Target (TGT) 18 Aug 212021 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation Second Quarter Earnings Release Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterward, we will invite you to participate in a question-and-answer session. At the close of prepared remarks, we will open the queue for the Q&A session. reminder, is a August recorded As XXXX. XX, Instructions] this being conference Wednesday, [Operator like the to Mr. now would I turn conference to over John Relations. Investor Hulbert, Vice President Please go ahead, sir.

Second for everyone. us thank morning, Earnings you Good on Call. And our Quarter XXXX Conference joining

provide today with few and Growth Chief Chief Chief our Brian Cornell, John Financial perspective Michael moments, Fiddelke, Mulligan, John, Chief their Officer. On Executive me, and Chairman will for second-quarter Christina a Officer, beyond. Brian, our the Christina, performance, Michael and are outlook line and the In Hennington, Officer, quarter and on third Operating Officer; and priorities

Following their listening comments via on question-and-answer joined this a remarks, conference webcast. call to for our and we'll are the lines by This who we're phone session. morning investors open others

our I the subject refer are be reminder, a filed in on this measures, number first press most recently of adjusted and With we included forward-looking Michael these Following financial comparable answer XX-K. to directly the this And Also important Brian? questions. earnings your finally, morning, the available and his risks make will most we GAAP as turn in it to Investor outlook. I'll call, on non-GAAP our that, follow-up the remarks, for are Reconciliations statements that any uncertainties, posted per thoughts most quarter non-GAAP all to Brian including of morning's described to on is his which release, numbers website. which in our are share. Relations perspective to over and

everyone. good And John. morning, Thanks,

a passionate team. it's Target's stronger that operations, and showed a is performance world-class than second-quarter resilient ever by been, fueled strategy, position one-of-a-kind Our leadership

and we've wants to of place serve all durable evolving know, to their leverages investing the that's first of scratch begun and and puts on that build lines. possible you years needs. time. clear grow model, in our surface the In our assets our that both capabilities years guests over we've been quarter, and and effort the As today; perform one model for to in it's top this building to and second bottom of the investment only what's continues business After

Even over a year comped ago. as record performance we

of course, nothing seeing growth is top new. on growth Of

already X.X% in in years this a and continued leading increases XX.X% sales growth This is In dramatic Target's XXXX delivering pandemic. business in on to growth. a followed of Our the consistent profitability by top record quarter, sales the the and increased up ago. was comparable second acceleration a year year's

total last or second-quarter billion more more over XX% $X.X sales expanded As have than a than the result, two years.

bottom the of and earned nearly up line, X year, double On we performance last X% years adjusted ago. our EPS compared with second-quarter $X.XX,

quarter, driver now have was to droves. emerged shores As they're we in guests described our from and primary year which in last the growth digital a returning

a the channel, majority where of As X.X% second-quarter store's result, ago. was grew of growth top our comps XX.X% the driven year a by on

of services, the XX% this last bulk channel a last of than grew transactions. guests In grew led on year. together, digital on XXX% more Drive time XXX% out our digital continues was the homes quarter, which bigger XXX% of in-store the their were from in Shipt, to addition, growth to our The of limiting ago growth than and second year. our by Comparable accounted for contrast building in when more traffic be Up, second-quarter same-day and XX% year year, record growth top coming of pickup, sales

spring season, nearly it put in than be for for by services Up same-day $X.X expansion, Drive-Up Pickup well two more the by accounting quickly over for alone digital that and expanded Among years, half last the Given now second-quarter of sales. sales To their our has sales it Drive have those to through the same-day double account increased dollar combined. Shipt rapid over options, billion. amount. grown terms, And largest,

we Beyond our and assortment, our continue from our needs. fulfillment serve to evolving unique, perfectly benefit options, guests' multi-category wants positioned which to is

result, all strong expanded a our comp X of on top year second the quarter a categories core growth sales As in of ago. in

as comparisons apparel more. often and across have of hear essential store refreshment remodeled of our same Shop the been visual expected, roll-out expertise rather, continue lead assortment. formats discretionary we throughout Levi's, guests model, Working and the roll-out Disney, the & food million way last our ago. same-day we've with small the owned of made that's work, We've has rewards. time, includes answer than was years. including while there's our team, course, thing our and Across the as to the national and from the consistently neighborhood When has brands, began nationwide more guests years, years Drive together in benefit on of to less and really support these we've we of This investing can't the partnerships country. expanded shopping our five bring Beauty than Hardlines while gains, launched attainment began The have again own home respond positioned roll-out month's in our more from As chain portfolio, ago half our the And brands certainly shops. brands, most Jack, pickup, And across operating year. transforming saw Target services. same-day followed they This what's performance. Apple, Target's of been transforming more more optimizing end At more which to more the in than starting way and stores and XXXX of multiple in as driving chain meaningful that's but last These Shipt important investments this in-store replenish performance newness to numbers, recently, new with with our minutes. milestone, owned X store this key national thing, what's a new nationwide we Then our connection while question, layout service the store as the of Cat strong our growth across network. Up $XX while and our dozens of inventory. both top XXXX. supply a which brands opening this one testing everything. on expected, And and of which talk our of followed question, we any I'll there's than beginning notably, Then by premium you the Target including moderate journey. many services, with our categories environment market subject by of over the let began it's in hubs XXX we honest and continue XXXX, we the X we've there's also year of an XXX locations in than up to fulfillment far enhanced and the delivered details performance, with in our that one over our we and which style our we And about to both Christina now now categories offering a share more continues strong the and to our year, productive reinvented Ulta categories expanded in few the XXX Circle, merchandising the focusing XXXX wage again categories. or in matter across providing beverage in and provide goal to in from growth impressive Also XXXX key? point driven

weeks and enough. across more $XXX say I and bonuses stores, said part-time many million frontlines, times team members can't a we our before, than distribution Just to ago, full-time, centers, an investment of recognition centers. but announced all few hourly, our of contact it to I've $XX it provide

corporate career. our our today, and In continue I even and Our critical a Target regenerative launch Forward, division work for team the incredibly of sustainability more responsibility equity. them build resiliency, one Target comes ends on given of we to an June, for time. opportunity success them. is we profitable waste, sustainable to And over the bold to ambitious making with new define is durable long-term and future build design and shop, practices. brands, efforts, and sustainability, the the X they thank such This invest across innovate for every eliminate with them everything and to we'll to elevate strategy world each communities. do excited of and and these place and partners, ambitions: of legacy begins chapter make of our rich special business grounded in is Target. equitable around to of beginning the a the new to can co-create and centered initiative a guests, position an great and were Target stronger Forward business sustainable our all how that and growth growth rewarding place to want and our in from And lifeblood to accelerate

