Target (TGT) 2 Mar 212020 Q4 Earnings call transcript

Good morning everyone and thanks for attending our 2021 financial community meeting. This morning we’re being joined by investors and others who are listening into webcast.

Following today’s meeting, Michael and I will be available to answer any follow-up questions.

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

First, any forward-looking statements that we make this morning are subject to risks and uncertainties, the most important of which are described in our SEC filings.

we share. non-GAAP remarks, adjusted measures, today’s per earnings in refer financial to including Second, all measures press of Investor are filings, Reconciliations non-GAAP are Relations included GAAP directly which in measure website. comparable our on financial posted releases SEC to and our the most With let’s meeting. that, the begin

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an confidence everyone the from team to team, guests the our ahead. all so have thank Just thank like for in your passion we’ll say their of I the I value amazing deliver our my each to to XXXX, around thank value in dedication of all with and ago, four with delivered I’m continue XX states other. you, offices Without distribution such care our to years and our centers, our the for you, years - want long-term on future of we stakeholders behalf world acknowledge in our Target in of to the for taking starts amount help headquarters couldn’t confident you. stakeholders you, can’t and enough on it stores

some Now remarks. back to Brian closing I’ll for over turn it

Thanks Michael.

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of growth will for interest our in John remain in investment We to you Hulbert from Finally, you our that in Target, thank engagement want bright turn long-term our joining and hearing your horizon program. portion I’ll your into to believe the to community financial your a discussion. move we for us to years I meeting. look journey, forward in it appreciate Q&A come. that We back John? to

Thanks Brian.

short break, we Before session. the Q&A and want take review I logistics to for a pause upcoming

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for Chris from instructions] our [Operator with Horvers Morgan. We JP first now ready are question

ahead. may go You

on in are well To quantify cleaning, to related that’s an raise assuming is costs then costs, outlook, and have dollars In as a longer the a significant I bonuses question. have billion Thanks, special question, pressuring operating ’XX, your as are the COVID morning. can $XX A to these related math our hour SG&A follow-up extent midyear. dollars? about good to expense tailwinds near such you you a what you ’XX term SG&A on how investment and

sales but get the to got a Sure, The about efficient and more Chris. a us some we we’ll written I When to outcome that of leverage dividers, in like [indiscernible] do think how there direction SG&A looks you the the will in helps will we’ve only take continue like lot more curves that once. cost that $XX, you that - is year, throughout model volume Plexiglas within that we’ve too, and can move to growth volume. seen on final just our things about by benefit that bend the we don’t think that SG&A. be of be fulfill one, The story what the annualizing one-time buying repeat be

So the line then that about is it back up outlook? mean embedded negative rate an does more SG&A top coming

since we XXXX’s that we’ve significant benefit it that wouldn’t and think a lower I gained will No, SG&A, way expect scale necessarily. that’s With about the than rate SG&A that be our rate, of then.

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change showrooming picture, on Understood, you’ve then Buy. longer talked wondering and organizational about the showrooming what Best bigger term versus brands. with is Was thought national

the and you into launched brands willingness You in in need Apple replace brands Ulta. does volumes it apparel maybe brands say and Target where higher need and now space, the to those of change here, the terms here is store? more the what take to get from have the what will national mall, the bar to What’s thought on to bring the

Yes Chris, it’s Brian.

very of that stores, things of build very stores think we continued we’ve strong continue the our saw out places, avoiding solid really comps, despite seen I the to so coming in has and throughout excess our been one are Americans trust very pandemic, underscored think and X%, public relevant, of the we’ve and I the of obviously I be we traffic, going think strength store pandemic store to to many very important.

know Apple, enjoy and beyond brands I addition done far Beauty, further of the and to our the now We by Levi’s, I work are like of They continue browsing, we’ve a showcase brands punctuate in create and building the enjoy think they invest go national brands, we a they of brands experience. stores. shopping and with think our combination shopping trusted that year own expansion our and inspired national to the throughout of the brands, that just Ulta seeing own showcasing. guests safe

multi-category future, It’s a play role. every come. years think enjoy be the to to stores and to continue to our and guests each going very think shopping our to they’re going are a where going we place to for As day, I enjoy portfolio important

be role I and and importance stores these to bullish national of new only the continue very We play, traffic to future stores. drive brand will the partnerships stores think our on accentuate

best Thanks, and of luck.

you. Thank

Our next question is from Karen Short with Barclays.

