Target (TGT) 16 Aug 232024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation's Second Quarter Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, August 16, 2023.

I would now like to turn the conference over to Mr. Investor President, Vice Hulbert, Relations. John sir. Please go ahead,

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

outlook On along a Hennington, provide our today priorities Chief me remainder and Michael Michael and Mulligan, the will Cornell, Financial Officer; with Brian, line and Officer. second of Christina, Chief Chair and In Chief are Operating on Executive moments, the Growth quarter their year. Chief Brian Christina our insights Fiddelke, performance, Officer; few John for Officer; the with John

we'll a remarks, their open session. Following the phone for question-and-answer lines

we're to call by our morning, investors listening webcast. on via are who This this comments joined and conference others

will and call, Following available the I be answer your to Michael follow-up questions.

reminder, morning forward-looking make filed most uncertainties, any we XX-K. earnings this and risks our a are to those release that this described including in recently press morning's statements finally, And in subject and as

adjusted Also press in Relations share. are is we non-GAAP all refer in Reconciliations GAAP to these on our measures, posted remarks, which website. numbers morning's the this comparable most earnings included of number directly per release, non-GAAP to Investor including financial

turn and the thoughts for to over the second remainder on quarter I'll Brian year. that, his With the it for priorities his of Brian?

morning, face multiple of headwinds Thanks, quarter, our external the in the showed good In John, team and model second in everyone. resilience and our remarkable business environment. the

listen environment. and very them Throughout in company, flexible a agile to to slowdown team to have this the of focused still. these While mean in dynamic and our led guests continue remains we on our that the temporary our to serve our pace headwinds carefully is as standing team staying business, doesn't

model, every reliably digital relevant that's it as have hubs place retail to to we're stay on journey, flexible model in stores allowing focused a and any the concept balanced guest a our us assortment we multi-category by unique a priorities our environment design. our And industry, us in quickly inherently or wants our to on as guests' whether allows pivot We shopping in on needs, device. flexibly And change. and serve quickly, offer a store and to pioneered that's fortunate a takes guests business

and By to, our we'll growing our guests strong with caring, together. the our continuously listening purpose to and learning of winning playbook while from serve then for families delivering engaging joy achieve their of refining everyday and our continue insights, we with all culture reinforcing

have we the year. decisions faced driven recovery critical adjust while a As steps guests. you'll in last our to our efficiently Back-to-College. proper allowing the serving the spending recall, the appropriate the XXXX, groundwork far our were provided in opportunities team the change seasons, seasonally of and focusing share operate us laid flexibility year's inventory assortments for Those to throughout the They've the inventory, ago, by year we've And year with actions a that so lean excess in on into enabled in consumer level. face to Back-to-School inventory fresh, importantly, presentation like important rapid the took to team half first In of challenge, down quickly patterns. allowed achieved of this profitability key and

also in team profit role Our a performance. played quarter second our critical

quarter, original exceed with despite the profit stores along discipline, our and chain agility. and see performance team to responded speed in trends efficiency efforts, our with line. supply began early meaningful we shortfall expectations softening the to a As allowed sales on the in top ongoing our Their

our year from million than ago. expanded experienced than the is EPS with first point XXXX. pressure half than a in since cumulative through year more a by of just the compared $XXX more More $X.XX the of more percentage XX% XXXX, higher fact quarter of profit specifically, income for despite ended, And the operating than higher we've shrink

progress, While see increases we we'll this is are further profitability confident encouraging meaningful over in time. our

our were sales X.X%. as top comparable expectations the below QX decreased On line, results

comp into a Circle June, Week, also holiday, May July. addition around from we of with quarter, In X.X the softened we in the Day with in pleased than members. second in trends recovery which traffic half the more million meaningful the comps new especially Target resulted Within were of saw Independence and along month, both before Circle trends

digital categories. strongest industry frequency while offset were comps quarter reflected trends, software stores, in our led our strategy, results growth our our channel our by second categories, fulfilled stores were Across more than discretionary with stores. sales Consistent quarter continued Consistent of service. recent Drive-Up were in our sales XX% our hubs in our in with channels, by second growth in by more continued notable results as

by Essentials, a more the divergence our now, is driven consumer. As trends than year the U.S. of and budgets. frequency in like causing multiple affecting the of that we've currents & consumers' These frequency these absorb categories categories to portion cross Food described for are much-higher being of inflation and discretionary include Beverage impact sales between categories, a

are continue ongoing on the student including loan payments, credits consumers government and care and efforts of to In that stimulus addition, travel, spending leisure to choosing suspension products. child pandemic, to on near-term consumers headwind tax entertainment an consumers during food finally, discretionary away like home, support pressure enhanced from the payments, manage. presents increase putting rollback services, the And of

many in factors team reaction our faced guest Beyond these Pride assortment. second the of our negative a store quarter, members to