$XXX U.S. Hispanic million with of community. early communities of for debt-free institutions In than and of beginning off This to this as of that colleges industry-leading will be business-aligned access the example educational black X benefit -based provide program educational more and in opportunity announced team. Target XXX historically spend team we part how than investing total, equity assistance serving to we As at next our including institutions, in we're own these years, with to meaningful programs members. and program a August universities, fall, serving our promote over will plan XX all our rolling the more provide along efforts, an this full-time part-time to out

likelihood particularly before call want the year Delta be ongoing acknowledge light will the now, to Christina, half uncertainty in to the I continue surrounding the variant. I to volatile, over of turn second of So the the that

priority. our remains safety course, Of number one

As evident accessible our investments to our making and encourage stores guests. operate we ongoing by for vaccinations, in and our our way both and team easy them the

have last In we've in digital more as and level are terms and continued in all how the while growth. flexibility already team what I between to on so I proven, acknowledge model. business, have resilience also the months operations demonstrated as want opportunities a continued proud far stores accomplished, our been we've this that want year, the see choose high commerce stores we of of soaring pivot across invest and the we productive teams. also to seamlessly and guests sales beyond both of to execution our And our many seeing to team business based been they doubt, our of can And our XX how our emphasize have shop. of

in terms a unusually in despite volatility team the well outline for the Target execution detail, setting high standard multiple of more has the will John consistently environment. As now, over external despite industry been in challenges year

work continues will am delivering year. Christina. our Target to turn inspired one year as other every on they of With guests. grateful performance share each as call care embrace truly I team outstanding by I their Our that, and challenge aligned they're team, over serving quarter, taking to the the after quarter after to focus

Brian. good everyone. Thanks, morning, And

built growth the our we've try engagement and building we in increase delight, them, stronger guest creates listening how And, them, more for growth time, of and we to inspire additional in every shared for drive Shipt when like By their with services that platform Target spending be overall guests an one We increases, or wants time. can us at example And anticipating Our is first are words, forefront course, our engagement, showing opportunities guest-first today our and needs, preference the for providing store them. more digital today shopping. drives Up including of as retail. with best future. same-day a we intently focus. of where This conventional strategy Drive trust, to In the other their stores, in and around decision engagement without over in a wouldn't capabilities the surprise, is many deeper we make. more before, and team

performance Target's as business entire ongoing our more. team even also product they to environment in I delivering the cost supply moment inflation, the Delta volatile variant, strength face superior and durability presented take model. want demonstrates our of for by a thank a performance second-quarter So challenges and chain continued and bottlenecks,

offers the of balance they need what rapidly. guests and even as unique multi-category sometimes assortment change, want our Our right

categories merchandising result, year, year, a record-setting As grew X core of growth still there's last runways all despite plenty ahead. our proving this again of that

the closed and which Second-quarter young growth Within were and as cafe, quarter low mid-teens and apparel, results of comps the XX% businesses, these was delivered kids, by beverage grew of than delivered last low in bakery, growth top growth, contemporary, part in our departments deli double-digit were year. strongest low delivered quarter. which range. Performance more on in second swim, second XX% all last apparel, double-digit year. Food led the during

in We categories, items of also number benefiting the fresh Drive saw double-digit from Up. in our growth available expansion an for

nearly Drive delivered growth than saw quarter, quarter. and more half of growth in in by our Up Beauty of beauty share growth orders. and baby year's market continued this teens high partnership has both Ulta The single-digit Within in in Essentials, XX% mid-single-digit top been month's high Essentials ago. growth in healthcare. growth year the of in-store products on single-digit fact, Hardlines and roll-out range, more grew by gain In a category business of growth pets high the on growth XX% to this our this driven care with delivered comp we than Beauty. advance mid this to The

We from growth low continue high in in toys, XX% the in to teens. which momentum benefit grew Sporting strong standout a with was the also goods range.

electronics range the mid-single-digit year's the as competitors expected, experienced period a than when decline growth closed. XX% during some moderate last more over of were in As comp a comped

provide in mid-teens. And Gather brand penetration brand model. sales categories of seeing example where another the collection providing beyond outpaced across the are XX year. saw & owned with the increase we the we've individual following strong and a about over single-digit the second in comp Within saw than second years, Importantly, Hardlines delivered share storage, over Home, At growth seen same market and last a focus in more acceleration kitchen, holidays XX% Electronics And they beverage, continues of with Good in Company our In increase gains. of year, that on X gathering our our new basis broad and our diverse last growth the quarter. Favorite to brands comped decor, in finally, points have both low of we're owned assortment. seen Home, growth outsized seasonal like as brand, differentiation power And and last stationery our given of time, last owned family growth an categories increasing in the and celebrating food multi-category compared grow guests' milestones, trends results moderating growth encouraging and in in we year. tremendous we've Day, in an and quarter, and categories,

despite to around healthy and rising safe meet sheets joy. their safely continue As of Delta the and needs uncertainties We'll adds we loved to cases, sense some their COVID with find ahead, look find to variant consumers balance have and and much-needed ones some eager connect remain normalcy. ways

