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    Target Corp (TGT)

    Business Description

    Target Corporation operates as a large retailer offering a wide assortment of general merchandise and food, both in physical stores and through digital channels. The company manages its business across five core merchandise categories: Apparel & Accessories, Beauty & Household Essentials, Food & Beverage, Hardlines, and Home Furnishings & Décor . Merchandise sales represent the vast majority of Target's revenues, with additional income from credit card profit-sharing and other sources . Approximately one-third of Target's sales come from its owned and exclusive brands, which include popular names like Cat & Jack, Threshold, and Good & Gather .

    1. Beauty & Household Essentials - Offers a wide range of beauty products and household necessities, catering to everyday consumer needs.
    2. Food & Beverage - Provides a diverse selection of groceries and beverages, including fresh produce and packaged goods.
    3. Home Furnishings & Décor - Features a variety of home furniture and decorative items, enhancing living spaces with style and functionality.
    4. Apparel & Accessories - Sells clothing and fashion accessories for men, women, and children, including exclusive brands.
    5. Hardlines - Includes durable goods such as electronics, sporting goods, and toys, appealing to a broad customer base.

    Q2 2025 Summary

    Initial Price$157.29May 2, 2024
    Final Price$139.17August 2, 2024
    Price Change$-18.12
    % Change-11.52%

    What went well

    • Drive Up sales grew over 14% in Q2, becoming a $2 billion business for the quarter, demonstrating the success of Target's convenient fulfillment options that increase customer loyalty and in-store shopping.
    • Target's Apparel category delivered a 3% comp growth in Q2, driven by successful own-brand products like All in Motion and high-profile launches like Blake Lively's Blake Brown haircare line, the most successful haircare launch ever at Target.
    • Operational efficiencies are improving margins, with significant reductions in fulfillment costs and productivity improvements in stores. Better alignment of inventory with demand has led to reduced shipping costs and overall efficiencies, with these benefits starting to pay off.

    What went wrong

    • Discretionary comparable sales at Target are still negative, indicating ongoing challenges in non-essential categories. Despite areas of strength like Apparel (which delivered a 3% comp growth ), overall discretionary sales are not growing, which could pressure overall sales growth.
    • Executives express caution about the outlook for the rest of the year due to consumer uncertainty, suggesting potential risks to achieving growth targets and possibly only reaching the lower end of their same-store sales guidance.
    • There is uncertainty about when discretionary categories will inflect to positive growth, as the company does not provide a specific timeline, highlighting potential ongoing weakness in these areas.

    Q&A Summary

    1. Operating Margin Sustainability
      Q: Can margins sustain improvements and return to 6%+ annually?
      A: We're pleased with our margin progress, thanks to top-line growth of 2% comp and efficiency gains. Apparel's return to growth improved mix, and we found efficiencies despite a more promotional environment. We're ahead on shrink reduction and will work to maintain momentum into Q3 and Q4.

    2. Merchandise Margin Strength
      Q: What drove Q2 merchandise margin strength, and is it sustainable?
      A: Margin strength came from efficiencies despite a promotional environment. We've improved fulfillment costs by aligning inventory with demand, reducing split shipments, and enhancing store productivity. These efforts are paying off, and we expect to continue benefiting from them.

    3. Discretionary Comps and Market Share
      Q: Discretionary comps are still negative; when might they turn positive?
      A: When we offer on-trend, stylish products at great prices, consumers respond. Apparel delivered a 3% comp, with successes like our All in Motion brand and $25 leggings. Beauty is a standout, with launches like Blake Lively's Betty Brown line—the most successful haircare launch at Target. We see opportunities in Home with affordable items, and over time, categories like Home will strengthen as purchase cycles renew.

    4. Consumer Behavior and Guidance
      Q: How do you reconcile strong Q2 guidance but lowered same-store sales outlook?
      A: The consumer remains resilient but choiceful. Our Q2 performance was at the high end due to getting newness and value right. Looking ahead, we're prudent given more uncertainty, but guidance is still centered on growth. We're excited about Back-to-School, Halloween, and holiday seasons and will continue to play offense.

    5. Price Investments and Elasticity
      Q: Are price investments effective, and can price positioning improve further?
      A: Consumers have reacted positively to price investments on 5,000 frequently purchased items. Beyond that, Target Circle members receive personalized offers, and our own brands offer great value. It's a combination of these efforts that strengthen guest relationships and provide value in this environment.

    6. Target Circle Penetration and Same-Day Delivery Growth
      Q: Will Target Circle penetration and same-day delivery growth improve sales?
      A: We're pleased with Circle 360 same-day delivery and Drive Up, both growing almost 14%. Users of these services spend more at Target, both online and in-store. During July Circle Week, we added 2 million new Circle members, and Drive Up was a $2 billion business in Q2. We see opportunities to expand these programs over time.