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for Our of moments serve we acknowledging people, to special to a want Target that is in our they continue ensure goal to while every refuge their lives. to day, guests that, as celebrate daily millions are

amount these challenges, and an to continues retail unacceptable of more recent retail In team organized crime. face our to addition theft

As you'll safety are remained detail in where theft expectations, quarter consistent sustainable we more our well direction. incidents in hear moving the the time. expect from above level the associated to with Michael, but And unfortunately, shrink wrong with in over second operate

incidents stores involving first X XXX% in of of violence a threats our year, this saw theft the During increase months violence. or

store work to for groups retail result, teams community our continuing find to promote to we're partners industry and solutions and with tirelessly a our guests. As safety

cautious both on is fundamentals. has for from forward served that approach planning as laser-focused by for and cautious consumer retail commitment of the a our you'll a team of quality backdrop, half and moving affordability, and Christina seasons on the given first the us newness, Against the with ahead, this hear John, consistent focused year. delivering adjusted remainder to year. the of year, Looking economic and the backdrop, guidance our well And is we've during preparing current biggest our team so reinforced the

been several business affordability growth Given and team the stock; while seamless source want that ensure to years, ensuring our experience reliably our volatility easy over our and rapid our highlighting to we X strength, experienced a throughout the the refocus differentiate competitors. choose proximity of every an and differentiated, assortment, stores always we inspiring we and trip, day. we on our our experience guest factors to leveraging has have opportunity from in a determine last to to shop: marketing; Being where guests have continue the on areas consumers every key These presentation of serve; the

focus of a of service our in new continue our and Ulta your and integrate we'll throughout leveraging to merchandising, our promotions Target and delivered the expansion along partnerships Starbuck the Apple Within XXX the the Disney. million Roundel options, Circle with recent deepening brand with the with and highlight to relationship on of addition and to invest drive continue our industry-leading have ad national power Drive-Up brand business members to including the of offers We'll Beauty, Levis, beverage Drive-Up ability portfolio, industry-leading owned over awareness returns like fall. And guest-focused we'll order. relevant key

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meaningful of with upstream of In to our our invest the centers, replenishment sortation deliver the delivery. the supply in savings while increasing expansion chain, we're continuing of speed last-mile along which network capabilities,

ever listen, different serve of the it's our lens and a call and year far result is it I So want Target think external consistent XXXX Christina, the I over from as pause been team's our is because backdrop helpful row guests, turn of efforts is much take in has Yet different before experienced. than now to I company to a was years pull the a to we've back today. ago. fourth today, X to our business in And where the anything stock understand which

and We team the relevance strategy, growth. to have guest deliver sustainable right long-term

faced $XX of this in XXXX. all higher stores about across than measured than of we And higher ad And X increase our billion half first the increases than than and half first number digital as the billion our visits was the engagement, guest of of both challenges merchandising despite in categories growth through XX% in in the This reflects growth in the over our we business. higher they're XXXX the million to business total making $XX Through guest and recent XXX significant Roundel an more Target. our was number XXXX. revenue in in or of entire XXXX, trips quarters, today, XX% by just channels more reflects delivered

a acknowledging end my to growth want volatility. team during by of Our this time remarks I accomplishment. uncertainty and delivered exceptional that

the way the profitability experience for entire efforts. agility the we've an continued continued quickly to better-than-expected year. in all also discipline It's want outstanding of and thank recognize top unexpected sales slowdown our that behalf team while stores responded and our shopping I so On this to and far they line our their centers to to our in And stakeholders, of provide their I members distribution want trends. for team because extraordinary recent delivering

Now I'll turn Christina. the over call to

the execution and the everyone. other were Despite in we good the our guests multiple rises to our in of of spots, there top each line, number and Brian, bright many a team's morning, Thanks, notable quarter. agile Of on top. to like the second the headwinds service were things faced

or the recover outlook spend ongoing even choices we're see confidence face inflation moments, however, we've every recent managing Consumers with lows. affordability. payments, in an challenges. embrace for from newness we're today, budgets moderating, face resuming can cautious unwavering on continue With are the planning In to to meantime, student facing guests consumer begin difficult continue prices with multiple seasonally improve purchase. caution, with guests of loan that rates to conditions higher Whether focus consumers continue relevant with our And started and while to an our hopeful time. appropriately maintaining to all as their

