John Hulbert welcomes investors and others to the 2024 Financial Community Meeting. He reminds attendees of important disclosures and mentions the use of non-GAAP financial measures. Brian Cornell then takes over and expresses excitement for discussing the company's growth horizon and long-term thinking. He also introduces several top leaders who will be speaking at the meeting. The focus will be on the long-term success and profitability of the company.

The company focuses on longer time frames when evaluating growth potential and will analyze their 2023 performance in that context. They will provide insights on their 2024 plans and sustained growth, and their ability to react to unforeseen realities. The company has been able to navigate the unpredictable post-pandemic return to normal by staying agile and continuously refining their approach. They aim to recapture profitable sales, traffic, and market share gains by expanding what makes them different and better for their guests, appealing to a wider consumer base, and investing in innovation. These elements have been staples in their strategy and will continue to be in the future.

Target has invested in its stores, with over 200 new stores built and 1200 existing locations remodeled. They believe that physical stores are still important in the digital era and plan to open more than 300 new stores in the next decade. They will also continue to invest in their supply chain and technology, including AI and machine learning, to improve guest experience and same day fulfillment.

Target's same day delivery service has become more competitive due to continued innovation and integration with their Target ecosystem. The company plans to expand same day delivery and focus on unlimited, same day delivery through their Target Circle 360 membership feature. The success of their drive up and order pickup services during COVID-19 highlights the importance of their investments in stores, supply chain, and technology. The acquisition of Shipt in 2017 has also helped to improve their same day delivery capabilities. Additionally, Target's Roundel advertising business, which was non-existent 10 years ago, has become a significant contributor to their revenue and has potential for further growth in the future. The company's focus on strengthening their relationship with guests and converting more consumers into guests will drive the growth of Roundel.

The article discusses the strength of Target's multi-category portfolio and the balance between frequency and discretionary categories. The company's partnerships with popular brands, such as Starbucks, Disney, and Apple, have been growing and contributing to their success. Target's expertise in product design, development, and brand creation has also led to the success of their own brand portfolio, including popular brands like Cat & Jack and Threshold. The company plans to continue focusing on their own brands in the future.

Target is committed to their team and their development, as well as their brand's success. They are not complacent about their past success and are continuously looking towards the future. Despite economic changes, their team is energized and taking initiative, leading to improved performance and growth. The team's current mantra is "grow time."

Target is committed to regaining top line growth, traffic, and share gains by improving the guest experience through upgrades in Target Circle and a focus on retail fundamentals. They will also focus on providing expert curation, style and trend authority, newness, great design, and incredible value to delight their guests. Additionally, they will accelerate their progress in omnichannel discovery to make it easier for consumers to discover Target products wherever they are. The company is not satisfied with their recent top line results and will continue to work towards improvement.

Target is confident in their path forward and is eager to share what's next. They have built a strong foundation for long-term growth and are committed to building on it. They will focus on their core strengths, capabilities, and differentiators to drive market share gains, sales growth, and profitability. The consumer outlook is mixed, with some encouraging signs in the economy but also stubborn pressures impacting families and retailers. Consumers are value-conscious and seeking stability with small doses of everyday joy.

Target's purpose of helping families find joy in everyday life is still relevant despite recent challenges. Their investments in digital shopping, supply chain, and loyalty have strengthened their reputation as an omnichannel powerhouse. Target's stores are known for inspiring customers to discover unexpected treasures, setting them apart from competitors. With the changing landscape of shopping, Target will continue to focus on designing experiences that support discovery, both in-store and online. This includes leveraging social media platforms like TikTok and Instagram to further accelerate their trend-setting capabilities. The team is highly motivated and engaged in creating these discovery-driven experiences.

Target's goal is to meet consumers where they are and provide a curated assortment of products to guide their shopping journey. This approach is exemplified by their own brand offerings, which provide both value and quality. Target's unique capabilities allow them to rapidly scale their own brands without sacrificing quality.

