Cara: But speed is about more than just strengthening our ability to jump on the latest trend of what's going viral right now.
Cara: By reducing a product development calendar, by at least 20% across our entire assortment, particularly in home and apparel.
Cara: We're adding in speed and flexibility that gives us more time to react to changes in the market and changes in consumer needs when it comes to newness, colors and sizes.
Cara: Our own brand sourcing and global supply planning teams do this by working closely with our vendor partners and strategically manage a raw materials production capacity and lead times [inaudible]
Cara: So we're getting the right items to our guests at the right time, while still upholding the high expectations consumers have for Target when it comes to quality sustainability and responsible sourcing. [inaudible]
Cara: Delivering on both speed and flexibility drives the kind of relevance that boosts top line and that kind of rigor and discipline also drives bottom line performance.
Cara: A great example of this is the work on all in motion.
Speaker Change: You already heard how Michael and his family love this brand, and they are not alone. Consumers couldn't get enough of our everyday soft fabric. And steady drumbeat of new silhouettes and styles in 2024.
Speaker Change: So, our team responded, chasing into an additional 8 million units, which helped our emotions deliver a more than 10% comp sales increase last year.
Speaker Change: And when we think about flexibility, that includes our country of production strategy for the products we directly sourced, and the multi-year effort we've made to diversify countries of origin. [inaudible]
Speaker Change: Our primary focus is on delivering the quality products and competitive prices that our guests deserve. And it's important to know that around half of what we sell is made in the US. And it's important to know that around half of what we sell is made in the US.
Speaker Change: In terms of our own brand production, we reduced what we sourced from China from roughly 60% in 2017 to around 30% today and on our way to less than 25% by the end of next year.
Speaker Change: A goal we expect to achieve four years ahead of our schedule.
Speaker Change: We've been especially effective in our apparel production and just 17% penetration in China.
Speaker Change: Thanks to success and shifting production to countries across the globe.
Speaker Change: So we're excited to continue pursuing opportunities in the Western Hemisphere across all own brand categories and in the US where possible.
Speaker Change: Finally, there's so much newness across discretionary, like our new Pillafort collections featuring Disney and Marvel, setting in stores in the spring.
Speaker Change: or the exciting Warby Parker partnership we just announced with shop and shops that will begin opening in the back half of the year.
because when you combine champions, legacy, and sportswear...
Speaker Change: With Target Style Authority, the result is amazing. This multi-year partnership will begin setting in stores in August , and will include a lifestyle collection featuring unique apparel sporting goods and bags.
Speaker Change: Ultimately, this will both bolster our style authority and complement our existing assortment of national brands and own brands. And most importantly, I know consumers will absolutely love it.
Speaker Change: So I want to extend a special thank you to Jamie Salter and everyone at Authentic Brands Group and Champion for all of your hard work in making this one of a kind partnership possible.
Speaker Change: Okay, before I hand off to Cara, I want to reiterate that everything we do starts with listening to consumers. [inaudible]
Cara: Learning from what works and what doesn't, and making improvements every day, as soon as matter why, when, or how you're shopping, it's easy, inspiring and affordable.
Cara: That's how we create everyday discovery and delight, and that's the thinking behind the phrase, today's Tarjay [inaudible]
Cara: because winning in this retail environment is not about what we've done. [inaudible]
It's about what we're creating. [inaudible]
every week. [inaudible]
every year to drive this business forward. [inaudible]
Cara: So I'm proud of the resiliency, consumer centricity, and creativity of our team and that they bring to everything that they're doing. And I can't wait to see what they're going to come up with next. [inaudible]
Cara: to give more consumers more reasons to choose target every day. [inaudible]
Thank you, now over to Cara.
Cara: Thanks, Rick, and good morning, everyone. It is great to be back with you again to share our plans to continue building momentum in our business.
Speaker Change: As you heard earlier from Brian , we aspire to bring together the best of what consumers want in a shopping experience in a way that is uniquely target . . . . . . . .
Speaker Change: Many other retail experiences offer trade-offs. You can have a good value, but not the best shopping experience. [inaudible]
Not with us.
Speaker Change: At Target, we don't believe in trade-offs. We believe in the power of and for our guests.
Speaker Change: You heard some rick that consumers want on-trend quality products and they want them at affordable prices. That's been part of our expect more pay less DNA for decades.
Speaker Change: Consumers want convenience and a great shopping experience. Whether you choose to shop in stores or online, we intensely design an elevated experience to be target filled with discovery, inspiration and ease.
Speaker Change: Consumers also want a compelling array of product choices. And they want to know that we stand behind each and every product that we sell. [inaudible]
Speaker Change: But we know it isn't just about what we sell. It's also so much about how we sell it.
Speaker Change: from TV ads to how we show up on social platforms to the way we design our stores, our website, and app.
Speaker Change: We know that experience is crucial, and we want to immerse consumers in a joyful and inspiring retail journey every time [inaudible]
After all, in addition to our on-friend design forward products,
Target also became famous for our aspirational in-store experience. [inaudible]
Speaker Change: It's how we earn the moniker, Tarje from our guests. And it's why they continue to hold us to the incredibly high standard that we also hold for ourselves. [inaudible]
Speaker Change: And those expectations, they aren't exclusive to our stores. Consumers not only want, but expect, target to provide that same level of discovery and inspiration, while scrolling our app, as they get when strolling our physical aisles. [inaudible]
Speaker Change: So that's a key focus as we continue to take that tarjet feeling that guests have love for decades and keep it fresh and relevant today by investing in capabilities to become America's favorite discovery destination. Thank you very much.
Speaker Change: This approach uniquely blends physical and digital retail, along with social in a way that only Target can.
Speaker Change: To us, it isn't just about a set of fulfillment options. Digital is the new front door to our experience. A way to come alongside our guests when they want and need us most.
Speaker Change: Sometimes that's providing mom the much needed inspiration on how to pull off that perfect, yet affordable, kids birthday party. Just a few clicks and everything she needs is added to her cart for a drive-up order, ready in a few hours. [inaudible]
Speaker Change: At other times, it's Target Circle 360, saving the day, helping dad with all he needs to make dinner tonight, brought straight to his front door from one of SHIP's 300,000 shoppers nationwide.
Speaker Change: So while others may view digital as if it's a separate business, a profit had went to overcome or simply a way to sell ads, we view it first as another opportunity to do what we do best, bringing that target magic to consumers.
Speaker Change: How can you keep Target top of mind long after the commercial ends? [inaudible]
Speaker Change: and it's working. For example, Target Santa stole the show across media outlets this holiday season with more than 70 million social mentions. Making it one of the top searches on TikTok the week of Black Friday.
Speaker Change: Through cultural relevance and a style that is uniquely Target, we're creating an unmatched emotional bond with our guests that translates to traffic and sales growth.
Speaker Change: But these bonds, they only actively consistently delight and inspire our guests. [inaudible]
Speaker Change: So over the last year we've continued to invest in many enhancements in innovation with the spirit of continuing to do just that.
First we always want to get the fundamentals right. [inaudible]
Speaker Change: and while guests may not even realize that we've made these changes, AB testing has shown that these have already led to hundreds of millions of dollars in incremental sales.
Speaker Change: But beyond the fundamentals, we're also always innovating, leaning in with a test and learn approach to design our digital experience to be truly distinctive. Thank you, David.
Speaker Change: For proof, look no further than our industry leading drive-up service. We were one of the first retailers to offer drive-up and it didn't take long before it became one of the most beloved services that we offer.
