That’s why you’ve seen us highlight our road map this morning. It reflects our team’s eagerness to grow, and more importantly, our plan to execute on that ambition. It’s how we’re putting the assets and capabilities we’ve built in the last decade to work in ways that are inspiring and in step with how consumers will be shopping in the next decade. It combines strengths that are unique to us into a comprehensive competitive position. A position that’s difficult to replicate because no one can put it all together like Target. We’ve said it before, it’s the power of and from our stores and digital experiences, to our fulfillment options, our multi category portfolio, our signature brand partnerships, our own brand Domus, and above all, our global team.
Our 400,000 Target team members, and a talented and dedicated and determined leadership team who have led and will keep leading our team through go time. But make no mistakes, everyone at Target, from the check lane to the C-suite, is committed to the next era of grow time. Now, we look forward to hearing from you. I’ll ask Christina, Cara, and Michael to join me back on stage so we can take your questions.
Operator: We will now transition into taking questions from our audience. If you have a question, please raise your hand and a member of our team will hand you a microphone to use. When you’ve finished asking your question, please hand the microphone back to our team. This will help us get to as many people in the audience as possible. Thank you.
Brian Cornell: The hands are going up. Why don’t we start right here?
Simeon Gutman: It’s Simeon Gutman from Morgan Stanley. My first question is on the buying discipline. So, Target makes a lot of its profit on discretionary products. Do you think you’ve developed new muscle over the last year or so or you just reacted to the environment and we’ll see some of this go back?
Brian Cornell: Christine, I think that’s a great place to start. And you can talk about the work we’ve done with our global sourcing teams to make sure we are evolving the way we buy goods across the country.
Christina Hennington: Yeah. Thank you for the question. We have evolved significantly over the last year and a half plus. What we’ve been living through over the last couple of years really has been quite unprecedented. And the opportunity has been to infuse more agility and flexibility into our model. So, in 2023, we bought with the intention of placing bets on the things that we were most excited about. Innovation, newness, our own brands, where we saw, the business trends were. But we also wanted to make sure that we created flexibility in the model. And so overall, we certainly bought less in those down trending categories to manage the inventory. But by buying less led to swifter operations, ease and just clarity in how to operate within this environment.
We were also able to introduce levers through dual sourcing capabilities, a country of production diversification, having more domestic backup. So, in categories like apparel, where it’s really important that we’re on trend and we’re able to get the things that we need quickly based on what we’re seeing in the market, we have increased our flexibility levers manyfold, and are using reserve open to buy, basically receipts that we haven’t spent as well as other flexibility levers to buy into the things that are working. And it is really paying off. Not only did we manage our inventory levels significantly lower, it led to significantly increase in stocks, the best we’ve had in four years, as well as being able to chase into the things that mattered.
Our apparel business is perhaps the best example of that where we’ve seen green shoots of acceleration quarter-by-quarter. And not totally visible when you look at the aggregate comp. Our discretionary comps were the best in the fourth quarter. They were better than in the first quarter. So we’ve seen that discretionary comp acceleration through, through the year. That’s what we plan to build on in 2024.
Brian Cornell: I’d only add that even in 2023, as we took a more conservative approach in discretionary categories, Christina, Rick, and Jill’s teams certainly leaned into key seasonal moments to make sure that we had the right newness, the right affordability. As guests continue to celebrate those key seasonal moments. We’ll do more of that in 2024 as we continue to make sure we adjust our flexibility to meet the needs of guests as they continue to change their shopping patterns. I’ll go over on this side. Michael?
UnidentifiedAnalyst: Thank you. I have two questions. One, seems like if we were to characterize the strategy today, it would be remodeled the stores, introduced new products, leverage some of the relationships that you have with your customers through a reintroduced circle program. You have a lot of experience with those strategies. Is it right for us to think that each one of those could contribute a 100 basis points to your comp and that’s how you build to getting low to mid-single digit comp over the long term? And then a more near-term question, you’re guiding to 3% to 5% comp decline for the first quarter flat to up 2%. How do you go from point A to point B? And how have you factored in some of the uncertainties like changes in credit card fees and the overall uncertain environment given that this election year, in the year ahead? Thank you very much.