Target's capabilities have made them an attractive partner for top designers, such as Diane von Furstenberg. They also prioritize offering the best national brands, like Stanley drinkware and celebrity-founded beauty brands, to meet consumer demand. Additionally, Target focuses on partnerships to provide expertise and brand recognition for their guests. These collaborations have been successful and are expected to play a bigger role in the future.

Ulta Beauty has expanded its presence at Target, Levi's, Apple, and Disney, and has a new partnership with Kendra Scott. They focus on value by offering low prices, simplifying promotions, and adding quality and newness to their own brand portfolio without increasing prices. They also prioritize retail fundamentals and invest in their team to provide a unique shopping experience both in-store and online.

Target is dedicated to providing world-class service and ensuring their stores are always well-stocked. They have been able to maintain leaner inventory levels and increase flexibility through the dedication of their team and the use of technology. They have invested in automating replenishment and optimizing delivery, and are excited about the potential of emerging technologies like generative AI. However, they also recognize the importance of human connection and will continue to invest in technology while keeping their team at the center of the Target experience. They also plan to use technology to improve segmentation and personalization for their guests.

The company aims to provide a personalized and engaging shopping experience for its guests by leveraging its large and engaged consumer base and constantly listening and learning from their feedback. They also highlight the success of their round aisle advertising business and their efforts to enhance their loyalty ecosystem, Roundel's reach, and the digital experience. The CEO shares his firsthand experience of seeing these initiatives in action, specifically mentioning a visit to a smaller store near Disney World where they successfully cater to two distinct guest segments. He also mentions a recent trip to Texas with members of the beauty and apparel teams.

The author discusses the success of Target's store, highlighting the positive feedback from customers about the variety of products available and the overall shopping experience. They also mention a recent store remodel and the addition of a Starbucks, which has become a social hub for the community. The author then introduces two Target executives, Jill Sando and Rick Gomez, who will discuss the company's own brand capabilities and how they help Target stand out in the retail industry.

The speaker discusses their experience leading various disciplines at Target and in the CPG industry. They introduce a new brand in toys called Gigglescape, which is designed for generation alpha and aims to fill a gap in Target's own brand assortment. The brand offers affordable prices and makes Target a stronger destination for toys.

Target is relaunching their up&up brand and introducing a new brand called Dealworthy to address the consumer need for value and affordability. Up&up is a popular brand with over $3 billion in sales and will now offer product improvements, new items, and low prices. Dealworthy will have items priced under $10 and will be the lowest priced item in each category. Target's discretionaries categories also have the opportunity to drive trips, as seen with their successful kids' brand Cat & Jack.

Target's brand Cat & Jack sells over 300 million units a year, driving repeat business due to its great prices, quality, and design. This success also benefits other brands in Target's portfolio, such as Wild Fable, which has become one of the biggest junior's brands in the country and recently expanded into swimwear. Good & Gather has helped Target reimagine their grocery space and experience, making Target a destination for food and contributing to their $8 billion increase in food and beverage sales since 2019.

Target's Good & Gather brand offers delicious, high-quality products at affordable prices, with a focus on using natural ingredients and expanding into new categories like baby and toddler products. The brand's success is attributed to Target's long history and expertise in creating and sourcing its own brands, as well as its ability to quickly adapt to trends and pursue sustainability goals. This not only drives growth, but also ensures the resiliency of the business model and maintains the quality that guests expect.

Target's capabilities of delivering new products at a large scale sets them apart from other companies. In the food and beverage category alone, they will be adding hundreds of new items to their Good & Gather and Favorite Day brands. Target's focus on consumer insights and feedback has also helped them improve and expand their brands, such as with their successful Cat & Jack brand and the recently launched Favorite Day brand. This consumer-led approach has led to double digit growth for Favorite Day and has helped Target better cater to their customers' needs.

Target has expanded its Favorite Day brand to include seasonal items such as gingerbread kits and hot cocoa bombs. They have also enhanced their brand management capabilities under the leadership of Jill Sando, allowing for a faster rollout of own brands. This has led to the success of their new kitchenware brand, Figmint, which has helped to increase their kitchenware business by 500 basis points. Guests appreciate the newness, innovation, and great design of Figmint and other own brands.

