Target (TGT) 18 May 222022 Q1 Earnings call transcript

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

During the presentation, all participants will be in a listen-only mode. Afterwards, 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 May 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.

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

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

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

everyone. morning, good and John, Thanks,

guests when cost team the strength relationship is results working quarter our we at pressures built business. affecting underlying first multiple Our our our with through the time a of demonstrate

our in expected, the of ago, As huge and business to a of gains continued top serve year of the resilience both underlying ability grow team consumer them. the first the on to quarter, our

over in resulting challenged we growth to and costs, unusually we expected to time. what However, be by factors, high profitability of a to well this host where operate was below due expect

saw sales First XXth XX% grew quarter increases. year of pandemic, encouraged the continues by our of in We're the the quarter in X.X%, increasing that on our XXXX. before sales year [XX%] traffic we of marked nearly to growth, growth XX also ago. were ago. comparable by acceleration those rapid quarter, top consecutive fuel top of followed on quarters a a comparable growth This X%

was rapidly expected, we'll factors the consumer to well We years Target's Our today. profitable combination which much guest seeing In the sustaining growing first we're our shifting and expectations, rate fueling traffic we're a sales of specifically, focus, and in growth prove with spent sales guests, below years an transportation reflecting on change is the thank we inventory, growth guest of costs rate expect to to more backdrop excess our driven And strain a for us over that we a where by focus categories, and detail macro we quarter higher-than-expected than saw have profitability their experience. much of while different on anticipated. restore very sales to maintaining laser operate I team time, lot work which the the gross a to shortly. ahead we level confident More supply that already Michael changing deeper relationship ahead. margin see our resulted hear loyalty want be chain. Christina, bulky put and stretched in dramatic John and additional This of more in in than it will mix and behavior.

a our XXX% growth little Within more market channel, and $X.X in in quarter, Up our having of categories. and multi-category increase, to and led perspective, this same-day our about [XXX%] sales billion each growth store allows of channels, sales be From ago. another Some first $X.X store a $X.X which wants channel, we that more to beverage X%. food sales services comps have the XX% digital quarter particular digital, balanced than the digital mid-teens strong and showed by just sales Broken accounted in were our by our specifically, prior Since expanded by and first benefit continue Drive us balanced to and the growth and first down of needs continues time. billion. their XXXX, to between portfolio, serve QX than delivery in than pushed a year share or flexibly over gains for guests More change. see more increased to billion, quarter continue we of year essential more than as grown category while this over top pandemic, growth on from

to In Ulta this a core where in the last driving of the We slowdown beginning expectations, the we trend including Beauty and service, added rapid The from new and beauty, March, sales and in we've partnership our impact benefited exceeded merchandise in stimulus our growth hard to in categories: of at comp saw area assortment also our ongoing expanding our X work higher store, of enhance both the double-digit lines, apparel, categories reflecting other year's when payments. partnership we initial with experience. have annualize Beauty. presentation, Ulta beauty productivity result an home adjacent year-over-year and began and sales

a consumer away anticipate slowdown the refocusing expect from anticipated the into in categories of we didn't to magnitude services, we their that we these and spending continue post-stimulus and shift. goods While

they Not to energy. basis. express At Target trends to been they've concerns guests X-year of after bulky suspended their the of same food a levels host American XXXX, And and couple high back benefit multiple inventory, and categories furniture. mix including they at weeks very As of buying getting a of saw categories, this about trust when trends Also Nevertheless, from demonstrate of even time, particularly even the focused with continues to outdoor little heart year's earlier, stronger and slack to with our in comparing guests, inventory I they Day quarter, still and see rightsizing continues inflation and including rapidly we they notable, rapid X growth by to continue store beginning and Mother's X-year indicate weekly a including out-of-home a face often ranging surges appliances, growth longer-term habits the are even rates, evolve, mentioned conditions, travel, elevated kitchen carry a slowdown of weeks the talk in the place continued holidays, our compared Notably, geopolitics encouraging much wage our activities spending growth, the spending Easter unprecedented on years we're to capacity in elevated actually capacity of persistent healthy pandemic, evolve. led in to faced us social the spending healthy meaningful These too and TVs their what the resilience position. of as many they're high seeing creating on saving and to gatherings. challenges. continues the overall around spending we cost we ago. pre-pandemic importantly, to their from guests, sales of April we we're in and consumer changing even beginning employment of as where experiencing, recent seeing the first the in the in surprising, this And particularly if growth. behaviors

set base cost options wherever categories. So presenting as in prices always margin to of seen providing you've as our the resulting been a team prices faster maintain retail course, changing that our lever in gross in possible. rapidly working assortment, today, recent rising continually to a across of multi-category are have last more overall our than declines guests of pull, to on our a of it's adapt us external and across incomes. items as serve we tirelessly we're multiple in to multiple we across wide offering than range quarters, costs clearly raise much And conditions household guests even our year-over-year prices, value a affordable accessible face diverse rates. But But pressures, in best and is we led while focused environment, broad broad ever

happy we experience the competition, versus benefit our strongly monitor over this as will these is time. we value not stack And pressure guest we're While decisions near-term and business currently they profit us up believe the quality the line, our the causes on our and telling we're about prices appreciate providing.

