Target 3Q15 Earnings Call Notes

Target’s (TGT) CEO Brian Cornell on Q3 2015 Results

Brian Cornell – Chairman and Chief Executive Officer

While consumers cautious we feel confident

“Sales in signature categories have been growing much faster than our overall sales, and they’re clearly exceeding industry benchmarks. So, while consumers continue to spend cautiously, we feel confident as we enter the holiday season. And we’re focused on continuing to deliver on both our strategic priorities and our financial goals.”

Wearables were standout in electronics

“One standout in electronics was wearable devices, part of the signature Wellness category, where we saw nearly 100% growth in comparable sales.”

We’re feeling good about the consumer sitting here in November

“we’re feeling really good about the trends we’re seeing, the reaction we’re getting from the guests. Certainly the growth in traffic for us is really encouraging. So, we’re seeing more Target guests come back to our stores and visit our sites. And they are continuing to respond very positively to the work we’ve done in signature categories. So, sitting here today, we are very confident about our position. We think we are connecting with the consumer and our guest. And I feel fantastic about the plans we have in place for the fourth quarter. So, while obviously still cautious, as we sit here early in November, we feel very good about the way the consumer and the guest is responding to our brand. And I feel as if we are really well-positioned for the fourth quarter.”

20% growth rate online below our expectations but outperforming the industry

“while our 20% growth rate is not in line with our expectations, it’s still dramatically outperforming the industry. And I think the most important measure we are looking at is the fact that over 80% of our guests start their shopping journey online, either at home on their desktop or via the mobile device. And that digitally influenced guest is coming into our stores more often.”

We have expanded our ship from store base

“Last year at this time, we had just over about 120 stores where we were shipping from store. As we sit here today, we are up to 462. So, we have expanded the base. We are going to leverage and swept the assets I think much more effectively. But importantly that enhanced base allows us to deliver to our guests in a much shorter timeframe. So, we would expect that to grow during the holidays. We have certainly ramped up for it.”

John Mulligan – Chief Operating Officer

The economics of ship from store work out well for us

“The labor model, what happens here is, actually it’s quite efficient because we have dedicated teams in those stores who do the picking, do the packing, and we are just able to use them, utilize them more efficiently. So, while there is more store labor that we are using, the offset clearly comes in our shipping expense because we are much closer to the guest we are shipping to, and then on the same P&L line but it’s an outstanding trade for us.”

Cathy Smith – Chief Financial Officer

Digital traffic growth hasn’t been as high as we expected this year

“although we have seen an acceleration in the last two months, we haven’t seen a growth in digital traffic we expected to see this year. We believe our biggest opportunity to drive traffic continues to be our work to streamline and enhance the digital experience.