Target has been focusing on sharpening their brand portfolio in the food and beverage sector. They have launched a flagship brand, Good & Gather, and retired their previous snack and dessert brand, Archer Farms, in favor of a new brand called Favorite Day. This approach helps them make consumer-centric decisions and meet their needs in a meaningful way. The investments made in their capabilities and team over the past two decades give Target a competitive advantage in the market. This work is seen as a springboard into the future, rather than just a defensive strategy.

Cara Sylvester, Target's guest experience leader, defines guest experience as the way Target engages with consumers and creates moments of discovery, connection, and joy. She explains that shopping today is nonlinear and fully integrated into people's lives, with many starting their purchase online or on social media. This is known as expansive retail.

Target strives to create a seamless shopping experience for their diverse and loyal customer base. They gather feedback from millions of guests to understand their needs and preferences, and design their stores, online presence, and social media accordingly. Despite varying shopping journeys, there are commonalities among Target guests, such as their love for shopping, desire for quality products, and use of multiple channels to create their desired experience. Target values their loyal customers and aims to meet them wherever and however they choose to shop.

Target's most engaged guests contribute to a significant portion of sales, demonstrating the strong connection the company has with its customers. This is due to the unique experience Target provides, with a curated assortment, bursts of discovery and delight, and human connection. While the company's big marketing campaigns grab attention, it's the smaller everyday moments that truly strengthen the bonds with guests. One example is Amelia, a team member at a Target store in San Antonio, Texas, who embodies the brand's values and empathy towards customers.

The Target experience is all about empathy and designing an experience for guests that is easy, fast, and fun. This is seen in services like Drive Up and in the overall atmosphere of Target stores. The same sense of exploration and relaxation is being brought to the digital experience, with a seamless integration between physical and online channels. This was evident during the holiday season, when more than half of in-store purchases were preceded by a visit to the Target app or website. Target's agile technology and interconnected pathways make it uniquely suited to be there for guests when inspiration strikes.

Target had a successful and connected holiday season in 2023, thanks to their investment in digital capabilities. This allowed them to create a personalized and warm shopping experience for their guests, with features such as generative AI, Shop the Look, and Target Circle loyalty program. Additionally, their advertising business, Roundel, seamlessly integrates into the guest experience and has contributed over $1.5 billion in value for the company. Roundel works with numerous vendors to deliver consistent and resonant creative content for the Target experience.

Target has a successful partnership with Apple for their holiday campaign, utilizing custom content and AI to target their guests' interests and preferences. This integrated campaign has resonated with shoppers and has resulted in a higher new guest rate. Additionally, Target's media mix allows them to connect with consumers on various platforms, including social media, driving a significant number of visits to their properties. Target has a strong presence on social media, particularly on TikTok, and recognizes the opportunity to connect with their guests and stay on top of trends through these platforms.

Target is working to integrate social media content and user-generated content into their digital platforms to make it easier for customers to find inspiration while shopping. They will use generative AI search and 3D visualization to personalize the shopping experience and make it more intuitive. This seamless shopping experience across stores, digital, and social is the future that Target is working towards. Additionally, their loyalty program, Target Circle, was introduced in 2019 to show appreciation to customers with deals, rewards, and perks.

Target has a successful loyalty program, Target Circle, with over 100 million members and $2 billion in rewards earned. The program has shown to increase guest visits and spending. However, based on feedback from members, Target has decided to improve and reimagine the program to make it even easier for guests to save and know their savings. This has led to the introduction of a new and improved Target Circle, which combines the best of Target's loyalty programs and focuses on ease and simplicity for guests. The goal is for guests to not just like, but love Target Circle.

Target is revamping their Target Circle program to make it easier for customers to save money and shop at their stores. By scanning the app at checkout, customers can automatically receive deals and discounts. The program includes a Target Circle card that offers additional benefits such as 5% off, free two-day shipping, extended return windows, and unlimited same day delivery. This revamp is a major initiative for the company and is designed to attract new customers and increase overall growth. The program also offers personalized bonuses and partnerships with companies like Ulta Beauty and Apple. Customers can choose from credit, debit, or reloadable card options to find the best fit for their needs.