    7. Expectations for Food & Beverage Mix
      Q: What's the long-term outlook for Food & Beverage?
      A: We see significant growth opportunity in Food & Beverage. Emphasizing affordability with 5,000 price reductions, introducing over 150 new own-brand products and 500 new national brand products, and focusing on convenience through Drive Up and same-day delivery, which saw double-digit growth in Q2, will drive this growth.

    8. Forecasting Business and Consumer Volatility
      Q: How do you forecast amid consumer volatility?
      A: We consider various factors, including seasonal revenues, trends versus prior years, and current consumer behaviors. We've factored these variables into our outlook for the period and quarter.

    9. Back-to-School and Discretionary Comps
      Q: How is the consumer behaving during Back-to-School, and when will discretionary comps improve?
      A: We're well-prepared for Back-to-School and holiday seasons, offering a great physical and digital experience. We'll continue to monitor consumer behavior, but when we provide on-trend products at great value, we see positive responses.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    Apparel & Accessories3,9674,1014,0074,4116,4853,8974,2614,003
    Beauty-----3,1193,3843,226
    - Household Essentials-----4,549--
    Beauty & Household Essentials7,6827,5137,619-----
    Food & Beverage5,9975,3925,7366,77423,8995,8535,5385,917
    - Food and Pet Supplies--------
    Hardlines3,3913,3833,1926,19616,1623,1603,3223,152
    Home Furnishings & Décor3,8553,9554,4205,5317,7603,5193,9084,185
    Household Essentials-----4,5494,5644,715
    Other56403087213464430
    Credit Card Profit Sharing174169165159667142144148
    Other Revenue200220229293942246287292
    Total Revenue25,32224,77325,39831,919107,41224,53125,45225,668
    Revenue by Geography - in Millions of USDFY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    U.S. Segment Revenue--------
    Canadian Segment Revenue--------
    Total Revenue25,32224,77325,39831,919107,41224,53125,45225,668
    KPIs - MetricFY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    Card Penetration19.0%18.6%18.3%18.4%-18.0%17.7%17.7%

    Executive Team

    NamePositionStart DateShort Bio
    Brian C. CornellChair of the Board and Chief Executive OfficerAugust 2014Brian C. Cornell has served as the Chair of the Board and CEO of Target Corporation since August 2014. He has over 30 years of leadership experience in retail and global consumer product companies .
    Michael J. FiddelkeExecutive Vice President and Chief Operating Officer, Chief Financial OfficerFebruary 2024 (COO), November 2019 (CFO)Michael J. Fiddelke has been the Executive Vice President and COO since February 2024 and CFO since November 2019. He previously held senior roles in operations and merchandising capabilities .
    A. Christina HenningtonExecutive Vice President and Chief Growth OfficerFebruary 2021A. Christina Hennington has been the Executive Vice President and Chief Growth Officer since February 2021. She previously served as Chief Merchandising Officer for Hardlines, Essentials, and Capabilities .
    Melissa K. KremerExecutive Vice President and Chief Human Resources OfficerJanuary 2019Melissa K. Kremer has served as the Executive Vice President and Chief Human Resources Officer since January 2019. She was previously the Senior Vice President of Talent and Organizational Effectiveness .
    Don H. LiuExecutive Vice President, Chief Legal & Compliance Officer, and Corporate SecretaryOctober 2023Don H. Liu has served in his current role since October 2023. He was previously the Chief Legal & Risk Officer and Corporate Secretary. He will retire in August 2024 and serve as a strategic advisor until May 2025 .
    Cara A. SylvesterExecutive Vice President and Chief Guest Experience OfficerMay 2022Cara A. Sylvester has been the Executive Vice President and Chief Guest Experience Officer since May 2022. She previously served as Chief Marketing & Digital Officer .
    Matthew L. ZabelExecutive Vice President and Chief Corporate Affairs OfficerOctober 2023Matthew L. Zabel has been the Executive Vice President and Chief Corporate Affairs Officer since October 2023. He was previously the General Counsel and held senior roles in risk and employee relations .
    Jim LeeExecutive Vice President and Chief Financial OfficerSeptember 22, 2024Jim Lee will be the Executive Vice President and CFO effective September 22, 2024. He previously held leadership roles at PepsiCo, including Deputy CFO and Senior Vice President of Corporate Finance .

    Questions to Ask Management

    1. Given the better-than-expected operating margin performance this quarter, can you elaborate on the specific drivers behind this improvement, and how sustainable are these factors in the face of ongoing cost pressures and a potentially more promotional environment?
    2. Despite improvements, discretionary categories still posted negative comps. What are the key challenges preventing these categories from returning to positive growth, and when do you anticipate an inflection point in discretionary spending?
    3. With the significant growth in your Food & Beverage business since the pandemic, how do you plan to manage the long-term mix of this category, and what impact does a higher proportion of lower-margin consumables have on your overall profitability?
    4. You mentioned progress in reducing inventory shrink ahead of expectations. Can you provide more details on the strategies implemented to combat shrink and how you plan to sustain these improvements, especially considering the industry-wide challenges related to theft and loss?
    5. Your after-tax return on invested capital (ROIC) increased to 16.6%, nearly 3 percentage points higher than last year. What specific initiatives contributed to this improvement, and how do you plan to maintain or enhance ROIC going forward in a potentially volatile economic environment?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateAugust 11, 2021
    End Date/DurationNo stated expiration
    Total additional amount$15 billion
    Remaining authorization amount$9,171,483,556
    DetailsAuthorized by the Board of Directors

