Target Corporation

Good morning, everyone, and welcome to our 2024 Financial Community Meeting. I'd like to start by welcoming the investors and others who are attending this meeting in person with us. And of course, we're happy that many, many more of you are attending the meeting remotely. Brian's going to kick off the meeting in a minute, but first I have a couple of important disclosures. First, any forward-looking statements that we make this morning are subject to risks and uncertainties, the most important of which are described in our SEC filings. And second, in today's remarks, we refer to non-GAAP financial measures, including adjusted earnings per share. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measure are included in our financial press releases, financial presentations, and SEC filings, which are posted on our investor relations website. With that, I'll turn it over to Brian to get things started.

Good morning, and thanks for joining us. We're looking forward to providing our perspective on the results we shared this morning. And I can't wait for you to hear from several of our top leaders, including Christina Hennington, Rick Gomez, Jill Sando, Kara Sylvester, and Michael Fidelke. While Michael still has his hands firmly on the wheel as CFO, this is his first FCM in his new role as our Chief Operating Officer. I can tell you we're looking forward to discussing Target's growth horizon and how it transcends volatility over any particular quarter or year. Our preference is always to think long term. It's why for years now, we've emphasized the durability of our business model. And many of you have validated that orientation in the conversations we've had with you over the years. So our session today will focus squarely on the long-term thinking that has driven top and bottom line growth over the last decade and positions us for continued profitable growth in the years ahead. You might be asking, why focus on decades? In part, because that feels like a long enough time frame to be meaningful. But it's also because we look at longer horizons when evaluating growth potential for investments, like new stores, supply chain, and other assets. And it's good to ask, what else would need to be true for those investments to succeed? So we'll analyze our 2023 performance in that context. We'll provide insights on how our 24 plans and guidance fit into that vision. and we'll spend time outlining our plan for sustained growth as well as our capacity to react to unforeseen realities. Both have been important over the last 10 years. By designing for steady growth before 2020, we were positioned to absorb exponential growth during a demand boom that none of us could have anticipated. Even now, the country and the retail industry are in a prolonged post-pandemic return to normal. which has been nearly as unpredictable as a pandemic itself from a consumer, social, political, and economic perspective. By staying agile as a team and by continuously refining our approach and innovating, we've been able to navigate this timeframe. In fact, if you think back to our earlier algorithms and long-range plans, we're well ahead of where we believed we'd be just a few short years ago. At the same time, we recognize this is a unique moment to clarify our roadmap for growth. Let me be really clear. Our goal is to recapture profitable sales, traffic, and market share gains by expanding what makes Target different and better for our guests, amplifying our appeal to consumers beyond our existing guest base. and reinforcing the innovation and investment that drive durable and consistent results for our business and shareholders. So I might start today with the elements of the overall strategy that have been staples all along and will continue to be staples going forward. Starting with our stores, the most visible and tangible proof of our long-term planning and investment. When I arrived at Target, we had just over 1,800 stores that didn't quite cover all 50 states. Since then, we've built more than 200 new stores. We've invested in more than 1,200 existing locations through remodels and partnerships. And our store footprint has expanded to cover the entire US. While retail is decades in the new digital era, on any given day, two-thirds to three-quarters of all U.S. shopping is still done in stores. And thanks to the Storz's Hub model we invented in the last decade, nearly all target shopping, including our significant digital penetration growth and our $30-plus billion in revenue growth, was made possible by our stores. So if you think store shopping will wind down any time in the next decade, we'll politely disagree on that point once again. Over the next decade, we expect to open more than 300 new, mostly full-size stores, adding billions of dollars in incremental growth. We'll continue to remodel stores with plans to invest in the vast majority of our nearly 2,000 stores in the next 10 years. We'll also continue to invest in our supply chain and technology. In less than 10 years, we've created, acquired, and constantly advanced sortation centers, upstream distribution centers, food distribution centers, and a steady stream of replenishment, technology, and logistics innovation. At least 10 additional supply chain facilities are in the pipeline and will be operating within the next decade. Underpinning all of this is our longstanding and ongoing investment in technology. This includes a leading team of engineers, data scientists, and product managers focused on further integrating AI and machine learning and driving early adoption of generative AI, all geared towards making it easier for our team to best serve our guests across both the digital and physical assets. Take same-day fulfillment. Our initial investments gave us an early lead in same-day. Today, same-day is much more competitive. But continued innovation and better integration with our target ecosystem means we're ready to expand same-day delivery for our guests while also building on our next-day capabilities. You'll hear more about this from Christina and Kara, including big moves we're making with Target Circle, a program that didn't exist 10 years ago, but today has well over 100 million members. Kara will talk about the incredible progress the team has made with Target Circle and where we're headed next. For now, I'll just emphasize the focus we're placing on unlimited same-day delivery. through a new membership feature called Target Circle 360, which is launching next month. Here's the takeaway. Without huge investments in stores, supply chain, and tech, there is no drive-up or order pickup, which were monumental growth drivers during COVID and today. And without stores, supply chain, and tech, and providers like UPS, FedEx, and Shipt, There is no home delivery, which is ready for a step change in guest acquisition, satisfaction, and loyalty. As we move forward, we'll leverage our 2017 acquisition tip to help us build unmistakable recognition for Target same-day delivery. Target's Rondell advertising business is another example of something that didn't exist 10 years ago. But today, it's the fastest growing contributor to the other revenue line on our P&L. In a crowded field of similar offerings, we're punching way above our weight, relative to the scale of our retail footprint. The unique relationship we have with our guests and the value our ad business unlocks for the brands that advertise with us are at the heart of Rondell's performance to date. And since our roadmap for growth focuses on strengthening our relationship with guests and converting more consumers into guests, we see tremendous growth potential for Rondell for years to come. There are a number of other points of continuity and cohesion in our strategy, but for this intro, I'll focus on just one more. That's the strength of our multi-category portfolio and the balance and stability offered by our mix of frequency and discretionary categories. The way we bring those categories to consumers is a standout strength we'll continue to build on. The curation, the authority and trend in newness, and the competitive advantage and assortment built around beloved national brands, world-class brand partnerships, and a fleet of own brands that drives about a third of our business and puts us in a league of our own. Ten years ago, our Starbucks and Disney collaborations were strong and growing. and we were building our partnership with Apple. Those three relationships continued to grow throughout this timeframe, and we added and expanded outstanding partnerships with CVS, Levi's, Hearth & Hand with Magnolia, and Ulta Beauty at Target that drive traffic, sales, and loyalty. This element of our strategy has been a bright part of our future. It will continue to play a big role in the decade ahead. And our team's expertise in product design and development and brand creation and management, they're towering strengths that really fuel our own brand portfolio. Brands like Cat & Jack, Threshold, Good & Gather, they bring millions of guests to Target. They're three of the 11 brands that generate a billion dollars or more in sales each year, a lineup that looked much more modest a decade ago. and they lead a roster of target brands that contribute to more than $30 billion in annual sales, plus outstanding margins for our bottom line. A steady cadence of brand launches like Figme last year and deal-worthy last month help keep our edges sharp on the newness, discovery, and affordability consumers crave in the market and find at Target. I believe our own brand capabilities will only become more prominent in the decade ahead. which is why we'll spend time this morning taking you behind the scenes on where we're headed with our own brands. Another area where we'll continue to excel is our commitment to our team. In the last decade, we've taken a leadership position in both pay and benefits, and learning and development, and we'll continue to be a pacesetter as we ensure our team has all the support they need to take care of our guests, themselves, and their families. So as we start to pull all this together, you might be saying, Brian, clearly Target has some strong assets and advantages and cultivated a great team. But what does that mean for 2024 or 2034? I can tell you our team has been humble enough to ask that and many other related questions. We're not taking anything for granted. There's no complacency about our past success. And while we recognize that a rebound in discretionary spending will favor our brand and our business, we're not waiting for economic changes or a different consumer outlook. I've been on the road nonstop since November, walking our stores, distribution floors. And I can tell you, the energy and initiative of our frontline team, what they're bringing to our business this year simply can't be conveyed on the slides behind me. This team has shifted to their front foot, and they're changing the momentum of our business, which is why we've seen sequential improvement from Q2 to Q3 to Q4. Discretionary declines moderated. Traffic trends rebounded. Our Q4 comps were the high end of our guidance. We drove major gains in efficiency and outperformed our guidance of a billion dollars in full year profit growth. Recognizing that we needed to clear the volatility and the challenges the last two years, our team buckled down and said, go time. But in recent weeks, I've seen the spelling expand by two letters, and I've seen the ambition expand even more than that. What our team is talking about now is grow time. That's the mantra I hear bubbling up from the front line, all with a commitment to recapturing top-line growth traffic and share gains in the years immediately ahead. That starts with ensuring our team can deliver for our guests each and every day. A major step is coming soon with the upgrades we're launching in Target Circle. Upgrades that will make it even easier to unlock the best of Target. At the same time, a focused list of priorities, along with a continued concentration on retail fundamentals, like affordability and in-stock reliability, We'll make our guest experience easy and dependable in every interaction. We'll continue to focus on delighting our guests with the products, partnerships, and value that make Target feel both elevated and accessible. The hallmarks here are expert curation, style and trend authority, newness, great design, and incredible value. We'll also accelerate our progress in omnichannel discovery. We've all seen how shopping is changing into an always-on activity that's integrated across several aspects of our lives, well beyond physical and digital stores. Discovery and inspiration has always been a hallmark of our shopping experience. We started by providing inspiration and easy access at our stores with no barriers between impulse and purchase. But we see an opportunity to do even more, to think differently about the intersection of physical, digital, and social, so consumers can discover target products wherever they're spending their time. So we hear from Christina and Kara this morning, we're going to keep building our capabilities in omnichannel discovery, since we see this as an advantage that's ownable over our retail rivals. So I've thrown a lot on the table, and there's more definition and detail to come. Having tackled both industry and in-house challenges over the last couple of years, I can tell you I'm not satisfied. And our team is not satisfied with our recent top-line results. We wanted to be even further along than we are today. But we're confident in our path forward, and we're eager to share what's next. Target is not just a bigger company than it was 10 years ago. It's stronger, healthier, and more resilient. a company that's flipping the switch from go time to grow time. Over the next hour or so, I'll ask Christina, Rick, Jill, Kara, and Michael to add some texture to those claims. Thanks again for being here. Christina, over to you.