Brian Cornell: I’m happy to start, Michael, and we’re not gonna provide you the waterfall today that breaks all those components apart, but everything you’ve talked about is baked into our plans. We certainly expect new stores to be a major contributor as we go forward. Michael talked about over a decade, we expect those 300 new stores to generate about $15 billion of incremental revenue. We’ll continue to invest in remodels, and we’ve got a long track record of seeing those remodels deliver really good returns. We’ll continue to lean into our own brands, our national brands and those great brand partnerships to make sure we’re providing our guests with the newness and inspiration they’re looking for. We’re very excited, as you heard from Cara, about the new Target Circle program.
The benefits of that base program, Circle Card and the excitement around Target 360 and how it will extend our same day offering to guests, bring it right to their home within an hour. So, each one of those elements plays a key role. We’re very excited about the enhancements we’ve made from an overall digital standpoint to provide more ease and inspiration and discovery for our guests. And both Michael and Cara talked about the upward potential we see in Roundel. So, they’ll all play a key role as we go forward. But I think it fundamentally starts with us understanding consumer trends, how consumers are shopping today and will shop differently going forward, and continue to meet their needs no matter how they wanna shop with Target, either in a physical store, in a digital environment, whether it starts with social or they’re just walking into a great neighborhood Target store.
So each element is going to contribute to our roadmap for growth. And underneath all of that is that continued focus on retail fundamentals, the blocking and tackling that make sure we provide our guests a great physical and digital experience, making sure we’re always in stock, that we leverage our proximity, that we provide great affordability and we’re there to provide a great guest experience no matter how you shop with our brand.
Michael Fiddelke: Yeah. And maybe just add on that by kind of reinforcing a point Brian made. I love the fact you can’t decompose our strategy into discrete things. It’s how they work together. Our guests engaging with Circle that finds you know, discretionary category discovery within that experience. And so it’s never one plus one equals two. We’re hoping, you know, one plus one plus one equals 10. And it’s how all of it comes together. You asked a question specifically on the cadence as we move through the year. I touched on it a little bit in my remarks. We anniversaried some of the strongest business last year in Q1, and so we would expect to see a build as we move through 2024.
Scot Ciccarelli: Scot Ciccarelli with Truist. Can you guys provide any more color on your most recent shrink results? And can you help us understand what happens with the sales velocity of products when you put them behind, lock and key?
Brian Cornell: Yeah. Micheal I’m happy to start, because I know it’s a topic on everyone’s mind. And when I think about shortage, when I think about shrink, I’ll start with the word progress. I think we’re seeing really solid progress and greater awareness at the national, state, and local level. And certainly, our teams have been working to ensure we provide a great guest experience and provide an experience that’s safe for our team and safe for our guests. And Michael, I think our teams have made significant progress, but a lot more to come.
Michael Fiddelke: Yeah. I mean, I can’t say enough about the hard work of the teams that have led to that, tone of progress that Brian hit on. And the way that rolls into our guidance is we’re expecting shrink to be flat year over year. We will learn a lot in the first quarter. We inventory a lot of stores in Q1, and so we’ll be smarter a quarter from now. But that progress has us expecting for a lagging metric flat, and we’ll see what we learn as we go through the year.
Mike Baker: Mike Baker from D. A. Davidson. I wanted to talk about your efficiency efforts in the $500 million that you achieved this year. How do we think about that over the next few years? Is that linear? Does it sort of get — sort of roll downhill and get better? What is assumed in your 2024 outlook? Thanks.
Michael Fiddelke: Yes. Well, I’m happy to start. The team’s work against a tough top line to deliver that efficiency progress this year, it’s a great start and I can view that as a down payment toward that $2 billion to $3 billion that we expect to get over time. And the things a little closer in that were highlights of that year, I’d call out the continued benefits of something like our sortation centers. When we have a sortation center in a market, we’re faster and we’re cheaper than other forms of delivery. I also and we touched on a little bit in the conversation already, but it warrants another shout out. The benefit of exceptionally well managed inventory just shows up everywhere. We’re so much more productive in store and in our DCs when inventory is well managed.
And so feel really good about the team’s work there in 2023, feel great about our inventory position as we step into 2024. I would expect our teams to continue taking the growth we’ve seen and the growth we expect and to translate that more into more efficiencies over time.
Brian Cornell: Michael, I’d only add that taking a very measured approach to setting priorities year-by-year. We see opportunities in stores, in supply chain, opportunities to better leverage technology to continue to build on that efficiency roadmap. So, year after year, we’ll reset priorities to make sure we’re laser focused on delivering those results and they’ll build over time.