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includes - last, of and wardrobe longtime great our vibe So Rachel to little book Jungalow for with create regarded and and go Comey, beloved free new focusing for it's Beauty. modern Jungalow's we've our brand. for to perfect newest help and is friends. of limited-time, partnerships in perfect founder, children's food sure kids and four-legged and goods, of illustrator, line, partnering Liang, to In-Home, the timing family our create into is just and a eclectic creation designers: them the author, addition Opalhouse Robinson household, and Target, to is babies. that Victor partner, some of wonder collection size-inclusive new a X Sandy books the staples. enlisted food artist, this Lotan, well limited-edition collection it making Glemaud, our September, the guests, And our apparel wild, bring design inspire and and dynamic their our Target classic a that Blakeney, imagination highly full owned looks. least, beyond cozy, our Christian Justina to on Home healthy, sustainable, home for And members launched apparel, your talents we've brand, Apparel Nili affordable options and furrier Kindful, And pet beloved not partnership for

celebrate us so partnerships loved over key having launches, moments holidays, telling with they're XX last missed occasions to on guests them ones, their Beyond many are on hungry product and months. our out the life everyday of

balancing So even with in of ways back-to-college you to attended be in safe any risks, back-to-school as year the Regardless ongoing optimism and account seasons plans to of start. in college of are progress, their a the they're carefully focusing Already off as themselves in having whether that move campus will onto person freshmen Target affordable position, finding a the merchandising our in many that first completely guests mindful great to first are on successful everything learning caution and same college fact hybrid, need back-to-school celebrate. Similarly, or sophomores and environment. inventory to find for time, virtual for our look environment. and the be has

providing list button. we for in our whole season last functionality be safe our like fear is price. about that of the their List things based start year, holiday value topic feature, the to throughout of the a offers by or allows a will has a long. app, guests app, as list did shop spread It's ongoing out out and affordability of making for new find providing school-specific our a that shopping And that users hearing a the entire providing back-to-school on on far of with supply school, add value item value, easily either goes and experience Given click in as This Target And real. the on reflects all focused This focus for easy Target online stresses deal possible rolling Target our School families we're from the beyond the Assist. that missing season, come and accessibility, guests. on with both on with and

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focus T-shirts matter Looking and sweaters on course, plan will treats our inspiration sleeve. how no as and and celebrate, EEK no ahead, including with size-inclusive soon treats array be and value a a options. to from and Favorite few Hyde And has in the denim tricks adaptive ever and for and & affordable usher new continue and And sharing in Target to we'll including costumes, for shorts self-indulgence Halloween, for we with of all shortage up broader have trading cozy great the fall. we We'll offerings sweet gender-neutral others, brands. our exciting of you than of Day-owned

most announced Beyond in our Forward, sustainability is our recently planet. business that on inclusive comprehensive me equitable, support a people every aspect and our near-term more why creating which of plans, This of strategy, I'm is a world. Target the proud is of what so vision and our the sustainable, energizes touches focus

from Forward systemic suppliers, role of for equity achieving extension the our broader strategy. perfect of talk change communities, serving support You've team products The on team formed diverse all; diverse guests, was which members, and direction communities heard about REACH of for more the black Target's in committee, in our lasting, commitments goal with retention members, and philanthropic our more a of and my Target as me color and unwavering more new efforts recruitment for of are goals.

year pleased commitment notably all XXXX. our To our by example by to I'm in date, more seen representation our salaried XX% levels, the is among the made. a increase increasing there's already officers. XX% across with While black most progress at accomplish, we've much Company progress to we've One nearly Company

communities, So proud investing it's is business well to I'm while team, and in of our most incredibly to of rewarding performing, our our our health the long-term the commitment see planet. how

on Rather, separate we These tacked inclusive Our world. Company's and collection are they in more core sustainability of are not and we purpose, business. bedrock focus of onto decisions. a a how our creating who initiatives are the and make equitable

to our over turn that together foundation in communities, may our sustain benefit that, their and While over the to grow we'll the how forward be quantify I business, of move a they believe will strongly call John. are spreadsheet, time. With I hard

Christina. Thanks,

an As before, I am training. I've mentioned engineer by

So Target's tool their not and technology: experience. the like Target This of from learning, to on have the human our automation, access The remove it about to And be the in of freeing business. how interested our can automation. is of through comes we're most serving probably and we're invest and team example both today future, guests. machine when doesn't works and part robotics, We Instead, our the I'm to element that obviously, of up to it machines invest But surprise when another both every optimize to available people members, have the for in technology, every we power people to enhance choice runs our team and more. and, as artificial them productivity operations, technology. choose productivity. important, looking no focus we naturally in or and what's investing intelligence, in to

in which our reported members billion Here's one Report, XXXX, over XXXX a just business it. In about way our generated that Annual we XXX,XXX we around this that growth to Target years $XX representing team in we Report had going over had in entered XX% as year showed year, about team number about XXXX into team the members that later, our Annual members X period. sales. five-year XXX,XXX of think

year, of to for of in representing a the However, our billion and this more positioned more so based is than far growth deliver expectations on our business year, XX% back with years sales results X or compared $XXX half ago. the our

as a has people XX,XXX significant make So our team financial in nearly increase their performing investments at for high historically provide to added our And benefits. raising significant enhanced creating been and team, mentioned, the an and we've bar also benefited capacity as we've pay even strong service from incredibly to productivity, guests level, execution. Brian in our on

the in saw the improvement in-store quarter, Specifically, second net most our we high for scores X for an already notably of services, in same-day all promoter pickup experience.

In to addition, last Drive continue Up, which industry-leading saw enhance of in guest with remains our XXXX. to on to second And top adult and an year meal year's quarter, and highest-rated ways cards. In beverages fresh capabilities. another increase and Up, over to service, ranging Pickup the items greeting assortment Up Drive pet last in improvements our items satisfaction X,XXX Drive pickup we we compared added from find for food, available the kits,

backup provide pick out We when alternate an person spaces a to of an functionality enhancements, unavailable, the and designate to ability order. is Drive for parking item the chain-wide including to app in to seamlessly using technology roll also suggestions numbered guests an continue up rollout Up,

experience, our driven the checkout. of floor on capabilities, own satisfaction life spring, provide same-day improvements shopping enthusiastically this in experience. on guest tools to Higher bringing that new meaningful shop. than which team guest and initiatives, in while completed This build our our they expertise purpose provide our Beyond on of attributes, them increase sales the their connections reflect most saw around both guests clear our serving Company shopping with as to initiatives. guests at guests. more notably, and Offering has interactions, to XXX,XXX team differentiated choose by confidence in-store on evidence focus our training, regardless our terms, also multiple team these impact we training scores with the These satisfaction authentic authentically increases embraced a consistent, a their across experience, members member establishing through service how