Thanks, Brian, and good morning, everyone. Continuing on what you've heard so far this morning, I want to emphasize two key themes. First, we build a foundation for long-term growth with a strategy that is both unique to Target and durable. And second, we're committed to building on that foundation for years to come. So this morning, I'll walk through the ways we're leaning into our core strengths, capabilities, and differentiators we've built and refined over time to meet consumers where they are and drive long-term market share gains, sales growth, and profitability. I want to start with an outlook on the consumer, which remains mixed. While there are some encouraging signs in the economy, there are also stubborn pressures impacting families and retails. Consumers say they still feel stretched, they are balancing a lot, and having to make trade-offs to meet their needs of their families, while sprinkling in the occasional luxury. And yet their affinity for style and newness, plus early signs of disinflation, contributed to a sequential uptick in discretionary category performance over the last two quarters, something we aim to build on and accelerate. At the same time, we expect consumers will remain highly value-conscious, hunting for great promotions and seeking comprehensive value in their purchases. Consumers are also craving stability with small doses of everyday joy. After the volatility of the global pandemic, they're now coping with geopolitical tensions, social and political divisiveness, and uncertainty around personal finances. This all demonstrates that our purpose to help all families discover the joy of everyday life remains incredibly relevant. And the assets and capabilities we've cultivated over time, like new and remodeled stores, investments in digital shopping, supply chain and loyalty, they've all increased consumers' view of us as an omnichannel powerhouse. Those enhanced strengths were built on long-established differentiators like design, curation, a well-balanced multi-category assortment, and outstanding value. And those are just some of the elements we'll build upon and amplify through our strategy as we move through 2024 and beyond. Think about the opportunities around something like omnichannel discovery. Designing experiences that support discovery has always been one of our strengths. Our stores are famous, or perhaps infamous, for inspiring guests to discover more than they expected. Millions of guests have experienced the joy of entering a Target store for a few items and end up leaving with extra treasures they didn't anticipate. This is a key aspect of how we set ourselves apart from our competitors. and something we'll continue to build on, regardless of where or how the shopping trip begins. After all, shopping looks very different now than it did a few years ago. It's no longer a point-in-time transactional event. Consumers today are constantly taking in new information and seeking inspiration from influencers and trendsetters. Target is already a trend shaper, but there's an opportunity to accelerate this further on both the platforms we own and on external platforms like TikTok and Instagram. Carol will share more specifics later, so I'll just say that our team's energy and engagement in building these discovery-driven experiences are truly inspiring. It's indicative of an ambition to meet consumers where they are, so that wherever and however a shopping journey starts, the path leads back to target as the destination. We have long been known for delighting guests through a carefully curated set of products and partnerships. We believe that a well-curated assortment isn't just good for managing inventory. It can be additive to the shopping experience too. Here's an extreme example. Imagine a restaurant with a seemingly infinite menu, with countless of pages of every type of cuisine and no cohesive point of view. Endless choice creates decision fatigue, taking away from an otherwise joyful outing. Sometimes, less is truly more. We make choices that allow us to offer a menu of products designing to serve a wide variety of guests' needs, helping to guide their shopping journey while ensuring a joyful and productive trip. Now, to be clear, this does take balance. We don't offer an endless aisle, but we do offer a compelling range of choices and price points throughout our assortment. We think of our assortment like a three-legged stool. It works best when we develop own brands that offer unmatched value and quality, provide the best industry-leading national brands, and cultivate partnerships that enhance our assortment. So let's start with our own brands. We've invested heavily over the past several years to continue to innovate and differentiate through our own brands, and we're not slowing down. Across the portfolio, we're launching new brands and expanding upon those already loved by our guests. In fact, own brands are so core to who we are, following my remarks, I've asked Jill Sando and Rick Gomez to join me and highlight how our unique skills and assets allow us to sustain and grow this massive own brand portfolio. And it's because of these differentiated end-to-end capabilities that we're able to rapidly scale affordable own brands without compromising quality. These capabilities also make us an attractive partner to some of the greatest designers around. Recently, we announced an upcoming partnership with iconic fashion designer Diane von Furstenberg. This collection will feature the signature patterns and colors that DVF is known for, along with her iconic wrap dresses. With a multi-generational appeal and offerings in extended sizes, as well as options for kids, this collection features more than 200 items spanning apparel, accessories, beauty, and home, combining timeless fashion with only at Target prices and value. Our second priority is to extend our assortment with the best national brand consumers want from Target. Stanley Drinkware is a timely example. Well before it became a cultural moment, we were early to recognize this brand's potential, allowing us to get a big jump on this trend. We secured great allocations across the portfolio and partnered with Stanley to create exclusive colors for our guests, both in the core line and through our only-at-Target brand, Hearth & Hand with Magnolia. Similarly, celebrity-founded beauty brands are taking over social media, and our guests say they want to find them at Target. That's why we partnered with Ashley Tisdale on our exclusive to Target launch of Being Frenchie, a line of personal care products powered by mood-boosting scents and self-care rituals. It's also why we've recently added Lemmy, Kourtney Kardashian Barker's new line of vitamin and botanical supplements to our assortment. These trending brands add to the credibility we've built in the beauty space and will continue to support our leadership role in these categories. Our third priority is to round out our assortment with a focus on partnerships, which provide deeper expertise and brand recognition for our guests. We've had tremendous success attracting and cultivating these unique collaborations, and in the years ahead, we expect they'll play an even bigger role, given the incrementality they've delivered. We continue to expand the presence of Ulta Beauty at Target, Levi's, Apple, Disney, and more, bringing industry-leading offerings and continued differentiation for Target. And last year, we launched a new partnership with Kendra Scott, and our guests couldn't get enough. These colorful jewelry and accessory pieces not only look good, but they do good too. With a shared vision for philanthropy, this collaboration shines bright on multiple levels. Expect plenty of new offerings in this partnership in 2024 and for years to come. Surrounding all our assortment choices is an unwavering focus on value, which starts with price but encompasses so much more. We continue to offer fantastic everyday low prices, and we're focused on clearly and effectively communicating our value proposition. One way we've done this is by simplifying our end caps to feature single price points and promotions. This allows us to clarify the incredible value we offer while helping our guests to effortlessly recognize the value. No games, no confusion. Additionally, our efficiency efforts and the greater size and scale we've achieved in the recent years have allowed us to further sharpen price points across our assortment. We continuously find ways to add quality and newness to our own brand portfolio without increasing prices. And of course, our focus on retail fundamentals serves as a through line supporting guests on their shopping journey before, during, and after they make a purchase. These efforts are always on focus, and we continue to deliver a unique blend of physical and digital shopping. We'll further leverage our fleet of nearly 2,000 stores to serve as inspiring shopping destinations and as fulfillment hubs for digital orders. And in the same way we focus on our store and digital assets, we continually invest in our team. We take care of our team so they can take care of our guests. From providing world-class service to ensuring we're in stock, we want our guests to feel confident that they'll be cared for and find what they seek on every target run. In fact, it was the dedication of our team that allowed us to maintain leaner, healthier inventory levels last year, which positions us well as we enter a new year. This led to stronger profit outcomes, improved in-stocks, and perhaps most importantly, increased flexibility, allowing us to react quickly to changing trends. We're also using technology to reduce costs, increase delivery speed, and improve consistency in our operations. Years ago, we took a bold stance when we outlined our plans to invest in stores at a time when the role of brick and mortar was in question. investing to automate upstream replenishment and optimize last mile delivery, we developed new ways to increase our delivery speed and reduce operating costs. These technology investments, which increased through the throughput of our existing store locations, helped to quiet the store versus digital debate as we pioneered the stores as hub strategy in support of the omni-channel services we provide. We're excited about the impact of continued advancements in technology, like generative AI, and the additive ways these tools will empower our teams. But we also want to make sure that human connection remains at the center of the target experience. This is why we'll continue to invest in technology while never losing sight of what makes life rich, the relationships and interactions we have with one another. Just as we uniquely saw the importance of combining physical stores and digital capabilities, we want to make sure we lean into emerging technologies and focus on placing them in the hands of our incredible target team. And finally, we'll continue to invest in technology to support segmentation and personalization. We love it when guests walk into one of our nearly 2,000 locations and says, this is my target. In the same way, we want to design an experience in which a guest places an item in their cart and says, this was made just for me. This balance of scale and personalization is unique in retail, something we do well and can continue to build on. After all, we have an enviable consumer base that is highly engaged with our brand, and they shop us frequently across our multi-category assortment, allowing us to gain invaluable insights across nearly all retail segments, not just one or two. It's also why our Roundel advertising business is so powerful. We're constantly listening and learning from our guest space, allowing us to offer rich insights to our vendors, offer compelling and personalized advertisements to our guests, and grow this aspect of the business in meaningful and lasting ways. You'll hear more from Kara on enhancements to our loyalty ecosystem, Roundel's growing reach, and our digital experience aimed at enhancing digital discovery. It's one thing to hear about these strategic initiatives, and it's another thing to see them in action. I'm often on the road to witness firsthand how our guests are experiencing joy through our assortment, shopping experience, and our team's dedication in serving them every day. On a recent trip to Orlando, I visited one of our smaller stores near Disney World. Our segmentation and assortment planning work let us focus on serving two very distinct segments in this market. One segment consists of the many Disney cast members who utilize this Target store to meet their everyday wants and needs on their way to and from work. The other segment is comprised of families who are visiting the area, looking to get everything they need to support their family vacations. These guest segments have very different target-run missions, and yet we're able to provide a cohesive experience that satisfies both of them. Similarly, a few weeks back, I traveled to Texas with members of my beauty and apparel teams. We heard directly from guests about the love of finding all their styling needs under one roof, from cosmetics and skincare items in Ulta Beauty, to apparel assortments only available at Target, to bold jewelry pieces from Kendra Scott. These powerhouse brands have all come together to offer consumers at this store a sum that is greater than the individual parts. On another trip, I visited a store in Mississippi where we'd recently completed a wall-to-wall remodel. We elevated the shopping experience, refreshed the assortment, and even added a Starbucks, the first one ever in this area. Our local team is incredibly proud that their Target store has become the social hub of this tight-knit community. These examples illustrate the interplay of our strategies, assortment, experience, and capabilities. showing how we're positioning Target to play a unique role in American retail. So now, before I turn things over to Kara, I'm going to invite Jill and Rick to the stage for a discussion on the power of Target's own brand capabilities and how they help Target stand out in a crowded marketplace.