Target Circle 360 is a new service that offers same-day delivery with no additional fees or markups for Target Circle members. It also includes access to a multi-retailer marketplace. This service will be available for a promotional price of $49 and will be rolled out on April 7th. Target plans to use AI-powered models to personalize the shopping experience and will continue to add benefits and perks for guests. The company's investments reflect their focus on consumer preferences and needs. Target aims to be the first choice for discovery, delight, and experiences that make guests smile. Michael Fiddelke, with an expanded title, will be joining the stage.

Michael Fiddelke, the new Chief Operating Officer at Target, is excited to lead the operations team and has a background in engineering. He has been with Target for over 20 years and has a deep understanding and respect for the work of his team. He has recently spent more time in stores and supply chain facilities, seeing firsthand the strength of their operations. Fiddelke's top priority is to build on the strong foundation established by John Mulligan and his team, and he is fortunate to have a talented group of leaders in place. The operations team is focused on expanding the company's footprint, modernizing their support system, and advancing their overall strategy through investments in store network, partnerships, and same day services.

The company is transforming its supply chain by automating processes and building a sortation center network. They are also focusing on inventory positioning and demand forecasting using AI and machine learning. The company is also investing in their team's pay, benefits, training, and well-being. Last year, the team focused on retail fundamentals and saw improvements in guest surveys. The CFO will provide a look back at last year's financial performance and compare it to a decade ago. They will also discuss their aspirations for the next 10 years and give an outlook for 2024. Despite lower top-line results, the company's bottom-line performance exceeded expectations.

The company experienced a 3.7% decline in comparable sales for the year, with varying trends in quarterly traffic. However, as traffic improved, there was an increase in comp sales, digital sales, and discretionary categories. The operating margin also saw growth, exceeding initial guidance due to improved markdown rates, reduced freight and transportation costs, and healthy inventory levels. The company also benefited from efficiency efforts, which delivered savings of over $0.5 billion last year. These savings helped offset other profit pressures, such as a soft top line and investments in employee benefits.

In the past year, Target saw growth in their Roundel ad business and their profit performance, leading to an increase in GAAP and adjusted EPS and cash from operations. However, inventory shrink costs also increased, reducing their operating margin rate over the past four years. The company is expecting shrink rates to remain flat in the coming year. Looking back over the past decade, Target has faced challenges in the changing retail landscape, but has developed capabilities for future growth.

The company has made significant progress in the past decade, with a 4% average growth rate in sales and a 7.6% average growth rate in adjusted EPS. Digital sales have grown significantly, with same day services accounting for 70% of the growth. Despite a decline in operating margin, the company remains committed to reinvesting in the business, supporting the dividend, and potentially repurchasing shares.

Over the past decade, the company has generated over $67 billion in cash, with the lowest amount being $4 billion in a single year. This demonstrates the durability of the business and gives confidence in future investments. The cash was primarily used for capital expenditures, dividends, and share repurchases while maintaining a strong credit rating. In the next 10 years, the company plans to focus on three growth drivers: comparable sales, new stores, and other revenue. They will invest in remodels, own brands, national brands, partnerships, and value-added services, and will continue to open new locations.

Target plans to open over 300 new stores in the next decade, generating an estimated $15 billion in annual sales. The company will also focus on the well-being of its team members and continue to see growth in other revenue streams, such as its Roundel ad business and digital marketplace, Target Plus. Overall, Target expects its total revenue to grow by an average of 4% per year over the next 10 years, with a goal to reach an optimal operating margin rate that will maximize profit dollar growth.

The company plans to maintain a sustainable dollar growth above 6%, and will adjust their annual CapEx based on business needs and external factors. They expect CapEx to range between $3.5 billion and $5.5 billion in 2025 and beyond. The company also plans to continue growing their dividend and managing the payout ratio, and share repurchases will play a role in EPS growth. The company's strong balance sheet will potentially allow for resumption of repurchase activity later this year.

