Q4 2024 Earnings Summary
- Target has added over $30 billion in revenue growth since pre-pandemic levels, deepening guest relationships and enhancing capabilities and partnerships, positioning the company as an even more relevant retailer for consumers in the years to come.
- Management is razor-focused on taking market share across virtually every aspect of their portfolio, including apparel, home, food and beverage, beauty, essentials, physical stores, and digital channels, indicating strong growth opportunities ahead.
- Target is committed to driving top-line growth over the next ten years to reward shareholders by increasing traffic to stores and online, demonstrating long-term strategic planning for sustained growth.
- Target expects a 3% to 5% decline in comparable sales in the first quarter, indicating weakening consumer demand and potential challenges in driving growth in the near term.
- The company anticipates a step down in operating margin in the first quarter relative to the fourth quarter, suggesting possible profitability pressures ahead.
- Uncertainties such as changes in credit card fees and the overall uncertain environment, especially in an election year, may pose risks to Target's growth projections.
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Margin Outlook
Q: Can you discuss gross margin performance and expectations for 2024?
A: In Q4 and the full year, we saw nearly 3 percentage points of improvement in gross margin due to better inventory management, which saved on markdowns and costs associated with past inventory challenges. Freight and transportation costs improved significantly year-over-year, contributing positively to margins. Looking ahead, we expect continued improvement in gross margin for next year, with assumptions incorporated into our EPS guidance despite some deleveraging from a cautious top-line outlook. -
Sales Guidance and Comps
Q: How will you achieve comps from a 3%-5% decline in Q1 to flat to up 2% for the full year?
A: As we anniversary strong business from last year in Q1, we expect comps to build throughout 2024. Our growth roadmap includes contributions from new stores—we anticipate 300 new stores generating about $15 billion in incremental revenue over a decade—remodels, own brands, brand partnerships, and enhancements in our digital and loyalty programs like the new Target Circle. We remain focused on understanding consumer trends to meet their evolving shopping needs. -
Market Share Focus
Q: How do you view market share performance and plans to recapture share?
A: We monitor market share closely and are committed to taking market share as we move forward. Since before the pandemic, we've added over $30 billion in revenue and deepened guest relationships through new capabilities and partnerships. We're focused on driving top-line growth across all aspects of our portfolio, including apparel, home, food and beverage, beauty, physical stores, and digital channels. -
Shrink and Inventory Losses
Q: Can you provide more color on shrink results and its impact on sales?
A: We're seeing solid progress on shrink, with greater awareness at national, state, and local levels. Our teams have worked hard to ensure a safe experience for guests and team members. Our guidance expects shrink to be flat year-over-year, and we'll continue to learn and adapt as we move through the year. -
Efficiency Initiatives
Q: How should we think about your $500 million in efficiency gains and future expectations?
A: The $500 million achieved this year is a down payment toward the $2-$3 billion in efficiencies we expect over time. Benefits came from initiatives like sortation centers and better inventory management, which improved productivity. We plan to continue translating growth into more efficiencies, leveraging opportunities in stores, supply chain, and technology. -
Target Circle 360 Pricing
Q: Is the $49 price for Target Circle 360 introductory, and what sets it apart from other loyalty programs?
A: The $49 is an introductory promotional price for Target Circle 360. For our cardholders, the $49 price will be evergreen, offering added value. Target Circle 360 provides same-day delivery in less than an hour, access to Shipt marketplace benefits, and all the deals and personalized rewards of the base Target Circle program, focusing on value and ease for our 100 million members. -
Traffic and Ticket Expectations
Q: What are your expectations for traffic and average ticket amid a value-focused consumer environment?
A: While we won't break out specific figures for ticket versus traffic, we're seeing a moderation of inflation, which is beneficial for consumers. Some ticket pressure is expected, but we view this positively as it may lead to share-of-wallet recovery in discretionary categories. -
Store Formats and Food Offering
Q: How do you assess returns on small-box stores versus larger formats, and what's the role of food in bigger stores?
A: We're pleased with returns from both small and large stores. Moving forward, we'll lean into larger-format stores to bring the full Target experience, including an expanded food and beverage offering. Small stores have helped us enter new markets, connect with college students, and improve assortment segmentation. -
Roundel Growth and Credit Trends
Q: Will growth in Roundel offset any pressure on credit, and how is credit performance?
A: We've seen an expected return to normal in credit metrics, with some year-over-year softness. However, this has been offset by the incredible growth in Roundel, contributing $1.5 billion in total value. We expect Roundel's growth to continue, benefiting both revenue and gross margin. -
Assortment Strategy and Partnerships
Q: How are you addressing store layout and premium offerings through partnerships?
A: We listen to our guests to improve store layouts and assortments. Partnerships like those with Ulta Beauty and Apple are guest-led, offering both value and premium products. Our goal is to meet guest needs across a wide range of occasions, introducing brands like Deal Worthy for value shoppers while providing premium options through collaborations.