Good morning. I am Jill Sando, and I lead the apparel and accessories home in Hardline's merchandising organization. I've been with Target for over 25 years. The majority of that time has been in merchandising, running different businesses across our discretionary portfolio. I've also spent some time in planning and help stand up our product design and development capabilities for our non-apparel businesses.

Hello, good morning. I'm Rick Gomez. I lead Target's food, essentials, and beauty businesses. I've had the opportunity to lead a variety of different disciplines at Target, including marketing, digital, strategy. And then before Target, I spent over 20 years working in the CPG industry, developing, launching, and managing a bunch of different food and beverage brands.

We're happy to have you here. Okay, our OMRAM portfolio on its own would be a Fortune 100 company, more than $30 billion in sales, and nearly one-third of our total revenue, and even more of our gross margin. That's because we have amazing capabilities that allow us to produce brands our guests genuinely love. Jill, let's start with one I know you're particularly excited about, a new brand in toys called Gigglescape.

Kids-related categories are huge for Target, and toys plays a key role in keeping Target relevant with families. National brands like Lego and exclusive brands like Our Generation have made Target one of the biggest toy retailers in America. And the addition of Gigglescape gives consumers one more, only at Target, reason to shop toys. Gigglescape is important for a few reasons. It's consumer-centric. It's our first own brand designed specifically for Generation Alpha and their unique needs. It's filling white space in our own brand assortment, and it has us poised to drive growth in a high-margin category. And Gigglescape is priced to be accessible to all families. Just a few weeks ago, we launched our stuffed animals. Most are priced under $10, and soon we'll launch books, puzzles, and toys, with all items in our spring assortment priced under $20. That kind of pricing makes it perfect for gifts, and for the spur-of-the-moment purchases because your child is being good today. This is a brand that makes our toys department a destination even when your Target run was inspired by something else and makes Target an even stronger destination for toys. I love them. They're super cute.