ahead. go may You

on think at much. In ask it, costs Hi, wages to right to million that a in definitely way obviously bigger question back XXXX. would you because $XXX little Is a XXXX, margins, were in a of in expenses think I had half depending SG&A about thanks theory, bit I question. dollars very billion X% calculate look Trying about the me a the around I dollars for then question operating that on that billion, think also the in the and the and SG&A a picture COVID XXXX. imply sales. it ’XX lose if two were quarters in north your differently, was closer gets I I and of what to

the of XXXX, history we put today in SG&A attracting retaining variables be SG&A put overly retail Karen, the scale, the year, across best think that gross where business. a the that a our to similar ago through use a big investing The any for to false exercise to will and as answer center the our We’ve in there’s and forefront so biggest years the going I and factor lot benefit has years in the team of - continue one that in going precise at them line of in moving strategy continue last think ways to a to lines, team of been journey a and this gave we several and of of well. part be on is embarked comes about the be in, many to Chris, of couple was a get margin I long an got the of on would can the team bit versus and precision. we I

of Karen, the pun guidance and environment. up I uncertain a all Michael’s no again, might this bull’s well remove think chest is kind eye we take the very sit recognize - today, as I from question front as but here intended, we

still recover. to start the We’re how happen rates going with speculating around what’s to economy, employment

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I picked If share, you the the the quarters had operating, about billion where three of we that market all earlier recall $X of of talked approximately year, of holiday market added we meetings, share the fact another competitors during we comments our our up in fact billion all first haven’t in we you’ve of were but $X season so I that on, our of ability execute recognize our you the model, got is do something vibrancy focus the to precision to that of time. would light in to ask that think normally that we I and in this provided do the at

all you’ve to gating mean, the these you’ve just on question. of No, number these to is they’re partnerships sure great. of accelerating respect color some targets a I a on a not on appreciate you and little accelerating or wanted could us very some you a remodels primary be With partnerships, faster what Thank picture that of but those, that you’ve I’m the at faster would partnerships not given that. announced, the little so rate? for ask that seems much. bigger done obviously it like I factor move

then taken think same think to we’ve pick-up and both drive-up, Ulta remodels Beauty. been and This the as as standpoint possible. new and Karen, the model about make the the with as test get we demonstrated always with we’ll assumptions our sure learn, same scale sure We validating small years. work want partnerships to way, the We years and we from in six It’s and learning, the I’ll time a a and sales thing quickly hit the leverage along before and to and testing great iterating we’ve partners, the formats. is we right, we accelerate. Apple last we our over back financial the start over team, standpoint to past, and and make approach approach the listening we’re five for took same about like go or and doing expand we’ve as the doing guests, by accelerator listening

great and Great, congratulations year. thanks very much, on a

you. Thank

The Edward next you. from Wells is Thank Kelly Fargo. from question

ahead. may You go

for morning today. Yes a picture here. also Maybe Thanks color just the on and one for hi, you then guys. good bigger ’XX

gross beyond then just little potential just in the digital a simply are a that about bit margin On Is ’XX? gross can getting growth offsets margin ahead more how color below margin, of on a merchandising, of add you in ’XX settling function ’XX? the outlook the bit thinking you and gross

when the I biggest year from about think was all benefits place Digital hugely that’s going rate great good a guests, - would pressure and see actually XXX example that, of to digital and perfect that’s that, when for sales accretive up our deepening pressure basis total. the told pressure, more is could think we occurs, all line, The digital we I the year, XXX we’re what impact, of But because things a not us to factor because the forward. with the last in than rate, me, business to it’s addition in margin if Ed. supply growth to digital, some me have in comes of that’ll sticky rate pressure points chain that about important sign we’re of in so that have growing basis dollar the but behavior is happen only that, us outcome. Sure you a be on double with about points bit relationship a ’XX would impact. how taken we and illustrate more know think little aggregate on digital We

going sure, a place that’s expect continue we’ll growth where forward XXXX in we So biggest excel. driver digital to I more welcome and would and for

I follow year to from--this just utilizing what a question was step taking up seen what’s provider, something business and from of retail party owning was that it more with a past a like growth, wanted a Shipt, would provide this Shipt. something competitive you’ve on and you color trend standpoint, this then the membership synergy Okay, that bit on potential if in Can just and partnership if then value a be unlock back, to versus it third as there would interest you? year

John, you to want about talk Shipt?

