Target Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation second 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, August 20, 2025. I would now like to turn the conference over to Mr. John Holbert, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us on our second quarter 2025 earnings conference call. On the line with me today are Brian Cornell, Chair and Chief Executive Officer, Michael Fidelke, Chief Operating Officer, Rick Gomez, Chief Commercial Officer, and Jim Lee, Chief Financial Officer. In a few moments, Brian, Michael, Rick, and Jim will provide their insights on our second quarter performance and outlook for the rest of the year and also share their perspective on today's announcement regarding CEO succession. Following their 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, Jim 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, including those described in this morning's earnings press release and 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 earnings press release, which is posted on our Investor Relations website. With that, I'll turn it over to Brian to kick things off. Brian? Thanks, John.

While today's call was scheduled to discuss our second quarter earnings, I want to start with a bigger headline, the announcement that the Board of Directors has unanimously elected Michael Fidelke to become Target's next CEO and to join the Board at the start of our 2026 fiscal year. The Board chose Michael through a deliberate and thoughtful succession planning process, which took place over the last few years. As part of this process, the board conducted a rigorous search in which Michael's skills, experience, and qualifications were thoroughly evaluated, alongside a strong list of both external and internal candidates. Today's announcement is an important milestone in the history of our company, and I'm confident that Michael is the right candidate to lead our business back to growth. Since I arrived at Target, I have consistently relied on Michael's strategic insights and sound judgment when making decisions, and he's played a critical role in advancing the key initiatives that have grown and sustained our business. Michael knows how our business can perform and what our team can deliver when we're at our best, and he'll bring that confidence along with an aggressive mindset for change into the CEO role. Through a wide range of career experiences, Michael has developed a deeper knowledge of our business, and greater insight into our organization than anyone I know. Importantly, through these experiences, Michael has forged deep relationships and built strong trust across the organization. And I'm confident the Target team will enthusiastically embrace his leadership. As I look back on my time at Target, I'm proud of what our team has accomplished as we've worked to evolve and grow our business in countless ways. By making significant investments in our team, and our physical and digital assets, we built the right foundation on which Michael and the rest of our leadership team can deliver strong performance in the years to come. At the same time, I share Michael's passion and urgency to accelerate our performance and build new momentum in our business. Results over the last few years have fallen short of our expectations and our potential. That's why Michael has been engaging the entire leadership team in an effort to refocus our strategy, and assess how we're functioning as an organization, and provide the launchpad to reestablish Target as a premier leader in retail. Included in this work is the Enterprise Acceleration Office that we launched last quarter, and which Michael will continue to lead. The team is building out specific plans to address the attributes of our working model that slow us down in an environment that demands more speed and agility than ever before. In particular, we know that process and technology opportunities at headquarters can get in the way of a great guest and team member experience, and that's where we're focused first. Michael will share more of these initial insights in a few minutes, but I want to stress that this is a longer-term effort that's focused on finding new and sustainable ways of working that can serve us for years to come. And the way our team has worked together this year to navigate through a volatile and uncertain tariff environment provides a vivid example of how our team can perform when we remove barriers and coordinate our efforts across the business. As one of the largest importers in the country, the prospect of higher tariffs meant we were facing some major financial and operational hurdles as we entered the year. This was further complicated by the multiple changes in tariff policy that had been announced and implemented as the year had progressed. Addressing these challenges has required close coordination between our merchandising supply chain, stores, and finance teams. This broad, cross-functional group has developed and rapidly implemented countless revisions to our product and inventory plans involving our assortment, product development, sourcing, receipt timing, supply chain flow, order quantities, and pricing. While the tariff environment remains challenging and highly uncertain, the team has made significant progress in mitigating their impact on the P&L. while maintaining our focus on value by limiting the impact on our pricing. And while we expect this year's P&L will reflect some short-term pressure from tariffs, we expect to end the year in a healthy position and move beyond this period of uncertainty in 2026. And as you'll hear from the team over the next few minutes, we saw clear indications of progress in our business in the second quarter as traffic and comp trends improved meaningfully from Q1, particularly in our stores. In addition, we're continuing to see improvements in quality measures surrounding the store experience, including on-shelf availability. And we continue to see particular strength in our business when guests find newness and innovation in our assortment, most notably in gaming, toys, and trading cards this quarter. I want to pause and thank our team for their efforts to deliver these encouraging results, while simultaneously working to minimize the impact of tariffs on our guests and our businesses. As I've traveled and visited stores and distribution facilities in recent months, I've been inspired by the positive energy I've seen throughout our team and their hunger to build on this momentum in the back half of the year and beyond. And to be clear, while we were happy to see improvement at Q2, we are far from satisfied with where our business is performing today. We need to do better, and our entire team is focused on consistent execution, building further momentum, and getting back to profitable long-term growth. And we're confident that we have the right foundation for this effort. Nearly 2,000 well-located, well-maintained stores located in all 50 states. A $31 billion owned brand portfolio supported by best-in-class product design, development, and sourcing capabilities. An assortment that includes best-loved national brands in every category. And world-class brand partnerships, including Apple, Starbucks, Levi's, and Champion. a growing and profitable first-party digital business, which provides the fuel for rapidly growing high-margin businesses like Rondell and Target Plus. One of the biggest loyalty programs in the country in Target Circle, which offers a growing list of services, including personalized discounts, same-day delivery, and 5% off when using our credit and debit cards. And, of course, an outstanding global team, united in supporting our guests and each other. Surrounding all these assets, capabilities in our team, we're fortunate to be part of an iconic brand that's developed a unique relationship with American consumers. It's a relationship we should never take for granted. We need to continually invest and evolve how we serve our guests, just as their wants and needs will continue to evolve over time. I am confident that under Michael's leadership, the team can strengthen the Target brand and deliver profitable growth. And I'm firmly committed to supporting Michael and the entire Target team as we work together to improve our performance, finish the year strong, and enter 2026 with renewed momentum across our business. With that, I'll turn the call over to Michael.