Okay, Rick, our frequency categories play such a crucial role in driving trips. And with Up and Up and Dealworthy, we're giving our guests new reasons to choose Target. Can you tell us about that?

Yes. Well, as you know, Christina, we invest a lot of time listening to consumers to better understand their needs. And one of the themes that we are consistently hearing is the need for value and affordability. So to address this consumer need, we are relaunching Up and Up and introducing Dealworthy. Up and Up is one of Target's most popular brands, delivering nearly $3 billion in sales, offering over 2,000 everyday items at affordable prices. And now we are making it even bigger and even better. We have developed product improvements across 40% of the line. We are also introducing hundreds of new items, and we are offering great prices, with the average item priced under $7. We're also launching Dealworthy. It's our new low-priced brand with items across the store, ranging from socks, laundry detergent, phone charges, and I can't stress enough what a great value Dealworthy will be. Most items will be priced under $10, and some of those electronics items will be priced 50% lower than what was previously offered at Target. Dealworthy will be the lowest priced item in each category, offering absolutely incredible value.

Indeed, our frequency businesses are an important part of driving trips to Target, meeting guests' critical needs. But our discretionaries have the opportunity, categories have the opportunity to do that as well. Jill, can you tell us a little bit about Kat & Jack?

Yes. Kids Apparel is another area where we have outsized market share, and Kat & Jack is a big part of that. This is the kids brand that we launched in 2016. Today, it's a $3 billion brand, the biggest kids brand in America. To put that into perspective, consider this. We sell well over 300 million units of Cat & Jack a year, which comes out to about eight Cat & Jack items for every child in America under the age of 12. This is part of a discretionary category, but Cat & Jack is a brand that drives repeat business for Target because of great prices and great quality, which parents love, and great design that kids love. And when you think about kids' style, the success of Cat & Jack pays dividends across our portfolio. It drives trips and sales across the store during key moments like back to school and throughout the year as kids grow into new sizes. Cat & Jack also complements brands like Wild Fable. That's our junior's brand, worn by millions of teens and tweens who started in Cat & Jack. It's one of the biggest juniors brands in the country and one we just extended into Swim. Wild Fable is a great brand on its own, one fueled by our speed to trend in a very dynamic category, but it also has an important advantage since families are already in the habit of turning to Target for clothes for their kids.

Thank you, Jill. Rick, let's switch gears a little bit and talk about Good & Gather because that's a brand that's helped us reimagine our grocery space and experience and really build our credibility in food.

Yeah, absolutely. I'd love to talk about food and beverage. Our food and beverage business delivers over $20 billion in sales, and that's up $8 billion in sales since 2019. That's because over the last few years, we've been making big strides in improving the food and beverage experience. I like to say that we have gone from being a retailer that just sells food to a retailer that truly celebrates food. And in doing that, we have made Target a destination for food. Now, Good & Gather has played a key role in that. At nearly $4 billion in sales, Good & Gather delivers a great value proposition, delicious products that the whole family will enjoy, high-quality ingredients with no artificial colors, no artificial flavors, no high fructose corn syrup, and importantly, great pricing with most items under $5. and we're not done growing the Good & Gather brand. Last fall, we expanded Good & Gather into new incremental spaces that are important to our guests, like Good & Gather Baby and Toddler, creating another go-to target, another go-to category for parents with young children at Target.

Well, it's abundantly clear that our guests rely on our own brands. Jill, you've been a part of these launches for so many years in your career. What makes us a leader in this space?

We have unrivaled design capabilities, amazing talent across our team, hundreds of patents. It is no exaggeration to say that Target pioneered cheap chic. And what we're doing is so hard to replicate because we didn't decide to make a play and own brands five or even 10 years ago. We've been doing this for decades. We've had an in-house sourcing capability for 25 years now. Today it spans 20 offices across 14 countries. Because we own our end-to-end sourcing business, we control our own destiny when you think about issues like country of production and raw material cost. We're more cost-effective with far fewer intermediaries in our network, which allows us to grow our bottom line even as we pass savings on to our guests. We can adapt quickly to emerging trends, which keeps us relevant. And we're able to pursue bold sustainability goals, which is important to driving growth by delivering on something that matters so much to millions of consumers. And those sustainability goals will also help ensure both the resiliency of our business model through responsible stewardship of the resources that we rely on and our ability to deliver the quality that our guests rely on.

And these capabilities, they really do set Target apart, especially considering the scale at which we operate, delivering a steady drumbeat of newness to consumers. You know, in my previous role in the CPG industry, it was a big year if we launched a few dozen new products. but for our food scientists, that's a couple weeks worth of work. In food and beverage alone this year, we'll add hundreds of new items to Good & Gather and Favorite Day, and that's on top of the hundreds of new items that we launched last year. We are delivering innovation at scale that is unmatched by others.

Well, our capabilities certainly are first rate, but that human touch fueled by the power of insights can't be stressed enough.

That's right. When we designed All In Motion, our performance brand, the first thing that we did was to engage with 15,000 consumers. We talked to fitness coaches. We attended dozens of workout classes. Because if you're designing for the consumer, it starts with listening to the consumer. And we're not just consumer-led when we're launching a product. We're consumer-led in how we continue to grow and develop our own brands. because you can't mistake performance for potential. Cat and Jack has been a runaway success, but we also learned through listening that we had opportunities to make the brand more appealing to more guests. Among other things, that led to the adaptive items we created to help all kids look and feel their best, and the expansions we made to our dressy and mid-dressy assortment, giving families more reasons to choose Cat and Jack and Target.

Consumer Insight has also helped to continue to develop and grow Favorite Day. We launched the brand during the pandemic, and we've seen it drive trips, build baskets, delivering double-digit growth year after year. So as food and beverage has become a go-to category for Target during the holidays, we've expanded the role of Favorite Day to offer key seasonal items. You saw that in November and December with gingerbread kits, hot cocoa bombs, a huge range of snack mixes. And just a few weeks ago, Favorite Day was front and center for Valentine's Day. And we'll continue to expand Favorite Day into those big seasonal moments that are so important to our guests and important to keeping Target relevant.

Well, Jill, this leads to the enhanced approach we take into brand management, including a team under your leadership.

We launched our brand management capability years ago and created an end-to-end process to successfully launch own brands. And that has enabled an accelerated rollout of own brands over the past five years. And we've been evolving our capabilities and are now operating more like a CPG company. The research, the market analysis, looking hard at the white space. That's shaped our decision-making around existing brands, like prioritizing Threshold as our flagship home brand and then offering a range of styles within it. That's critical because Target is one of the biggest home retailers in the country, and this is making it easier for our consumers to navigate our assortment. And our brand management work was critical to the success of our new kitchenware brand, Figment, which debuted last fall. This isn't the first time selling kitchenware as part of an own brand, but it is our first own brand devoted solely to kitchenware. And our guests love it. Baskets with Figment items are 25% larger than our previous own brand offering. And Figment was one of several factors that helped us accelerate our kitchenware business by more than 500 basis points between Q3 and Q4. taking us from a negative comp to a positive comp. Guests respond to newness and innovation and great design, and Figment is just one example of that.

There's been a lot of work in food and beverage to sharpen the focus of our brand portfolio. The launch of a flagship brand, Good & Gather, was the first step. We focused Market Pantry on family favorites at our most affordable prices. And we've also retired our previous snack and dessert brand, Archer Farms, and replaced it with Favorite Day, a brand with a much stronger identity around indulgent treats for the whole family. All of this helps Target make consumer-centric decisions about our assortment, like the addition of 50 new F&B items for Easter and dozens more that we're launching just in time for the summer season, including a favorite day soda. Now, it sounds simple, but the thoughtful, deliberate, holistic approach to designing, launching, and managing our brands, it's the difference between rolling out catch-all brands and the difference between that and building brands that consumers love because we're meeting their needs in a really meaningful way.

