Target Corporation (TGT)’s Earnings Conference Call Transcript

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Matthew Fassler

Got it.  Then, finally, just in terms of thinking about the cash coast to you, that $500-600 million, that is the sum total of adjustments that we need to make to the cash balance as we at the net cat number, as we look to the end of 2015?

John J. Mulligan, Chief Financial Officer

Yes, I think that’s right.

Matthew Fassler

Okay, thank you so much.

John J. Mulligan, Chief Financial Officer

Thanks, Matt.

Operator

Your next question comes from the line of Peter Benedict.

Peter Benedict

Hey guys.  Just a traffic and average ticket.  It sounds like the traffic was good here in the 4th quarter.  Was average ticket up as you are seeing it?  Maybe talk about the difference in average ticket that you see when you get something online versus when you get a transaction in the store.  Thank you.

John J. Mulligan, Chief Financial Officer

We’ll give you the traffic and ticket stuff like we usually do when we release the results in February but I can tell you we are pleased with traffic.  Traffic was the primary driver here of the comp for the quarter.  We feel really good about that.  I’m sorry, Peter, what was the second half of your question?

Peter Benedict

John, how does the average ticket profile differ online versus in store?  Is it materially different?

John J. Mulligan, Chief Financial Officer

Yes, it is.  It’s roughly two times the average ticket we see in the stores.  Now, I will tell you, the ticket drifts down a little bit during the holidays online but it’s still roughly double what we see in the rest of the store, so yes materially different.

Peter Benedict

Thank you.  Last, just beyond the promotional tone in the quarter versus the expectation, it’s clear that the comps were a little better than what you guys had, the profits were a little bit better, I’m just trying to understand was that a gross margin dynamic or was it more on the expense side?

Brian Cornell, Chairman and Chief Executive Officer

Peter, I think it was a very competitive holiday season.  One of the things that we feel very good about and we’ll talk much more about in February during the earnings call, is the mix of our business during the holidays.  I think you are seeing that flow into the updated EPS guidance we’ve provided today. We feel very good about the mix and the performance in categories like apparel and home and the strength that we showed throughout the holiday and into January in those very important signature categories.  An aggressive promotional period, but we feel very good about the mix of our business and how we performed and that is certainly translating into improved EPS for the quarter.

Peter Benedict

Perfect.  Thanks, Brian.

Brian Cornell, Chairman and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Robby Ohmes.

Robby Ohmes

Thanks guys.  Just a quick question, Brian and John, could you comment on now that you’ve pre-announced the 4th quarter, I get to a sort of US operating margin in the 7% ish type range.  Can you talk about what the barriers to getting that up to more historical levels, either for the 4th quarter and/or for the year?  Thanks.

John J. Mulligan, Chief Financial Officer

Sure.  I’ll start and conclude and Brian will jump in.  Our view of the EBIT margin rate probably for the US segment a little higher than 7%.  I think there is work to do to continue to go back towards where we were historically but one of the thing again that we want to lay for you guys in March is what is the long term earning potential here as we think about there’s a lot of puts and takes, the digital business growing faster, our ability to improve the profitability of the digital business using things like store fulfillment, store shipping, store pickup, all of the those help us balance inventories.  That is the view we want to provide you in March and we’ll go through this in quite a bit of detail.

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