Speaker Change: And even though this service has delivered consistently high growth and high net promoter scores that hasn't stopped us from innovating to make it even better. Adding features like Starbucks or returns right to your car. [inaudible]
Speaker Change: Recently, we became the first retailer to integrate our app into Apple CarPlay, and of course, the service is also available through Android Auto. Using these car-based technologies, guests can now let their local target team know they're on their way to pick up their driver border. They can navigate hands free to the store and alert the team when they've arrived. [inaudible]
Speaker Change: The convenience the ease and the reliability of our digital experience has supported tremendous growth, with overall digital sales now representing about 20% of our total volume. [inaudible]
Speaker Change: and repunching well above our weight in categories like suit and beverage. [inaudible]
Speaker Change: Helping with dinner tonight or even just stacking the pantry without ever having to get out of your car, drive up and same day delivery had been game-changers for so many of our guests. And if help propel us to be one of the nation's top five grocers, well ahead of many traditional grocery stores in the U.S.
Speaker Change: We're also innovating in support of product discovery and making changes that are more revolutionary, including how we're using Gen AI technology and social media signals into our digital experience.
Speaker Change: We've integrated the power of Gen AI throughout our digital experience in many compelling ways.
Speaker Change: including summarizing guest product reviews to better help other guests make purchase decisions.
Speaker Change: Enhancing content to make our product detail pages richer and more compelling.
Speaker Change: and Building Tools, like our Gen AI-powered gift finder that help guests find the perfect present for their loved ones over the holiday, just by answering a few simple questions.
Speaker Change: Before arriving at our digital or physical front door, we know that social media plays an outside role in today's shopping journey.
Speaker Change: Consumer seamlessly shifts between discovering trends and making purchases, which means shopping is no longer a distinct transaction.
Speaker Change: This provides countless opportunities to engage consumers in new ways and provides outsized potential for Target. Why? Because of all big box retailers, Target is the most engaged with brand on TikTok, Instagram, and Facebook. Number one.
Speaker Change: Social platforms are already among the fastest growing drivers of traffic to our digital platforms, and with far greater engagement compared to our peers we know there are massive opportunities ahead of us.
Speaker Change: And because we know where consumers are starting their shopping journey, we can use AI to identify emerging trends from these social platforms to more quickly amplify relevant products we
Speaker Change: And as this trend began to go viral on social platforms, we were able to quickly amplify all things leopard print across our platforms, right as it was trending capitalizing on this cultural moment as it occurred rather than reading and reacting after the fact. [inaudible]
Speaker Change: And again, it isn't about story, or digital, or social, it's all of them working together.
Speaker Change: We're connecting our digital experiences with our already beloved store experience unlike anyone else.
Speaker Change: So we know the consumers, they don't just set their phones down when they shop in a physical store. In fact, more than one third of guests with the Target app use it while shopping in our stores.
Speaker Change: This not only gives us additional ways to merge our in-store and digital shopping experience, it also leads to more opportunities drive sales through compelling product recommendations and promotions. [inaudible]
Speaker Change: Do I guess to use the Target app while in our stores already spend more per transaction? Nearly 50% more, in fact, with room to grow this further? [inaudible]
Speaker Change: So recently we rolled out new functionality that transforms your phone into a personal shopping assistance used to enhance the in-store experience. This functionality helps guests navigate within the store and allows them to easily find everything they're looking for, to guide
Speaker Change: So no more guessing what isle of product is in, or even where that isle is located.
Speaker Change: We can also recommend products that complement what you're searching or buying for.
Speaker Change: and what makes me even more excited is not just what we are doing but the endless possibilities of what we can do and soon.
Speaker Change: We're currently developing ways to utilize the app the search current target sick lockers. Navigating bargain hunters to where in the store of these deals can be found.
Speaker Change: or imagine a situation where, knowing where you're located in our store, we can customize your app experience to tailor the content based on what you're currently browsing.
Speaker Change: For example, the gases standing in one of our beauty isles, we could show them trending and viral beauty brands as well as work with key vendor partners to offer real-time personalized promotions to drive trial conversion and inspiration .
Speaker Change: And of course, digital commerce is seeing rapid growth from online marketplaces and we've been extending our assortment through a marketplace target plus [inaudible]
Speaker Change: Now to be clear, we still believe our intentional invitation only approach is the right strategy, both now and in the long haul for target. [inaudible]
Speaker Change: But that hasn't prevented us from massive growth. Target Plus now generates over $1 billion in GMV having grown more than 35% in the past year alone.
Speaker Change: This includes growth of nearly 40% in home categories, more than 60% in essentials and beauty, and more than 170% in food.
Speaker Change: Yes, our strategy is different, but we believe the trust consumers have for the target brand is a real competitive advantage. And that trust should extend to our marketplace offerings too.
Speaker Change: So I want to pause here for a moment and address another frequently asked question and if we would prefer to drive demand into our stores rather than online due to the incremental cost associated with digital fulfillment. [inaudible]
Speaker Change: Now to be clear, we think consumers should get to decide where and how they shop. Not a retailer. [inaudible]
Speaker Change: and while our in-store shopping is what made Target famous, and yes, it's the most profitable on average, our digital channel is profitable as well, and continuing to get even more efficient over time. And that's without adding the benefits of Round L and Target Plus. Jim will share more on this a bit later.
Speaker Change: But what's missing from this question is why we love seeing consumers engage with us online.
Speaker Change: Beyond the economics of an individual purchase is the power that each of those interactions has to deepen a consumer's connection to our brand, an opportunity that we don't take lightly. With every positive experience, we increase the affinity a guest has with our brand. They become part of the total target ecosystem.
Speaker Change: So I guess using our same day services tend to spend more overall with Target, more than 20% more on average, including more in our stores.
Speaker Change: So now, let's spend some time talking about our loyalty platform target circle
Speaker Change: Last year, we were sharing our relaunch plans for an already-beloved program, and today I can tell you that the relaunch worked as planned, growing the love for Target Circle with new and existing numbers.
Speaker Change: but we aren't standing still. In fact, we have plans to make Target circle bigger and better than ever. [inaudible]
Bigger being the operative word. [inaudible]
Speaker Change: Here's a sneak peek of a spot that we'll air later this month.
Speaker Change: Oh, <expletive> . That looks good. That's like, okay. Honey, maybe we should get another one. We're going to get two more? Yeah. It's why I want to get one half off. Cool. I can see that. Get seven days of big deals. It's Target Circle.
Speaker Change: for the marketer and me. Cannot help but smile watching that ad. We are going bigger because we're relentlessly focused on growing engagement with our brand and rewarding consumers for choosing target. And our members say they love it, both with their words and with their actions.
Speaker Change: Last year, active target circle members spent three times more on average compared with non-members Target Circle card holders spent around six times more and Target Circle 360 members spent an average of eight times more, shopping us six times more often than non-members
Speaker Change: But a common question I get is something like this. Cara, there's so many loyalty programs out there why should consumers sign up for another with Target Circle? So let me unpack this a bit.
Speaker Change: The base program is completely free, providing access to automatic deals and personalized offers just for you. Simply put, you save more money just by signing up.
Speaker Change: and a reminder that if you're a target circle card holder, you save an extra 5% every day. [inaudible]
Speaker Change: Target Circle 360 members get all the benefits of our base program plus same day deliveries from Target and other retailers.
Speaker Change: and clearly consumer see the value of a membership in Target Circle 360, given that our membership count is more than four times greater compared to a year ago.
Speaker Change: So now I want to focus on all the ways we've differentiated our membership program. Both in how it exists today and how we'll continue to make it better going forward.
Speaker Change: and with everything we do, it starts by listening to what guests tell us they want. [inaudible]
Speaker Change: First, we know that our guests love the shop, across many of their favorite stores.
Other membership programs only provide access to one retailer.
Speaker Change: With Target Circle 360, you already get unlimited, famed-day delivery with a personal shopper at Target and more than a hundred other retailers powered by SHIFT for just $99 per year and only $49 per year if you're a Target Circle card holder. [inaudible]
Speaker Change: Target Circle 360 members will also get the VIP Red Carpet Treatment with early access to exciting deals and limited time offerings and partnerships ahead of other guests.