Well, thank you both. I love that. And that's the perfect note to close on, consumer centricity. That's a theme running through everything we've covered today. New brands like Gigglescape, Figment, and Dealworthy are relaunched up and up in powerhouses like Good & Gather and Cat & Jack. So thank you, Rick and Jill, for that look into our own brand work. It really is incredible. When I think about Target's right to win in this environment and our ability to meet key consumer needs, our own brand's foundational to so many of our plans. That's because the investments we made in our capabilities and our team over more than two decades combined to form competitive advantage that few retailers anywhere can match. And it's not just a competitive moat we're talking about here, because we're not hunkering down playing defense. This work is our springboard into the future. And through the incredible value we've We value our own brand's offer across each of our key categories and the compelling newness they're adding to our entire assortment. We'll continue to deepen our relationships with our guests and we'll give all consumers compelling reasons to choose Target. Now I'll hand it off to Kara Sylvester, who will tell us more about how we're getting these products in front of consumers and engaging with our guests and potential guests more broadly. Thank you. Kara.

Thanks, Christina. And hello, everyone. Today I'm excited to talk about our guest experience. And you might ask, Kara, how do we define guest experience at Target? Well, we think of it as the way we engage across America, from simply saying hello to consumers in a warm Target way, to deepening the relationships we have with existing Target guests, to how we create moments of discovery, connection, and joy that invite people to choose Target again and again. But before we look back at the previous year and preview what's ahead, I want to ground us in a consumer point of view. Because to understand how Target designs its guest experience, we should start with how people are shopping today. As you heard from Christina, gone are the days when people would follow a consistent and well-defined path from discovery to purchase. Today, shopping is nonlinear and simply a part of the general ecosystem of our lives. Instead of a standalone experience that feels planned or predictable, shopping has become immersive, always on, and fully integrated into how we all go about our days. A large portion of US consumers, about 40%, start their purchase online. And 20% start on social platforms. And those are just the people who are actively looking to shop. Many more are enticed to shop by the inspiration they find scrolling their social feeds for hours every day. This is expansive retail. Non-traditional entry points, seamless transition between stores, online and social, and fully in tune with what shoppers want and need. To meet these shoppers where they are, we spent a lot of time getting to know what matters to them and seeing the target experience through their eyes. Our guest base is broad and diverse. In fact, 96% of US adults have shopped Target at some point in their life. Yet, we know that your shopping experience and mine are going to look and feel very different based on a variety of factors. Our families, our interests, our budgets, our schedule, and simply what brings us joy. Expectations also differ by category. If you're on a grocery run, you're looking for reliability and value. And if I'm shopping for one of my daughter's birthdays, I'm looking for inspiration and fun. These nuances are especially important for Target, given our diverse multi-category portfolio. Yet even though shopping journeys vary, after gathering feedback from millions of guests about what they care about and how Target fits into their lives, there are a few important truths that unite our guests and shape how we design our experience. First, Target guests love to shop. They consistently list shopping as one of their favorite activities, more so than your average consumer. 90% of guests tell us they're looking for quality products. They also want a meaningful connection with the brand, and they're ahead of the curve when it comes to keeping up with trends. Second, our guests are whenever, wherever, however shoppers, using multiple channels to create the experience that fits into their lives. They're in the driver's seat when it comes to creating the experience that works best for them, and we have to meet them where, when, and how they need us. Finally, one more important factor that defines target guests. They are loyal, really loyal. Our most engaged guests account for a greater share of sales than we see at other competitors, showing that the connection we have with guests is sticky and drives growth and profitability. Quite simply, guests look to Target for inspiration, to find on-trend, high-quality items at a great price, and to have some fun. Are we affordable? Yes. Are we fast and convenient? Absolutely. Can you check off everything on your list no matter how you prefer to shop? You bet. But there are other retailers who can say the same. What makes Target different, what makes guests consistently choose us over any other retailer, is how we make them feel when they interact with us. how we design our experience to elevate ordinary moments into extraordinary ones with a carefully curated assortment, bursts of discovery and delight, and plenty of human connection along the way. There, of course, are the big splashes of the target brand that grab headlines, generate buzz, and make people smile. Like our Halloween ghoul, Louis, who took the season by storm. Or the ugly squirrel sweater that we created in 48 hours to pay homage to the version worn by Taylor and Travis over the holidays. Or turning the Las Vegas sphere into a huge holiday snow globe, complete with bullseye in residence. But there are also millions of smaller, everyday moments that strengthen the bonds we have with our guests, making their lives a little bit easier and a little bit brighter. So when visiting one of our stores in San Antonio, Texas last year, I kept hearing about a team member who I needed to meet. In fact, even some guests stopped me and said I absolutely needed to meet her. And they were right. She was somebody I absolutely needed to meet, and I wanted you to meet her too. Let me introduce you to Amelia. So I love that video because it captures who we are as a brand and what we aim to deliver across our entire guest experience. our team brings so much empathy to their work. And it's not just the face-to-face interactions at checkout or in the aisles. Empathy is infused into how we design every part of the guest experience. DriveUp's a perfect example. The reason guests love DriveUp at Target because it's a service reflects what's most important to them. It's easy. Swing by, we'll bring out your order to you or even pick up your return. It's fast. Just tell us you're on your way. We'll be ready when you are. No pickup windows to worry about because we work on your schedule. It's fun at a Starbucks to make your trip that much more relaxing. And it's all free. This is what we mean by designing an experience for our guests. Looking at a service through their eyes, using target technology to rapidly iterate and introduce new capabilities, and finding ways to not only meet their needs, but add something extra to make their day. That's the target experience. You saw that from us in 2023 as we continued on our path to be America's favorite discovery destination. Our stores are known as a getaway spot, somewhere you can go and enjoy a few minutes or a few hours browsing the aisles with friendly team members to help you find just what you need. We're bringing that same sense of exploration and relaxation to guests who walk through our digital front door. Last year, shoppers visited us more than six billion times on our digital channels, looking for the same warmth, newness, and discovery that greets them when they walk into one of our front doors. In fact, more than half of guests who make a purchase in our stores have visited our app or our site that very same day, reinforcing how shoppers move fluidly from physical to online and back again. And Target's uniquely suited to be there for our guests when inspiration strikes because of our agile technology and the pathways we create between stores, digital, social, marketing, and more. The experience we created this past holiday season is a great example. This year, there was clear connectivity across our experience to create a memorable and meaningful visit no matter how you chose to shop with us. Holiday gateways in-store and online, digital gifting stations, product packaging to make you smile, in-store playlists to set the mood, festive TikTok content, and Target Wonderland community pop-up events. These all work together to celebrate the holidays with our guests in a way that only Target can. our ongoing investment in our digital capabilities enabled this year's fully connected holiday celebration. In 2023, we transformed our digital experience from a utilitarian shopping platform that was one size fits all to one that is filled with warmth, greets you personally, just like Amelia would, and delivers a custom blend of newness, trend, value, and ease just for you. And it's not just what the guests see, but what's happening behind the scenes to power these personalized experiences. We're using generative AI to power our product detail pages to provide more friendly and relevant explanations of what guests want to know about our assortment. AI also powers features like Shop the Look and our Get It Now Assistant, which lets you know when items in your cart are available for pickup at a nearby store. It's also the engine behind the insights we use to give guests more personal experiences and rewards through our loyalty program, Target Circle. and it's a key element of how we create thoughtfully curated campaigns for consumers through our advertising business, Roundel. This might be a good time to talk about how Roundel seamlessly integrates into the guest experience and continues to drive more than $1.5 billion in value for our business. Growing more than 20% in 2023, Roundel is the powerful bridge between our guests and the brands they love. Roundel works with more than 2,600 vendors to deliver creative that is resonant and wholly consistent with the target experience. In return, our guests receive content that speaks directly to their interests and preferences. Take our holiday campaign with Apple. Tech products top many guest holiday gift lists, so we work with Apple on a comprehensive campaign to keep their products front and center for our guests this holiday season. With custom content designed to reach our guests across a number of platforms, including connected TV, YouTube, and social media. Our co-created holiday video ad made us the first Apple partner to highlight the new double tap feature on its Watch Series 9 in a spot. To add relevance, we used AI on our site to position the right products in the right moments. Think serving up promotions to red card holders so they get the best deal plus extra 5% off by using their card. Or helping a guest find the perfect gift for their teenager. Hint, go for the AirPods Pro. This integrated campaign tapped into our powerful ecosystem of digital, social, marketing, and merchandising and absolutely resonated with shoppers. We deepened relationships with existing fans and attracted new ones with a significantly higher new guest rate compared to prior Apple campaigns at Target. In addition to the way Roundel powers the guest experience when guests are browsing our app or website, unique to Target is our media mix, with 35% of revenue being generated outside of our own properties. That means that we're able to connect with consumers wherever they are, like on social or streaming platforms, driving more than 250 million visits to Target properties in 2023. And social is increasingly where our guests are. We have more followers than any other mass retailer on TikTok, with incredibly high engagement, which underscores our opportunity to connect the love that guests have for us on social to a smooth path to purchase in stores and on our digital properties. Our guests use social to stay in touch with the latest trends in a way that feels specifically designed for them. So we're working across the spectrum of social, from user-generated content and target creators to our talent partners and target-owned platforms to make it easier for guests to maintain that discovery mindset as they shop. Over the coming year, you'll see us experimenting to bring off-platform content onto our digital properties so guests can find inspiration right on our site and our app. And we'll blend social and commerce to create an experience that taps into real-time trends and makes offline inspiration to online purchase intuitive and easy. So imagine a guest looking for just the right things for a housewarming celebration. They open our app, which is personalized just for them, and type in housewarming party ideas. Using generative AI search, they see the latest products that fit their style and preferences, including delicious snacks from Good & Gather, chic party supplies, modern glassware, and even some new party outfits. We've brought the fun of wandering the aisles of our stores alongside inspiration from lifestyle influencers to spark new finds, like beautiful living room decor. Our guest uses 3D visualization to see it in their space and AI-powered reviews to learn more. they love it and snap it up along with their must-have party supplies. Within a few hours, their haul arrives thanks to same-day delivery. They love the item so much, they share their finds on social media, inspiring other guests to shop Target. This is the future our teams are working on today, a seamless, fluid shopping experience across stores, digital, and social, and centered on what our guests want and need. and knowing what our guests want and need, deepening our connection with them and making millions of guests feel that every visit is made just for them is at the heart of our loyalty program, Target Circle. We introduced the program in 2019 as a way to say thank you to guests with deals, rewards, and perks. Today, we have more than 100 million members who have earned $2 billion in rewards. Members have told us how much they value the program, and it shows. Last year they visited us five times more often and spent five times more than guests who aren't members of Target Circle. Yet. And our personalized deals and bonus offers, powered by our proprietary technology, drove $1.5 billion in incremental sales last year. yet members have also told us that it could be even easier to save and know how much they're saving. So we took this opportunity not just to improve our program, but to reimagine how we think about loyalty across the entirety of our experience. So today, I am thrilled to introduce a new Target Circle, one that brings the best of Target together under one loyalty program. Here's a short video that we created to sum up what's new and what's next. So bringing together Target Circle, Target Circle Card, and Target Circle 360 simplifies and expands how we deliver value to our guests. And as we've been talking about, we've designed the program to give guests flexibility and control in how they shop. There's the Target Circle our guests know and love today that gives every member access to the best deals and rewards at Target. There's absolutely no cost to join. What's new is they can now shop Target without having to search for and add offers. Deals are automatically applied at checkout. Plus, they'll continue to receive partner perks with Ulta Beauty and Apple and even more rewards through personalized bonuses based on their shopping behavior. For those guests who want to save even more, Target Circle Card offers an extra 5% off each trip. This is on top of the automatic savings they receive as Target Circle members, plus free two-day shipping, extended time for returns, and no annual fee. And with credit card, debit card, or reloadable card options, consumers can find the product that's right for them. And finally, for those who want the magic of Target delivered to their door in as little as one hour, there's Target Circle 360. An extension of the same-day capabilities we've built since our acquisition of Shipt in 2017, Target Circle 360 members can order everything from groceries to household essentials to the newest must-have item with no additional fees, no markups, and support from a preferred shopper. Members even have access to Ship's multi-retailer marketplace, which gives them access to even more items from their favorite local stores. No waiting for days for boxes to arrive on your doorstep, just unlimited same-day delivery that we're rolling out to guests at the promotional price of $49, which will be the standard price for Target Circle card holders. Guests will have access to the new Target Circle starting April 7th, and we can't wait for them to feel the difference. This is just the beginning for Target Circle. Our AI-powered models will continue to deepen our relationship with guests and enable us to deliver one-on-one personalization at scale. And with this new foundation in place, we'll continue adding benefits and perks based on what matters most to our guests, like exclusive partnerships, product offers, and more, so they can get the most out of shopping at Target. This goes back full circle, pun intended, to how people are shopping today. Shopping's dynamic, and so are we. The investments we're making reflect our focus on consumers' preferences and needs, so we continue to be their first choice for discovery, delight, and experiences that make them smile. That's Target's guest experience at its best, building connection and celebrating everyday moments in meaningful and memorable ways, moving with our guests through their lives so we're able to bring joy whenever we can. That's the Target magic, and it's what fuels our future. Now I'd like to welcome a familiar face with an expanded title to the stage, Michael Fidelke.