evolving to on and record we'll growth environment. a importantly, with guests on value, maintain continued helping a showing our look and our rapidly sales site, footsteps we this as More clicks our year more in resulting traffic in them money in time ago. growth of are And ahead, on top save appreciation and stores focus more our

gas are For unit way pure those miles record shopping time miles prices, trips. driving to broadened by response smart and low who a our merchandise combined to assortment, consolidating with on our save prices, in focused offers high

Of shopping course, including looking services, guests which time home reliable And scope same-day our portfolio charge. is of in-store of offer brands our outstanding valuable convenient Up for across our money-saving their every the pickup services, options and who in and any our we invest our no to they're merchandising for quality of for when because one are guests $XX billion families, categories. saving savings environment, we're in continuing Drive at expanding and offer

to a our extreme flexibly our over they've across and experience, current fuel. And our right serve dollars, our design the in to with entered team QX, our of last has volatility behind improving volatility Rapid have challenges opposite categories, continues the amounted channels and few doesn't team, to while handled incredible services, Just we is begin which handling energy to the the year with guest working combined and growth created focus. of in ensure face as that that In for to we guests, merchandise don't this shift and hopeful scenes years. we've volatility, moderate, managed team unprecedented our anything portfolio of see of billions extreme to on tens this the experienced focus demand away. impact host we conditions will operations

the these it to that we're as quarters. of and restore design project operating to impact from many ahead, in over that expectations, or maintain mid-single plans continued time. navigate But In to we look of even long-term grow we our as including short-term in and an digits to profitability in affected ability the continuing our So profitable persist hasn't clear invest of future of the long-term deliver challenges, growth. will X% business the margin pressures our confidence meantime, is higher

successfully Our confident and we're our business through volatility. business navigate ability facing these to emerge from extreme even will team proven model challenges stronger their And have we're today.

growth, will we're by early Just growth it later investments making followed were we're that, over off in as our future Christina. profitable over pay today, our decisions in with XXXX to turn investments the years, I'll handsomely in combined With time. confident

good and Brian, Thanks, morning, everyone.

Financial vision Just a our at my Meeting, as our company. ago, few a strategic outlined Community months presentation

where While started are guests habits frequently feeling today, many the strategy of I are with is our where top what's their get shopping how again questions I facets to that environment, of about start covered I economic and our day, mind guests. We for how given current want our evolving then them.

about of prices might the broad, every macro American Our every complex. rapidly breadth on as million some accent for we shoes serve navigate gas inflation changing on worried A those And and of they're slice more or much week. guest that to environment answers to the questions a they're given they rising and be the individual also guest their that guests that XX decisions pillows nearly as just looking home. average their splurge new but telling us base making each population is encompasses

but the wide remains looking friends. the state resume of still Another with Many of the array but COVID our are solutions this and build has provide share important And for it in Target more more like their games more feeling much on their a great all about and sharing of decisions brand. to and and and personal needs, little experience for guests. With summer we barbecues delivering flexible positive quarter, ease, they're invested safety, to finances. substantial planning maintain and of In are guest shortly. forward those I'll been so Target on costs. about league worried wants economy, trust minds travel and and guests uncertainty came outings the first overall the to for guest inspiration their never with a be love to

more shift newness mobility quarter purchases our results as the their wants those of portfolio, first multi-category out love play fashion increasing Target reinforce travel. forward experiences and prepaid More and strength we toys are seeing This baskets and apparel, toward us which and allows Our categories. cards, notable lean and includes power ever-changing in guests needs. to more, going-out of our in into

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Our love partnerships to they brands, continue as Target value, well. and owned the to as brand have and appreciate they national even expect guests design great quality options appreciate and from our come

the traffic and comparable Brian over sales in growth in share gains. expectations, team strong X% outlined, As line first unit delivered with our reflecting quarter, just in

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As was in Brian impactful was gross by driven sales mentioned, first most factors. performance softer inventory The much below resulting in was expected a too our This in number of expectations. well which those categories, several quarter areas. margin of than

how our one we to to years over under that had the about X given were spending would federal payments. As we no before for task plans quarter, anticipate stimulus seen our compare historically change of developed circumstances was high ever

view differently to of forecasts on demand actual the and such, determine relied the careful for we our both estimate, than Despite As materialized quarter. had external, we mix numerous and this approach, internal help anticipated.