of for a a to at as they who possible ago, with billion make than compared delivering of you work quantities those work in performance. you them on the some as ability supply record deliver and line, The working easy compared while multiple that more the Company high quickly has our that's year successfully our their upfront the products have their situations, great generating it's In of craft, we've quantities. line with vendors the shelves secure we they look it facing easy navigate nearly chain to makes empty business done inventory typically the And ordering they've at ready sold take supply themselves hard increases. and meaningfully last year's top both past see strong than in still Bottom are to more and work deliver to XX% of additional well. constraints are on effort true our QX As team improved in are top performance. and of that to as growth miss challenges guests behind $X.X much Christina simple. the mentioned, the also passion in-stocks seeing address securing these mastery level to simply passion of teams and to When ending the we across year-ago, do, is job, our their top have collaborating as In we're achieved on headquarters as with have chain. longer believe expectations performer, athlete, beyond some the That's all look our see team include larger and could risk successful are cases, happy a constraints and the product team an impressive with In behalf up artist, we together, freight other usual. bottom mitigating our well-positioned that line, guests. when growth Steps the bottlenecks or domestic And shipping. that a fall season, both replenishment addressing is international of on we're affecting and life, expedited been or advance occasions. everyday their

thank and business pause our team forward, to challenges way. everything that the regardless everywhere for the our they want world I to in always, of as So propel come their do members

properties program suspension. following ramp Our team has year's as busy they a last temporary up year our had remodel

offer by lower sortation team open And to centers These a getting is capability, generate Chicago, addition, the with my given number in to XX facilities on currently and stores to site high open delivery more projects in New location a In shipments. to open the within sales Wisconsin. markets remodel Spanning holidays. has expect Disneyworld, new fellow in complete opened the distribution more in Welcome all More also quarter, to distribution in the all one ready of across XXXX. followed fall, our and and country. and Madison, Hawaii, The new in two to facilities Badgers X and after more year-and-a-half working way York than year. news forward. on the capacity sustained a in-flight, replenishment add location growth out to they're there. We track in XXXX we're new stores to times the City XXXX three to opened team planning over Hollywood. sortation density October, additional track campus we've near creating an this last in the new higher adjacent neighborhood even to the about going ship-from-store growth XX second New new already Orlando, another XXX X centers, in stores, remodels a new Jersey support new stores network. we We're in including are XXX at capacity and in a cost faster more in We're from this the across our centers country continued

additional we goal energy the projects, solar to energy. having in and we our improving move offsite transition U.S. rooftop for contracts solar renewable This rooftop beyond operations, investing and In includes expanding renewable finally, of And for time. a net-zero addition, they in up space XXXX, landfill zero digital commitments capacity support by more store locations the our towards waste XXXX at over XXX our efficiency as backroom growth they at to overall driving free serve, to as facilities. energy in is of enterprise team being

the resources is Creating invested and our opportunities Obviously, and want we announce been including strength. healthcare uniquely remarks but broader So much Target proud have years our the we I end goes emotional, online free to based recent physical in now, also starting in of team investments many in I've virtual recently and announced capital high doubled excited equity and benefits wage, and visits, of one members, chain. Assistance opportunity I Program reasons in includes a for this to at during create supply support engagement. the level down investments always become mental, it's advance clear to free way farther. Debt-Free Forward's both our an and have to team. here stores this month. and that culture the XX with stayed and But we Brian was health. to where invest mentioned, pay, I've We've to already what several and our support workforce, our added productively we've benefits including strong earlier access new started, all really as in U.S. for But my inclusive many our were equitable Education of on and we've in And a ambitions team. programs it doctor apps ongoing across now made years, pandemic to Target

more most offering at day team than industry, the debt-free program in the have first degrees, comprehensive XXX,XXX with more We undergraduate beginning to certificates, certifications, access their members Target. and

as costs, course degree. to want a team master's will the smaller and for members And education, for continue might out-of-pocket $XX,XXX undergraduate participation. program pays program otherwise their Importantly, hinder fees, pursuing the who those pay to up beyond textbooks such annually for that

what a reasons alongside the grateful been the they times, we has market years, many like time. for connection made low deepen can ahead. investments X many we've a more, time, said And That's we relationship this very in I labor about have a high last member Brian team. up to generating excited look of the impactful to team Because time serve our more made when the Target's investment over the haven't over the of one we has all with our the seen continue long am with store we've none team's that's ones guests. remains to turnover of any at we've made in Target while As great heating been our to opportunities investments and deepening team do than return, in levels accomplish years

Now, I will turn the call over to Michael.

Thanks, John. been in the After record XXXX, our growing on of growth. year year's theme of this has top performance

stores in opportunities our we comp our making chain, isn't a supply sales recently owned invest team. our driven our Program. we're the team and make. our in the grew distinct investments And years see member our making line of measured laid and includes by announced decisions in on groundwork while That today, were the in and we're important continue course, investments Of quarter, as to investment through supply bonuses year's including of future. of brands, stores, to financial in most chain, statements, support we ago certainly a a And new and the they're this team, growth we return investments in growth Education X.X%. Total investing host technology, we the for second the Debt-Free member Assistance our the team capital X.X%

two-year months. XX% comping May two-year smallest excess the it in given that much the a was a On throughout Within we saw, this more quarter, over three increase the saw all a across results increase year, year ago. basis, of consistent XX% were growth quarter, as

smaller shopping slightly with mentioned, them we've guests trips. Brian and more homes, out time of As their more often spending seen making

