Katharine McShane • Goldman Sachs Group Inc.

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Chief Commercial Officer Rick Gomez explained that Target will offset the 'vast majority' of tariff impacts through strategies like diversifying country of production, evolving assortments to maintain key price points, and leveraging vendor partnerships. CEO Brian Cornell added that while the tariff environment is uncertain, the team is focused on leveraging its multi-category portfolio and own brands to deliver value and remain price competitive.

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CEO Brian Cornell described the consumer as evolving from 'resilient' to 'resourceful,' a trend that has been developing for some time. He explained that shoppers are carefully managing budgets, seeking deals on essentials to free up funds for desired discretionary items. In response, Target's Q4 strategy will lean into value and promotions, bundling deals with newness to align with this resourceful shopping behavior.

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Walmart U.S. CEO John Furner explained that tools like Walmart Fulfillment Services (WFS) are helping sellers manage inventory effectively. He noted that inventory is flowing smoothly through ports and that marketplace GMV growth has been consistent. This healthy marketplace activity, supported by fulfillment and delivery services, directly enables the advertising business, which was a key contributor to eCommerce profitability.

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CEO Doug McMillon stated there is significant room for growth in newer businesses. Walmart U.S. CEO John Furner noted encouraging trends in general merchandise and strong seasonal sell-through helping margins. CFO John David Rainey specified that the negative mix impact from general merchandise is expected to be about half of what it was last year, and highlighted strong growth in marketplace categories like automotive and home.

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CEO Doug McMillon, Walmart U.S. CEO John Furner, Sam's Club CEO Christopher Nicholas, and Walmart International CEO Kath McLay collectively responded. They expressed passion for the category, noting that general merchandise comps were positive in the U.S. despite deflation, driven by unit growth in home, toys, and hardlines. They highlighted strong seasonal performance, momentum in international markets tied to convenience, and the critical role of e-commerce and marketplace in driving future growth.

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Bahram Akradi, Founder, Chairman and CEO, attributed the substantial growth in personal training to a multi-year strategic transformation that is now bearing fruit. He acknowledged that while spa and cafe revenues are improving year-over-year, there remains significant opportunity for better execution. He also noted that in recessionary periods, customers tend to use their memberships more frequently, which boosts retention and positions the company well.

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CFO Jeremy Fletcher explained that the industry has historically shown low price elasticity because demand is driven by non-discretionary needs, service, and availability. He noted that while consumers under broad economic pressure might defer purchases, this is typically not a reaction to industry-specific price changes. He emphasized that maintaining an existing vehicle is often a cost-saving measure for consumers, which supports demand resilience, though he conceded that unprecedented price hikes would be a different dynamic.

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CFO Carl Ford confirmed that the trend of attracting higher-income shoppers (quintiles 4 and 5) accelerated in Q4 as they seek value. He noted these customers have higher baskets, and overall, tickets over $200 have shown strength, while the $50-$100 ticket range has seen declines.

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CEO Mike Creedon described the transaction as a 'clean deal,' with approximately 1,000 combo stores transferring to the new owner. Regarding tariffs, he confirmed the unmitigated 10% is in the forecast but stated the company uses a full toolkit to offset costs, including dropping items, changing sourcing, and finally, implementing 'strategic and surgical' price increases where necessary.

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CEO Michael Creedon described the transaction as a 'clean deal,' where approximately 1,000 combo stores will transfer to the new owner. Regarding tariffs, he confirmed the unmitigated portion is in the forecast but the team continues to work on offsetting it through all available tools. He affirmed that surgical and strategic price increases are a final lever used in this process.

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Interim CEO Mike Creedon stated his primary focus is executing the Family Dollar strategic review and positioning Dollar Tree for long-term growth, emphasizing a customer-first, test-and-learn approach. He explained the leadership changes were made to align executive experience with the future needs of each banner, positioning them for their respective 'next chapters' post-review.

