Target 2Q15 Earnings Call Notes

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Digital sales grew 30%, which was slightly below our expectations

“Second quarter digital sales grew 30% from a year ago slightly below our expectations as we compared against very intense digital channel promotions last year. Digital growth contributed about 60 basis points to our comp sales growth this quarter. ”

Priority is to become a digital leader

“Looking ahead we’ll continue to work to advance the key strategic priorities we laid out last fall. First on our list is to become a leader in digital, this is critically important because guest research shows that digital relevance drives traffic and engagement across all selling channels. While we’re pleased with the industry leading growth we’ve seen so far this year we have much more work to do and a key asset will deploy is our source. We’re already shipping digital orders from approximately 140 stores and by the end of this year we’ll be shipping for more than 450 locations.”

Ship from store capabilities allow more inventory balance

“Ship-from-store capabilities allows us to balance inventory across the network, leverage the capital and labor already in our stores and reach guest more quickly.”

Supply chain needs to be fundamentally reworked

“Retail is changing rapidly today than any time in my career and we need to ensure that core operations keep pace with the new ways we’re serving the guests. Overtime Target has developed an incredibly complex supply chain, built to serve an outdated linear model in which product flows from vendors through distribution centers to stores. To serve guests today we are becoming much more flexible in a way we fulfill demand for products and services. And this is stretching our supply chain well beyond its core capabilities.”

As we’ve had to change some fundamentals have suffered

“And frankly, as a result some retail fundamentals have started to suffer. Specifically in stocks in our stores have been unacceptable so far this year. And our guests deserve better. In this new role I’ve asked John to focus first and foremost on improving the capabilities of our supply chain, working across organizational boundaries to understand and address root causes that are hampering day to day execution.”

Pleased with comp performance so far this month

“As we look ahead to the full year we are certainly pleased with our results so far which have been notable stronger than expected and we have been pleased with comp performance so far this month, including back to school sales which reflected retiming of some tax free holidays into early August’

“we’re seeing a very positive start to back-to-school and back-to-college.”

Pushing for more localization

“let me start with localization and as I said during the couple of calls, this is still a very nascent effort for us. We’re in one market a handful of stores in Chicago, but we’d really been focusing on a handful of areas where we recognize we need to change our assortment, change our presentation, be more relevant and really recognize the needs and the demographics of these local markets. So, there is a handful of categories I might list up one craft beer and really making sure that in a category like craft beer we have locally relevant items and we recognized that even in a market like Chicago those need to be tailored neighborhood by neighborhood.”

Have to build a good digital experience

“We got to continue to make sure that we build awareness. We got to make sure that as our guest engages with us digitally we make it really easy, and we make it easy to find product and easy checkout experience. We believe that available to promise which will roll-out this fall will give our guest the confidence that they know where the product is and when it will arrive for them either in a store for them to pick up or being available directly to their home. So we’re focused on making sure that we provide not only a great in-store but a great digital experience and we’re going to make sure that we continue to make our site easy to work with and more and more that’s the mobile interchange that we’ve got to make sure is easy for our guest to find product and checkout. ”

Turn our stores into flexible fulfillment centers

“And to the point John made, we don’t need to be building upstream DCs we’re going to continue to convert more of our stores and as we go in the fourth quarter close to 450 that will act as flexible fulfillment centers to make sure that we can quickly and efficiently get product to the guest.”