Edward Yruma: Thank you.
Operator: Thank you. The next question is from Scott Mushkin with R5 Capital. You may go ahead.
Scott Mushkin: Hey, guys, thanks for taking my question. So €“ and you guys got into some good detail about the cost savings you have planned. I was wondering, is there any thought that 2023, we may have an extension of the challenges and thinking about CapEx, thinking about labor hours and how you might attack that in 2023 as the Fed is successful here and engineers a recession?
Brian Cornell: Scott, as you might imagine, right now, we are laser focused on the holiday season and making sure we end 2022 in a position where we continue to hold and grow share and meet the needs of our guests. For the very early stages of looking at 2023, we’ll be back after the first of the year with more details about our overall plans, including CapEx spending and our outlook for the overall consumer environment. So give us a few weeks, we’ll be back to you after the first of the year, but obviously, we’re going to spend a lot of time right now focused on executing our plan, getting through the holiday season and then assessing the consumer and the overall retail landscape as we look to 2023.
Scott Mushkin: So then another extension of the question, but I wanted to get a second view on this. Imitation is the best form of flattery. And one of the competitors, especially in Apparel and Home, has been copying you guys pretty readily and partnering with other brands. I mean, how much do you think that could impact your sales or maybe is impacting your sales in those categories? Or do you think it’s really not a factor?
Brian Cornell: Scott, it’s why we spend so much time looking at unit market share performance. And as we continue to perform well across our entire portfolio, we feel like we’ve got the right mix of great national brand partners that strengthen our own brands. We have a fabulous in-store experience and the ease and simplicity of our digital channels. So we think we’re well positioned to continue to hold and grow share across our entire portfolio, not just in the holiday season, but for years to come.
Scott Mushkin: All right. Guys, thank you very much. I appreciate it.
Brian Cornell: Thank you, Scott.
Operator: Thank you. The next question is from Robby Ohmes with Bank of America. You may go ahead.
Robert Ohmes: Hey, thanks for taking my question. Maybe for Christina and maybe Brian can chime in here. I know it’s early, but with the kind of shift in trends you’re seeing, is there any more you can tell us maybe about the income demographic dissecting of your guests? Has there been any changes in patterns amongst that? So for example, Walmart obviously called out yesterday that they’re seeing more of these $100,000-plus people trading into Walmart. Is there anything that you can tell us about your lower-income guests versus your middle or higher income that helps us understand what’s going on?
Christina Hennington: Yes. Our first proof point about how we’re performing is obviously the strength of our traffic as well as our market share gains. And those are broad, span across all of our categories. As we look at the guest and where the growth is coming from, it’s coming from a deepening engagement with our current guests. And so they are coming more often, and they are spending across more categories. And there are a couple of inflection points in behavior with our Target guests that are really meaningful: One is when they become an omnichannel guests; the second is how much they use our fulfillment capabilities; and the third is the amount that they buy Food & Beverage. And all those three are growing at a faster rate than total Target. That gives us confidence that going forward, we’ll continue to deepen the engagement with the guests that are most meaningful for our long-term business.
Robert Ohmes: And then just maybe a quick follow-up. Anything on the digital side? Any new initiatives you guys would be thinking about maybe doing more with marketplace or things to get your digital growth a little higher again?
John Mulligan: Well, I think there’s a couple of things there. One, the digital team is doing a great job. And there — to Brian’s point, right now, they’re very focused on delivering a great Q4 for our guests. I think a couple of things we are excited about is first, bringing — and these are the top two requests from our guests, always being led by our guests as it relates to what we’re going to provide from a digital perspective. Number one is adding Starbucks to Drive-Up. And we have seen that in the test stores, very, very popular. This has been a request for a long time from guests. “I’m getting milk, I’m getting diapers, why can’t I get my latte to go as well?” I think the second one under the heading of continuing to create ease, and this is also a request from our guests, is being able to do returns through Drive-Up. That one’s a little bit further behind Starbucks.
We’re testing that in a small number of stores. It just went guest-facing recently. And so we’ll continue to test that through the fourth quarter here and look to hopefully expand that next year. But I think the example there — the examples there are more important than what we’re doing, that is the guest leading us to what they want us to provide from a digital perspective, whether that be on the site or in how we fulfil their services.
Robert Ohmes: Great. Thank you.
Operator: Thank you. The next question is from Simeon Gutman with Morgan Stanley. You may go ahead.
Simeon Gutman: Hey, good morning, everyone. I wanted to ask on the sales backdrop for a minute. You took a lot of markdowns and some inventory was released to the market. Walmart had the same, and they’ve been discounting. Why couldn’t this environment just be off-price having a lot of inventory and the market is just stuffed and that could be part of this weakness, and it’s going to take some time for that to clear as opposed to the consumer really weakening in fundamentals? I just wanted to throw it out there.
Brian Cornell: Simeon, I’ll go back to some of the syndicated data that we’ve been looking at. And clearly, across all of retail, we saw a change in shopping behavior in the back half of October leading into November. The most recent information we’ve seen from NPD would indicate during the first week of November, general merchandise categories contracted by 14%. So a very significant change in shopping behavior. So I think, as Christina pointed out a number of times, we’ve had a consumer who has been dealing with very stubborn inflation for quarter-after-quarter now. They’re certainly starting to look at higher prices in Food & Beverage, in many cases, prices that are up double digits. They’re shopping very carefully on a budget.
And I think they’re looking at discretionary categories and saying, “All right, if I’m going to buy, I’m looking for a great deal and a great value.” So what we’ve seen overall is a change in consumer behavior over the last few weeks. We’re going to watch it carefully throughout the holiday season, but I think it is a by-product of a consumer who has been facing higher costs throughout the year, is working with their budget, shopping very carefully, looking for value and recognize they’ve got to start with core staples before they spend dollars in discretionary categories.
Simeon Gutman: Yes. That makes sense. And my follow-up is the $2 billion to $3 billion, it sounds like it’s process oriented. But some of the things you mentioned in terms of flowing inventory, it seems like that will require CapEx. And again, I don’t want to put words in your mouth, but to be able to drive these efficiencies, is it pure process? Or does CapEx need to step up to make investments in order to realize the savings?
Michael Fiddelke: Yes, it’s a fair question, Simeon. And sometimes it involves CapEx, and we’re happy to invest that CapEx when the return is there. And so if we can put capital into the business that can drive efficiency for the team, I think you’ve seen us do that with technology in stores and supply chain, so that’s a path we’ve been on, and we certainly aren’t shy about making that investment when the return is there. But it won’t all require capital. There’s a lot of process reengineering and optimization that we can do that shouldn’t have a capital price tag associated with it. And again, back to the examples John and Christina provided, so much of that is about the scale we’ve gained. There’s a path of simplifying and taking costs out of the business when you don’t have growth.
We’ve got the fortunate position to be looking at the business on the heels of just exceptional growth and that creates a lot of opportunity for us to rebuild process against the business that’s substantially bigger than it was a few years ago.
Brian Cornell: Operator, we got time for one last question today.
Simeon Gutman: Okay. Thank you for taking my question today.
Operator: Thank you. Our last question comes from Kate McShane with Goldman Sachs. You may go ahead.