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all trends, seeing Beverage sales with points digits softened Conversely, second Home were Hardlines Apparel, quarter, strength several saw low percentage Food quarter. softer than mid-teens recent digits, in double low in and comp the and the first the & candy snacks, and particular in single from discretionary the further we declines categories beverages. in in to

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Joanna So new & our worked colors line to Gaines beloved we at exclusive owned found and to brand, as Hearth partnership part in with add Chip only Target. Hand, the of

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for Our a the this on pause, balances resonate broadly us promise. our these assortment approach broad-based and to inclusivity our celebration, for appeal. is Target the adapt so to reaction In moments that goal future deliver and and to brand signal is case, learn

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products, boxes long, season of & at all including XX% also for Back-to-College assortments. Savings prices assortment a Student and guests leaning with so points. including deal-driven items. Gather our our our just For supplies college Good key Appreciation items Teachers approaching are And lunch example low everyday students, further and price such as with savings low we're a than ultra new in graphic no mindset, and $X.XX, we're an and Back-to-School, We off school for events. value-conscious, starting featuring compelling launching tees Back-to-School teachers into new We're as $X great look lunchbox-sized as and know Back-to-School time

Target. markets play college-bound inventory opportunities ready in always market as season we're includes is to This to as into This students. leaning allocations we're strategic in offense where there are during stock big a well Back-to-College to proximity key greatest share the year, season. and affordability for ensure critical and this bets

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with owned our based many value fact, we $XX-plus portfolio. on In affordability, making decisions consumers comprehensive through shop their we're highlighting billion where brand the to provide on

For the prep for expanding launching flagship time example, new and styles launch this major make just incredible the brand even help for a holidays, online mix brand aesthetic brands kitchenware a to easier will newness line and to homes, match Threshold, be later branding, new of easier And stronger including price Look quality our of offering beloved a others, With in facelift. lots their this guests that while in on owned and for we'll Home, will owned points clarified be received store durability. and affordable new just shelves Fall. meal everyday love. while

to the shopping Ulta Beauty remodel John that this will as and starts Target a heavily Disney greatest in-store our out just more including stores we rolling our begin which feedback quarter. the And at latest stores to we'll remodels our in and experiences, guest additional well reflect with of like experience, thinking Levi's cover Apple, and As experience continue offerings, detail, latest as in experience, locations. incorporate new remodel and we digital our our invest into

personalized include guests. will to to feedback, other a experience love and ease convenience functionality, while Based discovery more the enhances of guest of navigation enhanced joy digital our more search to and investing ease the different we're updates of bring landing digital This that content, on create experiences, navigation. balancing

our all, commitment it team all shows exhibit excellence continue everyday teams and consistently the up Regardless of the pursuit environment, of external in of the discover helping Through joy our a to families to in life. rises bring and day to such work to a Target talented for day you out. the life magic alongside that moment. I'm Thank team. incredibly all proud do you to to

I'll call With to turn John. over that, the

Thanks, our by and Christina, amazing want Brian team. to thanking I start Christina. Like

managed better-than-expected to agility testament a successfully as their quarter's they This profitability resilience and through multiple challenges. was

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ago, focused have As best teams and year factors in on this play reporting safety practices earlier. been this months Christina key I training described of investing reinforcing that in our on provide the store our to great particular, call and a retail critical support we've fundamentals In and our year, filling role been a incremental setting, team. X experience, shopping that the providing replenishing several and including staffing protecting scheduling; and presentations; guests merchandise highlighted

strategically our Throughout a teams elevated, at store day across to designed key is sequenced The program through been goal to and Back-to-School reinforce in best an Back-to-College. country. this practices have provide like consistent training these experience moments, every year, progressing store every the

setting to accuracy, the critical of quickly decline individual rolled when programs pricing implemented across a recover X,XXX response for seasonal begin goal metrics. items metrics in locations to process new nearly of our consistency more tied training, in support execution and And greater performance improvement to orders including help they achieving seen this stores, a completely. and rapid outcomes, in of more key we've the see level we've guest broad-based Since on locating we've key digital out quickly

we rollout we Drive-Up long of these further to are how nationwide as Drive-Up. top differentiate we could We've provide. the as proud while a bar adding rollout, we consistently order applied tests receives highest the trip. to to XXXX. push and guests we find half Also to services add accomplished, rating the that, that at any disciplined list. To that said satisfaction Starbucks beginning results of continually that small-scale Starbucks high with maintaining already of mentioned, in second ability in were they do the for early service what of Christina ways we returns we've we've new a as we on And ourselves execute the ask could really satisfaction, Drive-Up new us our And and of we Drive-Up their stores, test-and-iterate told with a are to from pleased ensure when returns taking the approach attained the

a process we outstanding. time have and the minutes, their X of to Following a Drive-Up lane, a for return Drive-Up successful a with is April arrives Once the test launched nationwide consistent team wait a been within Drive-Up in and our at service May, returns, for order. the standards results guest member traditional average