Speaker Change: The weather is stocking the hotel room with snacks or quickly getting those items they forgot to pack, we know our guests love to travel [inaudible]
Speaker Change: and we want to help take the stress out of it. So we are incredibly excited to announce a partnership with Marriott Bonvoy, coming later this spring, to make traveling even easier and more rewarding for Target Circle 360 members. More details to come very soon.
Speaker Change: These are just a few of the continued investments that we're making to elevate our loyalty offering, and it shows the importance of how we're thinking about differentiating our same day delivery service too. [inaudible] and it's the end of the day
Speaker Change: In the same way that we first became famous for our in-store experience and later that the industry was drive up as well, we aspire to grow same day delivery to be another unmistakably target offering that becomes synonymous with the elevated joy, the value and experience that we're known for.
Speaker Change: With this signature service as a core benefit over the next three years, we believe our target Circle 360 membership count has the potential to more than triple with opportunities to grow even further over time.
Speaker Change: And as you've heard me share before, the insights that we gained from our target circle members help power our media business round out. These insights allow us to introduce the right brand partners and products to the right guests, creating connections that are beneficial for all involved. [inaudible]
Speaker Change: and we're doing it in unique ways both on platforms that we own and those that we don't. [inaudible]
Speaker Change: If our aim is to put the guest at the center of every investment that we make, then our approach to digital advertising should be no difference. [inaudible]
Speaker Change: For example, with Target Product ads by Rondelle Sink sponsored ads on our website and app we help partners place ads where guests are already browsing and with shoppers who are likely to purchase based on our rich data and insights
Speaker Change: This leads to very high conversion rates and return on ad spend. The result? These ad fees will alone have grown more than 35% last year. [inaudible]
Speaker Change: and another key source of round-out power lies in the qualities of our audiences, target guests who are trend-forward, deeply engaged and enjoy shopping.
Speaker Change: The richness of our guest space and the trust they have for our brand, this is why we're seeing outside growth. [inaudible]
Speaker Change: It's also why we have so much confidence in round eligibility to scale for years to come. We continue to innovate and prove our value to existing partners, who spend more with us every year. [inaudible]
Speaker Change: We're also making it easier for smaller, emerging brands to utilize the power of roundels reach. And in the last year, we've grown this partner segment by more than 40 percent.
Speaker Change: I want to pause here to address the notion that these digital offerings are alternative revenue streams or ancillary businesses.
Speaker Change: Others may talk about them this way, but it's target their part of our holistic ecosystem. Let's talk about them.
Speaker Change: and one only provides value because of how it works with the rest of the portfolio.
Speaker Change: The reason why Target Circle is a beloved loyalty platform is because it's attached to a brand that consumers love.
Speaker Change: Roundout was powered by the robust insights that come from Target Circle, and as we grow our offerings on Target Plus, that allows Roundout to onboard new advertising partners more quickly too.
Speaker Change: Our ecosystem is not a collection of individual capabilities or offerings, but parts of a hole that interact harmoniously to serve our guests each and every day.
Speaker Change: So over the past year, we've continued to invest in opportunities to be the best version of ourselves for our guests today and tomorrow and that isn't slowing down [inaudible]
Speaker Change: Thanks, Cara. I've been at Target for about six months now, and while I've already had the chance to meet some of you, I'm looking forward to spending many more times with you in your head.
Speaker Change: Since I arrived, I developed a much deeper appreciation for the strength of the target business model and a team that supports it. In particular, I want to thank my members of my talented finance team who focused on being outstanding business partners while ensuring we make the right long term financial decisions.
Speaker Change: I was excited to come to Target because of the amazing brand backed by asset and scale that we can apply throughout our business, including nearly 2000 stores served by more than 60 supply chain facilities and an experienced global sourcing organization with offices around the world.
Speaker Change: A large and diversified own brand portfolio, generating more than $31 billion in annual sales. [inaudible]
Speaker Change: A unique and balanced mix of six core merchandise categories spanning both wants and daily needs, each of which generates well over $10 billion in annual sales.
Speaker Change: A full suite of digital fulfillment capabilities that together account for more than 20 billion dollars in annual sales with one of the fastest growing marketplaces in Target Plus.
Speaker Change: With all these assets supporting our differentiated strategy, Target has a compelling growth opportunity in the years ahead. And I'm looking forward to sharing our progress with you over time.
Speaker Change: As you know we face some unexpected challenges in 2024 and we're encouraged that we ended the year with stronger than expected to for performance
Speaker Change: When we first provided 4th quarter top line guidance last November , we expected comparable sales in a range around flat. This morning we reported a 1.5% increase in Q4 comp sales consistent with our January update. [inaudible]
Speaker Change: When we guided Q4 EPS back in November , we specified a range of $1.85 to $2.45 and this morning we reported Q4 gap and adjusted EPS of $2.41 near the very high end of that range.
Speaker Change: It's also notable that despite the volatility we saw on a quarterly basis, our fully results ended up with the top and bottom line ranges that Michael provided at the beginning of the year.
Speaker Change: And while last year's EPS was slightly lower than in 2023, that year also included a 53rd week.
Speaker Change: When we just for our estimate of the benefit of that extra week in an apple sample spaces, 2024 net sales grew by about 1% over 2023 and full your EPS grew by about 3% [inaudible]
Speaker Change: Within digital, we saw double digit growth in both drive up and same day delivery of power by Target Circle 360.
Speaker Change: We also saw more than 35% growth in third-party GMV on target plus last year with more than 40% growth in Q4. We also saw more than 35% growth in Q4.
Rondell: Randell also had another strong year with growth in the mid-teens
Rondell: Beyond getting to know the Target team, I've also great gained a deeper appreciation for the ways that Target is unique within the US market.
Rondell: For example, and as Tara highlighted earlier, our approach to digital commerce is distinctly different from other retailers.
Rondell: and I want to dig into that because things might look similar on the surface. [inaudible]
Rondell: For instance, when you look across the top of the slide, you see a complete army channel retailer offering in-store shopping and a full suite of digital fulfillment options.
Rondell: But what makes Target unique is the way those instrument options work together to increase guest engagement more broadly. [inaudible]
Rondell: As Michael mentioned earlier, when guests try our drive up and same day delivery services, they increase their overall spending by an average of more than 20% including more spending in our stores.
Rondell: You don't hear that from others, and it's a tangible example of the power of and that Cara described earlier.
Rondell: In Managing Our Swortman, we focus first on selecting the right set of items and the categories our guests expect from us, and then we determine the appropriate channel by item and category.
Rondell: Because of this selective approach, most of our first party digital sales come from items we offer both online and in our stores.
Rondell: This fits perfectly with our stores' Hubs model, allowing us to leverage our stores' assets, inventory, and team to fulfill a very high percentage of a first party demand, more than 97% in 2024.
Rondell: It's a model that delivers speed and efficiency in a capital light manner.
Rondell: and importantly, it's scalable as our digital sales have more than tripled over the last five years on largely the same asset base.
Rondell: Of course, beyond the direct impacts and benefit of first-party sales, the Digital Channel also powers our Roundell ad business and our Target Plus marketplace.
Rondell: Target Plus is an agile capitalite option for selling a wide range of products from distinctive brands without the need to buy, store, and move the inventory ourselves.
Rondell: As a result, Target Plus is especially well suited for items that turn slowly, items that occupy a lot of physical space, and ones for which demand tends to be variable, and less predictable.
Rondell: While Target Plus is a relatively small contributor to our PNL today, there's a compelling opportunity to rapidly expand our Target Plus assortment, benefiting both our top line and bottom line in 2025 and beyond.