knowing markdowns demand margin. incremental quality we and leading essentials. like We preserve addition, support experience, care latter, decisions. categories that In bulkier trade-off reduced would can gross keep household we guest the the more, chose on-shelf and over for personal away room food To or presentations make sell fast-growing and the to we and needed like our products difficult make as beverage, of product and furniture, from shifted grew supply time could bigger, to TVs this beauty,

long building our that we given decisions, in off loyalty they'll the were these long-term pay difficult term, top priority. While believe remains

As of luxuries, and look and all a temporary support sparks selection we'll affordable to guests, experience do value our ahead, that necessities providing a continue and and a we great can provides escape. to smile we unbeatable them shopping

the of some yet. offers to second for everyday summer's many all offerings discover our joy opportunities our And inclusive The families features team quarter most of help life. this assortment

to about with X collaborated feature with our to and both years, social other line along we're joy, And uplifting of Heritage announced Tabitha the and on many XX amplifying highlighting June always their than actress, marketing plenty with are and assortment media affirmation and product, that businesses. her our style a relevant influence celebrate limited with positivity, to and in of Asian creation Having community the everyday launch bold Pride to of items inspiration recently dads accessories And Asian-American are products voices and spirit. speaking over their opportunities June honor social time-only of year. as ecstatic This author how represents collections this stories to May media With First, June, set Month honor Islander have to an we're cultures their options unique phenomenon, we we Month. right the May, and authentically Tabitha grow Starting excited expanded LGBTQ+ with and excited celebrate of and around apparel partnership for joys with founders and creators, celebrates summer. Brown, Pacific of our course, offers that in next culture. celebrating and celebrating joy. of sure partnership beacon we of exclusive corner, we're mom just finished the inclusive more and community in and by lift

the and confident through long-term our and service And to our volatility globe I and other. and would and each the locations this chain, in every to guests serving dynamic each leadership our John, things day. pass and business want strong. growing in I business strategy across to centers rapid demand, distribution over not Without thank stores, their able we're and teams navigate our both our ability we to our shifts be headquarters consumer Despite remains continue for unwavering macro supply period. the environment them, guests to and our Before around team's the all to global

our team that our and deepened joy ability We guest building one-of-a-kind of the continue delivery a in affinity all lasting provide on positive guests do to inspiring over and through relevance our experience to focus time. serving we in assortment, in by come this forward best to the I'll we With second have do that, all of over in pass look to quarter together And lucky and things to to We're all to retail will make John. the beyond. life. I

Thanks, Christina.

team fast And and result, our standards. with growing years, enough on acceleration of has namely, our to maintaining weren't inventory couple the the as XXXX, in in-stock issues, in up related last with sales our X keep with the we beginning early consistent volume. wasn't a focused been Over expansion our of sales separate levels

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availability. a As we product both and to result, in in-stocks see improvements began

However, conditions have remained perfect. far from

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and sales much As than Christina more quarter, in categories ended we Brian this several in inventory mentioned, carrying and sporting up the expected, electronics, where pronounced home, too was goods slowdown apparel. including

categories, the higher and capacity addition, fact require compounded average of several and items are capacity. outdoor including than pressures than kitchen were these average In of living, that amounts in bulkier furniture appliances, storage by

our inspiring. team shop, capacity rather difficult sales which tougher fresh with Christina's floors inventory, excess collaborated presentations and jamming storage with guest this with items store carrying them and to their season, have her Rather to experience. clear temporary and down than team secured than product, team on an work our them mentioned, team the preserving call keep our as As excess Christina made would more items through the we beyond marked relevant to instead. decisions eye And made made

in doubt decisions difficult While long-term have no we the right choices. they these are moment, were the

indirectly take volume. and team the required extra member manage to However, from resulting actions they chose terms involve of in higher to we costs, hours directly the

to improving time, while we expect to pace of to discuss that these move don't detail, volumes time the in front Michael year. inventory begin and year, QX even impact sales, more receipt will persist longer adjust will later our beyond as conditions of As in results the time enough lead had before have continue half the the conditions More categories. match we'll we to levels in specifically, over

additional capacity years will to new work we throughout chain ramp continue while buildings the our to opened up productivity in build open continue ahead. as the addition, we in to the In supply last their buildings fall year

expand Beyond centers, speed we this the supply of increased delivery. in reduced work unit downstream ongoing chain, add to continue the upstream sortation cost mile to our capacity which last and

have of Following the sortation the successful to now operating, with plans centers test more end we the by X year. our market, X of concept open open Minneapolis and the in

has that's newly capacity, opened number to our carrier these in Each high-speed, significantly low-cost packages the post creating option are X expected to ability sort a the our year. still of up facilities national partners, already each volume packages office, the X.X While areas QX, total, throughout sortation flowing million individually in the center. to centers including handled in USPS ramping surrounding grow their by metro centers a delivery

to In addition, cost our rolling capability other expand option, we've X begun out Target opened the and at delivery, Mile delivery Last soon that center will our lowest recently sortation Atlanta facilities.