Danny Brett Hower: Hi. Congratulations on the presentation. Danny Brett Hower with HSBC. Question to Cara on the new Target Circle program. I mean, is $49 obviously like an introductory price? How long are you willing to sustain at that price level? Because, I think it’s hard to make the math with the same day, one hour delivery at $49. And how do you plan to compete with the other programs, loyalty programs out there? What would be some of the key differentiators other than this entry $49 price point. Thank you.
Brian Cornell: Cara, I’ll let you take it away.
Cara Sylvester: Take it away. We’re really excited to talk about it and I think it’s really important that we really anchor on the entire Target Circle ecosystem. That was really important to us and the notion of accessibility and for all is really important. That’s why we first are reimagining how we’re thinking about delivering value. Our guests are really clear. They want value, affordability, and they want ease. And so we’re making it even easier for our 100 million members to actually be able to get the deals and rewards that they want with automatic savings applied at checkout. I’ll hit on your question around pricing, in just a minute, but I think it’s really important to talk about our cardholders as well. Today, the cardholders, that program doesn’t work with Target Circle.
And so what we’re doing is we’re actually bringing these two things together so that not only do you get 5% off every trip and extended returns and free shipping, you also get all the benefits of the base Target Circle program, which are those deals that our guests love and those personalized rewards that are based specifically on your shopping behavior. The other thing that we’re adding for our cardholders is an evergreen price of $49 for Target Circle 360. So, if you are a cardholder for us, always on price will be $49 which is an amazing price and it’s less than a dollar a week of the magic of Target delivered to your door. For Target Circle 3 60, we’re really excited to build on our strength and same day delivery since our acquisition of Shipt in 2017.
You will get the magic of Target delivered to your door in less than an hour. You’ll also have access to the Shipt marketplace of benefits. You will also have access to all of those deals and rewards and personalized perks as part of the base circle program. It’s just the beginning for us. That $49 is an introductory promotional price for Target Circle 360.
Brian Cornell: I just want to take this moment, and I hope many of our leaders back home are listening. And just thank the Circle team, the teams that have been working on this program for months and months, our tech teams have been supporting them and the entire effort that organization has put behind bringing this forward today. As you can tell, we are really excited about the future of Target Circle and think it’s going to be a major growth driver and deepen guest relevance and bring new consumers into the Target franchise.
Greg Melich: It’s Greg Melich with Evercore ISI. I had two questions. One is, Michael, could you just, you said Roundel will be up again, I think it was 20% last year. For guidance this year, are you thinking that offsets any pressure on credit and just tell us how credit is going? And then my other question goes back to traffic. Great to hear all the initiatives in the Target Circle. In the guidance, what are we thinking about with AUR and average ticket, given that it is a value focused consumer, we heard all the products that are under $10 and all this. So in that 0 to 2 comp, how much would traffic be up. Three while AUR is down, something like that?
Michael Fiddelke: So, if I start with the questions on the credit side of things, we’ve seen I think we’ve characterized it throughout the year, kind of an expected return to normal in a lot of those underlying credit metrics. And so, you’ve seen a little bit of softness year-over-year there that in 2023 was offset nicely and then some by the incredible growth we’ve seen in the Roundel business. And as a reminder, I think I said this twice in remarks, Roundel is both a little other revenue and a lot of gross margin. And so, it benefits two places to get to that $1.5 billion of value in total. But we’ve seen outsized growth there and we would expect that to continue this year. We’re really confident about our prospects to continue growing our Roundel business to the benefit of the guests that get strong engagement with all of those offers.
Another example of how the strategy fits together, the more engagement we have with Circle, the better we know our guests. The better we know our guests, the better we can serve them through Roundel. And so, we’re excited about what growth looks like there. Your second question, Greg, refresh my memory. Yes, we won’t break out ticket versus traffic. But the theme I’ll talk about that we’ve seen this year is a moderation of inflation, I think, but disinflation is the word of the quarter in retail. That’s a good thing for the consumer. You’ve heard us talk about that being one of the inputs to some share of wallet recovery on the discretionary side of things. And so, we’re pleased to see that ticket pressure because we think it’s a good thing for the U.S. consumer.
Edward Yruma: Edward Yruma, Piper Sandler. You’ve spent much of the last decade kind of opening atypical stores, small boxes, urban locations. And it sounds like you’re pivoting back to kind of traditional large boxes in in ostensibly suburban areas. We’d love to understand kind of what that what that small box portfolio looks like. Have you been pleased with the returns given some of the changes in the urban dynamic? And then as you look to these larger stores, how should we think about the role of food in some of these bigger boxes? Thanks.