Rondell: Now to be clear, the profit rate in the digital channel is lower than our stores, but digital growth is good for our bottom line. And we have clear plans in place to further improve our digital profitability over time.
Rondell: I also want to note, this analysis of digital profitability doesn't rely on the sizeable indirect benefits we gain from our digital platform, including revenue from Roundell and Target Plus.
Rondell: and importantly, the growth in store sales we see when a guest tries one of our digital services. [inaudible]
Rondell: To emphasize that point, our first party digital business delivers incremental profit to our bottom line, even if we exclude the indirect benefits from Roundell and Target Plus.
Rondell: Beyond digital profitability, I want to also unpack a few of our financial metrics behind our six core merchandising categories, because understanding these dynamics is critical to understanding our business.
Rondell: At the top of the slide, you can see the percentage of our sales and each of our six core categories. A balance makes you don't see anywhere else in retail. [inaudible]
Rondell: The next line compares the gross margin rates in each of these categories ranging from the lowest rate in hard lines to more than double that rate in apparel. [inaudible]
Rondell: This wide range is an important part of understanding our financial results, because variability in category growth rates can have a very meaningful impact on our gross margin rate.
Rondell: In over the last five years, the range of margin-mix impact has been quite wide from as much as a 160 basis point headwind in the first quarter of 2020 to 150 basis point tailwind a year later. [inaudible]
Rondell: Next on the slide you can see our own brand mix, which runs from more than 75% in apparel to the low single digits to single digits of beauty and hard lines.
Rondell: Obviously this metric is important strategically but it also has implications for our financial results [inaudible]
Rondell: Owen Brands, our key part of our differentiation and a typically earn higher gross margin rates than our national brands.
Rondell: They also involve longer lead times, giving us less flexibility to react to changes in sales trends [inaudible]
Rondell: That last point relates to the next row on the table.
Rondell: showing the relative space occupied by these categories in the supply chain. [inaudible]
Rondell: Together, these two metrics help to illustrate a challenge that we encountered in Q3 of last year when a meaningful slowdown in home put extra pressure on our supply chain and stores at the same time there were handling peak volume in advance of the holidays. [inaudible]
Rondell: As a result, and as Rick covered earlier, the team has been working to reduce lead times in our longest lead apparel and home categories
Rondell: This effort will be an ongoing journey, but we've already made progress most notably in a parallel. [inaudible]
Rondell: and over time, this work will benefit our business in many ways, especially when volatility is high.
Rondell: More specifically with shorter lead times, we can react more quickly when consumer demand rises, to replenish more quickly and maximize sales [inaudible]
Rondell: Conversely, when demand softens unexpectedly, shorter lead times allow us to adjust inventory more quickly and reduce markdown exposure.
Rondell: In addition, this work can help our supply chain by reducing peaks and valleys and storage needs when there's a volatility in demand.
Rondell: Beyond our work on lead times, the team is laying into Target Plus as a way to augment our assortment without taking on the inventory risk and capacity needs of our first party business [inaudible]
Rondell: especially for items that are bulky and not well-suited for guests to bring home in their car. [inaudible]
Speaker Change: Finally, as you see at the bottom of the slide, you can see the relative variability in sales trends in each of these core categories over time.
Speaker Change: Not surprisingly, variability is highest on the discretionary side of our assortment, where guests can rapidly adjust their short term spending as conditions change.
Speaker Change: With about half of these half of our sales in these categories we naturally have more variability in our business than if we only sold our frequency categories. [inaudible]
Speaker Change: But importantly, we're also compensated for that variability, as our highest margin categories are also on the discretionary side of our business.
Speaker Change: With that as context, I want to move to our longer term financial aspirations, which remain largely consistent with what we shared before. [inaudible]
Speaker Change: Michael outlined the dressable market opportunity earlier, and with our scale assets and strategy, we're looking to address that opportunity by maintaining or growing share and categories that we sell, resulting in an average of low to mid-singled, top-line growth over time.
Speaker Change: And notably, over the last five years, Target's average top-line growth has exceeded that pace resulting in total growth of about 36 percent, a number that compares favorably to the retail sector and consumer spending over that period.
Speaker Change: But growth rates varied widely over that period with nearly half of that nearly all that growth in the first two years and flatish trends since then.
Speaker Change: This reflects our strong mix of discretionary categories and the dramatic swings in consumer spending that happens during the pandemic and the period of high inflation that followed. [inaudible]
Speaker Change: including three consecutive quarters of sharegames in the peril, improving share trends in our home business, and how they season sharegames in both sporting goods and toys within hardlines.
Speaker Change: When combined with steady growth in our frequency categories, and ongoing shared gains in beauty, we feel well positioned to deliver a long-term top line growth.
Speaker Change: Turning to profitability, we expect to grow our operating margin rate over time based on multiple profit enhancing opportunities ahead of us. Among those tailwinds, we expect continued outsized growth from Roundell and Target Plus, both of which are creative to our operating margin rate. We expect to grow our operating margin rate over time based on multiple profit enhancing opportunities ahead of us.
Speaker Change: We're expecting more good news from Shrink in 2025 and beyond. As you recall, from 2019 through 2023, our operating margin absorbed about 120 basis points of pressure from higher inventory Shrink.
Speaker Change: Last year we recovered about the third of that pressure, as a lower financial impact from shrink was an approximate 40 basis point tailwind to our full year operating margin rate [inaudible]
Speaker Change: Given recent trends and the increased focus on retail crime we've seen at the federal, state, and local level we expect to benefit from further shrinking improvement in 2025 and beyond.
Speaker Change: In the last two years since we launched the work, we've already attained the initial goal of more than $2 billion in savings [inaudible]
Speaker Change: But that doesn't mean we're going to stop. Rather, it will become an ongoing mindset across our business to find savings opportunities we can take to the bottom line or reinvest in support of our guest experience, lower prices and our team.
Speaker Change: And with our scale, if we hold or gain share in each across our merchandise categories, we can expand the size of our business by more than 15 billion dollars over five years. An amount that's larger than many of our retail peers.
Speaker Change: We're planning to deliver a modest increase in our operating margin rate this year as profit at Tailwinds, offset continued investments in long-term profitable growth.
Speaker Change: For the year, we're expecting an effective tax rate of 23 to 24%, which includes the implementation of new global minimum tax rules.
Speaker Change: Altogether, we're expecting 2025 and adjusted EPS of 880-980
Speaker Change: Regarding capital deployment, I'll first reiterate our long-standing priorities. We'd first look to invest fully in our business in products that meet our strategic and financial criteria.
Speaker Change: Second, we look to support the dividend and build on our record of more than 50 years of annual increase.
Speaker Change: and finally we look to return any excess cash beyond those first two uses through share repurchases over time within the constraints of our middle-A credit ratings.
Speaker Change: Regarding the first priority, we continue to expect capex of $4 to $5 billion this year.
Speaker Change: The bulk of these investments will be focused on stores, including both new locations and existing ones. [inaudible]
Speaker Change: and finally, beyond those first two uses, we expect to have capacity for shared repurchases within the limits of our credit ratings. As always, the timing and magnitude will depend on business results and our assessment of the external environment.
Speaker Change: In particular, we plan to make some extra flexibility in a near term to help us navigate uncertainty regarding tariffs.
Speaker Change: With a sourcing organization that's decades old, our team has a lot of experience in navigating this type of volatility. They're monitoring the situation carefully and we expect to successfully navigate through any changes just like we have in the past. [inaudible]
Speaker Change: However, given your term uncertainty we'll be looking to maintain a larger than normal cushion on the balance sheet [inaudible]
Speaker Change: As always our team will focus first on minimizing any impact on our guests as we manage our business to deliver on our financial goals
Speaker Change: Finally, I want to spend a minute on our guidance practices and our decision to move away from quarterly guidance.
Speaker Change: This change reflects our expectation of continued elevated volatility, which limits the effectiveness of quarterly forecasts.