been the P&L. a deliver low-cost and reliable guests the sign This delivery capability, orders fast, For our our efficient, this drivers to down neighborhood both up provides for Shipt, we batches and have hyperlocally collaborate of with benefiting sorted business, at whose that our partners option to level.

continue already years have come. in up opening While for delivering, capability And centers the we're excited this about the results these to to new are plans ramping very we this early and stages. initiative centers is

the Beyond allowing about also investments in chain, in investments the more to productive, we're and them shop. inspiring our supply excited making more stores, fun to more we're become

through For And to us just pace nearly plans the complete we the on under XXX on mobilized remodel year. stores. those already projects keeping first projects, for the of half year, quarter, we in have had

shopping team full will this it efficient be updating which the wall transform guests traditional make we more part of ceiling, remodels to to operate. more every experience and inspiring to XXX in under year's store, Just to from projects of wall our for the floor for and our

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these existing In Wyoming we continue New to from in quarter, the the York. X Beyond Square investments, to in store around stores markets formats, Jackson locations, new ranging Times Hole open we smaller in opened all first country.

we've We neighborhoods. performance continue new guests ability markets in pleased the of has a continued X COVID, team projects. markets keeping sales activity great in constraints, great last experience. been periods our raw flexibly we've up And their affected guest while in including they've construction pressures by the focus on those dealing and our and new been of rapid delivering on a around be done following our new maintaining college were that and like and to those materials merchandising working partners, the remodel merchandise volumes temporarily job lockdown labor track recovery seen in to our over serve areas, costs projects our urban the locations, And store our costs, ramps of to in Similar experiencing and stores and with tourist our with for destinations price stores dense volatility in years. as

stores, capabilities handled from our over X easy any we've to Michael, what energizing worked our around ago, seen and the of X the growth chain, operations team. been years Shipt. hand team But to inspiring. want So would our they partners entire the our unexpected last been as hasn't have challenges and expansion supply over has of us our pause obstacles. for new it growth our the team, at expected as and certainly beyond both well years even and They've to and The to I I to properties ready get business thank in call

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turn call I'll Michael. to Now over the

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with up each for for serving every families shows day other. Our to team and work all a passion serving

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digital In accounts $X.X XXXX, nearly in billion growth. added the we've of fact, that of that quarter since sales Drive for Up first half

rate percentage accounted in mix the a X.X impact higher impact decline position rate of freight were heavy, higher for quarter compared one the reflecting Among of margin Sales of supply combined XX basis actions by centers. costs inventory categories taken about headcount the for causal points our along saw with year's the in and percentage about to little costs. of Among year. chain higher first the decline, other the and factors, our drivers, remainder percentage this of compensation the about decline, over impact driven distribution worth point of accounted decline, pressure. points other On we points that merchandising impairments, too with a drove actions gross markdowns line, rightsize of of X the last

from line, quarter, throughout control On and team the the inflation-driven benefited increases with cost helped SG&A in last cost fixed compensation lines. impact Within impact incentive the the expense strong we leverage lower expense to continued offset of was compared by year. which offset investments compensation, multiple expense of

points line, rate was XX QX, revenue points expense about D&A of X.X of in basis first All percentage the X.X% benefit about lower than growth. reflecting together, last saw our margin on year. leverage operating strong we On quarter

our below this the performance by While expected we actual the anticipated, on line. well far margin incurred unexpectedly driven would high we quarter lower year's last was rate year, gross the be costs than in we

to now start decades. our by deployment. for which where I Turning always I'll remained capital consistent reiterating priorities, have do,

First, financial in support criteria. that projects fully and invest and strategic our we business our

and And the excess remaining dividend XX-year with build of over top Second, we repurchases support any credit growth. look to priority. record share annual we Beginning of the on ratings through within time. finally, our A cash middle the limits dividend our return

to was $X for spend quarter keeping $X just on $X billion year. First billion the track us billion, CapEx under to

working our and they're some job inspection obstacles and of to communities, shortages, While permitting projects delays teams a face doing in continue delays great including moving. shipping around challenges, multiple keeping supply and these

inflationary unexpected projects, John will as total affecting of for are our some our year. addition, impact the mentioned, spending capital pressures which In

at recent of end I advance which reach plan mentioned our year. to for high $X believe efforts we're capital continue team's the our the our projects, I year's As given financial the to projects, forward. business move today, billion And this on to we'll community make progress meeting, excited our billion to $X

share XX% quarter, Moving count. a our in a by dividend, share the consecutive to dividends on track $XXX increase Board to plan keeping reflecting dividend, that share year, paid partially finally, approve mid-teens up last XXst million We from quarterly per offset to our the repurchases. We recommend of And healthy our in range year regarding later priority. decline the in be about increases. a in low XXXX to of XX% in this XX% increase second year, the annual dividend first

accelerated the metrics settles the quarter, repurchase into in stock entered in to Given into our by the June. we plan up will which result $X.XX coming of year, an the leverage retirement first our the strong in of billion plan time

