Target 1Q16 Earnings Call Notes

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Brian Cornell

Saw a decline in smaller convenience trips

“Sales in the quarter came in lighter than expected and daily and regional shopping patterns were more volatile than the entire periods. While guests generally maintain their pattern of larger, pantry stocking visits, we thought slowdown in growth of smaller convenient strips.”

Seen a significant geographic variance

” as we looked at business in April, and again in the start of May, we’ve seen a significant performance difference between our West Coast markets and particularly our Northeast markets, and significant variability, where we’ve seen some very positive growth performance across our entire portfolio, in Los Angeles, in San Francisco and many of our core West Coast markets, offset by significant slowness in the Northeast, in Boston, in New York, in Philadelphia, in D.C.”

Consumers are spending on home improvement

“We recognized the year-on-year fuel prices have increase and our guest and the consumer spending than they did a year ago at the pump. And we’re certainly recognized that within overall categories today’s consumer, our guest is reinvesting in their homes. They’re spending money on home improvement.”

Majority of retail still done in stores but starts online

” we recognize that even as we look at the start of 2016, the majority of the retail business in United States continues to be done in stores, but it starts online, so we better have great digital capabilities to make sure when our guest is shopping target, no matter how they shop, we make it a convenient, easy experience.”

Consumers are paying more at the pump again, that’s having an impact

“certainly it was earlier Easter. We recognize the impact of that. Certainly weather in many major markets has been a factor. It’s not an excuse. We’ve got to figure out how we perform under any circumstances. We know as the guest and our consumer has moved through the course of 2016, prices of the pump, fuel prices have resin and that certainly an impact. And then when we look at macro basis on overall spending, we certainly recognize that consumers are spending more on travel, on leisure activities, they been investing in their homes as I mentioned before. ”

Catherine Smith

Post Easter sales softened noticeably

” Within the quarter, we experienced solid results through the Easter holiday; post Easter sales and traffic trends softened noticeably consistent with what you’ve heard from many of our competitors. Also notable in the first quarter we saw a meaningful increase in the volatility of our weekly sales performance compared with last year.”

Planning to manage inventory more carefully given slowdown in sales

“Quarter end inventory was up a little bit more than 4% rising faster than sales [ph]. As John mentioned, some of this growth reflected intentional inventory investment in to support in-stock in essential categories. However, given the recent slowdown in our sales and our caution regarding the second quarter, we are planning to manage inventory carefully throughout this quarter and beyond.”