As refinement. we consistently the our based through we've period, this process began testing an intensive Drive-Up, put of scale we we're complexities Starbucks promptly guest to can And confident wanted the given or addition and the our making hot to period after a and beverage delivering cold arrives, of testing up today, service and during what on learned the while we test standards. service maintaining of

complete for of pumpkin the rolling in out nationwide Drive-Up to end the October, and rollout time As latte season. a process spice by Starbucks result, we're currently plan of at the in just

openings. before brief finish year's So new to now a I want I update on provide this store my remarks,

locations other new bringing our of XXX,XXX quarter, year-to-date we we second the plan XX. Highlight to to X XX,XXX we'll XXXX. and evacuate our week, from the another second-highest its offshore had As of size was projects first of first you most the the friends. a XXX,XXX some new feet. outstanding the Thankfully, second stalls, execution reflecting lost opened opening safe, and by new our one up are of to And stores or in stores, it At our Mall, in out open Oahu be Beauty, in volume Hawaii there hit members a this and store opened. I that and feet to XX strongest is say during to and Snack in is count sales X. one ranging openings also that homes, location our it new know, the this store of acknowledge XX Hawaii. to square open recent Windward location the XXX the happy productive new generated team in most want wildfires have expected And square this year, we've Maui in of stores family Ulta chain. largest of devastating In about had I'm stores since shelter completed Starbucks, Drive-Up CVS, Like quarter one XXXX, Hawaii, for Bar in the total the our are year, bringing featuring to to of though providing team. pause our the

open, other helping Our emergency get nearby and remain stores to supplies. much-needed while donating essentials guests masks

our members In donation local a from collecting announced donations and and colleagues million wildfires. $X national across addition, these team help their partners, the team help Target country to has disaster member by to fund is impacted giving

end I over as Michael, most: care Michael. each team team tireless care of be usual, it taking where consistently I I The and them our maintained them of focus and all, work want retail. to it turn alongside their call but matters on to I and the day. That, years the efforts been the over as best other. couldn't learn I'll more highlight has anything our through what started proud and to have Taking of with from X last turn to business So guests in every

Thanks, John.

resilience. our host a top operating business mentioned, model through of challenges team is continue just its As line, to our and showing navigate on but the John

quarter. growth ad card in declines traffic. sales with reflecting to decline in X.X% our X.X% other also amount X.X%. that the sharing same second last further from which combined Roundel a our team More offset progress revenue with lean ahead. Total goals recovery in business, further down confidence strong while throughout progress which inventory face us validates of is our with business year. maintained the performance, our quarter our softer-than-expected to have profit other in sound, income revenue, sales we profit and we're really planning other the cautious us items revenue continued efficiency even and allowed is strategy sales, our and grew compared small that Total continued QX, decreased This Within in Comparable year. down specifically, meaningful right credit by X.X% we've pleased for was years in second the positioned the strength we profit the see position positioning, the of giving were efforts, toward make continue approach

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factors While in played role the possible quantify a it's each these of each one. of reliably the quarter, separate impact not to

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years fully our we share business, any dividend of A more we projects credit on of that than look financial criteria. return in XX repurchase invest we to increases. excess First, and Then our time ratings. strategic through And cash consecutive limits within build our in meet over and annual finally, Middle support our the

we year, continue to we second billion expenditures billion year, this the sheet strengthening far to repurchase billion compared per CapEx dividend. A $XXX as we've with range. in full on focus $XXX finally, $X million our $X.X of in last XX% the dividends quarter, And and $X in our to balance in In to debt that a we made capital our expect year levels Middle paid million So reflecting support any QX increase restoring and metrics didn't share continue the ratings. shares credit

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While to the still X points healthy expect and it percentage absolute than over more well terms below operate where higher in time. level than quarter, the remains first we

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positive the to consumer and resilient, On see in recovery side, a have and GDP, been overall employment beginning spending we're confidence. consumer

inflation we're On frequency while near-term ledger, comps to dollar rates to happy our cause pressure side the in moderate, that's some see the other of on to likely categories. begin

the upcoming strained of this loan will cautious planning, this repayments our resumption budgets us of millions households. so of remain really backdrop, pressure the student tens put that addition, served additional of approach Against In already on well an has we year. in far