ASR, we addition repurchased quarter. in shares this In $XX the in million another first to

anticipate this capital having we challenges on we're lower share to capital, chain the returned current now we $X continued their we facing repurchases return XXXX. working total While given ample be supply repurchases will through capacity the year impact expect billion year, this than our and in

As maintaining ratings. goal we'll performance middle up our conditions, a and based business with credit external always, of pace, adjust down, A flow, on our or cash

we decisions our return of time. So the invested CapEx measures In the now trailing a to after-tax turn of efficiency XX-month first over which I after-tax and XX.X%. ROIC quarter, want both profitability on reported to our capital, our

very number, it expect business, the much time. of low indicative a the to was While our operate lower over strong expected, end this very of health near is than underlying we of where

to turn guidance. Now our let's

line, based expect low full on we range. continue and the to year mid-single-digit seen In so far trends our terms the we've results growth in in revenue to of top first May, the quarter

multiple currently uncertainty In our operating a profitability, More headwinds cost that terms sources a specifically, range rate potential going higher. below the of margin given believe rate outcomes, for guidance we're the will operating see we elevated our of full be around level year now forward, the of or well X% volatility we prior of centered X% we're of currently full given facing unexpected and margin facing, our year.

to in enter near-term profit John will category. fall doing second to an challenges the first on we of performance. team As the mentioned, is faced ensure season the appropriate focused we everything in continue necessary by the quarter level quarter, And our inventory we our expect impact with

range, well below rate margin operate a we'd we operating QX first where our expect such, in centered to a wide rate around to normal conditions. expect As X.X%, under quarter

half performance into through As which to profit we hampered as the In and expect environment expect year, at expect supply we begin positions external mentioned, year. of of our the to don't excess pressures expect we don't global gross until QX we inventory have to continue we see margin That improve. back to John anything in In will chain said, the close meaningful normal in we be any our to earliest. to impact worked particular, performance back the the will the in the QX. half move that XXXX particular, reduction expect our

a of facing So for the remainder But will to clear year. elevated been costs our affect profitability things. let about the continue me we've couple be of the

where long-run not is is regarding that nothing performance it are changed of has on business laser-focused the an healthy facing our our to nor expectations And higher our our And performance. or an to That ability rate run of First, time. operating these be current profit today our can it with changed other we underlying of significant we grow up out to X% restore as business our come near-term our stronger quickly business deliver that said, to business, the helping happy headwinds to incredibly team to side. today, are view potential the on navigate challenges, happening of we over margin we're long have should and one over operating time. has stand the fortunate

our top and after in we've growth all, focus remodels, the in even chain, course, new year, on in our making guests, pullback We share on than more loyalty, XXXX of team, from driving have with and a seen of building line financial ample prior a recent continues After delighting significant serving to the were and stores, earnings first today. last years in all capacity the per to supply and than quarter investments, continue long-term higher which XX% of beginning the pandemic. quarter first deeper

a power have can shows and challenging want business regain our established we over given line, we're we've financial the expect higher strong will we from to operating from make, we restore even it be of to or our which environment and And investments we continue to as foundation of to the guests the we our the with mean operating today, today's recover time. long-term doesn't continue margins expect momentum where growing algorithm. and consistent that our top the time, profitability we loyalty with X% level over generate we While

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

Thanks, Michael.

team growth to durable move to we our Before your business deliver the in confident to why continued in we're model to want today's ahead. volatile questions, reinforce minutes and navigate market successfully the our of take environment profitable share I and few ability a years

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forward made retail. piece work to ensure enhance to and and advancements, keeping to and best investments But for Target found investments purposeful in inclusive significant, and pathways X paying also the Over years, team new all we've our workforce in equitable provide hiring, workplace. ways the we've elevating with goals maintaining benefits. the These we're with an last begin create

business our us you So long-term expect because never its even without achieve our in our to should continue tirelessly longer as potential profitability, work to we team, we'll investing them. to restore

guests. We our relationship perspective with the regarding have same

translating last made relationship X were we've on Target and decisions in the These to traffic, the designed growth top a deliberate of and number years, between both deepen the Over guests. decisions our bottom. ever-increasing that to resulted the line have

guest long-term an a when the maintained our the just building on ever-deepening focus is financial their between they that was on team ended, performance, and say facing guests. our experience team potential in am with So quarter on laser-focused incurring depends guest experience. proud costs, trade-offs short-term That's I to and maintaining our which because relationships our

be So with Michael to today. our thank John, take questions. will call and And to Christina, your now that, into listening I for I you want happy

Horvers from with Our Chris comes question Instructions] first JPMorgan. [Operator

a have and I well question a follow-up. as as

quarter first second inventory you that in of XXXX, the get is, first quarter. back a impairment So able the question were took you to large in

large question out the how but a capture And gross there the wouldn't this potential risk understanding And how different we markdown is, lingering this you the was in the that be it's environment Maybe in margin are the XQ? Now why decline risk could impairment? quarter? how XQ? quarter, much framing face in first in

to work inventory for We question, some Yes. Chris. the got Thanks still through.