Speaker Change: As an example, consider the impact of warm weather on apparel sales in last year's third quarter, namely our apparel comp moved from more than 3% growth in Q2 to down nearly 1% in Q3 back up to 3.5% growth in Q4.
Speaker Change: Even as we move to annual guidance, we'll have the opportunity to revisit our full-year outlook after every quarter and assess whether any changes might be appropriate. And of course, we can comment on timing considerations and prior year comparisons.
Speaker Change: and I'd like to comment on our top line results so far this quarter as sales have become more volatile since the recent holiday season.
Speaker Change: More specifically in February , we saw record sales performance on Valentine's Day, but overall top-line performance for the month was soft, as cold weather affected apparel sales and consumer confidence declines, impacting our discretionary assortment more broadly.
Speaker Change: Looking ahead, we expect to see a moderation in this trend as apparel sales respond to warmer weather around the country.
Speaker Change: And given our performance around Valentine's Day, we're looking forward to the Easter holiday where we'll feature a seasonal sortment ranging from candy to toys, home decor and apparel, and of course everything needed for Easter dinner. [inaudible]
Speaker Change: Beyond the impact of these early top line trends, we're expecting some outsized profit pressures in this year's first quarter compared with the rest of the year. [inaudible]
Speaker Change: These include tariff uncertainty, expected start-up costs from a ramp up in new stores and remodel projects, and the timing of certain S-GNA and tax expenses within the year.
Speaker Change: In contrast, we'll face easier profit comparisons to the back half of the year, including the 2-3 benefit from lapping last year's unexpected supply chain costs, which we don't expect to repeat in 2025.
Speaker Change: As I get ready to hand things back to Brian , I want to start by thanking the entire Target team for their tireless efforts to support our guests, our business and each other.
Speaker Change: Our teams have managed through several years of elevated volatility and they've never lost their focus on serving our guests [inaudible]
Speaker Change: I also want to thank everyone who's here today for your continued interest in Target.
Speaker Change: In the same way that volatility presents a challenge for our team, we know it's challenging for investors [inaudible]
Speaker Change: Today we are laser focused on reducing volatility in our business, as we focus on controlling what we can control. [inaudible]
Speaker Change: and with the potential for reduced volatility combined with growth prospects ahead of us, there's a compelling opportunity to reward shareholders over time.
With that I'll turn things back over to Brian .
Brian: Well, thank you, Jim. In a minute, I'll invite the team back to the stage to answer your questions, but before I do, let me recap a few key points.
Speaker Change: Starting with the three questions I posed at the beginning of the meeting [inaudible]
What is Target's unique place in retail?
Speaker Change: How will Target build more engagement with even more consumers? And how will that engagement translate to traffic, trails and profitability over the next five years?
Speaker Change: As we shared with you today, we are very confident in our path forward because we have the scale, the strategy and the capabilities to make Target a long-term winner in retail.
It always starts with product. [inaudible]
We've wrote today all to grant all six categories or assortment.
were the fifth largest frequency player in U.S. retail. . .
Speaker Change: We're accelerating investments in our discretionary categories to build on the more than 50 billion dollars in annual sales in hard lines, home, and apparel.
Speaker Change: We're getting access to thousands of trusted products and brands through our billion-dollar marketplace, Target Plus.
Speaker Change: A marketplace we expect to reach $5 billion in GMD over the next five years.
Speaker Change: We pair this newness with relevance and value in our assortment.
Speaker Change: and an experience that makes it easy and fun for consumers to shop in the way that works best for them.
As a result,
Speaker Change: Gethmade, 350 million more trips to Target last year than they did in 2019.
Those trips are part of an ecosystem of marketing.
Speaker Change: Advertising, Lawyers of benefits, and digital and historic experiences, to make every trip tailored to the needs and preference of our guests. [inaudible]
Speaker Change: That level of personalization and flexibility is a win-win for our guests and our business.
Speaker Change: Our industry-leading STD services are growing at a double digit pace and even more growth potential ahead.
Speaker Change: target circle 360 membership, quadruple since launch, and we've added benefits like a partnership with
Speaker Change: and our media business, Randell, continues to generate nearly $2 billion in value for target, while creating connections with consumers and brands that we believe allow it to double in size in the next five years.
Speaker Change: All this comes together in a road map for growth that we expected to deliver more than $15 billion in sales growth over the next five years.
Today Sergeant, it's here. [inaudible]
Speaker Change: that consists in drumbeat of a raided discovery and delight we offer to consumers.
It stays true to who we've always been. [inaudible]
Speaker Change: keeps pace with consumers friends and leverages our connection to culture great friends on our own while always thinking long term about a unique role Target plays a retail and in the lives of millions of consumers we serve each and every day.
Speaker Change: So, thank you once again for being here today, and now I'll invite Michael, Rick Cara, Jim to join me on the stage to take your questions.
Michael Lassner: All right, I absolutely love the show of hands as we started a long attack to the stage. And Michael Lasser, I think I saw your hand go up very first. So I'll give you the first question today.
Thank you very much, Brian Michael Lasser from UBS. Thank you guys.
Michael Lassner: It seemed like one of the messages today that Target offered is we can still generate growth, but also increase the predictability and lower the volatility of the business.
Michael Lassner: based on some of the investments that we're making in system team members and infrastructure. So A, is that right? And B, when are we going to, when is it realistic? Realistic for outsiders to start to see that play out?
Michael Lassner: in the P&L because it has been quite volatile over the last few years and I'll add my second question speaking of volatility, the tear situation remains quite fluid.
Michael Lassner: Based on what you know today, how did you factor that into your guidance for 2025? Thank you very much. Michael, it's a great place to start and those are two powerful takeaways. Thank you very much.
that focus on consistency and reliability. [inaudible]
Michael Lassner: You've heard it from Michael, you heard it throughout our discussion today, and certainly Jim and I have spent a lot of time talking about consistency going forward. Michael, I'm going to let you start and talk about the focus on reliability. And Jim, let's kind of share some thoughts on the importance of consistency as we go forward.
Michael Lassner: Yeah, that's a good question, Michael, and think about it and we think about it is consistent progress over time. And you could hear us building on momentum in some cases where we talked about, you know, we've had liability, inventory reliability improvements for eight quarters in a row now. And we want to build on that with more progress as we move through the quarters of 2025. . . . . . .
Michael Lassner: You heard Rick Share, as we're shortening lead times, discretionary categories are going to come inherently with more volatility than food staples, but when we can pull 20% of our lead times out of a category like apparel, and that's some of the thinking that's gone into our lead times that are powering the receipts that we take into 2025 in that category, we'd expect that to help us reduce that volatility over time.
Yeah, for you, I think...
Michael Lassner: Clearly it's important for us as we focus on delivering value for the long term, but we clearly understand the value of consistency as well. I think you'll see an ongoing journey as we're trying to reduce volatility. I'll take some time and there's there's.
Michael Lassner: Certainly stepping stones along the way, but it'll take some time to get to the end goal. But that's our focus and are also our focus is giving me on controlling what we can control. There's elements out there that are uncontrollable, but we're going to focus on what we can do the best and be as sufficient as we can be. [inaudible]
Michael Lassner: Michael, turning to your question about terrorists, and obviously we've sent a lot of times a team talking about terrorists.
Speaker Change: We've got a very experienced team in place. We've been here before, we've managed with Terrace in the past. But Rick, you talked on stage today about some of the changes we've been making. Obviously, speed and flexibility is important in this environment. Why don't you start and Michael want to build on some of the changes in the thoughts we have around Terrace right now? [inaudible]
Yeah and I think I'd start with the team. [inaudible]
Speaker Change: We have a really incredible team, both in global sourcing as well as design, you know, decades of experience and under their leadership they've been very proactive and been thinking about this for years now and have been working to diversify our country of production. Thank you very much.
and so we have been...