The company expects high single digit growth in earnings per share and a rise in after tax ROIC over the next decade. However, due to soft consumer spending patterns, they are planning for a modest increase in comparable sales in the range of 0% to 2% for the year 2024. They anticipate a decline in the first quarter but a resumption of growth in the remaining three quarters. The impact of inventory shrink will be flat, but there may be some deleveraging on the SG&A line due to cautious top line expectations and investments in long term growth. There are also some expected tailwinds, such as a modest improvement in shipping and transportation rates and continued growth in their Roundel ad business.

Target expects their efficiency work to improve their gross margin and SG&A expense rates, leading to a modest increase in their operating margin rate and a goal of reaching 6%. They anticipate a 2% growth in EPS for 2024, but note that it is equivalent to a mid to high single digit increase on a 52-week basis. They also plan for a decline in comparable sales for the first quarter, but expect strong cash generation and a potential increase in their dividend later in the year. The current CFO is stepping down and a successor will be named, but they will continue in their role until then. They express gratitude to the Target team and excitement to work with them in the future.

Target's CEO Brian Cornell addressed potential questions from investors, assuring them that the company's roadmap for growth will lead to increased profitability and market share. He also highlighted the significant progress made in 2020 and the potential for resuming share repurchases later in the year. Cornell emphasized the company's long-term focus and the strong performance of revenue, earnings per share, and dividends over the past decade.

The speaker discusses the importance of investing in strategies and capabilities for consumers and the business in order to deliver outstanding shareholder returns. They highlight their team's eagerness to grow and their plan to execute on that ambition. The unique strengths and competitive position of Target are also mentioned, along with the commitment of the entire team to the next era of growth. The audience is invited to ask questions.

The speaker addresses a question about Target's buying discipline and mentions the company's evolution over the past year and a half. They have focused on agility and flexibility in their buying process, placing bets on innovative and new products while also creating flexibility in the model. This has allowed for swifter operations and the introduction of levers such as dual sourcing and domestic backup.

The company has increased its flexibility in categories like apparel, resulting in lower inventory levels and an increase in sales. They have seen success in their apparel business and plan to build on this in 2024. In 2023, they will continue to adjust their flexibility to meet the changing shopping patterns of their customers. The current strategy includes remodeling stores, introducing new products, and leveraging relationships with customers through the reintroduced circle program.

The speaker is discussing the factors that will contribute to Target's long-term comp and near-term comp decline. They mention new stores, remodels, brand partnerships, the Target Circle program, digital enhancements, and the potential of Roundel. These elements are all factored into their plans for growth.

The speaker discusses how consumer trends and shopping habits are driving Target's growth strategy. They emphasize the importance of meeting customer needs and providing a seamless shopping experience, whether in-store or online. The focus is on retail fundamentals and leveraging technology to enhance the overall customer experience. The speaker also mentions that the company is seeing progress in reducing shrink and discusses the impact of putting products behind lock and key.

The speaker discusses progress being made at the national, state, and local level in terms of providing a safe and enjoyable experience for guests. They mention that teams have made significant progress, but there is still more to come. They also mention that they expect shrink to be flat year over year and will learn more in the first quarter. The speaker then talks about the company's efficiency efforts and the $500 million achieved this year, which is seen as a down payment towards their goal of $2 billion to $3 billion over time. They highlight the benefits of their sortation centers and well-managed inventory in achieving this efficiency.

In 2023, the team at Target is proud of their work and confident in their inventory for 2024. They plan to continue growing and becoming more efficient over time. CEO Brian Cornell emphasizes the importance of setting priorities each year to achieve results. A question is asked about the new Target Circle program and its $49 introductory price. Cara Sylvester, who is in charge of the program, explains that they are focused on accessibility and delivering value to their 100 million members. She also mentions the benefits for cardholders and addresses the question about pricing.