QX on of guidance think contemplates still sorry, have to some second give a in -- side the around margin a inventory wide in operating And the QX. so our X.X%, or of work you that of we our we And guidance operating the that, of gross or do take, pain range margin saw quarter.

before to actions the front of know QX QX set and we important we seasons Importantly, big well those us be will back some up believe got taking college. It year. to a school, the We've it. holiday in of in balance for back us:

guest actions And strong. to the taking so a now preserve be experience. to right continues That we're

about we in as line start top well. traffic we're of it the as what QX And see excited QX. a You on saw in

more the big your outlook for And Are now Are chain then pressures to now what supply what little for bit to expand offset did You these air XQ? And freight you relative implied back months Okay. to billion your changed more these costs. clearance change are the you $X assumption? half, also back and margin extent And as mentioned operating year? a a ago? in enough in the follow-up, promotions then a mix baking particularly few half? you in can on about the

Yes.

the of on hit X will factors of half in that back bigger at be You year. the the play

of in in freight guest that mentioned change the half some mix. of The of some outside of we in even against we we same When of the of air see chain don't expect category the take a anniversary discussed, saw shift from about $X we offset point top year. expect, start about biggest categories of level from the QX. is my see pressure, back the the it billion a to we've would comes supply as in mix, rate do But I the freight intentionally to continue we remarks list. protect product perspective at and and we early at to disruption, XX As basis to we drag shopping what just margin describe transportation the

half. positioned in second the we'll of those better the of work got and we'll year, some And to where some categories through inventory are through first into work we've the the ones half heading be

comes Short question Karen next from Barclays. The with

had questions. I X

Day that March and you curious had just I'm had philosophy with on were your the is, first X trends to an into the seeing. the insight you that on So some respect Analyst fact

Because, philosophy come yesterday you think maybe did it as your just I on update well. can us mean, Walmart I giving maybe on So with a pre-announcement? up

consumer So you're with the and with changing cost the in the of quickly good equation. side very camp things on

So I And quick then a that's just had question. first my follow-up.

in front highs. transportation not we prices last would to shifts as in risen stand anticipate that over rapid anticipate you did fuel others did soar of the not seen way and we March, XX they We the costs days. the as and Karen, we've have have freight all-time

from we did see not and we've the shift dramatic certainly consumer the many While stimulus activities, impact to normal luggage, The in we to returning talked TVs more shift about. of anticipating categories and that expect appliances to the didn't guest impact business categories were like the from And we on small to certainly celebrating, impacted first that continue expect friends, supply anticipate with and chain QX. costs. certainly that quarter, toys, in guests our in have out and we being that our would overlapping to

York. for after and our to second, So sit stage balance fourth third in rapidly and getting of environment plans for build we things back as we that. quarter we're It's own a normalized the the XXXX. we're We changed operating improving And New what on track on in over more performance adjusting year. ourselves our the committed

And the obviously, -- productivity. my should you be sales second Okay. have then we is, higher That question sustainable.

what what guided into So reported structure, just that longer term, But margin you obviously, biggest higher your translate reflects. a guide what given today should and sustainably that is the also question, operating which are to. right, that's you investors asking

why and little color not on more -- a but a takes, operating margin. guess, stair give I the function step just puts could algorithm back get your [XX%] you if the maybe the and So the to to puts -- on

we that. in to QX on of got to a work pull up and of that some benefits, current question. through we'll the You of take. range, or we in give through business the it's let to hit to run work the as profitability we so and back our expect get SG&A first The But on react be is line, margin And work sticky. We've that confidence especially do reflects some and to of sustainability in in that inventory liability, environment, rate to the that over X% to of work levers that the leverage, the path. seen us for would snuck the on be Brian's have note, work But some your do some as have we lot time. long-term the continue and you've that hard outlook quarter, to QX of the the as head nail it sticky, scale should we

by. finished just Karen,

us we with things the of were go is we we in have together March forward the great since One that hasn't as guest. confidence gives relationship and changed the

The that with While XX% about pressures the and on very that we've year continues feel to X% guest operating guests. more XX% us we certainly the affordability us the value us during of comps almost growing seen stores since facing challenges, quarter, site. gives as guest confidence to this visit X% shop grew and site. that, us, of over our footsteps significant time confidence we need. in And stores for traffic, made of last as top fact tremendous on good gives reward our we're that top experience invisible to That reward visits a start putting protected provide particularly traffic we've that our cost some guest last year. by great of great We the our they and will while continue

our but that this just year, to forecast. give not So us out-year confidence, in continues in

The next question Sachs. with is from Goldman Kate McShane

just than margin here slightly pricing Or the ticket side inflation understand Are of more offset prices have help see that expect help the during we us can the prices any given actions there we cost of that that quarter, can the average I higher could the these down you QX? what level if wondered you through. on did and some in we little saw may passed bit a pressures further?

