Target Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation third quarter earnings release conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will invite you to participate in a question and answer session. At the close of prepared remarks, we will open the queue for the Q&A session. At that time, if you have a question, you will need to press star 1 on your telephone. As a reminder, this conference is being recorded Wednesday, November 17th, 2021. I would now like to turn the conference over to Mr. John Hulbert, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us on our third quarter 2021 earnings conference call. On the line with me today are Brian Cornell, Chairman and Chief Executive Officer, Christina Hennington, Chief Growth Officer, John Mulligan, Chief Operating Officer, and Michael Fidelke, Chief Financial Officer. In a few moments, Brian, Christina, John, and Michael will provide their perspective on our third quarter performance and our outlook and priorities for the fourth quarter and beyond. Following the remarks, we'll open the phone lines for a question and answer session. This morning, we're joined on this conference call by investors and others who are listening to our comments via webcast. Following the call, Michael and I will be available to answer your follow-up questions. And finally, as a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainties, the most important of which are described in our most recently filed 10-K. Also in these remarks, we refer to non-GAAP financial measures, including adjusted earnings per share. Reconciliations of all non-GAAP numbers to the most directly comparable GAAP number are included in this morning's press release, which is posted on our Investor Relations website. With that, I'll turn it over to Brian for his thoughts on the quarter and his perspective on our outlook.

Brian. Thanks, John. And good morning, everyone. Our third quarter results are consistent with what our team has been delivering quarter after quarter for years now. And they continue to demonstrate the extraordinary level of engagement we're seeing from our guests, both with our brand and with our team. In the third quarter, Comparable sales expanded 12.7%, on top of a nearly 21% increase one year ago. Consistent with recent quarters, traffic was the primary driver of this year's growth, as our guests increasingly turned to Target to serve their wants and needs. Across our sales channels, store sales were the primary growth driver this quarter, while same-day services propelled our digital growth. Since the third quarter of 2019, prior to the pandemic, Q3 store sales have expanded by $3.8 billion, while digital sales have increased another $3.1 billion. This provides a vivid demonstration of the flexibility of our operating model to serve our guests, no matter how they choose to shop. All of these results reflect a level of guest engagement far beyond what many would have imagined a few years ago. when we started making huge investments throughout our business, in our stores, new brands, same day services, supply chain, and importantly, our team. Back then, Target was already known for a world-class team, a differentiated shopping experience, unique assortment, and an iconic brand. But we knew there was much more to do. We saw a clear opportunity to build on that solid foundation. finding new ways to enhance our capabilities while strengthening the bond with both our team and our guests. And today, those bonds have never been stronger. As I mentioned, within our digital capabilities, more and more of our guests are trying and embracing our industry-leading same-day services. Third-quarter sales through these services have expanded by nearly 400%, or $2 billion, over the last two years. Through the first three quarters of the year, Sales through these services have grown by more than $6 billion since 2019, a number larger than the total sales of many prominent retailers. Beyond fulfillment capabilities, our balanced multi-category assortment is another key driver of flexibility and resiliency within our business model. The breadth of our assortment, both within and across our core categories, allows our team to quickly and seamlessly serve our guests. even when their wants and needs are changing rapidly. In the third quarter, we saw consistent, strong growth across our entire merchandising portfolio. More specifically, all five of our core merchandise categories saw double digit growth in the quarter, ranging from the low double digits to the mid-teens, resulting in strong market share gains on top of unprecedented share growth in 2020. And we're not slowing down in our efforts to serve our guests. We continue to invest in key partnerships that enhance our assortment and experience, including the opening of more than 100 Ulta Beauty Shop and Shops and our recent announcement that we're doubling the number of enhanced Apple experiences in electronics. Christina will provide more details in a few minutes. In our conference call three months ago, we outlined multiple actions we're taking to support our inventory and in-stops. Given the supply chain challenges that have emerged throughout the pandemic, As you know, those pressures only intensified in the third quarter, and our team has done an outstanding job in the face of these challenges, identifying bottlenecks and finding solutions to keep inventory flowing throughout our network. While those efforts drove some incremental costs in the quarter, we view them as a continuation of the many productive long-term investments we're making in our business in support of the trust we have built with our guests, and obviously, our guests responded to these efforts with strong third quarter traffic, which we expect will continue in Q4 and beyond. Beyond our supply chain, the team has done a great job navigating through broader cost pressures, as many vendors have raised wholesale prices to accommodate higher costs within their businesses. As our team faced these cost increases, they maintained a guest-first approach and a focus on value while managing overall profitability as well. As a result, our business delivered strong third quarter financial results from the top to the bottom of the P&L, while building on the trust we've established with our guests. So I want to pause and acknowledge the incredible effort of our teams across the company, from headquarters to stores, from our merchandising, distribution, and transportation teams to our sourcing offices around the world. Because of your agility, energy, and selfless collaboration, Target delivered for our guests and our shareholders in the third quarter. And as we enter the fourth quarter and ramp up for the peak holiday season, we're really well positioned to continue delivering for all of our stakeholders and close out an already amazing year. I want to thank you for everything you do. So the theme you'll hear in today's call is that we're excited and ready for the holiday season. We know our guests are excited to celebrate. following a year in 2020 when many families stayed apart due to safety concerns. This year, our guests have eagerly started their holiday shopping as they respond to our holiday promotions, low price guarantees, and our ongoing efforts to provide ease, reliability, safety, and value across every shopping experience. And importantly, we've taken multiple actions to support our guests during the holiday season and beyond. On top of the investments in inventory, In stocks and value I outlined earlier, we've announced that we're hiring 30,000 new year-round supply chain team members to support our current and expected growth. In our stores, we're providing our team members with more pay, flexibility, and reliable hours this holiday season, offering more than 5 million additional hours to our existing team, an investment of more than $75 million over the holiday season. To supplement the additional hours from our existing team, we're hiring another 100,000 seasonal team members throughout the country, many of whom will have an opportunity to stay on with Target after the holidays. And importantly, during a season in which our guests are busier than any other time of the year, our merchandising and marketing teams are focused on cutting through the clutter. That means we're keeping our marketing messages and promotions simple and our operations flexible to offer an easy and reliable experience for our guests. no matter how they choose to shop. And finally, while Target has already had an outstanding year, our team is looking ahead and not slowing down. We're continuing to invest in our future, in our new stores and existing stores, our supply chain and fulfillment capabilities, in our owned and national brands, and the safety and well-being of our team. We're investing in Target Forward, an ambitious commitment to co-create an equitable and regenerative future. together with our guests, partners, and communities. All of these efforts are focused on advancing Target's leadership position within retail, taking a guest-led approach to everything we do, and supporting our company values to care, grow, and win together. I have the privilege of working alongside this great team as they bring our values to life every day across every part of the company. I'm endlessly grateful for their passionate support of our guests, of our brand, end for each other. With that, I'll turn the call over to Christina.