Speaker Change: He's pulling moving things out of China to other places around the world looking at going across Asia as well as Western Hemisphere, Guatemala, Honduras. [inaudible]
Speaker Change: So we have a much more diverse set of countries from which we produce.
Speaker Change: And I think that's just going to give us more flexibility and help us be more agile. You use the word, I think use the word dynamic or fluid to describe tariffs and we see it very much the same way. And so we just need to make sure that we have options and that we're being flexible. And as we're going through this and navigating sort of the changes that we continue to put the consumer first. [inaudible]
Michael Lassner: and that we're thinking through how are we going to navigate this while delivering the value that we've committed to deliver to the consumer? Michael, before I turn it over to you, to be really clear for everyone that's here today, when we think about tariffs and tariff implications, we always start with the impact on consumers and the families we serve. [inaudible]
Michael Lassner: And how in an environment like this we continue to make sure we're providing the affordability and value they're looking for. And Michael, I know that's been part of our conversation for a long time now as we think about the impact of tariffs. Yeah, absolutely. I think Rick said it well. I mean, it starts with a great team.
Michael Lassner: and a huge thanks to the team that works through what we expect to kind of navigate as we move through 2025.
Speaker Change: But to connect that question to the one we just had before, you also heard Rick describe and we diversify our countries of production, especially in the Western Hemisphere. We actually get the benefit of speed, too. And so that helps this region, that helps us reduce volatility from an inventory perspective in those businesses. Let me start over here, Simeon.
Speaker Change: Hi everyone, Simeon Gutman, Morgan Stanley . I want to point it to Jim and then bring everyone back in. There was a 6% margin target, even margin target at one point. We didn't hear about that today and there was maybe a mid single digit reference to long term EPS growth. [inaudible]
Speaker Change: Can you talk about the either reinvestment rate of the business or providing you more flexibility and then Brian more broadly? Is there a greater reinvestment as you look at this business given the factors that retailers are facing? Thanks
Speaker Change: Jim O'Leach, you start? Yep, I mean in terms of referencing the six percent one is continuous productivity and thinking about continually fueling our investments for our business. As Michael stated last year, I mean our...
Speaker Change: We look for what's the optimal rate of which we can maximize our profit dollar growth over time.
Speaker Change: and we certainly think we have tailwinds and continue operating, operating profit margin that we expect to maintain this year and you're going forward. So we expect to make that progress in addition to newness and affordability merchandising and a lot of things we do in our core.
Speaker Change: Digital Growth in high growth platforms like Roundell and Target Plus are going to be creative and we also have the continued tailwinds from shrink as well.
Speaker Change: Jimmy, on the investment side, I'll go all the way back to, but...
Speaker Change: Tax-rated adjustments back in 2017. And since that time, we've invested well over 50 billion dollars of capital in our business.
Speaker Change: and our stores and supply chain and technology. We've been investing in building new capabilities, and Cara can talk about the capabilities that we built from a marketing standpoint.
Speaker Change: Investing in new initiatives, Rick Investing in tools to make sure we're better merchants. Thank you very much.
So...
Speaker Change: We've been investing in our business for a number of years [inaudible]
Speaker Change: and it's that combination of strategy and scale and capabilities that for me is so important as we say here today and gives us so much confidence in the future. But, Karen, why don't you talk about some of the investments we've made in marketing because I know Michael, we talk a lot about stores and I know you've been tracking the investments we've made in stores and the new stores, new full-size stores we're building.
and the work on...
Bumer,
Speaker Change: And so our investments in marketing have come alongside that. There's no better example of today's Tarje than if you look at how we show up on social as an example. I mentioned the power of the target brand being the number one engaged with brand. That's both based on how we put things out into the world, newness content. It's also how consumers talk about us and the power of how they talk through that. And so that's how we put things out into the world. That's how we put things out into the world. That's how we put things out into the world.
Speaker Change: So if I think about where we're then leveraging that power of those marketing investments to make our digital experiences smarter, to make those more tarjet. If I think through modern retailer today, physical, no one has a better sort experience for us. Social, we have the power of the brand, you have the investments that we've made consistently in digital, I think that really sets us up for success go forward.
Speaker Change: Rick, one of the things that we know we've been investing in, and you talked about it today from the stage, is our own brand portfolio. And we talked about a $31 billion own brand portfolio, close to a dozen billion dollar brands. [inaudible]
Speaker Change: for their honor way to be three or four billion dollar brands. We've been making big investments in our own brand portfolio and those capabilities and I know you and your team run it like a good super package, good company. What should give the group a sense for the way we're investing in our own brands and the capabilities behind those brands? [inaudible]
Speaker Change: Sure, I would love to. I mean, first of all, the fact that we refer to them as own brands.
Speaker Change: says something. We don't think of them as private label. We don't think of them as labels. They are brands that have positioning, that have meaning, that have a clear consumer target and bring differentiation to the marketplace. [inaudible]
and so...
Speaker Change: To do that, we have to continue to not just launch brands but we have to manage brands and make sure that we're bringing innovation and news to those brands [inaudible]
Speaker Change: and I think the couple examples I would highlight is Up and Up. It's a brand that's been around for a long time, has lots and lots of items, but it needed a refresh. And so we went in and invested in the brand, redesigned all the packaging graphics.
Speaker Change: Took about 40% of the line and did product improvements, new fragrances, more sustainable packaging, and we're really excited about that. And that's what we think you need to do to keep brands up.
Contemporary and relevant.
Speaker Change: The other example I would just give you really quickly is all in motion. [inaudible]
Speaker Change: Did he expand on some of the investments, including the capabilities that we've been enhancing to run our stores and our DCs even more efficiently? [inaudible]
Speaker Change: Yeah, you heard me refer today to some of the technology investments we continue to make. I mean, some of that system modernization and supply chain is at the core of how we buy and replenish product. And we've been on a multi-year journey that I'm excited about what the progress in 2025 will be to bring more of those capabilities to more of the assortment.
Speaker Change: And then another place where I get excited, you could probably pick it up in today's presentation of where we're innovating is when it comes to the speed that we can drive in our stores as Hubs model. And some of you have the chance to visit our Sortation Center and you can see what those facilities have done for us.
Speaker Change: But what we think, we can pull off some of the markets that don't have a sortation center that can make us even faster with package delivery and make us more efficient. Another great example of kind of a sustained focus on how we get more efficient over time. I get excited about what 2025 will hold there. [inaudible]
Speaker Change: Jimmy, I'll end with one other area that we've made big investments in the last few years and we couldn't cover everything today. I know we covered a lot of ground, but Rick talked about the dramatic growth we've seen in food and beverage over the last few years. [inaudible]
Speaker Change: That is a byproduct of consistent investments in our food supply chain.
in our sourcing capabilities.
in our in-store experience. [inaudible]
in our...
Speaker Change: Team at store level that's managing food each and every day. Those have been a big part of the acceleration we've seen in food. And, Carrie, you talked about the fact that we're now one of the biggest digital food retailers in the United States. It's a byproduct consistent investments behind those key drivers in our business. [inaudible]
Chris Horvitz: Thanks, Chris Horvers, J.P. Morgan. Good morning and thanks for the presentation. Good morning, Chris.
Speaker Change: I'll give both questions like Michael did. My first question is longer term, you know, Target Plast going from 1 billion to 5 billion.
Speaker Change: It's a big number, that's big growth. What's driving at? Is that a way to think about how the assortment is going to expand over time? Obviously, there's a marketing push there as well. And would you ever consider sort of a fulfilled by Target kind of model? And then more in the near term, is you think about the pressures that you're talking about in the first quarter. Inventory is up 7%, I know you talked about it a little bit. To what extent are you baking in some excess clearance and promotional pressure? Thank you.
