Joe Feldman

Joe Feldman asked for specific examples of planned in-store changes for next year, beyond the FUN 101 initiative, focusing on key floor pads. He also followed up on the declining penetration of the Target Circle card, seeking reasons for the trend and strategies to re-engage customers.

Answer

Rick Gomez, Chief Commercial Officer, provided examples of upcoming in-store changes, including further evolution of FUN 101, elevating the home business (product style, store experience, Threshold brand), post-Ulta Beauty contract plans, and enhancing the baby category. Regarding Target Circle, Gomez highlighted its large size and the success of Target Circle 360 in fueling same-day delivery, mentioning early access events and leveraging first-party data for personalization. Jim Lee, Chief Financial Officer, noted lower spend, penetration, and balances for the card program. Michael Fiddelke, Chief Operating Officer, identified an opportunity to better convert Target Circle members to cardholders.

Joe Feldman asked for specific examples of the planned in-store changes for the next year, particularly regarding key floor pads beyond the FUN 101 initiative.

Answer

CCO Rick Gomez provided examples, stating that FUN 101 changes are ongoing, and significant transformations are planned for the Home category to elevate style and facilitate discovery, including a reinvented Threshold brand. He also mentioned plans for the Beauty space post-Ulta Beauty contract in August 2026, and changes in the Baby category to make it more inviting and gift-focused. CFO Jim Lee and COO Michael Fiddelke then discussed Target Circle card penetration. Jim Lee noted lower spend, penetration, and balances in the card program, while Michael Fiddelke identified an opportunity to better leverage the large Target Circle base as an on-ramp for Circle card adoption.

Joe Feldman inquired about the primary drivers behind the strong January order growth, asking if it was due to stimulus, marketing, or new customer acquisition. He also asked about the company's promotional strategy and the current customer lead time for a custom sofa.

Answer

Chairman & CEO Farooq Kathwari attributed the strong demand to the company's brand quality and increased consumer interest in home furnishings. He noted that Ethan Allen has intentionally maintained promotional savings of up to 25% to attract new clients, which has successfully increased their customer base. Despite these discounts, he explained that margins have improved due to operational efficiencies and a more cost-effective shift to digital marketing. Kathwari stated that the current lead time for a custom sofa has been reduced to approximately 8-9 weeks.