Mike Baker

Mike Baker noted that October sales were flat but Q4 guidance projected a low single-digit decline, questioning if this indicated a slowdown post-Halloween. He also asked about the wide EPS range for Q4 and the expected margin performance within that range.

Answer

Michael Fiddelke, Chief Operating Officer, acknowledged the volatility in Q3, with flat sales in August and October, and a decline in September, which informed the prudent Q4 guidance. He emphasized Target's strong inventory position entering Q4, being down 2% overall but appropriately balanced between frequency and discretionary categories. Jim Lee, Chief Financial Officer, added that Q3 gross margins were broadly flat, and continued volatility is expected in Q4, justifying the wider EPS range. Fiddelke reiterated Target's focus on offering guests value through competitive pricing (e.g., 3,000 price cuts, Thanksgiving meal under $20) and a strong product assortment (20,000 new items).

Mike Baker questioned the Q4 guidance of a low single-digit comparable sales decline, given October's flat performance, asking if it signals a post-Halloween slowdown. He also inquired about the expected margin performance within the wide Q4 EPS range.

Answer

COO Michael Fiddelke acknowledged Q3's monthly volatility (flat August, September decline, flat October) and stated that the Q4 guidance is prudent, reflecting this volatility. He highlighted a strong inventory position entering Q4, appropriately balanced between frequency and discretionary categories. CFO Jim Lee added that Q3 gross margins were broadly flat despite a dynamic environment, and similar volatility is expected in Q4, necessitating a wider EPS range for agility. Michael Fiddelke emphasized Target's value proposition for guests, combining price cuts (e.g., Thanksgiving meal deal) with 20,000 new items for the holiday season.

Inquired about the status of the potential TrueBlue acquisition, the broader M&A pipeline, market share trends, and the reasons behind MRI franchisees not renewing their agreements.

Answer

The company remains interested in the TrueBlue transaction but has no new updates and is exploring other M&A opportunities. Market share is difficult to gauge due to lost MRI franchisees, but individual performance is in line with the market. The MRI non-renewals are part of a long-term trend for that network, which has a looser affiliation model compared to other company brands.

Inquired about the path to the 75% SG&A-to-gross-profit target, the scale of future cost savings, and the current progress towards the $50 million new inventory reduction goal.

Answer

The SG&A target will be reached through a combination of gross profit improvement and further cost optimization. Additional cost savings are expected but won't be as large as the initial $30 million. The company is confident in hitting the $50 million inventory reduction goal by year-end but declined to provide a specific progress figure at this time.