TARGET CORP Q3 FY2024 earnings call

• Brian Cornell highlighted traffic growth of 2.4% as validation of guest-focused strategies, with digital sales up nearly 11% and same-day delivery growing 20%. • Rick Gomez discussed holiday season plans, including partnerships like with Taylor Swift, and strong performance in beauty, food, and some home categories. • Michael Fiddelke spoke about inventory reliability, in-stock positions improving, new store openings, and investments in existing stores and digital fulfillment. • Jim Lee provided financial results, noting EPS below expectations due to soft discretionary trends and cost headwinds, and outlined guidance for Q4 and full-year.

In the third quarter, Target's comparable sales increased 0.3%, with traffic growing 2.4% but average ticket declining due to cautious consumer spending. The digital channel saw nearly 11% growth, with same-day delivery powered by Target Circle 360 up nearly 20% and Drive Up accounting for over $2 billion in Q3 sales. Ship-to-home also grew. Beauty had a comp increase of more than 6%, while frequency businesses showed solid growth. Apparel had a small sales decline but relative performance first to market, while Home and Hardlines faced softness. Revenue contribution: Digital channel growth was significant, beauty and frequency categories contributed positively, while Home and Hardlines were softer.

• Fourth quarter comparable sales expected to be around flat, impacted by discretionary category softness and calendar headwinds. • Full-year GAAP and adjusted EPS range revised to $8.30 to $8.90 per share, lower than initial guidance due to sales and profit headwinds. • Focus on planning cautiously based on volatility and positioning for 2025.

• Supply chain challenges including port strikes and receipt timing issues leading to elevated costs. • Unexpected SG&A cost pressures such as higher general liability and health care expenses. • Consumer spending volatility and cautious shopping behaviors impacting sales in discretionary categories.

Q: Can you quantify the magnitude of unique costs and their split between gross and SG&A?

A: Michael Fiddelke mentioned deceleration in high-margin categories like apparel and home, inventory prepositioning for port strikes as unique costs, and Jim Lee noted general liability and health care costs contributed ~1% to SG&A increase.

Q: What's the outlook for discretionary category recovery?

A: Rick Gomez noted apparel has bright spots with on-trend newness and value, home has response to newness from partnerships, while Hardlines faces industry challenges but decorative accessories perform well.

Q: How does Target position itself to be in the consideration set?

A: Brian Cornell emphasized continuing to be Target with unique mix of brands, partnerships, digital assets, store investments, and loyalty program Circle, along with multi-category offerings.