Target 3Q16 Earnings Call Notes

Target’s (TGT) CEO Brian Cornell on Q3 2016 Results

Encouraged to see a meaningful improvement in sales of Apple products

” in the third quarter, we were encouraged to see a meaningful improvement in sales of Apple products driven by their introduction of several new product innovations.”

Expecting it to be promotional and competitive holiday season

As we think about the holiday season, we expect it to be a very competitive, promotional environment like we’ve seen over the last couple of years. So, we think we’ve got great plans in place and we’re very excited about the merchandising, the marketing and promotional plans, and we think we’re going to be very competitive throughout the season.”

Mark Tritton

Weak trends in mobile phones overall as upgrade cycles lengthening

“As Brian mentioned, the electronics recent product launches helped improve trends in Apple this quarter, however, we continue to see soft trends in mobile phones overall, which is what we’ve seen in the industry as upgrade cycles are lengthening.”

Planning for strong demand for Apple, VR and connected home devices

“In electronics this quarter, we’re planning for strong demand for Apple new products, given that pre-order volume was three times higher than last year. We’re also expecting a lot of guest’s interest in Virtual Reality along with connected home devices like Google home.”

Products will be in stock. Invested in supply chain.

“When guests shop at our stores this holiday season, in addition to great products displays and services, you’ll find our in stock position is better than we’ve ever measured, reflecting improvement across every category we sell, and importantly, we are attaining those in stock levels with lower inventory than a year ago. Over the last 18 months, we’ve deliberately invested in our inventory position and key commodity categories. To ensure we remain in stock, and categories where reliability is most important to our guests However, now that we’ve annualized these investments, and we’re beginning to see the benefit of our work to make our supply chain faster, and more reliable, we’ll be able to deliver outstanding in stocks on a smaller base of inventory over time.

The accuracy of our inventory data is key to our speed and reliability, and we’ve been investing in our systems and processes to achieve greater accuracy. One example is our implementation of our RFID Technology and a portion of our apparel assortment, which is currently in more than 1,600 of our stores.

In affected categories, overall inventory accuracy has increased dramatically, meaningfully reducing the number of occasions in which we can’t physically locate an item. In addition, we’ve made system changes to optimize replenishment of products that our guests purchase in multiples and made changes to minimum on hand standards and higher volume locations, both of which have dramatically reduced our stocks on effective items. We will continue to test and roll out these enhancements throughout next year

Because of our efforts to eliminate non-guests facing work in our stores, the team is delivering outstanding service to our guests, while delivering efficiency and support of our cost control efforts.”