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we've to adjusted range of and change full expect $X.XX. our to range and GAAP this the $X.XX our year also bottom line, EPS $X the With $X now in with prior top in adjusted line guidance compared

position. determine the variable we're to and range, will continue benefit in our confident expected efficiency important we'll of actual will from where While be our as up the our multiple sales to inventory pace single efforts this lean comparison results factors wind most

GAAP mid-single-digit in from a In to of sales the EPS expecting on and comparable a wide range we're decline. range third quarter, $X.XX adjusted $X.XX a centered around

couple cadence, want note of take a to EPS this I quarterly of year. unique circumstances of terms In

and The X first out how to play expected that quarters. over next is shrink is the

second I expectations unchanged. mentioned was based full see, to our on with high shrink earlier, As consistent loss year continuing our rates the we're expectations, shrink quarter remain and

year-over-year the points. we between consistent XX the different and roughly QX basis QX, rate with year expect pressure the and half However, be expect of meaningfully dollar QX. comparisons will around from the we In at shrink look first will

amount expect we to QX, favorability in a small of see shrink. However, from year-over-year

in I comparisons that rates expectation want not quarterly QX. does to loss this to will begin improve stress in anticipated an that change reflect underlying

unsustainable achieve our moderate levels. our expectation partners, mentioned, both Brian rates government is we're loss working over to long-run As And stores lower and rates hard, and today's that with community inside time. shrink will from

down. that yet have but only that indications we've a loss might seen will be rates begin loss come evidence not seen to rates plateau, far, soon so But reaching

rates of accruals the a throughout change was year-end. cadence the resulting shrink the been more recognized is we've accruals the consistent period So of in in expected loss for half in how only last comparisons rates seen year-over-year quarter consistent back quarterly when reason have Because rapidly, year, at year. higher loss increased this XXXX, in by shrink more

week will XX-week extra of comparable sales quarter XXXX that of basis will include we note affect base on the our add the sales that the estimate the as of an on about leverage points extra and XX I'll operating margin is quarter. length. periods week We important is profits. year, results so sales week equal in calculation fourth about not that that will a billion Another and accounting extra in consideration $X.X

their our best they're line top retail. continued their team. end built the remarks, team ready quarter's this and in my to responsiveness amazing demonstrating volatility, As work the confident to work resilience I clearly of my business long-term I they face add to why the enhance get to in our want we the flexibility thanks that we're From into their and efficiency, Target to showing with entire plans,

Brian. call I'll back to that, the turn over With

ahead. want to prospects, turn which your our so we position reinforce years and I confident Before in why profitable pause the we're long-term in us to questions, growth for

to process last you decade. the Target's do needs and their The ongoing is well, in preferences over assets your we're way meet right to guests' we listening have preferences. you of the that consumers and Retail assets the To quickly of rapidly to continuous journey: proud change. And wants, allow strengthened which evolve and evolving place an have as built to need

existing served as hubs to and developed in experience that supply base, the that optimizing launched store support never markets new our had of design. stores new been do. of and ratings industry-leading we a support built unique to invested anything model chain to facilities some highest time, fulfillment. billions dollars in shopping pioneered and Target and locations invested services, store, of while We We new store capabilities those which by model. a their We During modernizing opened received we satisfaction continue same-day guest in this digital evolve our we

innovated gained than we of built industry-leading huge sales. and along even assortment, to our billion more way. annual make an Within Beauty businesses stronger and portfolio $XX brands which owned generate today market We stronger amounts of in share our the Food even

partners time, vendors strengthened also our ad We developed Target. power portfolio Ulta At the guest at bond same base our of business, our national guests, leverages our with which and we the the of our the vendor recent brand as and launched Roundel example. deepen relationships, Beauty to most between

quickly of can even we has largest our in We and also Target the United programs built loyalty the guests which them. serve and providing launched how about Circle, one with deeper insights us States, become

job increasing the team, and to the by pathways rapidly hourly in provide satisfaction. building we development and And wages and stronger retail, team to safety benefits operational advancement while their designing enhance best finally, we and career invested in their our processes

best and their that With including invest today, to our in our into capabilities navigate and evolve and are to We're face. to guests, we're not carefully to will any committed the our We're place today. prepared team guests expectations all as they we'll these of assets still. uniquely even from and where uncertainties assets continuing standing to in serve needs and wants listening future,

our time tools our capabilities to company's future opportunities the and the and to vendor and will best success. deliver our over our new ones great partners, challenges with we brands, will are bring need adapt. Since and position what with no team, arise, growth and stores, one the everything when the thrive to we have knows our And long-term

take will With John, Michael questions. and to to Christina, your be turn that, I Q&A. we'll happy

