Target Corporation (TGT)
Q2 2010 Earnings Call Transcript
August 18, 2010 10:30 am ET
Gregg Steinhafel – Chairman, President and CEO
Kathee Tesija – EVP, Merchandising
Doug Scovanner – EVP and CFO
John Zolidis – Buckingham Research
Robby Ohmes – BoA Merrill Lynch
Deborah Weinswig – Citi
Charles Grom – JPMorgan
Adrianne Shapira – Goldman Sachs
Jeff Klinefelter – Piper Jaffray
Mark Miller – William Blair
Previous Statements by TGT
» Target Corporation Q1 2010 Earnings Call Transcript
» Target Corp. Q4 2009 Earnings Call Transcript
» Target Corporation Q3 2009 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation’s second quarter earnings release conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in the question-and-answer session. As a reminder, this conference is being recorded Wednesday, August 18, 2010.
I would now like to turn the conference over to Mr. Gregg Steinhafel, Chairman, President, and Chief Executive Officer. Please go ahead, sir.
Good morning, and welcome to Target’s 2010 second quarter earnings conference call. On the line with me today are Doug Scovanner, Executive Vice President and Chief Financial Officer; and Kathee Tesija, Executive Vice President, Merchandising.
This morning I will provide a high level overview of our second quarter performance; then Kathee will discuss category results, share recent guest insights and outline upcoming merchandising initiatives; and finally, Doug will provide more detail on our second quarter financial results and our outlook for upcoming quarters. Following Doug’s remarks, we’ll open the phone lines for a question-and-answer session.
As a reminder, we’re joined on this conference call by investors and other who are listening to our comments today via webcast. Following this conference call, John Hulbert and Doug will be available throughout the day to answer any follow-up questions you may have.
Also as a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainties, the most important of which are described in our SEC filings.
We are very pleased with our second quarter financial results, particularly because our team was able to deliver strong profit performance in the face of slightly softer than expected top line sales. Our earnings per share of $0.92 for the quarter was better than we expected and it established another record high for a non-holiday quarter in the company’s history.
Our comparable store sales increased 1.7%, somewhat below our expectation going into the quarter. Healthy traffic trends continued in the second quarter, driving more than 100% of our comparable store sales increase.
While some of that strength was driven by our current remodel program, traffic was quite healthy across the chain, the result of compelling merchandising, innovative marketing, strong store execution and a superior value proposition, the essence of our Expect More Pay Less brand promise. Kathee will provide detail on category performance in a few minutes.
Our teams maintained their disciplined focus on expense control during the quarter, productivity in our stores continues to increase even while our guest survey scores confirm that we’re consistently delivering superior guest service in great looking stores, and because of strong leadership, thoughtful underwriting and superb execution our credit card segment turned in a remarkable second quarter performance, with segment profit up more than 100% over last year.
Looking ahead, teams across the company are preparing for the launch of our exciting new rewards program this October in which guest will began receiving 5% off every day when they use one of our credit cards or the Target debit card. Doug will provide much more detail in a few minutes.
As we consider the economy and the pattern of our sales, it’s clear that the second quarter marked a change in recent trend, following stronger results in the last two quarters, GDP growth softened considerably in the second quarter and our sales trends leveled off as well.
While no one has a clear view of the future, recent results in both our business and the economy reinforce our perspective that the current recovery will be slow and inconsistent. While guests are still cautious, we’re encouraged that we continue to see strong traffic, very healthy sales in discretionary apparel and strong market share gains in virtually all of our frequency categories.
Reflecting our view on the pace of recovery, we continue to take a conservative position with our inventory in seasonal and mark down sensitive categories, preferring that our team is prepared to chase in the even to fan upturn rather than taking excessive risks that would lead to dramatic mark downs in a slower than expected sales environment. As always we remain committed to being in stock in all of our need based categories were mark down risks are negligible.
We opened three new stores in the second quarter, including our first store in Manhattan. We are very excited about the warm welcome we received from the community in and around Spanish Harlem, and we’ve heard from many of you that you’ve already had a chance to see the store in person. We plan to open another 10 stores in the third quarter and after closings and relocations, we expect to add 10 locations this year.
We plan to steadily build from this very elite program in the next few years, adding 20 or more new locations in 2011 and more than 30 in 2012. While we have the appetite, the team and access to capital that would enable our new store base to grow more quickly, we are steadfast in applying a returns based approach to the approval of new stores. These growth expectations reflect our estimate of the number of projects that will meet our investment criteria in the current environment.
In the meantime, we are pleased to invest productively in a refresh of our existing store base, incorporating PFresh food layout, along with improvement in home, beauty, electronics, video games and shoes. We completed another 116 remodels in the second quarter alone. So far this year we’ve remodeled more than 200 stores and have well over 300 PFresh stores operating across the country today.