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CEO Winnie Park responded that the company is not observing any significant changes in customer spending patterns. CFO Kristy Chipman added that the financial guidance incorporates a wide range of scenarios to account for the challenging macroeconomic environment, making it difficult to isolate the impact of any single factor.

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Interim CEO Ken Bull attributed the improved Q3 results to a return to the company's core formula: delivering trend-right, high-quality, extreme-value products focused on kids. He asserted that 'when we do that, we win.' While acknowledging there is more work to do, he emphasized that this strategic mindset shift is underway and will create further opportunities.

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Interim President and CEO Kenneth Bull explained that the majority of holiday merchandise has already been purchased due to long lead times, though there is some opportunity to "chase" key trend items. He indicated that significant improvements in the product assortment, reflecting the new focus on newness and value, would likely become apparent to customers starting in the spring and summer seasons of the following year.

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Executive Robert Helm confirmed the consumables mix impact was in line with expectations and that the current strategic priority is capturing market share, not raising margins. He added that wage pressures have softened. He estimated that capturing even 5% of the addressable market would be a significant sales opportunity, equating to a couple hundred basis points of positive comp.

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CFO Robert Helm explained that the higher mix of consumables created a 20 basis point drag on gross margin for the quarter. He also stated that Q3 was the final quarter of significant year-over-year freight cost benefits, with future gains expected to be more muted and driven by operational efficiencies.

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CFO Robert Helm stated that of the 296 competitor stores closing, roughly 100 are located in Ollie's trade areas, but he downplayed the risk of a Q4 impact due to the competitor's lack of seasonal inventory. CEO John Swygert noted that about half of Ollie's categories comped positive, driven by deals rather than consumer weakness. Executive Vice President and COO Eric van der Valk added that Ollie's is seeing strength across all income segments and retaining higher-income shoppers.

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CFO Jeff Howie stated that incentive compensation is not expected to have a specific impact on 2025 guidance, as it is tied to performance and would only be a factor if results substantially exceed estimates. CEO Laura Alber attributed West Elm's turnaround to traction in key initiatives: introducing more new products and collaborations, generating 'brand heat' through social media and influencers, and improving channel execution with more in-stock product and enhanced digital storytelling.

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CEO Laura Alber stated the company is operating under the assumption of a muted housing market and is driving furniture improvements via newness. CFO Jeff Howie clarified that inventory is positioned for the holidays, not pulled forward. He detailed a robust tariff mitigation plan, noting China exposure has been reduced from 50% to 25% and highlighting their U.S. manufacturing footprint and vertically integrated supply chain as key advantages.

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CFO Kelly Dilts explained that the path to the target won't be linear. Key drivers for gross margin improvement include shrink reduction (80 bps potential) and damage control (40 bps potential), which are within the company's control. Additional contributors will be private brands, inventory optimization, supply chain efficiencies, the DG Media Network, and an improved non-consumable sales mix. Dilts noted that sales growth will primarily come from mature store comps.

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CEO Todd Vasos confirmed a positive shift, stating that the company saw a rebound and gained market share with its mid-to-high-end consumer in Q3. He noted they successfully captured more of their 'fair share' compared to the previous quarter and aim to continue this momentum.

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CEO Lauren Hobart detailed a multi-faceted footwear strategy focused on high-impact marketing, enhanced in-store service powered by teammate training and RFID technology, and an improved digital experience. She noted footwear penetration has reached 28% and affirmed the company's goal is to continue gaining significant market share in the category.

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President and CEO Lauren Hobart stated that the company has leaned heavily into differentiated products across categories, which makes it less vulnerable to market-wide promotions. CFO Navdeep Gupta added that vertical brands like CALIA and VRST are key differentiators. Regarding the ticket increase, he explained it was consistent with prior quarters and driven by the mix of differentiated products, which allows for better price realization.