As an engineer by training, I've always had a passion and respect for the work of my new team. And I've learned a lot working with them and alongside them during my 20 plus years at Target. As John Hulbert would tell you, over the years, I've often added complexity to our investor travel so we could squeeze in just one more store visit. And throughout the recent holiday season and so far this new year, it's been great to have an opportunity to spend even more time with teams in both our stores and supply chain facilities. While our financial conversations often focus on the metrics we use to assess our performance, there's no substitute for seeing firsthand the strength of our operations, the benefits that come from well-managed inventory and newness, and hearing what our talented team is focused on building for the future. So before I move into the financial portion of my remarks, I'm going to spend a few minutes on my priorities as I move into this new role. And as I've mentioned to my new team, I'm coming into this job at a time when our operations are in a very strong position. As such, my top priority is to build on the foundation that John Mulligan and the team have already established. And I'm fortunate to have an outstanding group of leaders already in place. As you've heard from John over the years, the operations team is focused on advancing multiple long-term initiatives to expand our footprint, modernize how we support our business, and advance our company strategy. These efforts begin with investments in our store network, developing new locations, remodeling existing ones, supporting key partnerships like Ulta Beauty, enhancing our same-day services, and more. We're also transforming our supply chain. This includes our journey to automate upstream replenishment with a focus on reducing store workload and increasing reliability. It also includes the build out of our sortation center network, which offers faster delivery times while meaningfully reducing the cost of last mile delivery. Beyond this investment in our infrastructure, we're partnering with teams across the company to enhance our inventory positioning and demand forecasting, leveraging AI and machine learning to enhance our speed, consistency, and efficiency. And of course, we're focused on the support and development of our team, including their pay, benefits, training, and well-being. As I've said consistently during my time as CFO, our team is our most valuable asset. And I'm bringing that perspective into my new role. As Christina mentioned earlier, beginning last year, our team renewed their focus on retail fundamentals after several years of managing through unusually high volatility. These efforts focused first on in-stocks, but encompassed a broad array of measures relating to guest experience. In total last year, our store teams rolled out new training on 25 separate best practices, and we've seen the benefit in our recent guest surveys. While those initial improvements are encouraging, we'll continue on that journey throughout this year to ensure we're setting the standard for the shopping experience in US retail. So now, let me turn to our financial results. And while our focus today is on the future, I'm also gonna give a look back for perspective on our longer-term trajectory. I'll begin with a review of last year's financial performance and then examine how it compares with a decade ago. With that context, I'll look ahead to our aspirations over the next 10 years and conclude with our outlook for 2024. It's clear that last year was unusual, as top line results came in below our guidance. But our bottom line performance came in well ahead of expectations. For the full year, we saw a 3.7% decline in our comparable sales, reflecting quarterly traffic trends that varied widely from the strongest performance in Q1 to the softest in Q2, and an improving trend in Q3 and Q4. As traffic improved, we saw a better comp sales trend, better digital sales, and a dramatic improvement in discretionary categories. On the operating margin line, our business delivered dollar growth of nearly $2 billion last year, well beyond our initial guidance of a billion dollars or more. This was driven by a rebound in our operating margin rate from historic lows in 2022, a year where we faced unusually high markdown rates, sky-high freight and transportation costs, and rising rates of inventory shrink. Last year, as the team managed inventory really well, markdown rates improved dramatically and we saw a huge reduction in freight and transportation costs, more than we expected as we entered the year. healthy inventory levels also helped our operations. Without the need to manage overfilled back rooms, store teams were able to flow product onto their sales floor more easily and increase their focus on guest-facing work. Similarly, our supply chain facilities were able to operate more smoothly without the necessary labor hours and extra touches required to manage overly full buildings. Last year, we also benefited meaningfully from the efficiency efforts we launched about a year ago. When we began this work, we said we expected to realize $2 to $3 billion in permanent efficiency gains over a three-year period. And with the first of those three years behind us, we continue to feel very good about our progress. More specifically, we estimate that these efforts delivered savings of more than half a billion dollars last year, helping to offset other profit pressures, including the deleveraging effect of a soft top line, continued investments and paying benefits for our team, and higher inventory shrink. And finally, last year we continued to benefit from our roundel ad business, which grew more than 20% in a year when we were facing challenging trends on the top line. Altogether, last year's profit performance led to growth in our gap and adjusted EPS of nearly $3, or just under 50% compared with the prior year. In addition, cash from operations more than doubled from $4 billion in 2022 to $8.6 billion last year. And finally, after-tax return on invested capital expanded by well over three percentage points, from 12.6% in 2022 to 16.1% last year. Before I include my recap of 2023, I want to provide an update on inventory shrink, which includes the impact of retail theft. Last year, consistent with expectations, shrink costs increased more than $500 million compared with 2022, representing about 50 basis points of incremental rate pressure. Even more notable, compared with 2019, shrink costs have reduced our operating margin rate by a cumulative 1.2 percentage points over a four-year period. Happily, we've seen some encouraging trends recently, resulting from both the actions we've taken and the community efforts we're seeing across the country. I want to pause and give a quick shout out to our assets protection and information security teams who are working around the clock to protect the safety of our team and our guests. I'll add, however, that because it's a lagging metric, we're planning for shrink rates to remain approximately flat in 2024. So now, with last year in the books, I want to briefly pull back the lens and look back over the last decade, which is a very long time in retail. This will help to highlight the journey we've been on and the capabilities we've developed, serving as the foundation for the next decade of profitable growth. As you all know, the last 10 years were a time of rapid change in retail. This led to some sluggish results at Target in the early years as our business faced some significant challenges. Those periods were followed by rapid progress in later years based on the steps we took to address those challenges. Let's start with the top line. In 2013, our US business generated about $71 billion in sales, while 2023 sales were about $34.5 billion higher, representing an average growth rate of about 4% per year. Breaking down that growth by channel, about $16.5 billion occurred in our stores, while digital sales grew by another $18 billion, becoming nearly 13 times larger over that decade. Within our digital sales, same-day services, which didn't exist 10 years ago, accounted for $12.5 billion, or 70% of our digital growth between 2013 and 2023. On the bottom line, our adjusted EPS in the US grew by an average of about 7.6% per year, from $4.29 in 2013 to $8.94 last year, while gap EPS from continuing operations grew slightly faster. On top of those EPS gains, our per share dividend grew at an average rate of 10.7% per year, from $1.58 in 2013 to $4.36 last year. I'd note that these bottom line returns were delivered during a decade in which our operating profitability experienced a meaningful amount of compression, from a 6.7% operating margin rate in 2013 to 5.3% last year, as we experienced significant pressure from inventory shrink and higher digital penetration. Going forward, we expect to offset at least a portion of this decline over time as we work to achieve an optimal and sustainable operating margin rate. Turning to capital deployment, our priorities have remained consistent for decades, so I'll briefly reiterate them here. We first look to reinvest capital in our business in projects that meet our strategic and financial criteria. Second, we look to support the dividend and build on our 52-year record of annual increases in the dividend per share. And finally, we deploy any excess cash after these first two uses to repurchase shares within the limits of our middle-A credit ratings. Over the last decade, our operations generated just over $67 billion of cash. And during that time, the lowest level in any single year was still more than $4 billion. These cash returns demonstrate the durability