[Operator Instructions] Oppenheimer. with Our is Rupesh first Parikh from question

are what seeing And color hoping you any So get on what I reads with more was quarter-to-date. initial guys the then you're seeing in season. to of Back-to-School terms have you if

But Rupesh, consistent for start. month very first we in we're pleased what for to to saw of the in seeing. with turn with and happy it's the obviously, the XX I'm very were results as Target we're early days July season. of Back-to-School August, shopping. very the their They Michael, guests Back-to-College

that. have important don't I always to Back-to-College and to seasons Back-to-School much We are. They knew the us. add Yes. would be for

it And only moment us for the opportunities. a season. have some was next seasonal Second-biggest to holiday season we to share where expected

started so our across we come. performs the in days we've categories what So Brian moments. know far. in, well XX And the with those thing moments to exciting the got seasonal seasonal said, balance is of we And just we're see so quarter, so getting like but all pleased business with a of the year about lot those

thing expect as season September, about add of I into September. in the throughout particularly the to fact, only we and Michael, extend is month we shopping the Back-to-College, would think Back-to-School,

will a to think season September. it's off start, very be early. we we're So still solid Back-to-School into that a extends this But

maybe Great. question. then one And follow-up

X% achieving for 'XX. at rate early expectations as your indicated a Day, operating So as margin Analyst you FY

is next weaker of in X% given that fiscal the to getting up year? possibility, line, Just in top that still your realm of

path in looks think continue on like. through the more we that evidenced as much agility QX. the couldn't would back set profit year. strong the saw I strong more year, sure to into half progression the paved quarter. was we'll the year. profit to long-term plan I'm progress the teams one up making on cautiously to X% come at that, we'll the time and are I we possible right thrilled XXXX. expect and Rupesh, by for to trajectory team in profit rate balance half be the And headed we're the we And performance meaningful now, that the question, the in And as in year, of Fair profit what a Right pleased come with of with laser-focused continue but the We're recovery back with towards over improvement this this to delivering on time. as back second When of

Kate Our with McShane from question Goldman next Sachs. is

on if of you -- versus plan maybe side talk the could markdowns a and bit were what how merchandising meaningful offset discretionary softness wondered challenges. the little were margins through was gross some more there? We We And much the offset given the curious about more. the

a and expected the promotional color. as Yes. know, add environment want Kate, clear any Kate, and we year's saw to biggest meaningful the to rational year-over-year really cost Christina, last welcome, on from for markdowns you the we mean, But I start markdown clearly, story front. described inventory. and excess think is quarter. the happy I you I'm more On basis, to improvement as if

the last X-plus about in the an comes of vast respective improvement from rate from being point inventory And from so as year. think improvement that you cleaner year-over-year, majority costs and saving margin those

inventory And in one so saw the sales quarter flexibility, by just more to again, reacting example with planning the of and we by with the really some to of, urgency, able clean. team cautiously, keep by business the we've trends positioning been

clean XX% down inventory If look of in in inventories total, started balance as the at XX% as you'll the picture with, discretionary down we the see categories. quarter exiting an with sheet, you

markdowns showing expected. out So inventory that's we on playing feel with well managed the front, up as and

continuing the light environment have build team's that rational, wouldn't lot we believe of the We're we're to the and back profit a is to add. with I Michael. Yes, pleased and agility our circumstances. in

the of on to as first of discretionary get within was any July? about how bit I the the little just changes in got in detail categories heels, a discretionary thinking comes categories, of better half that you're more especially year. the wanted back into question think, asked. behavior the question But the follow-up a And consumer traffic And

trends we've much last really very fueled I labor Kate, continued year so see Well, think see the market. same and by to a I we strength of Yes. over resilient in consumer, the is U.S. now. think the I think the that

see of to bigger that's in who wallet. & Beverage is continue facing We categories high their portion a a pressure Food and absorbing consumer Essential inflationary

spending, in rotation goods a their seen discretionary about think they as think into wallet services. I from we've

in in leisure, seeing what's uptick travel You're entertainment. and happening the

we expect trends, We'll the of back half continue those So to the into it watch year. carefully.