XX.X% traffic the average decline in in quarter, grew Specifically, partially tickets. a second by offset X.X%

driven we've traffic on comp was by XXXX. two-year year's double-digit last tickets, seen since a basis, that increases primarily given and in average both However, ticket growth

the our channel mentioned, also this growth Brian driver has As been year. primary store

grew store Specifically, increased change store, the year XX% And habits, of X.X% shopping reflecting sales given second In XX.X% in the last meaningfully. we've of year's top that comps sales mix ago. XXX% and years. compounded growth more quarter, guest the over digital channel, XX% of sales seen the a X changed on grew comparable this year, than comp of our in-store our in fulfillment digital last

same-day stickiness of them, orders levels. same-day from last they quarter, elevated our of Specifically, try provides grew home Once sales shipped actually This evidence declined guests in the love services. while XX% to them. year's services on vivid the

rely they've up these ramped continued on services in-store to shopping, as as well. So their they've even

trend year's to and guest is isn't continue double the actually Another we to XX% channel second a indication will note expect time in digital penetration this quarter sales shift second compared this XX% from that from we in important last digital of behavior, in Obviously, this with reported back this the slightly year's fell it's moving the well of over of over year year. the percent the XXXX, XX.X% XXXX. of of quarter X.X% total

and digital margin in gross about change the about partially sales points was toward gross gross XX.X% year XX.X% pressure same-day gross second-quarter in by markdown low merchandise the rate last contributed Among the compared of pressure digital the to This return merchandising, down product a second-quarter impact a ago. options. million our about basis margin from from last flat have a last benefit points saw estimate, Our was XX of the reflecting the and which $XXX about offset we reserve XX year's other change words, basis combined tailwind about costs, supply driven drivers, mix offset last higher this year, in margin with this freight by pressure Among our from year's rate other rate of small of XX rates. mix second-quarter benefit shift fulfillment, about would by XX margin basis costly benefit basis to from reserve less chain accounted of for points In points of been drivers, year. year. without estimate, and

rate a leverage this basis points by last the benefit year, XX a change an and This for team. rates strong year. This reflected XX.X% about increase On from sales the growth levels lower-than-normal down growth expenses continued of in our areas SG&A offset SG&A pay expense from marketing line, like we year's some from in pressure continued in from expense also ago. year benefits reflect saw

X.X%, line, year down margin from XXXX. more basis rate points was quarter D&A second the on XX our growth. about by ago, from about Altogether, driven rate basis improvement XX X.X operating last we the than second-quarter than higher of saw On a points percentage but points sales year leverage

of the line, adjusted higher GAAP of year. year our was was X.X% EPS EPS On second $X.XX quarter X.X% $X.XX ago. a And than last bottom above

EPS have doubled X adjusted GAAP years. Second-quarter both the over and last

affecting $X.X $X.X is our This about due historically ago billion So far cash. performance, billion than this just of over circumstances year. year, a a lower some year strong operations unique to but have last generated

second position outpaced sales given our Specifically, of quarter of the at our our have the had than during much preferred, was lower inventory year end the that far expectations the half last year. first we'd

turnover As the a result, have running leverage inventory at last high inventory would sales. appropriate we payables this point support year, were our of owned to having been and lower and unusually amount

to a headwinds better is last more to more year, and operating begun has than decline billion leverage to year, a $X payables near-term this which cash in higher sustainable our such, position, are both flow. inventory our than much of As level,

more year. last at tax of our income year-to-date last taxable given this time the $X the volatility first payments year than through our addition, billion than are half income In higher in

to where to I want start deployment, which As have reiterate capital I always remained is priorities turn same our which do, for to the I decades.

in projects dividends over the our limits any First, within financial and our on maintained ratings. the return we share to criteria. every our that increases, through Middle-A our of credit strategic excess of XXXX. time, meet we we business repurchases since and annual we've strong look finally, cash, record dividend And fully and build which invest Then year support

new in earlier. John of original the $X.X-billion the lower chain retiming than projects expecting just project range. This Capex year, And in Capex the over next billion store, the now the billion we're supply and this invested some our far we've $X.X remodel, and to in $X.X spending year. expectation that for about So outlined year, is reflects support

in govern opportunities front with and refine the Capex As view next a higher continue superior productive we're line, billion investment of our about Bottom in delivering move of X billion us continued view a in our And excited X year's result of is retiming, decisions view, on prior growth and this we'll our returns. year. focus somewhat the to to the we we'll our as next than range.

once exceptionally the cash just ago position, million and has $XXX. Even capital in and expect of our equivalents said is given at second our the and our billion strong price our we employment current the capital will and cash up $X credit shares an is move as in of time. credit authorization, return before also journey are fully year confidence cash and cash us Beyond of investments slightly team board the And quarter in business $XX and over authorization over This repurchase But share well ended shareholders, multi-year year's from share the strength after levels the business the I consistent the priorities time. our capital $X.X with continue a approved metrics before, quarter, expect $X.X allow returned we over it which a and in dividends believe we buying We cash this current billion of generate to long-term outlined maintain another our to flow average robust volatility announced consistent completed. billion. with we ratings. we Single-A our to second investments, with and ongoing $XXX of elevated today, billion will environment, to to new back be I've as above back It the we through current This a programs about paid repurchases our above. position cash reflects our

which to time. performance of of over to discussion our brief the on a of return invested turn close with I our want measures investment current I decisions review expectations, after-tax our performance capital, my our Before

testament quarter, year. our performance of a our the XX XX.X% the second business amazing compared ROIC the with last end For the and This the is XX.X% trailing ago. of number after-tax year and to months was over model Target's through team a an

As we've of stakeholders. any eager our back return in reasons the growth and many industry. are expect of deliver range performance a of the one before, is settle the to And could into these the time, XXs superior remarkable but a we're in benefit over business to in we said all after-tax to mid-to-high our returns this of sustainable metric resilience continue that investing

to turn expectations the sales comp let's for our Now season. fall

was ago, the As we days growth how XX% half described call to our comp more the XX strong than on top of business deliver recall of single-digit in very in year, the XXXX. back conference our positioned growth, half you'll of in back of

Target's ahead. there generate remains high expectations. continued with environment end performance the This look strength can previous that our exceeded business single-digit the in today. our fall, this of through range, comparable consistently many consumer, are U.S. high growth confidence performance uncertainties While near And the gives sales the us the in as volatile increasing combined the guidance the our year half we first of has range.

margin or rate somewhat outlook an in based previous today's to single-digit of our growth high From expect our margin end operating expectation rate with for operating X% on be the see of full-year days high perspective, reach our fall, said expected higher. range. well we a XX near comp similar the above would it to potential of we XXXX ago, rate X%, We a have regarding the profitability. we