of our business as we navigated through several challenging periods over those 10 years. They also give us a lot of confidence in our prospects for making continued productive investments in the years ahead. Throughout that entire decade, deployment of cash was consistent with our long-term priorities. Just over $30 billion was devoted to CapEx, counting for about 45% of the total. Another $14.5 billion was paid as dividends. And cumulative share repurchases accounted for the remainder of just over $22 billion as we retired more than 206 million shares at an average price of about $108, all while maintaining our middle A ratings over the entire period. So now, with that long-term look back as context, I want to turn to what we expect to achieve over the next 10 years, beginning with the top line, where we're focused on three separate growth drivers. Comparable sales, new stores, and other revenue. Comps are expected to be the primary source of growth, with increases in the low to mid single-digit range in a normal year, consistent with our average over the last decade. We'll support this comp growth with continued investments in our business in remodels, own brands, national brands, signature partnerships, and value-added services across all channels. Turning to remodels, we plan to invest in the vast majority of our nearly 2,000 store fleet over the next 10 years. Each year, projects will range from full-scale remodels, in which we touch the entire store, to more surgical investments, including the addition of Ulta Beauty locations, fixture upgrades, support of our same-day services, and more. On top of existing stores, we'll continue opening new locations based on the strong financial returns they generate. As Brian mentioned, most of these new stores will be larger on average than we've opened in recent years. Based on the opportunities we've already identified, we expect to open more than 300 additional stores over the next decade, meaningfully extending our reach into new neighborhoods. By the end of those 10 years, we expect those new stores will be generating incremental sales of around $15 billion annually. Beyond our buildings, we'll continue to focus on the well-being of our team members, who enable our growth and serve as the face of Target every day. As Christina and Kara highlighted earlier, the human element, as exemplified by our team, is a continued differentiator for Target in a world where commerce is becoming increasingly mechanized and impersonal. Finally, over the next decade, we expect to continue seeing outsized growth in other revenue. This has been driven in recent years by our Roundel ad business, which contributed more than $1.5 billion of value to Target last year, to the benefit of both gross margin and other revenue. On top of Roundel, we also expect our digital marketplace, Target+, to make a more meaningful contribution over the next 10 years. Putting this all together, over the next decade, we expect our total revenue will grow by an average rate of roughly 4% per year over the next 10 years. If we attain that goal, our business will add more than $50 billion of revenue, on top of the $107 billion we delivered in 2023. That growth will enable our business to further benefit from scale efficiencies as we continue to extend our reach in the US market. On the operating margin line, our ambition is to reach the optimal rate to maximize profit dollar growth over time. While we don't yet know what that rate will be, we believe it will be at least as high as our pre-pandemic rate of 6%. We made enormous progress in moving back towards 6% last year and expect to make continued progress in 2024 and beyond. Once we reach that 6% milestone, we'd be happy to continue moving higher as long as we're seeing appropriate dollar growth. For example, if we're successful in reducing shrink over the next few years, that might support our ability to sustainably operate above 6% over time. Regarding CapEx, we don't apply a rule of thumb to determine annual spending. Rather, we maintain a bottom-up plan and allocate capital on all the projects that meet our strategic and financial criteria. As you've seen in recent years, annual CapEx will vary based on the external backdrop. And individual project investments, which naturally follow the evolving needs of the business, will vary as we snap the chalk line in a specific year. For example, while in 2022, we needed to rapidly expand our upstream replenishment capacity, we're no longer feeling that same urgency today. Similarly, while we love what we're seeing in our sortation centers and expect to meaningfully grow their capacity over time, the pacing of sort center investments has slowed somewhat in the near term, given that brown box last mile delivery volumes declined significantly last year. When we put together all of those considerations along with our long-term growth ambitions, we believe annual CapEx will typically range between $3.5 billion and $5.5 billion in 2025 and beyond. Regarding our second capital priority, we expect to continue growing the per share dividend over the next decade, and we'll manage the rate of annual increases with a goal of reaching a 40% payout ratio over time. As for our third capital priority, we expect share repurchases will continue to play a meaningful role in our EPS growth in years ahead. Our strong balance sheet successfully absorbed a number of powerful shocks in 2022. And last year, we made significant progress in moving our debt metrics back to appropriate levels. This sets the stage for a potential resumption in repurchase activity later this year. Altogether, we believe we can deliver high single-digit growth in earnings per share in a typical year, at or above the average you've seen over the last 10 years. And lastly, we believe our after-tax ROIC can continue to move higher into the teens over the next decade, into the high teens over the next decade. So now, let me turn briefly to our expectations for 2024. On the top line, we're still planning cautiously, given the consumer spending patterns we've seen for two full years now. More specifically, on the discretionary side of our business, even as we've seen improving trends over the last two quarters, overall demand remains soft as spending patterns continue to normalize from pandemic peaks. In our frequency businesses, we're anticipating a further recovery in unit trends this year as inflation continues to moderate. Altogether, we're planning for a modest increase in comparable sales in the 0% to 2% range for the year. Within the year, our top line will face the highest hurdle in the first quarter, while over the remainder of the year, we'll be comparing over notably softer results. As a result, while we're looking to build on the momentum we've seen in recent quarters, our plans anticipate a comp decline in the first quarter. After that, we're planning for a resumption of top line growth over the remaining three quarters of the year. On the operating margin line, we expect the impact of inventory shrink will be roughly flat to last year. In addition, given our cautious top line expectations and continued investments in long-term growth, we'll likely see some deleveraging on the SG&A line. In terms of tailwinds, we're planning for modest rate improvement in shipping and transportation as we annualize the benefit of the lower rate contracts negotiated throughout 2023. we're also planning for continued outsized growth in our Roundel ad business, contributing to both gross margin and other revenue. And of course, we expect our efficiency work will benefit both our gross margin and SG&A expense rates. Altogether, in 2024, we're planning for a modest increase from last year's 5.3% operating margin rate as we continue moving toward our 6% goal. On the bottom line, our 2024 expectations translate to a full year range for both gap and adjusted EPS of $8.60 to $9.60. On first glance, the midpoint of this range represents growth of just under 2% versus 2023. However, I'd note that it's equivalent to a mid to high single digit increase on a 52 to 52 week basis, given that last year had an extra week. Regarding the first quarter, our full year plans translate to a range of $1.70 to $2.10 for both GAAP and adjusted EPS on an expected 3% to 5% decline in comparable sales. Turning to our balance sheet and capital deployment, we continue to expect a CapEx range of $3 to $4 billion for the year and are planning for another strong year of cash generation. Later in the year, we'll recommend that our board approve another increase in our per share dividend. And finally, while we don't expect to repurchase any shares in Q1, we may be able to resume that activity later in the year within the limits of our middle A ratings. As I get ready to close, I want to pause and thank the entire Target team with a particular call out to my colleagues in finance. It's been an honor to serve as your chief financial officer for the last four and a half years. Just as I have been, I'm confident my successor will be incredibly grateful for the leadership, integrity, passion, and discipline you bring to your work every day. Until a successor is named, I'll continue to fully occupy the CFO role and partner with all of you on behalf of Target and our stakeholders. To my new team, I'm incredibly excited to be working with all of you. As I said earlier, our operations are already in great shape and I'm fortunate to be working with a strong set of leaders. I can't wait to see what we can accomplish together as we build and sustain the foundation for another decade of profitable growth at Target. Thank you, now I'll turn it over to Brian for some closing remarks.