I and ability still sector. cautious enter approach think the into in holiday to goods we'll spending inventory the discretionary see changing taking the we think season. position we chase be us as But allows I the demand, consumer a is ready when very our demand to

with Our next from is Chen TD Cowen. question Oliver

what's traffic, continue it expect be embedded in that's for or forecast Regarding range? your to guidance? to traffic Do the you in low mid-single-digit negative negative

in what we apparel? And non-private Also, little see deeper in the your how relative label as private dive a assortment as overall of terms product the thinking rebalancing label? and/or are discretionary do to you portfolio about into assortment, opportunities you

want Christina, exciting some changes the standpoint? you make we have some of talk to of going do assortment, the in of about newness half for and the to of place an year, our in plans brand have back we're the new we from owned the some

to. happy be I'd Yes,

question. the for thanks Oliver, So

to an continue that needs us for long meet discretionary guests' build to different strategy we portfolio, it times. assortment We our the fully believe variety of multi-category offers portfolio, On the a ability the in term. in our

as Food Beauty, on spending, we're, at At well & really the highlight of our double-digit as with the a in Target consumer Beverage Ulta Beauty our Beauty both core is Essentials moment, business. of portfolio where given growth strength course, the being & leading and with

we a Within our source, assortments of elements. things We role in against we design, and that seeing brand innovation. you delivering are is -- working very can And as that where portfolio those plays there out, build discretionary, huge we're what around are that owned newness pointed much control lot a we create, those goals. we

tumblers And Hearth about, the taking of advantage even trend embedding of introducing you in with that in hot introduced whether the we've newness last & quarter, family Hand. think lot and and a that

is Threshold, with signature just new relaunched aesthetics great points branding. which price brand, We have updated our and Home our and brand, own

to continue lean We on opportunities.

and kitchenware launch incredible about really this we're later durability. which quarter, You'll quality brand excited for its a see but value, us

Beverage Food trip. strength of strength opportunities or time it's our of But can more introduce both showcase Home beyond to a guests in is us the & well Target, mentioned, store Back-to-School, one Back-to-College, taking as those that can and Michael where the where to complete to advantage the as for as during seasonal innovation, do happens of leverage times, terrific And we portfolio. opportunities really the at those Apparel

but doing. the in can So different We're so we'll keep we're responsive doing leaning what into appropriately that we categories, be we're planning market.

forecast. And we a as know, out separate traffic, Oliver, on traffic break don't you

But of into a kind one, the embedded so just all that the line build is And of it. I'll our in guide reiterate from comments. that, thoughts that top goes my things couple underlie

pleased were We to the than saw way back the if saw traffic with over quarter, guests traffic sequential we XXXX, faster July and million XX% so translates as dollars first more in in I higher at the zoom then this interactions improve That to that were if we slightly pre-pandemic. in or the versus look rate a you of and out, And online. to year business at did improvement. improvement months you we've all almost store mean, XXX our Target XXXX, with coming X got than compared we well

time, engagement prospects guest to we've growth evidenced our the over forward. our going traffic built deeper by And is so critically important

questions try tie to X together. those I'll

are throughout During seasons. moments for combine point, Target. into our And the those year, are know to for great affordability to the We lean us Christina's very balance you'll we'll important newness those guests, moments traffic-driving see those seasonal with moments. of continue

you're today that target.com, the the that lean the great in as We'll newness continue of holidays, affordability this that If season combining ready do stores looking enter with great we meet you're seeing our season, for Target guests. affordability. Back-to-School to our at us great Halloween into or with needs get

the be be those year, we meet for moments guest but we'll into we'll Target big of lean plan to where the we there back So expects the cautious needs. their seasonal know to as half

been forward customers has to always of around well appealing stakeholders. strategies Brian, in Target are What LGBTQIA+? as array important the thoughts about your one of as going follow-up. and broad to particularly thinking Inclusivity terms there,

to families. serve. And really heart the our at all purpose is commitment our bring is joy that all we Oliver, the of families to

experiences, So to come. recharge that is should do and for sure our want expect they place continue of shopping make those and we over place where can to guests, us years the happy that a to see you all enjoy to Target

is next Michael from Lasser UBS. question Our with

or are pressure, going is share. is perception Target elsewhere is over either its now The that as years. under gained few last Target lot a And share guests of market losing traffic the

can Target elsewhere? levers would And or might how now what recapture those value to at are in much shopping are seeking cost those to So order pull guests disenfranchised retailers? out it who discretionary become or regain that other goods

might stores. significant our spending more added pandemic, out I guests start the of Michael, looking increase since kind $XX top performance at driven importantly, growth, shopping by in of we've billion been and over in our the an of by zooming Since a over start XXXX. bit years. several and increase a And line that's time transactions, trips

means fundamentals, proximity, forward. our a leveraging serve a you in retail us to affordability, for we We'll we're years work strategy sure into that Making make going sure in place from shop, great providing will in-store providing and being have great investing had sure time standpoint. I we'll place guest do That well have every to in stock making think recommitting the we which in experience. we're experience. a extends are fulfillment the great continue

turn guests it's or to or Target Shipt. services, to their having home see whether continue Drive-Up something We same-day Pick-Up through to delivered our for

of a that billion and portfolio Our style brand It's is a trusted affordability. now portfolio. brands and quality portfolio owned provides great $XX brand

believe I few served invest that and us going the continue well strategy serve us forward. continue to we'll So the over years in last well so will to