    Past Guidance

    Q2 2025 Earnings Call

    • Issued Period: Q2 2025
    • Guided Period: Q3 2025 and FY 2025
    • Guidance:
      • Q3 2025 Guidance:
        • Comparable sales growth: 0% to 2% .
        • GAAP and adjusted EPS: $2.10 to $2.40 .
      • FY 2025 Guidance:
        • Comparable sales growth: 0% to 2% .
        • Full year GAAP and adjusted EPS range: $9 to $9.70 .

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: Q2 2025 and FY 2025
    • Guidance:
      • Q2 2025 Guidance:
        • Comparable sales increase: 0% to 2% .
        • EPS: $1.95 to $2.35 .
      • FY 2025 Guidance:
        • Comparable sales increase: 0% to 2% .
        • EPS: $8.60 to $9.60 .
        • Capital Expenditures (CapEx): $3 billion to $4 billion .
        • Dividends: Plan to recommend a small increase in the quarterly dividend .
        • Share Repurchases: May resume later in the year .
        • Gross Margin Rate: Expected benefit related to shrink .
        • After-Tax Return on Invested Capital (ROIC): Expected growth into the high teens .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      • Q1 2024 Guidance:
        • EPS: $1.70 to $2.10 .
      • FY 2024 Guidance:
        • Comparable sales increase: 0% to 2% .
        • Operating Margin: Increase from 5.3% towards 6% .
        • EPS: $8.60 to $9.60 .
        • Capital Expenditures (CapEx): $3 billion to $4 billion .
        • Shrink Rates: Expected to remain flat .
        • Roundel Ad Business: Expected growth contributing to gross margin and revenue .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Albertsons Companies, Inc.
    • Amazon.com, Inc.
    • Best Buy Co., Inc.
    • Costco Wholesale Corporation
    • CVS Health Corporation
    • Dollar General Corporation
    • Dollar Tree, Inc.
    • The Gap, Inc.
    • The Home Depot, Inc.
    • Kohl's Corporation
    • The Kroger Co.
    • Lowe's Companies, Inc.
    • Macy's, Inc.
    • Nordstrom, Inc.
    • Rite Aid Corporation
    • Ross Stores, Inc.
    • The TJX Companies, Inc.
    • Walgreens Boots Alliance, Inc.
    • Walmart Inc.
    • BJ's Wholesale Club Holdings, Inc. (included in the Current Peer Group)

    Latest news

    Recent developments and announcements about TGT.

    Financial Reporting

      Earnings Report

      ·
      Nov 20, 2024, 12:28 PM

      Target Corporation Q3 2024 Earnings Results

      Date: November 20, 2024

      **Key Highlights: **

      • Comparable Sales: Increased by 0.3%, driven by a 2.4% increase in guest traffic and a 10.8% growth in digital comparable sales .
      • Revenue: Total revenue for the third quarter was $25.7 billion, a 1.1% increase from the previous year .
      • Gross Margin: The gross margin rate decreased slightly to 27.2% from 27.4% in the previous year, due to higher digital fulfillment and supply chain costs .
      • Operating Income: Operating income for the third quarter was $1.2 billion, down 11.2% from the previous year .
      • Earnings Per Share (EPS): GAAP and Adjusted EPS were $1.85, a decrease of 11.9% compared to $2.10 in the previous year .
      • Net Earnings: Net earnings for the third quarter were $854 million, down 12.1% from the previous year .
      • Guidance: For the fourth quarter, Target expects flat comparable sales and GAAP and Adjusted EPS between $1.85 and $2.45. For the full year, the expected GAAP and Adjusted EPS range is $8.30 to $8.90 .

      **Significant Trends: **

      • Digital Sales Growth: Digital sales continue to be a significant driver, with a 10.8% increase in the third quarter, reflecting nearly 20% growth in same-day delivery services .
      • Category Performance: Beauty sales grew by more than 6%, while Food & Beverage and Essentials categories saw low-single-digit growth .
      • Cost Pressures: Higher digital fulfillment and supply chain costs, along with increased team member pay and benefits, impacted the gross margin and operating income .
      • Capital Deployment: Target repurchased $354 million of its shares and paid $516 million in dividends during the third quarter .

      **CEO Statement: ** Brian Cornell, CEO of Target Corporation, highlighted the company's ability to navigate a volatile operating environment and expressed confidence in the underlying strength and fundamentals of the business, especially heading into the holiday season .

      For more detailed information, you can visit the Target Corporation News Release .