As we get ready to take your questions, I might get started with some of the questions I can imagine are on your mind this morning. First, are the updates we shared enough to get Target back to growth? The answer is absolutely. We're confident that the roadmap we've outlined today puts our core strengths, capabilities, and points of difference to work in new ways with even greater value, relevance, ease for our current guests and U.S. consumers more broadly. This roadmap will help us meet consumers where they are to drive traffic, profitable sales growth, and long-term market share gains. Another question might be, Can Target keep building on the profit improvement you put up last year? You just heard it from Michael. Nearly $2 billion in 2023 of operating income growth. Far outpacing our guidance. more than a half billion dollars in cost savings from our ongoing efficiency efforts, giving us a fast start on our multi-year efficiency goals, and realistic expectations for additional improvement in our operating margin rate this year as we move towards our 6% goal. Ultimately, I'm sure you're asking, what does this mean for shareholders over time? And that brings us back to our emphasis on long-term horizons and the durability of our business model. Again, you heard it from Michael. From 2013 to 2023, revenue grew by almost 50%, while earnings per share and the annual dividend more than doubled. The progress we made last year in shifting the momentum of our business, defining our roadmap for growth, and improving our profit performance has set us up to resume share repurchase, potentially later this year. We know that's been an important source of shareholder returns over time. But since most of you know our capital priorities as well as we do at this point, I'm guessing you noticed that I'm ending with a priority that's been on top of the list for decades. Simply put, investing in the right strategies and capabilities for our consumers and our business is the surest way to deliver outstanding shareholder returns over decades. As you've seen in the last decade, there's a lot we can't control in the operating environment. But we are in charge of our financial decisions and the business plans and investments that drive our performance. We know that if we perform well for consumers, the market will reward investors who are fueling those efforts. That's why you've seen us highlight our roadmap 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 dominance, 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.