Understood.

operating question next billion Our the labor. top $X that, harvesting presumably, light you're of the And on adjusting the the traffic declines, of billion $X to is expense couple of on years. In you're follow-up over your of outlook. of midst in savings

And look to benefit are expense us dollar growth is So would to onetime your you in of how factors forward? operating going year? growth half that that are going can not give be any for the back sustainable dollar the operating a your sense there moving

happy that leverage to on matters. I'm I the take Yes, Michael. obviously, mean, one, SG&A line,

up the some got a an some in And our so showed in those that on especially in we of softness inflation. amount in still in of environment. on the deleverage expenses, line importantly, investments as fair inflationary wage second quarter saw more We And fixed team, and benefits well.

the really that the there. we whole inventory team's well for in the P&L, implications but with not just managing And the And flows inventories. well-managed system. But in flexibility say across the about the across SG&A, I'll on remarkable. was markdowns talked gross But margin line quarter, starts

last when us back inventory. distribution were It us makes inefficient stores full. I the our lot a more more when in more makes of are mean, centers we managing That rooms heavy we're year. in -- inefficient efficient

so seeing the inventories I the and those that And benefits we're across system, would of continue. cleaner position expect benefits to

and operation, well focused over got efficiency, translate expect and gains environment. current efficiency on into we've few scale be work to the years would the costs And we've the more on the years that's to seen really to efficient front. that that the in continue come to a And in a expense on quarters last fuel I team managing

Operator, one question have for time today. we last

Gutman Morgan question Stanley. Simeon from Our is with last

performing, And how that that ask, you at the spreads or how look which about don't customer your that if deciles. a best your you quintiles customer? you sense, glean at it's is wanted think the comp look in I it there's occasional consumer, and and could the business I from your to customer, if in give whether middle across know we recovers. anything us then Can maybe most way the

about the stores Christina, do that are guests we to of our want some shopping today? different insights you have the share

Yes.

wallet. seen rotation I the we've in seen a -- think, Brian obviously, we've as talked about, their

on with guests discretionary frequency And so now the our are that are more leaning more engaged our into businesses businesses.

customers. Target compelling Circle to This give we from proof and quarter of how really you years, the actions. But I value most and is very Week our the Target Days, we second a back value opportunity guests tell came was Deal out our Target to performed was did where point prior during demonstrate responded a shift Circle loyal that would Target's Week. to

In single-largest than already way, an has We million X.Xx rate, XXX average Circle program. guests, Target loyalty Week more which acquisition the incremental A by fact, into is that members. ever. loyalty it program, was acquired weeks' our XXX,XXX-plus the that

so to serve to And them fueled depth relating and Circle our we're guests way which and that. one Target we're by is that do to understand ability going to them our going continue be the to uniquely, to is

maybe follow-up, Michael. for the then And

is happen the call any If margins stands there see of get categories it? the Meaning we bounce there that over, reason you we of your it next said back, business we'll anything that of year. recovery at continue you recovery? of But in so, the recover that stands when is along or in comps answer the there margin that the especially means back why could that path? year I and it, the recover, way back know anything shouldn't we is look to margin that half the if see way signature

think would higher-margin I of And be some to it's a positive discretionary about now, sure. the a that been welcome a margin, those see factors comp to growth to for we've benefit return in talking for while Simeon. categories,

to mean, of single is from of is we If continue shortage. we've to in to One I margin that pre-pandemic, where biggest need go things watch the the the back we'll seen headwinds were the You one pressure business.

path And that's forecasted in year-over-year but come a shortage X-year were of on a material see the still so headwind pleased QX, basis. stabilization, a as we we basis, to on in

as I be well. so to forward think important going watch an And variable will that

on up throughout the for efforts team wrap to call our thank certainly quarter. I their note, as want we today, Michael, that the entire

teams protection I last guests allow to particularly our I couple day keep appreciate want safe to the safely retail our quarters and facing team do operate pressures of recognize us asset our over each about been We've and work day. organized that crime, with we've talked and asset to protection the the really every lot teams. every our safe, and each a

joining That for quarter call. all you us. our to up second later look talking this We to thank forward year. So you wraps

Goodbye.