Michael Lasser: The perception is that Target gained a lot of share over the last few years. And now as its traffic is under pressure, guests are either going elsewhere or Target is losing market share. So what levers can Target pull in order to recapture those who would become a different franchise or are seeking out value or discretionary goods at other retailers? And how much might it cost to regain those guests that are now shopping elsewhere?
Brian Cornell: Michael, I might start by zooming out a bit and kind of looking at our performance over several years. Since the start of the pandemic, we’ve added over $30 billion of top line growth, a significant increase since 2019. And importantly, that’s been driven by an increase in trips and transactions, get spending more time shopping in our stores. I think the strategy we have in place and have had in place for years will serve us well going forward. We’ll continue to make sure we’re investing in a great in-store experience. Making sure that we are recommitting to retail fundamentals, which means being in stock every time you shop, providing great affordability, making sure we’re leveraging our proximity, providing a great guest experience that extends into the work we’ll do from a fulfillment standpoint.
We continue to see our guests turn to target for same-day services, whether it’s Drive-Up or Pick-Up or having something delivered to their home through Shipt. Our own brand portfolio is now a $30 billion brand portfolio. It’s a trusted portfolio of brands that provides great quality and style and affordability. So, we’ll continue to invest in the strategy that served us so well over the last few years, and I believe will continue to serve us well going forward.
Michael Lasser: Understood. Our follow-up question is on the operating expense outlook in light of the traffic declines, presumably, you’re adjusting your labor. And on top of that, you’re in the midst of harvesting $2 billion to $3 billion of savings over the next couple of years. So can you give us a sense for how your operating dollar growth is going to look in the back half of the year? And are there any onetime factors that are going to benefit your operating expense – excuse me, operating expense dollar growth that would not be sustainable moving forward?
Michael Fiddelke: Yes, I’m happy to take that one, Michael. I mean, obviously, on the SG&A line, leverage matters. And so the softness we saw in the second quarter showed up in some deleverage on some of those more fixed expenses, especially in an inflationary environment. We still got a fair amount of inflation. And importantly, investments in our team, in wage and benefits on that line as well. But I’ll say the team’s flexibility in the quarter, not just in SG&A, but across the P&L is really remarkable. And that starts with well-managed inventories. And we talked about the implications for markdowns on the gross margin line there but managing inventory well flows across the whole system. And we were heavy last year. That makes us more efficient, more inefficient in stores when the backrooms are full.
It makes us more inefficient in our distribution centers when we’re managing a lot of inventory. And so we’re seeing the benefits of that cleaner inventories position across the system, and I would expect those benefits to continue. And we’ve got a team that’s really focused on managing costs and expense well in the current environment. And that work on efficiency to translate the scale gains we’ve seen over the last few years into a more efficient operation. I would expect that to continue to be fuel in the quarters and years to come on the efficiency front.
Michael Lasser: Thank you.
Brian Cornell: Operator, we have time for one last question today.
Operator: Thank you. Our last question is from Simeon Gutman with Morgan Stanley. You may go ahead.