Typically in diversity strategy based with every at and is noticing comping both year. believe on ends outstanding comping today, you'd bottom at when now, from like guests of a success seeing can performance. deliver for aspect this team. record in growing I've we the level too, if positioned rate Brian the prior Target of ours, I've over an and the begins in higher X% year. over years assume or is we numbers our a large, higher XXXX, saw mature Instead, said been rate Target Specifically, today. for never the we're their our retail, earlier, growth more you coming of our we're that Company top experienced were year we're see now engagement, to soft Like full seeing Obviously, you the lines. operating margin and than time together on XX which like like are a of our

I'd to for team reporting like So by on of all our Target results today entire exceptional remarks behalf my thanking the the we're stakeholders, today. of close

will the call to back over turn Brian. Now, I

Michael. Thanks,

aspect of Before purpose. I we A to few able we last every on we've want move to project been Out and all the aspect strategy. meaning into ago, already Michael's and Company's discovery, a team, we represent stand our everyday we strong inclusion came for, our sense word Those of life. are it discover help questions, of strong of our every pick was of have across your families the to to there simply. way our Across our wanted the purpose work embarked all, for to is words which which a joy years today, our but articulate to to up point, team. what we the commitment joy, that who business. we synchronize articulate deep on better words Families, put

move all focused has we can ask it on if I'd forward. working that strategies, creates. behind is Alignment find let's things relentlessly activities questions. advance to everyone a aside and strong and our move on purpose, take the it alignment look a strategic enabled I So go will of answer and The Christina, the alignment trouble or our Q&A. what of will Target doesn't our really That be everyday of at words? into purpose Target Michael, it of our putting that had to articulation it's in the relying way, activities. our the ourselves we already had purpose John, of we of sense something the to your that, of purpose, and investments, focus ahead. to and as on With work In strategy If we that the today reporting set kind our most our we're why happy team. performance and that focus focus matters both same on

Thank you.

question-and-answer Instructions] first Our comes begin question from We will Chris Horvers now session. JPMorgan. [Operator the with

ahead. go may You

Thanks. Good everybody. morning,

on about questions. the are different growth you the quarter? question you're seeing patterns first thinking and purchasing move any second X have My seeing where talk in you I back-to-school to as relative you categories is, about far, effect forward from So how so can Delta in you are

stores assortment. to and a out back-to-school guests off now. in start is shopping and were entire it strong were I we're Chris, really broad-based back-to-school we seeing and John, Christina and right our yesterday Michael,

assortment And got strong value. at a back-to-school a we're I tremendous we've think season. back-to-college great off a and to

And derive follow-up, puts Can are half takes? it. the the to in a clearance then X% elevate the what levels Got Does that margin -- gross more the headwinds persist and assuming do or how about the the about product that, in outlook. margin. Mike, operating margin and within thinking you're freight gross back degree or talk perhaps and what are you overall, on promotion and higher you to

the us those Chris, business quarter to time think all we some offset the takes, talk I heard good and levers example of have and a you've about over of within really puts the second that. is

feel offsets good found in and sales performance. return flat If some margins last you were we there about take our essentially actuals, and out the year-over-year year's adjustment good so profit

I through at think that clear. zoom period. bit look loud a theme same out longer little and comes a and We

was If you first now sitting of half the at QX first go XX.X% gross back season. for and the We're QX rate QX XXXX XX.X% XX.X% XXXX, spring. half to in margin of the versus and year the for this right

to and happened year beyond. we years so of and I the well this for lots ability the back profitability manage and our of really last half about business that think bodes over the two good And feel the

and very luck. Got it. much, of Thanks best

Thanks, Chris.

question with The Thank you. next Citi. Lejuez is Paul from

You may ahead. go

Two inflation Thanks, front. the ones. quick guys. I'm just on curious

about what label for the you? in do out grew faster half. Thanks. grocery label talk general Is that provide. performance, to maybe go playing to going continued cost that that the you're Any can also want be the mentioned, pressures private the Curious able you might tailwind you private in it and second gross in versus be of to you how sort back you category food, provided a If XQ. And margin about to quantification that gross I see merchandise. seeing driver margin performance

seeing and how in Christina environment? let's the our performance we're brand Well, we're managing about have this talk in strength costs

Good take morning, that Paul. to happy be I'd one.

with brands. start owned Let's

products huge in of strategic desire differentiate brands market, to As you the our and guests. owned bring a part quality to are our know, great continue imperative to

to we've that And at as opportunities that's base. to that's is we to our we so in saw find persist. needs, our continue the quarter, brands guests' And to accelerate unique a as what second meet continue our been commitment exactly faster is owned the than on. going pattern rate And the to long

portion portion that of so, And brands sales even margin. mix, you our big represent bigger of also know owned gross a but our a

So seeing cost to tailwind we we for expectations that full what we're to us business is the of financial of the value creates by manage that on on But Yes, going you And profit to do this day. freight. delivering suite a costs on the We our back every guests have. while back going leveraging profitability great offer the well side. as to on point, your question costs. then Michael's pressures production first as the levers have,

Thanks, luck. guys. Good

from next you. Karen Thank is Barclays. with The Short question

ahead. go may You

much. very Thanks Hi.

per So since XX% at I you're up more wanted to ask, productivity, basis foot look XXXX. a than on sales just you square sales your

structure? a little productivity, guess to or we look lean structure? would of sustainability expect investments I'm of wondering about the what higher with little in kind I set could is, terms more this into think long-term you higher forward, So Or we maybe, operating how margin differently, the going a should margin

improved do to bear a of stores, on equation how comes comes that footprint so our why a back we drive you and and math new step That powers focused end from on that day, productivity. that much I bit, to can the remodel. in at for little of investments your adjust the If certainly the Karen, growth in so in see store our that's we bear we're question growth, the margin

good focused to on you'll can investments growth productivity basis, profit. on so translate we us With good drive growth. a that see that growth per-square-foot And that consistently comes and bottom-line

on in consistent invest on our market expansion our to years brands, in invest and share to stores, quarter mean, to it hear our growth, to highly growth fulfillment invest was theme John Michael our place. plans going expect quarter for stores. that to for invest and new going team. services, after growth the will theme we I drive And We'll invest of well. in should this come. our productive summarized continue We're continue Karen, talked have be in that about top remodel to in continue a you you'll continuing our but forward. in focus theme quarter

Thanks XX on commented just, that. points Okay. pressure higher from for and And then product you also basis gross costs. freight the of margin

little seeing cost you absorbing On can then, inflation just are a some on versus you you're the retail on And front, cost maybe product the inflation? color what give of that inflation.

well. I it think Christina said

the are business. at and managing puts takes the teams across experts Our

sure couple our So years were how our to if incredible that. of site the matters stores. any making said, be be we'll in how rewrite to a I good Christina underscore talking and laser-focused team the ago, something. we find and our and we we'll And also on about managed guests has value wind clock offset tariffs in feel our value on complexity business, about really and

we've And price work lot that to and invest in going that or we solid make sure a our guests forward, inflation hard to to done want of so, perception continue not. find value

Great. Thank you.