Speaker Change: Carol, what's your start? Sure, I think on the Target Plus front, I think it's always important to start with why we have a differentiated strategy [inaudible]
Speaker Change: to stand behind each and every one. That being said, that strategy does not prohibit us from growth. We grew a target plus by 35% in this past year, accelerated in the fourth quarter by complementing the assortment strategy that Rick talked about. In a payroll, you saw from Jim, 75% owned brand. [inaudible]
Speaker Change: So we hit the billion dollar mark. We have our eyes set on the next milestone, which is five billion and five years. It is a big number. That's just the milestone. That's not the end game. We see consistent growth because we've continued to lean in. Be consumer led. We've tested and iterated to get to this point. We see great growth ahead. We see great growth ahead. We see great growth ahead. We see great growth ahead. We see great growth ahead.
Speaker Change: Christmassy, we talked a lot about Debiorean. There are a number of different factors. We talked about extreme cold. I was reminded this morning there were floods and fires across the country in February . No consumer confidence has dipped. We've all seen those numbers. [inaudible]
Speaker Change: There are some other factors that consumers think about the potential impact on
Speaker Change: Carrots, and what it will mean for them, but Rick, you have some real important highlights as we think about February and importantly, and we've not spring and Easter in front of us. So why don't you talk about kind of where we are and kind of the next step forward as we go into March and April and then Jimmy can talk about how we factored, you know, at least. [inaudible]
Speaker Change: Sure, I'd be happy to. I mean, and I think Jimmy mentioned this February was volatile and there was a lot of things going on out in the macro environment. But there were some things that give us encouragement, some proof points that give us some optimism going into the spring.
Speaker Change: The first one that I would highlight is, although consumers are strapped, they're on a budget, they're under financial pressure, they still are prioritizing and leaning into those special holiday moments. We saw that in Valentine's Day. We had record sales in Valentine's Day. That votes really well for Easter, so we are encouraged by that and looking forward to Easter. I'm sorry, I'm sorry, I'm sorry
Speaker Change: The second thing I would say is we talked about the consumer being very resourceful. Looking for lowest prices, the best deals, we saw that play out with Circle Week in the fall. It was our biggest fall promotion that we have ever had. We're coming up on Circle Week in a few weeks.
Speaker Change: So there's a lot of reason to believe that from a consumer perspective that that will be really relevant and that they will lean in there [inaudible]
Speaker Change: The weather has been, you know, very volatile, but in certain markets where we've seen the weather break, at least for a week or so, what we've seen is our apparel, particularly our most weather impacted apparel categories, see an acceleration and trend up to almost 600 basis points. [inaudible]
Speaker Change: and we're seeing that across swim, kids, and men, which tend to be the most weather-impacted apparel categories.
Speaker Change: and that gives us confidence that we've got the right styles we've got the right colors we have the right content for spring so the weather will change it will change and when it does we feel like we're going to be really prepared to have [inaudible]
Great style, great design at affordable prices, which has really been the equation for success in the apparel business.
Yeah?
Speaker Change: Yeah, in terms of all the things they're having in the market. So our fully organized order reflects sort of a wide range of potential scenarios and uncertainty that we see in the marketplace right now. So that certainly covers...
Speaker Change: Tariffs and certain things. As I mentioned, we're going to be focusing on what controlling what we can control. What we don't know is potential consumer demand that's across the board, across based on how tariffs ripple across the economy, for instance, but we have that wide range for the reason. As I mentioned earlier, like moving off of [inaudible]
Speaker Change: Cordley Guidance, Daniel Guidance just reflects the fact that we are in a position of elevated volatility, so there's going to be swings up and down across the quarters, and we think that's the prudent play. Right, we'll come back to the side.
Karen short: Hi, I'm Karen Short from Melius Research. Thanks for taking the questions, and thanks for today. So, my question is, or two.
Karen short: How much are you expecting in savings and how much will that benefit the actual full-year guidance?
Karen short: And then the second question is, when you look at TQ to 4Q, can you just talk about the puts and takes in terms of gross margins and FGNA and how do you think about the cadence of EPS, TQ to 4Q?
Speaker Change: Michael, I might ask you to start with the plans we've had in place for a number of years now around, efficiency, driving effect on this throughout the organization, and how we've embedded that in kind of everything we do.
Michael Lassner: Yeah, Jim said it well. I mean, you can think of that as always ongoing forward. And I think you can see even our guidance for the year to be expanding operating margin rate on a flat comp implies some healthy efficiency gains from within the business. And so we expect the team to lean in and deliver those just like we laid out with our guidance, but it shows up all over the place. It shows up in the fulfillment example. And if you go back on what's been driving some of those efficiency gains going before, reducing number of split package shipments has made us
Michael Lassner: More profitable when we ship product, the sortation centers, we saw [inaudible]
Michael Lassner: are certification center packages delivered by drivers using the shipped capability up over 30% last year. And so that just means a lot more packages delivered in a more cost efficient manner. And so those are the types of efficiencies among many and others. I mean I [inaudible]
Michael Lassner: I get the pleasure every week of seeing a scorecard that lets us know, operationally, how are you performing in our stores. [inaudible]
Michael Lassner: and that scorecard was greener and greener as we moved through last year. And when we're on our best practices, it sets us up to achieve the consistency. You heard me talk about we want to drive in 2025, but it also drives efficiency within the business. When we're executing well, we're making it most efficient for our teams. We're on our way. We're on our way. We're on our way. We're on our way.
Speaker Change: Rick, I know your teams are focused on efficiency and everything you do from assortment planning to pricing and promotion how you're running the business. If you shared a few examples and it's so important to work human-leading and really if using Gen AI and how we're handling marketing and building loyalty, I think sharing some of those examples would be really helpful to the group.
Speaker Change: Yeah, I mean where we are focused on in merchandising is [inaudible]
Speaker Change: How do we modernize merchandising and what we call the round table, the cross-functional team that comes together? What we've recognized is the world has changed.
Speaker Change: Speed is critical. Trends happen really fast. Something goes viral on TikTok and it could be the leopard print or it could be something else. And we have to be on top of that and we have to be able to move quickly. And that's going to require a new way of doing work and a new way of doing business so that we've initiated that process now. And our hope is through this calendar year to kind of really redefine how merchants show up.
Speaker Change: How They Spend Their Time The goal of it really is to take some of that non-value added work off of the plate so that merchants can lean in externally and be more creative and looking for new opportunities.
So that's really what we're focused on.
Speaker Change: And I would just comment on how we leverage, again, the consistent investments in technology and AI to really power our digital platform, power loyalty as well and our ad business round out. If I talk through sort of traditional AI, I mentioned that we made a ton of investments and improvements in our algorithms this year. We're seeing really great results from that. [inaudible]
Speaker Change: It's also important to point out that AI powers Target Circle, and so we think through our ability to have our large multi-million dollar or multi-million member base [inaudible]
Speaker Change: We now are able to actually give personalized promotions which leveraged science so that we're more efficient and more profitable as we think through our ability to drive a better guest experience but also make it more efficient for Target. Thank you very much for your time.
Speaker Change: and then I hit on some of the places where we're then layering out with Gen AI. And Gen AI is exciting because it's human based technology can make the experience richer, it also can just be more efficient for us with humans to be able to consume information and make purchase decisions.
Speaker Change: So do you think about kind of start-of-year balance of the year? Maybe we'll just keep it at an EPS level. How are we feeling about the business and what kind of shape do you want to provide? Yeah, I think part of my commentary was about also we'll have easier profit comparisons in the second half the year we're lapping the Q3 supply chain challenges and there's also a timing aspect I think Karen you mentioned. There's a timing aspect of SGNA when they'll hit our P&L this year so be much more front-load in the first half versus the second half. We'll see you next time.