Kate. question, the for Thanks Sure.

if in increase we traffic single per headline a shared in story the decompose But ASPs, low as in As for units offset see digit basket. reduction is remarks, a ticket, us did by you -- we you growth.

It's goes say As in bit is you've how mix. lot inflation product environment. bit the little us a little times many into a ASP a much that before, heard It's probably number.

in so basket. a decompose little color saw but on that's we just there, the to a And what little more trickier

continue top the have Target. well And picture that we line and with what continue the the by a is line positions us the engagement the top to rightsize growing -- time. on resonating laser-focused back and that for for traffic We we with of the we're indicator that how That That's year. over us deepening doing to of profit great as guests growing us be number. to positions part want

being And any the dimensionalize is your margin how a you've might analysis? Okay. kind think you and regards know range the it and there bottom can lower in the I scenario that be much anchored to that, range do the it of guidance, way can to that you granted around with go? margin of Or operating what X.X% wide

there's look year. lot we of obviously, as QX -- a of I and play mean, the There's factors Yes. at balance at the

used we year. think this the we it of expect language, wouldn't be I balance for the to normal

So guide of in for our that, around is plus our X.X%, the best in X% of a factors wide those minus, of range view guide or and our year. QX

The next Scott question with Capital. is Mushkin from RX

that seeing, wanted food. thing the bit till guess doesn't talk up? first the consumer to about late is inflation going to holds those how maybe about everyday little is the are items summer. probably inflation. vantage, particularly a you in react like So concerned demand over occur are I How talk that from I people consumers time? you utilities, think And peak it do know I our But consumer

can't obviously, in during just crystal that basis. And ball Scott, of almost can see me, start a continue I I you front quarter we future, the while consumer. daily watching we where and a of into Well, the resilient project we're wish what to this on tell saw had we May, the we

the and assortment over time. quarter. And our the providing, are think stores providing. appreciating in that's second and multiple the newness numbers And seasonal important value the to categories. to they're our success traffic that critically we're shopping start in both we relevance up we're Our They're our

the inflationary we pressure. the I you, saw and in respond with in work So consumer ongoing the going I'd that that's But consumer by us stores built extraordinary first outlook tells can a couple you traffic continuing the as and on into we've quarter, happen second rewarded to May the how the what's in tell quarter. the guest love way years. And our to of we an be last the and continuing give we're over site X in our trust to do to they visits

I a consumer your seeing that it weaken, follow-up to know the and as potential and look volatility that, at guess to So down things? I you're see Brian. do you could to not guys when the when the business seeing we're do can you you to start take getting move? more on How things do if cost And quickly when action aggressive you start bring your maybe you that? yet,

certainly, the just our the we team, of making investing the be effectiveness most and with doubling think, over each for guests, relationship efficiencies for the our strengths a which every that to in work operation. volatile whether the around operating we to that on efficiency first growing way really and with with that have organization. to able make sure certainly And one in to guests, we'll even pandemic, And are market successful term, our out us I make our it's shareholders. maintaining we quarter, create been is of We economic be agility, it's changing know we're consumer respond a the us. continue and we environment, focusing relationship last changes along throughout few day we've on long our share changes, value finding think during sure to finding Scott, the greater deepen sure we're got coming And to years and we agile. down in pronounced Well, to the environment

Group. question with Advisory Telsey is from Joe The next Feldman

Christina a think if had little that. comment a earlier that made remarks, I color or curious behind more you seem share you're just your more Like what about I consumers survey scripted work? their in positive hearing the finances. And was in could seeing

to, I'd Joe. Yes. happy be

more environment consumer. chapters been months And honestly. environment We've been series last taken engaged has through consumer macro the behavior we understand have X-plus a have feels trying of control the been their for shifts couple of X consumer to highly because the that of we're years, almost in -- years, control. the seeing out We of of so is every what

preferences missed value, they want and about assortment going And their our decisions that family and fact friends in means, the and moderating what despite those inflation, our and that's it, and based those so again. it's behavior And if accommodating based on have making they back on out, how do, about shifts seeing what their they to they're they've traveling And shifts our happen. which charge. relevance might they're worries because messaging

really that and not indicator future. it's consumer past close important of expect so stay And an the behavior to the is to

the Got had you pressure things assume pretty to gross as from steady lapping some on a seeing. that an this last a again guys mean, guys on you'll gradually anyway, always Because I you Should Prior And then just around pressure be year it. presumably have margin XX%. follow-up basis, of quarter, we year. annual gross improve historically, the are progresses? margin

And reason to any to so through that of as naturally right think is pressures? come we we kind these there back cycle won't

Yes.

