Market Overview

Highlights from Target's Q413 Earnings Conference Call

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Below are some highlights from Target's (NYSE: TGT) fourth-quarter conference call:

  • Target committed to an end-to-end review in cooperation with third-party experts to understand how the breach occurred.
    • Conducting an end-to-end forensic investigation of processes, systems and personnel to make informed decisions on potential security enhancements.
    • Accelerating the adoption of advanced chip-enabled technology, investing more than $100 million to equip our stores and to issue Target branded smart chip credit and debit cards.
    • Investing $5 million in a new coalition with the Better Business Bureau, the National Cyber Security Alliance and the National Cyber Forensics and Training Alliance to advance public education around cyber security and the dangers of consumer scams.
  • Sales have started to recover from the trends observed following breach-related announcements in December and January.
  • Pleased with our holiday season results prior to the announcement of the data breach.
  • Enormous progress in multi-channel efforts throughout 2013, with increased conversion both on our Web site and on mobile apps.
    • Acquired Chefs Catalog, Cooking.com and DermStore, extending online assortment by providing guests access to additional high-end brands.
  • Launched Cartwheel, a unique mobile savings tool which has far exceeded expectations in both adoption and engagement.
    • Digital social savings app, which ended 2013 with over five million users who've already saved more than $43 million.
    • Half of Cartwheel users are millennials, a much higher percentage than they represent and our overall guest base.
    • Redemption rates on Cartwheel are more than 10 times higher than we see in other direct channels.
    • Added the ability to scan barcodes to find out if there's a Cartwheel deal on an item.
  • Growth in digital traffic and sales outpaced industry averages.
  • Launched in-store pickup chain-wide at the beginning of November and with very little marketing, this new offering became a meaningful driver of digital traffic and sales.
  • Continuing to pilot innovation-store formats.
    • Analyzing opportunities to repeat the size and enhance the flexibility of formats like City Target.
    • High single-digit comparable sales in our second year City Target stores.
    • Opening up a wider universe of potential sites in dense urban areas.
    • Developed a separate smaller format called Target Express. At about 15% of the size of one of our general merchandise stores.
  • In 2013, saved approximately $200 million by reprioritizing team activities and finding more efficient ways to get business done.
    • Expect the benefit of expense optimization efforts to reach $1 billion in annualized savings by 2015.
  • Following the data breach, sales team reacted quickly, making nimble adjustments to minimize excess inventory.
    • Ended the year with a clean inventory position, while fourth quarter gross margin rate reflected the additional clearance activity resulting from the sales slowdown.
  • For the quarter overall, non-discretionary categories generally saw the strongest sales performance.
  • Among more discretionary categories, electronics saw an increase in fourth quarter comparable sales, led by mobile.
  • Thanksgiving was biggest digital sales day ever with mobile devices accounting for a full 25% of those sales.
  • Important factor in digital success was the fourth quarter rollout of the opportunity to buy online and pickup in store.
    • In-store pickup requests represented about 10% of fourth quarter digital orders, but they peaked at a much higher rate before Christmas as guests relied on the service as a great solution for last-minute gift shopping

Posted-In: Earnings News

 

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