Memberships Yes, with business incredibly partners, I’ll and is to Shipt serving an the there. They how talked of same and important our Target retail results just sure. think incredibly grew just an team of by were over scaling XXX%. down the on the Good - and Shipt so We strong pleased they this integral outstanding come past doubled performance Shipt’s job the very about this, did But We sales important, has for morning. in Birmingham I our year the by become Target gained number grew XXX%. year. business, fulfillment day the operations, share, back part as market and shoppers. right

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Great, thank you.

The Please go ahead. you. Capital Thank question Keybanc with Yruma is Ed next from Markets.

are term guys done great you of because industry goods on soft I’m And differentiating Hey, it having and good the longer to question, just keep you on moving asking pretty in like high? does premium I competitors as your a level important a hard have for based job guess kind is some of your guess Thanks wages were up. that customer I wages. guys. questions. relative of your design. morning early lines service the to first, at raising you think Do that taking kind seem a

and share? you As food, food, think about you do how grab differentiate think particularly fresh Thanks. can you

the billions think commitment digital back strategy most we said capital at in we that Ed, company XXXX, we’d invest in of the in and XXXX, and opportunities, and dollars other. our this incredibly engaged, the the team, team, John in making investment team of crew to we’ve time, I retail, and benefits, XXXX Mulligan XXXX and a our by-product in I and building in of stores, our stores, fulfillment seen talked when in and I’ll I of and us the were in XXXX we also to meeting new our and best out about important that’s build go our made is and investing laid was out results to remodeling care stores and allowed investing guests, At and capabilities. that building but for commitment think wages training care on each taking that’s taking focused it’s the of

star XXXX. shopping we the a created of and They really made during was safe team the environment. stepped Our sure up pandemic

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around a a in It’s the investments brands. our I short well beverage, tremendous sure it typifies and off own great the great our Gather things think value, a a received I time. we with think your quality make do guests, period invest we shareholders. great dollar start, at brand by it’s team. multi-billion of continue been made on in is design, we’ve to food in and investments provided To for We’ll returns our Good question to and

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and assortment to As fresh add drive-up John of guests more pick-up day. mentioned, access products we’ll each our providing to our every for and products they’re throughout year, that the those looking to continue assortment

Thank you.

Thank you. Mushkin The next Scott question is with RX from Capital.

ahead. You may go

for questions. Hey taking guys, thanks my

Morning Scott.

Good morning.

I first structural. more really think strategic, the I is question have

your at generally, just conceivably the growth sales, going that rate looking fulfillment growth conceptually? of costs to be is below to rate the of Just go able or

two our fulfillment paths. on to think make through I costs Scott, costs, fulfillment continue on we progress

fulfillment of providing to from we our ship today, so Shipt ago, come drive-up there. each two we individual absolute order than of all continue were so continue store, costs lower is service, down they to years today, the cost see cheaper are it, those First today, pick-up

better said Shipt the we’ve The fastest second pick-up, all centers, way we economics, of for much economics see fulfillment of mix. and has our portion than come shipping and our our which is Drive-up, are growing costs have also down years, shipping the through portfolio. from order as our stores, from better back than they

than fulfillment, favorable we In well. from see as faster addition grows to that, so ship much mix store

be pleased progress our goods shipping continue unit We the the delivering guests. fulfilling to we’re goods, economics making on really to of or with

of I looking is that made of spend they Target more with and and time, we component that that The hub power of guests thing with growth by not at the John slicing which our they has matter is, that But the those guest to Anytime that we’re lot to efficient fulfillment always stapled services. about more lot a all at the we’ve over those use also greater greater more in that of relationship in stores a impact is getting progress deeper to the most guest digital helps might channel, only equation, be the spend as and as add of P&L total thing omnichannel having the total and overall. do economics. dicing digital in that forget of the talked have to become important marginal economically a

the stores in Scott, relationship, fulfillment year assets spends and is It now digital node economics so we fulfillment to just examples time. over the our last use together we both deepen channels by look all money with of but more over one node, at all deepens it’s guest relationship fulfillment Target drive-up of can actually is and how utilize guests, comes how our really using the shared store. them we’ve that that get it and the

the of of that of guests So over fulfillment our time. relationship to as going as John said, our of economics it’s the and to capabilities, we’re nodes really more we build those improve one deeper but sum continue the parts use each

I appreciate that answer.