as to over To we're certainly the improving the the for You're kind in pointing the volatility that and And given in the come be is of business. in to have explicit with a back profitability pleased expectations potential for long through Joe. annual in of right balance the in see picture margin theme there, will going steps of I've year is We've come we run, the direction a on QX. focus an back full one run the in year year. profitability that implied in the over. direction think. Quarterly But what we'll the long the on sure. to the half more this take of margin path might that of than But is there

Edward with Kelly Fargo. Wells The next question is from

your through any I hearing competitor, probably about are wanted you this Brian, hesitation, in mean may much you why. beyond to ask Can frame I from in biggest pressure issue, the If maybe inventory seems time Yes. to the pricing. there's cost like pass occur? about consumers to potential talk talk related areas about supply do plans I costs to But we the of guess, chain. the this.

surgically And great carefully. very sure expect looking where cost our time of provide you environment laser-focused at in to absolutely making a Yes. pass in But guests are affordability on we this value the protecting should appropriate. along Joe, to we're this we position also us and need.

continue very manage for costs think the that. our we'll environment the pass provide each But where start on can we've and value determine look when they the got to while sure we along balanced and and day making that thing we right a perspective with I take guests for cost Target we selectively. doing to So from and every

just work needs then can amount Okay. cancellations? lot follow-up. then before, going And where things a higher. And be? should ordering the adjust pre-pandemic. up you store be like sort But over really of what has the per to just XXXX of Or about lot And your is in sales today changed, lot obviously a and a where talk to quantify Inventory a going adjusting Maybe that's are doing are still done. you excess and is forward? most inventory it sitting forward this

we some it it's earlier normal of There's where of to chain that some to the against number, given at for and But categories balance already things bit expect make We've working sure we've -- should a through term as Yes, few sitting some for in to got need if One inflation you near land Ed. here, desire of going sooner on a we've too. sure cost I about is piece. that our that we're say, to little product good kind inventory we landing make on our to supply inventories. some new got The growth guest. investments volatility, of the product question. will protect inventory sheet. look There's capital include growth the some product talked work level a of you that sales

the of normal so it of year. on make near be stocks the some work X not the have trends the in in disruptions caused out watching. that that the we get we'll And line as back us expect the old with progress part early But in factors, to what of quarter of are avoid the we're secure product, big we rate term to here and run current Obviously, last the land first look year. might factors over to second the to those like those for sales some

are, Yes. a -- we things all is we a turn equal, hit say, being And think reasonable think little on how given just bit, compare. pile everything would turn I XXXX don't I it. faster. I would on Michael to But we larger much think

more times. longer. lead means frankly, time Given the any of those supply in the times given are that we And lead at chain, -- slowness carry inventory because

want question right for And and work to through need we lead of being today. in naturally But across increase be Like to for times a offset in that, supply where with so time more increased we Operator, we be see would sure. the is the we now, one we larger part have we're have we sales by to that chain. aren't lumpy, turns Michael going virtually said, that will. general, more every business

last of question comes from with Bank Our Robbie Ohmes America.

X quick follow-ups.

groceries, if expectations? The you similar your first business that Essentials that versus so isolate guys kind seeing Household of is, Is of margin was in gross pressure? area Beverage, how Food and &

in gross & quarter. in just quarter the been feel share a after has We performance grower, top And general good Beverage line gainer such margin grocery. about steady Food

consumer a those preference response a gather brands Food the And Beverage, & think value, built favorite has that's brands It's day in margin. the we talked seen economics about the & the in the in own And that lot, makes We've direction. and the Food I so and in that to looking we've I guest we've for right guest also it's and of work good from strength been category, Beverage owned and for strength just as X perspective. think think, important great incredible. good

on In has the ability to national healthy? brands coming been cover the the through increases cost

at obviously approach that sure where we're all right making food great categories our those to in different there, spite value pressures, cost inflationary We're looking to get providing Yes. too. balance no looking of across that in that guests we're beverage, and and

it traffic, think last new healthy was sense of -- was I against customers any quickly, year, And plus is the XX frequency? on -- then really just which versus

and to engagement. with when the we thing balance but bit in we're that to is personalized engagement But time. the the come traffic continue preference it's year always heard of more to what that deeper one talk in a coming deeper we couple over mix and And lot million over that just driving XXX way quarter, back we us deeper drive of Target we're just right? job, doing deeper the can a driving little resonating guests, a should past And results So you've doing in can see both the and when you with past it build traffic is a And guests. that years. of bode that comes with circle see, That's way for the that not of over this of gives us the in optimism well Target through and just and beyond. our

more consumer-centric. Yes, levels, really that's our our about, tools cents income was time to commitment broad. of our Robbie. continue was to to guest just across and our demographic more And growth over be very levels, that but talked if using X being add Michael I to could base The broad. because All commitment the that. it breadth And of relevant

And everyone to to you with forward to appreciate that, we Operator, right. today. I call our really participating. conclude soon. we're going look talking All

So thank you.