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CEO Shane O'Kelly emphasized strong vendor engagement and collaboration on cost reduction. CFO Ryan Grimsland added that the financial benefits from improved costs, terms, and promotional pricing will build sequentially through the year, with a more pronounced positive impact on COGS expected in the second half of 2025 after cycling the previous year's price investments.

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CEO Gina Boswell stated the January semi-annual sale was in line with expectations, though sales were affected by leaner holiday inventory. She explained that collaborations are a key strategic tool to drive traffic, excitement, and 'brand heat' through differentiated storytelling and scarcity, serving as a powerful complement to traditional promotions like the semi-annual sale.

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CEO Gina Boswell confirmed that there has been no change in strategy and that adjacencies are delivering as expected. She highlighted strong repeat purchase rates and their ability to build the basket. She reiterated that these categories are successfully attracting new customers to varying degrees, depending on the specific product line, and are contributing to growth alongside the core business.

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President of Retail Julie Rosen acknowledged an execution miss, stating the marketing and in-store presentation failed to convey a major sale event and had 'a little bit too much elevation.' While mid-sale adjustments helped, performance remained below expectations. She confirmed the timing was the same as last year but said they are now evaluating all aspects for the future, including timing, marketing, and merchandising, to optimize the event.

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CFO Brandon Sink projected slight ticket growth for 2025, driven by continued Pro strength, which would be offset by persistent traffic pressure from DIY customers. He expects commodity inflation to be muted. Sink clarified that the Q1 margin pressure from 'category accelerators' is due to the specific timing of initiative rollouts, such as rural store resets, which are more heavily concentrated in the first quarter.

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EVP and CFO Herbert Nappier cited continued gross margin expansion, a better sales environment, and benefits from cost actions as drivers for the margin outlook. President and CEO William Stengel explained that future independent store acquisitions will be less financially material than the large 2024 deals and that post-close performance has been as expected, though these stores are not yet in the comp base.

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EVP and CFO Herbert Nappier explained the inventory increase was a strategic, year-long effort to improve NAPA's product availability by increasing SKU depth and count, supplemented by inventory from recent acquisitions. He noted freight investments are competitively sensitive but are focused on enhancing driver availability and store service. President and CEO William Stengel added that these investments are yielding positive results, with internal metrics like service levels, DC safety, and customer satisfaction at all-time highs.

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CFO Kurt Barton clarified that the 2025 operating margin is expected to center around the 2024 level. He confirmed the guidance range of 9.6% to 10.0% is proportional to the 1% to 3% comp sales guidance. Barton explained that the company is purposefully investing in its 2030 strategic initiatives, self-funding them through gross margin expansion and SG&A efficiencies, which allows for growth while maintaining the operating margin.

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CEO Robert Eddy explained that adding gas stations significantly boosts club performance by improving comps and membership renewals, and the company will continue retrofitting clubs where feasible. Regarding CMP, he stated the process is yielding strong results, with participating categories outperforming others in both sales and margin, and its principles will become embedded in daily operations.

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CEO Bob Eddy stated that while membership growth in size, quality, and premium-tier penetration is strong, the company's long-term economic algorithm remains unchanged for now, particularly given market uncertainty. CFO Laura Felice added that the maturity curve for new members is also consistent with past observations. Eddy noted the next major opportunity is to better activate and engage the growing member base.

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Chairman and CEO Bob Eddy and CFO Laura Felice confirmed that while membership growth and quality are strong, they are not changing the long-term economic algorithm at this time due to market uncertainty. Felice added that the maturity curve for new members is also tracking consistently with historical patterns, supporting the decision to maintain the current long-term outlook.

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CEO Reade Fahs noted that promotions, particularly a successful progressive lens offer, are effective at driving new traffic and will continue. CFO Melissa Rasmussen added that the traffic increase in Q3 more than offset the promotional impact on gross margin. Regarding remote capabilities, Fahs stated there are over 730 enabled stores, with remote exams representing 11% of exams in those states. He did not quantify the lift but highlighted the efficiency gains and the potential of a new 'hybrid remote' pilot.

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