Gregor
All right.
Speaker Change: Why don't we go back a couple of rows and I'm sorry. We're staring into the lights now. So I'm just gonna let them right there. It sounds great. Thank you. Hi. Thank you. This is Kristina Morales from Simeon Research. My question is regarding a growth. How do you expect to gain more market share? Is it in store base? Drive up more digitally? How do you expect to gain that share? How do you expect to gain that share? How do you expect to gain that share? How do you expect to gain that share?
Speaker Change: Rick, I might ask you to start, but I know Cara has a point of view on this as well, and we've spent a lot of time thinking about it.
Speaker Change: Share opportunities across our entire portfolio, the changes that are taking place in retail, physical opportunities, digital opportunities, how we leverage some of the capabilities we've been investing in for years, why don't you start Rick? Yeah, and I would start with
Rick: to bring people into the target ecosystem and have them use different services and participate in different programs like Circle to become stickier and stickier and they become more loyal and loyal. So we don't really think about it as like let's prioritize different options as much as let's get the consumer in and have them use multiple different types so they ultimately become more loyal.
Speaker Change: I would just add on, I think Rick said it really well. Shopping has evolved quite significantly. And so how consumers are actually interacting with our different fulfillment services is very different today than it was even just a few years ago. And I think if we think about how we design our experience, we want to create and continue to invest in that signature, in-store experience. Physical retail, you heard this from all of us. We really believe in the power. When people think Target, they think, let me grab that Starbucks and roam the aisle and see what's new.
Speaker Change: Love that. That's evolved though, in terms of how what they're putting in their cart when they're in stores versus maybe what they did in their drive up order. [inaudible]
So, in short, experience.
Speaker Change: Truly Signature, Drive Up Experience, Truly Signature, Same Day Delivery Experience, and I would also Truly Signature Social Experience. We think through those four areas, the intersection of them, we really want to ensure that those are the places that we're doubling down and investing in to be connected with consumers go forward. I'll go back to a slide that Michael had in his presentation. Thank you very much.
Speaker Change: Now $4.2 trillion of US retail dollars and of the top 10 players they represent under 40% We're a three share today, but over years and years we've been investing in this amazing [inaudible]
Product Disortment, this unique combination of amazing, national brand partners [inaudible]
Speaker Change: This robust $31 billion own brand portfolio, and all the great emerging brands that want to do business with Target and start on ourselves and be part of our digital ecosystem.
Speaker Change: physical, digital, and the components of social and making it really easy for our guests to shop with us.
Speaker Change: And Michael, we never lose focus on those retail fundamentals. He's just making sure that we're more reliable every time you shop. [inaudible]
Speaker Change: We're taking a world where there is going to be further fallout and retail.
Speaker Change: It seems like almost every couple of weeks we see one of our competitors saying they're closing stores, they're rationalizing at portfolio Those are all share opportunities for us and we've had 2000 amazing stores today We'll be sitting on the stage in a few years time on how we have 2300 and we're in different captions We'll be sitting on the stage and we'll be sitting on the stage and we'll be sitting on the stage in a few years
Speaker Change: Will have a bigger and more robust digital business with services like Target Circle 360 to just think it really easy for you to engage in the brand. [inaudible]
Speaker Change: So we see significant opportunities. We talked about more than 15 billion today, but when we look at the entire retail universe and where we sit today, we think we have some amazing assets and capabilities to leverage in a terrific team.
Speaker Change: Thank you. Thanks Paul Leswer, City, curious around that flat comp that you talked about for F-25, which categories do you expect to be above? Which ones do you expect to be below? Also curious about how you're thinking on food inflation? And what are we going to do about eggs? Rick, you want to start with eggs or you want to start with some opportunities for growth? Yeah. Yeah. Um. Yeah.
Speaker Change: I think as we looked to 2025 and what we decided to do was to take a conservative posture given all of the volatility, particularly in some of the discretionary businesses.
Speaker Change: and what we said is let's plan conservatively, and then let's see how things unfold with the consumer, their mindset, their behaviors, and then to the degree that we need to chase into volume we can do that.
Speaker Change: We think on our frequency businesses, it's a little bit more predictable with tariffs aside and they've been giving like delivering single digit growth . . .
Speaker Change: and so we anticipate that that will continue going forward. So it's a little bit of a posturing on trying to be conservative given the volatility that we see.
Speaker Change: Maggie, I want to make sure, if you have a question, I've seen you sit there patiently. I don't want to put you on the spot, but I give you a chance to answer it. No? Then I see a hand along the aisle right here in white, if we could hand her the mic.
Speaker Change: Thank you very much, Jihama from Bernstein. A quick follow-up question on e-commerce. I think Jim you mentioned that it's already profitable excluding Round-Down and Target Circles 360 and all of the memberships as well.
Speaker Change: What are the levers you can pull to improve the core e-commerce profitability from here? And on top of that, on the Circo 360 program, what makes you differentiate it? Given that people are only going to have maybe a few paid memberships a year, thank you.
Speaker Change: I'm happy to start on the profit journey we've been on. It was fun to hear Jim unpack some of what we see today.
Speaker Change: And we think we're just getting started there. We see the opportunity to get more efficient and all those paths of fulfillment over time. The most expensive thing to do always to be to ship a package or ship a brown box. You heard us describe a couple of times today. Some of what we're excited about that we can think we can we think can add
Speaker Change: In a hurry is drive up exploded in the early days of the pandemic. We're going back to now with an eye to how can we take footsteps out for our store team to allow those processes to function even faster. That'll be work that we continue to make progress on in 2025. And so I get excited about our starting point sure, but even more excited about the efficiency that we think with our scale, we can drive in all that all those different modes of fulfillment. [inaudible]
Speaker Change: I'm having hit on the Target Circle 360 question and I think it's also important to start with Target Circle because we've seen incredible response. We've been able to attract 13 million new members. We see some of our highest traffic weeks of the year upcoming really excited about Target Circle Week. [inaudible]
Speaker Change: But importantly, we're making it really easy. It's free to join, and it's easy to save more money, which is really compelling to consumers right now. [inaudible]
Speaker Change: Beyond that, we've been really pleased with what's been happening with Target Circle 360, as I shared in my remarks.
Speaker Change: We know that guests shop a lot of different stores in retail. You saw that 4.2 trillion market share, people shop a lot of different places And so for us today with 360 the ability to get same day deliveries from Target, but also a hundred other retailers with our partners at SHIFT is differentiated today in the marketplace.
Speaker Change: I see the clock is run out, and I do want to thank everyone for joining us. As we wrap up today, I share with you personally. I've been sitting in this chair for 11 years now. And we've gone through different cycles. We've lived through pandemics. We've seen record high, 30 year high inflation. No changes in the consumer environment. But sitting here today, I would tell all of you, I don't think I've ever been more excited and more confident about [inaudible]
Speaker Change: The Direction We're Headed, and we shared a lot of that with you today, but I always start Rick with Product.
Speaker Change: and I think we have this very unique assortment of amazing national brand partners, our own brand, emerging brand, and then those partnerships that we announced this week, you know, what we do with Disney and Marvel,
Speaker Change: What we're going to do with champion going forward, we're a destination for partners and we're place people want to do business [inaudible]
Speaker Change: Cara, you've taught a lot today about the work we've done from a digital standpoint. How we're integrating social and everything we do.
Target Plus,
Speaker Change: And then Michael, just the fundamentals we constantly come back to, and running 2,000 great stores with more to come, making sure that we continue to become more reliable, more consistent.
Speaker Change: We see tremendous upsides as a team and I can't tell you how much pride I have in the team that's here and the 400,000 team members that wake up every day thinking about how they serve or against throughout the country. So thanks so much for joining us. We look forward to seeing you throughout the year and appreciate your attention today. So thank you. Thank you.