Target is combining its cardholder program with its Target Circle program, offering 5% off every trip, extended returns, and free shipping, as well as personalized rewards and deals. Cardholders will also have access to Target Circle 360, which offers same-day delivery and access to the Shipt marketplace. The price for this program will be $49 for cardholders, an introductory promotional price. The company is excited about the growth potential and relevance this will bring to Target. The Roundel program saw a 20% increase last year, according to Michael, who thanked the teams involved in bringing this program forward.

The company expects to see a return to normal in credit metrics, with growth in the Roundel business offsetting any pressure on credit. They are confident in the growth of Roundel and see it as a benefit to guests who engage with the Target Circle program. The company expects a moderation of inflation and a decrease in prices for consumers. They will not break out ticket versus traffic in their guidance.

Target's CEO, Brian Cornell, and analyst Edward Yruma discuss the company's recent focus on larger traditional stores in suburban areas and its success with this strategy. They also mention the growth of Target's food and beverage offering, particularly the success of the brand Good & Gather. Cornell explains that the company will continue to expand its food and beverage offerings in new trading areas.

Target is excited about their upcoming pipeline of larger stores with a broader food offering, which will allow them to compete in new trade areas and gain market share. They also see strong returns from their smaller stores and will continue to build them in the right opportunities. They have successfully expanded into Manhattan and college campuses, building connections with new consumers.

The company has gained several important benefits from their small format journey, including expanding into new markets, building a lifelong connection with college students, and learning more about segmenting their assortment. They are intentional about staying relevant in different life stages, such as college and parenthood. The small format stores have also taught them about the potential for expanding their assortment strategy in larger stores.

The speaker discusses the potential for more sophisticated segmentation and allocation strategies to optimize local potential. They also mention the benefits of digital influence on store sales and the success of same day services. A question is asked about gross margin and the speaker mentions the assumptions for Q4 and 2024, as well as the financial implications of the rollout of target 360.

In the last few minutes of a conference, Michael Fiddelke is asked about gross margin and he explains that there has been a significant improvement in Q4 and throughout the year due to better inventory management, lower costs for freight and transportation, and benefits from digital and supply chain. Looking ahead, they are being cautious with their top line but expect continued improvement in gross margin. When asked about Target Circle, Fiddelke emphasizes the importance of growth and meeting guests' needs through a free loyalty program and Target's delivery services.

The speaker discusses the success of Target's Target Circle program and its impact on the company's growth. They mention the importance of considering the guest's perspective when making decisions and how the use of drive-up orders leads to increased spending. The speaker also addresses questions about store layout, the use of Shipt data to inform product offerings, and potential partnerships in the future.

Target is constantly looking for new partnerships and ways to add value to their guests' lives. They are guest-led and do not use any data from Shipt in their assortment building process. They focus on meeting their guests' needs across a wide range of shopping occasions, with a balance of value and premium options. They have recently introduced Dealworthy as an opening price point brand and have a successful partnership with Ulta Beauty for premium beauty products. This is based on the insight that most beauty shoppers shop both mass and premium brands.

Target's partnership with Ulta was crucial in servicing guests and trips in a certain category. They prioritize meeting unique needs and unmet needs in the category based on what the guest wants. Target has learned that listening to the guest and consumer trends leads to good decisions, such as offering Starbucks for drive-up guests and accepting returns. In terms of performance in the fourth quarter, Target is unsure if it is due to giving back from the COVID bump or if consumers are more focused on food and value, which may not showcase the full potential of the Target brand. Michael is asked about Target's share and how they plan to recapture it.

The speaker addresses a question about the company's operating margin and market share. The first quarter may see a decrease in operating margin due to a cautious approach towards top line growth, but this is expected to improve later in the year. The company is committed to taking market share and has seen significant revenue growth in recent years. They will continue to focus on driving top line growth and deepening partnerships to be a relevant retailer for years to come.

The speaker discusses the significant opportunities for growth in their company's portfolio, particularly in areas such as apparel, home, food and beverage, and beauty. They emphasize the importance of constantly evaluating market share and discussing it regularly. The speaker thanks those who attended the meeting and looks forward to hearing from them during the company's first quarter earnings report.

This summary was generated with AI and may contain some inaccuracies.