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Target Corporation (



Q3 2010 Earnings Conference Call

November 17, 2010 10:30 am ET


Gregg Steinhafel – Chairman, President and CEO

Kathee Tesija – EVP, Merchandising

Doug Scovanner – EVP and CFO


Bob Drbul – Barclays Capital

Charles Grom – JPMorgan

Peter Benedict – Robert Baird

Neil Currie – UBS

John Zolidis - Buckingham Research

Dan Binder – Jefferies & Co.

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Adrianne Shapira – Goldman Sachs

Grant Nelik [ph] – ISI

Robby Ohmes – Bank of America

Deborah Weinswig – Citi

Colin McGranahan - Bernstein



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» Target CEO Discusses Q2 2010 Results - Earnings Call Transcript
» 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 third 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. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, November 17, 2010.

I would now like to turn the conference over to Mr. Gregg Steinhafel, Chairman, President, and Chief Executive Officer. Please go ahead, sir.



Thank you. Good morning, and welcome to Target’s 2010 third 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 of Merchandising.

This morning I'll provide a high-level overview of our third quarter performance; then Kathee will share recent guest insights, discuss category results and describe our merchandising and marketing plans for the fourth quarter and finally, Doug will provide more detail on our third quarter financial results and our outlook for the remainder of the year. 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 others 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 pleased with our third quarter financial results, which reflect strong performance in our core businesses as well as favorability in our third quarter income tax rate, which Doug will explain in a few minutes.

Our comparable store sales increased 1.6%, reflecting the lift from our remodel program; along with a modest comp increase net the underlying business.

Traffic continued to increase more than 2% in the third quarter even against the harder comparison presented by last years third quarter when traffic began to increase for the first time in 2009. Traffic has been healthy across the chain in 2010 particularly in our remodeled stores. And in the last two weeks of the quarter, both traffic and sales benefited from the launch of our new 5% REDCard Rewards Program, which is being enthusiastically embraced by our guests.

Our sales continue to reflect the underlying economics challenges facing our guest resulting in volatility from week to week and across categories. We continue to enjoy strong sales in non-discretionary categories like food, healthcare and household commodities but we're also pleased with recent results in discretionary categories like beauty and women’s apparel. These categories offer our guests a well-edited assortment of both fashion and basic items that combine compelling value, quality and style.

Disciplined control of expenses has played a key role in our strong financial performance this year. Our teams are focused on smart expense control, maximizing opportunities to enhance productivity by eliminating non-value added work without compromising the guest experience. While this thinking is applied across the company, our stores teams continue to set the standard by consistently delivering meaningful productivity improvements while maintaining or improving guest service and reliability measures in our guest service. This is a testament to the leadership within our stores organization and to the dedication of our 300,000 store team members.

Our credit card segment continues to deliver outstanding performance both profit dollars and pre-tax returns in this segment more than doubled from a year ago. This performance was the result of superb execution in a very tough environment, particularly as we began to comply with new late fee regulations and of course, beyond profitability the credit card segment is completely integrated with our retail strategy providing the platform for our new REDCards Rewards Loyalty Program. While consumers remained conservative in their purchasing behavior, we're encouraged by recent finds in the broader economy that may signal somewhat stronger and more stable sales in the coming months. For example, job market statistics have improved in recent weeks. We believe that consumers regardless of their political views are relieved to have the uncertainties surrounding recent elections behind them and looking ahead, we believe that consumers would likely respond positively to a decision regarding the expiration of the Bush-Era tax cuts particularly if they were extended or made permanent.

While some current signals are more positive, we continue to plan our business cautiously. We believe it's prudent to manage our expenses and inventories to accommodate a slow paced of economic recovery while continuing to innovate and pursue initiatives that drive top line growth.

In the third quarter, we opened 10 new stores completing our 2010 new store program. We also completed well over 100 remodels bringing our total for the year to 341, nearly four times the number we've completed in any other year in company history. Combining these projects with the PFresh stores we had in place at the beginning of the year we are now operating 462 general merchandise stores that incorporate the expanded food layout and in addition we have hundreds of locations reflecting our updated store designs in beauty, home, electronics, video games and shoes. While we expect to slowly ramp up new store growth in the next few years we don't plan to back off our ambitious program to update existing stores.

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