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

go may You ahead.

Hey, holding on sheet. cash balance a questions. I one have is guys. the of I Thanks lot for you're first guess taking my your

what And talked in term? now, cash new you do do to short hold? level got what guess, But the with you the about repurchase. more guys guys I ideal the of is of You share you what for

the first in be cash. question: that priority one the invest answer drive that and continuing to Yeah. growth is and Well, always of been to use to invest to will has the business,

is announced capital north a that last to XX% cash good dividend. the fortune Our continues in a of month, to priority second just grow. dividend. have support We with we generate of per-share the as And we our increase lot business,

share less about a to back closer you'll sheet, into cash credit little normal times, prudent in. how we on of north so, X.X period But have be something the balance the our on repurchase to a Optimal we us we're see flat well. gives we for in capacity sure. of be spot to step that us that today Over billion to as it's cash time, that depending want the carry And year the of Middle-A ratings. than sweet

work at then And more what next months months would step Thank Brian, initiatives that Great. market what you I just at team think Okay. XX compared tremendous are if But forward the has to over the went over my share the growth I competitors? and second question to guess, strategic back XX look outsized drive guess XX you months, really, biggest, months. XX going is done. gain next I to the you.

going brand We've to had you'll to familiar very we've to a We're just despite be We'll stores rolling invest so strong next to that in made, our stores. and out few our invest we'll a very theme performance. about new And to the remodeled and in continue in progress, it'll re-modeling continue the be half years. Scott, pipeline invest over of continue us our date, we've see you. our brands stores to remodels.

invest and key this around driving Up growth. to and about team. in quarter make are to almost think always You'll market good our XX%, traffic continue traffic of of as growth continue gains. And see you'll and expansion about we invest drive all stores us we'll sure about Again, Drive we forward, to talk [Indiscernible] hear in us continue on digital of and continue the share we felt in And exceptionally and Pickup metrics we'll our comps both channels, strong to to going Shipt. build the continue laser-focused

site, our make comps going across equate gains traffic share be will investments stores and drive our The brands, will in that our continue themes forward. stores, our team fulfillment very our visits to those to market strong to we entire our portfolio. to consistent and So continue our channels, to drive

for commitment continued to So but few years come. that's our the not just next quarters, for

have done. And guys. a you what Thanks, job Thank Perfect. you. guys tremendous

Thanks, Scott.

The Michael with UBS. Lasser from next is Thank you. question

You may ahead. go

a outside in Thanks taking for traffic. see gains Good Target question. continues my morning. lot to

high days, more of the your XX year? are has out the last back the do of and go activities? to any how pattern your next weekend, of unfold to change as profit travel quarters the versus for and been expecting the consumers over single-digits couple traffic like weekday And Over the there especially traffic, other half guide as you

I at allows in has changes one. need maybe and fact the the micro-level, in bigger consistent at and strength for not the healthy. tell our it's as momentum been that to And a there flex back-to-college But consumer aggregate stocking aggregate consistently very year, I behavior there behavior can household has The would excited between are that We've Traffic well. we're on of this was very that within last in What Michael, portfolio talked is early consistent back-to-school about the you about patterns been up. essentials businesses. more jump us are been people level. and the strong. and changes were

of more to that out, and business less we're they're luggage and we're going products, the very therefore, wearing and has dresses Now, seeing seeing strong. return -- been beauty and

industry are is and patterns that of and aggregate are businesses. across all macro by broad-based outpacing the our strength the it's but Target So underneath, there led

have to. the would of this we of variant. the I impact Michael, watch carefully. lots I back questions come been know there about And, And very just Delta

of on our certainly masks are the safety. see consistent the in and traffic resilience But think, consumer continue tremendous seeing I that, and shopping our flow and stores. we more optimistic we're focused see traffic a wearing very we into represent this consumer across We country. But very they caution as patterns, with to today are more

pattern resilient resilience traffic that a seeing start that we as third quarter, we're and very consumer, that and So continuing. the is

operating activity an Thank profitability? level the sustain Target unique start the pandemic, margin that in is environment, made, current of rhythm, seen operating run? that now about return would which a low return a into something weigh on you. sizable at least to Is question the promotional might the wouldn't Target's able X% comp, stable the be is of there you've that to investments entered long the you've this over future on My a so passed you've follow-up and after you've comped year-and-a-half why

Yeah.

wasn't guy environment. the these there's calls we weren't one good talking can't on line there always Michael, something So, unique the of about. where in I margin guy remember a specific or bad

so that matters ability with put that I and is our always sales P&L hangs think together a together starts most great, to growth. what And

algorithm, translates market we line new growth position good And all bottom a we'll P&L forward, in today be centered confident to a share sales team's a and we'll And into in on so I'm to aren't share our go continued that feel while together with put gains. continued about. a those, ability

and very good you luck. much, Thank

Thanks, Michael.

question The next you. Thank is Capital Edward from Markets. KeyBanc with Yruma

ahead. go may You

had growth more kind question Hey. data just And for the broader on just down little a that Target the you've what the guys. Good your taking that with I a top lot have Thanks. you on digital and and really on strong of acting and I compares in the today. a basis then you between said question. guess have same-day of morning, the you digital how Was ship-to-home services? your real-time learned? are guess sees businesses, guess, a you first, consumer Circle on negative. Thanks bit quick that a consumer symptom that I was decision

is to John. This talk you. Ed. Hey, It's good to

it. Two things going you On the ship-to-home, on. hit I on think right are

Just ship-to-home last at year. year the the tremendous -- in second quarter particularly in last growth of early

over strong camping that. we're So just and growth very, very

And I I is quarter, the growth look in Order year. more tremendous Order We the that Drive-Up services, but our second growth meaningfully in like importantly, Shipt, and think Pickup, probably remarkable, X after is quarter year started thing, year continued the Drive growth the to after and in same-day in continues to it Pickup. and at after truly years grow is Up. ago one

three you great year all thing And other. the for the guests. we us, services. highest-rated from those it's products. as So that we business our know, and we They're away each are fast service very, along not and service those also our each that But about of for with very incrementally the single comes margin love And have. highest-rated Drive-Up acting it's taking love efficient. is

last digital businesses good the several the that's the grown a last So years, months, for our our as XX we've margin same-day digital services have faster, and grown over over significantly in particular business.

