Target Corporation Q4 FY2025 earnings call

Michael starts by introducing the new chapter at Target, emphasizing clear definition of Target's place in retail, four priorities (leading with merchandising authority, elevating guest experience, accelerating technology, strengthening team and communities) guiding the path forward. Kara discusses merchandising authority, reclaiming style authority in home, getting faster with style in apparel and fun 101, accelerating beauty as a destination, creating newness in food, leveraging wellness, evolving baby business. She also talks about elevating guest experience through store improvements, resetting stores operating model, and innovating with concept stores. Jim recaps past financial performance, outlines guidance for 2026 including net sales growth, operating income, EPS, capital expenditures, and emphasizes the importance of differentiation in various assets like stores, product design, and digital fulfillment.

For full year 2026, planning to grow net sales in a range around 2% vs last year, including small increase in comparable sales. Operating income rate expected to be approximately 20 basis points higher than 2025's 4.6% adjusted rate. Expecting GAAP and adjusted EPS in range from 750 to 850. Capital expenditures expected to be approximately $5 billion, with bulk focused on stores, including opening over 30 new stores and completing over 130 full store remodels. Plan to recommend small increase in quarterly dividend and repurchase shares within credit rating limits.

Q: Spencer at Wolf Research asks about $1 billion store investment buckets, remodel program out years.

A: Michael and Jim discuss store payroll investment for better guest experience, remodels with 2 - 4% lifts in year one.

Q: Michael Lasser from UBS asks what's different and structures for sustainable growth.

A: Emphasizes clear strategy and focus on being design - led, differentiated, and having top - notch experience.

Q: Kate McShane from Goldman Sachs asks about same store sales by first half vs back half.

A: Changes starting now with early proof points in some categories, continuous cadence of store changes.

Q: Simeon Gutman from Morgan Stanley asks how to keep merchandise authority.

A: Clarity of strategy and team with over half new to role or target.

Q: Chris Horbers from B of A asks about pricing and markdown levels.

A: Focus on growth and top - line market share growth, getting forecast right.

Q: Mike Baker from DA Davidson asks why sudden change.

A: Leaders assessing where to improve, having balance of long - term Target employees and fresh perspectives.

Q: Rupesh from front row asks about confidence in executing multiple changes.

A: Focus on execution, having teams and extra teams for change.

Q: Chris Nardone from Bank of America asks about pricing architecture and long - term growth.

A: Sharp pricing, value equation with newness and differentiation.

Q: Cory Tarlo from Jefferies asks about pricing expectation and EPS anchor.

A: Competitive pricing, low to mid single digit sales growth with margin expansion.

Q: Paul Legere from Citi asks about sales guidance, digital vs stores, CapEx.

A: Focus on guest needs, stores and digital both important, $5 billion CapEx for strategic returns.

Q: Kelly Bania from BMO Capital asks about payroll investment hours vs wages, food category mix.

A: Investment in team, food drives traffic.

Q: Peter Keith from Piper Sandler asks about gross margin.

A: 2026 gross margin expansion due to lapping costs, long - term margin expansion from growth and margin - rich revenue sources.

Q: Joe Feldman from Telsey Advisory Group asks about supply chain investment and Target Plus.

A: Supply chain critical for product flow, Target Plus Marketplace growing with category expansion.

Q: Greg Malek from Evercore ISI asks about traffic and earnings range.

A: Traffic important for durable growth, range centered around 2% net sales growth with leverage.

Q: Brad Thomas from KeyBank asks about tariff impact on margins.

A: Confident team to react to tariff variables, focus on guest value.

Q: Jacob from Melius Research asks about Chicago operating standards rollout and change management.

A: Optimizing store roles in Chicago, focus on team culture and store specialization.

Q: David Bellinger from Mizuho asks about agenda commerce and AI.

A: Curators by nature, leveraging AI for personalized guest experience.

Q: Oliver Chen from TD Cowen asks about AI impact and comps.

A: AI in personalization and team efficiency, need for low to mid - single digit sales growth for leverage.

Q: Jihan from Bernstein asks about e - commerce profitability.

A: Digital ecosystem profitable, guests spending more in total with DriveUp use.