TARGET CORP Q4 FY2024 earnings call

• Target's unique place: It's a destination for on-trend, affordable products and an inviting shopping experience. • Investments: Expect to invest $4 billion to $5 billion in stores, supply chain, and technology this year. Open over 20 new stores and remodel many more. • Product assortment: Balances national brands, a large owned brand portfolio, and special partnerships. Focuses on newness and relevance. • Target Circle: Relaunched loyalty program with 13 million new members in 2024, offering benefits like Target Circle Card with 5% savings daily and Target Circle 360 with same-day delivery. • Roundel: Media business generating nearly $2 billion in value last year, with potential to double in size over the next 5 years. • Reliability efforts: Working on improving in-stock performance, checkout speed, and supply chain efficiency, with progress seen in reduced out-of-stocks and higher guest satisfaction in checkout speed.

Beauty saw nearly 7% sales growth and share gains. Apparel grew share over the last 3 quarters. Over the holiday season, Target gained share in Home and areas of Hardlines like books and toys. The product assortment includes national brands, a $31 billion owned brand portfolio, and special partnerships. Food & Beverage, Essentials, and Beauty categories have grown by nearly $20 billion since 2019, with Good & Gather being a key owned brand in Food & Beverage approaching $4 billion in sales, and up&up in Essentials closing in on $3 billion.

• Expect to invest $4 billion to $5 billion in stores, supply chain, and technology in 2025. • Goal to drive more than $15 billion in revenue growth over the next 5 years. • 2025 and adjusted EPS guidance: $8.80 to $9.80. • Plan to recommend a low single-digit increase in the quarterly dividend later in the year. • Expect capacity for share repurchases within credit rating constraints, with flexibility to navigate tariff uncertainty.

• Economic uncertainty: Persistent economic uncertainty causing consumers to be cautious in discretionary spending. • Tariff volatility: Fluid tariff situation requiring careful navigation to minimize impact on guests and business. • Operational volatility: Discretionary categories lead to sales variability, and efforts to reduce lead times in Apparel and Home are ongoing to manage this.

Q: It seemed like one of the messages today that Target offered is we can still generate growth, but also increase the predictability and lower the volatility of the business based on some of the investments that we're making in systems, team members and infrastructure. And when are we going to see that play out in the P&L?

A: Michael Fiddelke mentioned inventory reliability improvements for 8 quarters in a row and shortening lead times in categories like Apparel to reduce volatility over time. James Lee stated it's an ongoing journey to reduce volatility with stepping stones along the way.

Q: Speaking of volatility, the tariff situation remains quite fluid. Based on what you know today, how did you factor that into your guidance for 2025?

A: Richard Gomez mentioned the team has been diversifying country of production, moving things out of China to other places like Western Hemisphere countries (Guatemala, Honduras) to be more flexible. James Lee said the team is experienced in navigating tariffs and has been proactive in diversifying production to handle fluid tariff situations