on component. the jump Target can And in that I Circle

over what quite for is a we're reflected our and sure relevancy Target this we As relevant you about members great primarily are in XXX million; And to is offers, it's your question, great that more they'd appreciate. in deals, program and up giving us it's million personalized been accurately in to that more substantial. XXX them consumers Circle, making

the promotional quarter, an savings $XX on of guests the the plus $XXX worth in purchases, second from savings X% example, so, million from another And earnings as offers. benefited of from million

offering in commitment our to affordability, point that building amazing is Target of another proof So keep just Circle the we'll accessibility, on.

you. Thank

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

ahead. go may You

of how Good categories message of to a have a as much do half, Christina, the your half about I on to talk you everyone, your how key services year-over-year to plan focus consumer and on in versus to you. second comments spend your little some bridge same-day margin Thank a mentioned that for back maybe emphasizing morning, bit is you you on And question OpEx marketing the year about communicate the emphasis? value and basis. congratulations just the your trying operating the My half also might the for plans second think, on results.

Steph, I'd like to start.

I question think us. you've the for answered

We'll You'll strength of our see and around holiday that us the our obvious holidays we balance value. messaging great how and multi-category certainly season services, be the emphasize guests the important they'll for in during same-day affordability, know our assortment.

steady news, be value. news, stream great underscore of it will and product So, will service great very a

question? And does that your conclude

just to to is be flat, I of context if going the you just the in to one for operating OpEx spend offset margins year? around happening there be operating the in are but expenses terms prior are trying us gross to bit the something what versus in have prior going year-over-year is a we're Could follow-up. step-up did year, marketing, a seeing margins some I'm half. back else understand down is give it

margin spend. takes. had into I to the gross for It's the the to into Because early get in hose specifics we for course pandemic. in our our changed was last see the SG&A. Yeah, excited to level the marketing you'll expectation the I similar normalized quarter, puts wrapped expect or more of we kind aren't getting about of of OpEx of on some line that to year. all the second of and year mean, a we're things stages as back foot put one QX we And

should And a to returning I what power good back of about so of the marketing feel that healthy as in level the view investment I growth half year.

Very helpful. you. Thank

Bank you. Thank of Ohmes is America. The next question Robby with from

You may go ahead.

Hey. Good morning. hoping comment more my I go Thanks how could to add to on much taking you for was items you Drive to question. have Up.

go grocery, XQ. can you Drive add Up. grocery fresh be that of So X,XXX a speak Target that that Thanks. but grocery guys you've moving were then grocery that to a not there I to lot know, added of further growth the of shop? fresh that, much a can to mix? you're could keep is you added said full related in And on items items said Did Drive enough super lot full business? adding to you items destination, on items I much How on you driving how And in maybe, to a are of historically, think towards go grocery? Up more general you more

Up on Drive First you? are question. how Robby, the Hey,

are driving things think that there I two growth. there are

said, and continue Drive There's and us to Up. First is through work way category returns to things like our expansion there. to we add like We'd clearance to like Drive the for work categories do. to to like you we'd add Up

go And there further we so our there's I category product think of lot a can from perspective.

added The find we're SUV sit your park added other added in you'll that We added come for the lot at to we for our side given out is time, add just among improving -- to any we the to ability black and canopies driver do we see Drive-Up to XX lots help can that. your you. more parking Drive numbered us locations, adding waiting And service the substitutions, -- and pick-up Up parking itself. do order SUVs black another the that weather, continue to so with we

So us I see service as think to the well. innovate continue you'll

let we to that, is the high very, runway And Up. we improve continued scores to core from leads of see long for the our teams, execution course, NPS to us talk of about I'll driveway. Christina, the in a store which high continue at very food And, see that Drive So you assortment.

guests there relevant. and been continues has is They are assortment. of easily this I strength real is Favorite expansion the Drive over that you'll the do to Gather about and food whole think the food And of much rather that Day going delicious, understanding is us because they're Good we've from amongst they guest a the years launched. Up they're the upside growing for we've them curated who point in it or expanding question last view, assortment's taste of but across brands the several digital experience just in the of always converting the Yeah. and well, so the built that look beverage. are business quickly than stars and portfolio, we including they of convenience be physical your when a in and are great, experience, the exceptionally and beverage And source Drive-Up: finding more a Target are in to to onto success because lot The business. the the see future assortment in &

morning. for X time have final we question this Operator,

you. Thank

question last Bania from BMO is Our with Kelly Capital.

ahead. You go may

fitting for Thanks morning. in. Good us Hi.

cadence suggests question margins higher it year. looking expected But for for X% pattern. another realized as Just the this historical range seems the wanted in the -- the first much EBIT ask at the in of be but the than about half in I magnitude about for to mid typical something is just to EBIT deceleration second low as half. And the seems margins X.X, this coming half, twice of Target's lower to second

get to a back of costs half. the in conservatism or trying just sense So

marketing back half, just the or activity in Any for the out the called with could You planning you're help what you maybe? color that. promotional expense

Kelly. to good really profit growth for the We back help year There You're feel our and we operating is the north we their right, the expect of that flows seasonality versus year. X% quarter-by-quarter, about deliver fall. P&L and half of to yields margins spring some think through the or

on feel able of And profit so put any while the precise be And exercise. in together rate all we'll getting I specific an we right about. back too good that think would the that be precision line half to confident year in a we're for now,

the Enjoy you Operator, for that joining quarter rest Thank you. concludes talking you the and to Thank of call. our second forward summer us in look later today. we to the year.