As - at faster a path grow the to to a basis ever too, and Amazon in your fulfillment their sales, guys one that’s saying, you make happen. would as fulfillment has for--because what struggled obviously cost, right come getting here can costs it obviously you too, if this with I just you be to grow fulfillment know guys looking able leverage costs struggled see Amazon than on to where slower a because I than do are sales, their think follow-up that

economics look a so to ridden us, John’s our Scott, power a store, ship stores it us to store local and shorter supply the chain It’s store cost helps that’s the that economics piece, the place point, to is gives to when you comes fulfill. a that an advantaged fulfill, I’d the cheaper growing as fastest, and the box profiles advantage the have store cheaper the like that it’s lot distance way start asked. store. to incredible rails give after because that’s on all the through us that everything’s Same-day question from us and to we cost a fulfillment

go demand that that a I of the that able has give same real being this back flexibility. in way stores can in surprised meet put to not out having a thing think it and piece in ship stores trunk they incredibly probably able drop the it guest the great we to to a seen can drive-up, a sitting knowing stores and valuable there’s chooses but see however place well. have us other all we and flexibility a it cars huge our to and team need power it if shelf advantage The flexible, of is guest are a scale in trip, via that can it the that us, their year happen, on to We’ve so a store how to exactly we to the could our great inventory is say, ability back, us would coming. in gives guest be it’s it as come fulfill make and the can year time see shop, But inventory going store in been can perfectly on box it

at other the returns than I parts go both the of talked sum it’s and that Brian make just a the whole astronomical is and and thing piling lot the them, at picking a sum is great significant don’t I’d any together we digital last grew today, start year of the you hell parts total. economic our way that generated at what at we that we think start the of profits. to real the the working together for power don’t a when Michael, store grew the an you and need now, sum the and of back more to for rate, provides we the thing said, operates things that guests us. about on when see to of disaggregate this It the Michael that that us package together I think, because of in look together, rate, to for parts, Yes, deliver sense to we

you guys this you for and what that. stores on else amazing It’s you could Perfect year. so do everything doing just and much perform so congratulations to more the and off well, so hats did guys, and volume

Scott. Thanks

next Gutman with Morgan is The Thank you. question Stanley. from Simeon

You may ahead. go

you’re first ’XX, not the Hey, margins outside lot about managing of a there’s conversations I I a term they’re good question longer to of visibility, not margin. I is want My know outcome a of about guess more morning and ’XX, an so but particular margins. sort on to had we’ve everyone. know I question, ask, It’s

of the planned that is ’XX, margin could years? terms out that hold for Beyond have investments you anything of some back the there in

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speed healthy leverage of to digital margin margin over as but brands a continue add our I up partners, national guest mix as of and we fulfillment, those long control. multi-category portfolio, outlook things all as take see build think a to the bullish same-day term we very convenience continue very brand we the management own advantage and well to great our is for our as

follow-up then was you you thinking you Great, pillars with the share headway $X you’re how share XXXX. I that of most of to categories a the okay. talk can of My retaining build the XXX% pyramid, it saw it, terms that anything that in in it? you’re and in from of on terms Can keep hoping about of you more range foundation. that on about one share in the gained make outcomes is retention, you XXXX? it in think Can billion of and anything

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the stores, think I we’re to and share, digital experience positions continue to grow in our to come. continue store to for positioned investments well years and we’re well think in making that grow to share I in us

few with luggage going had there the portfolio out outpaced industry. breadth are Brian what’s not year, punctuate gives so wore they’re flexibility, venturing portfolio follow really change even that the in to wear When want do keep guest, us their the buy growing to we to might that of guest on to it if a for thing a come. going that the through same piece have our yet the we the of the against the of on much an is over. much make-up, because chose the performance points people don’t a will us said, I all trip, and wardrobe apparel we is new ability industry, impact significantly if buy industry clothes Yes, guest people deliver. over and their to and They’ll what they we gaining to multi-category needs very and might This year, yoga pants flex add years to the share and really

thanks, Great, and congratulations.

Thank you.

Thank next you. is from The Stephanie Wissink Jefferies. with question

You may go ahead.

comp on you Wissink. for this saw much stimulus, Thanks my I of follow Grady compare strength How February on Corey you to would impact to what the summer? wanted that is this comment. on round last and Hi, Steph for question. up taking of the can attribute you

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the of throughout sure meet needs and to the XX of continue guests we encouraged So month and February, with to the very flexible agile we’ll the make stay next months.

Thanks.

As stand you in-stock a to feel term? in ask you you do today? about near gaps Are follow-up, to you seeing I that positions need wanted the your remediate Where inventory on any position.

Christina?

We’re very pleased position. with our inventory

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