In the near term, we'll continue to generate incredible value by executing on our strategy. "We believe Target remains a long-term winner. We are now ready for our first question from Chris Horvers with J.P. Morgan. The only surprise was that we got there last year, much sooner than planned. But I will quickly say we'll continue to be cautious and maintain an ample amount of liquidity to carry us through a wide range of near-term scenarios. While that headwind was notable, it was less than I believe most of us would have expected given that we saw $10 billion of digital sales growth accounting for two-thirds of our total growth. Contrast that with the second quarter last year, when our comp sales grew more than 24%, our gross margin rate also increased, and we saw a jaw-dropping amount of leverage on the SG&A and D&A expense lines which more than offset investments in team and guest safety. Five years ago, we envisioned a future for ourselves in which the key to guest preference and breakout growth lay in an unappreciated omnichannel asset called the store. I want to reiterate that our priorities remain the same as they have been for decades. At that time, we said the most important investment we were making was in our team, and I think the results we've seen in 2017 and 2018 and 2019, and 2020 is a byproduct of that commitment to our team, investing in wages and benefits, investing in training and crew opportunities, and I think it's allowed us to build the best team in retail, that's incredibly engaged, that's focused on taking care of our guests, but also taking care of each other. "Following years of investment to build a durable, scalable and sustainable business model, we saw record growth in 2020, as our guests turned to Target to safely provide for their families throughout the pandemic," Target Chairman and CEO Brian Cornell said in a statement. It's not a checklist but a set of principles that define great service, like welcoming a guest and paying attention to what they need, which might be as simple as finding an item or as big as building an outfit. As such, we're planning for annual CAPEX in the $4 billion range in each of the next few years to support remodels, new stores, and supply chain projects that add replenishment capacity and modernize the network, including sortation centers. I mean, you've obviously given us the number of remodels that you've done and I'm sure they're not all primary targets for some of these partnerships, but it seems like you could move a little faster on those, so a little color on that would be great. We began to put all those pieces together like no one else had, and the experience was taking hold on the timetable we expected, then 2020 accelerated everything, and today Target is as synonymous with same day and safety as it with style and swagger. In fact, we found that what we built to make Target the easiest place to shop had also set us up to be one of the safest. The other thing I would say is we see -- very similar to drive-up, when a guest engages with Shipt through Target, again we see growth in our sales in-store and online on the Target platform as well, so they get more engaged with Target. To do that, I'm going to go way back in history and talk about our experience at the Target store in Colma, California, part of the San Francisco market. First is each individual fulfillment service, we continue to lower the absolute cost of providing it, so order pick-up today, drive-up today, Shipt today, ship from store, all of those are cheaper than they were two years ago, so we continue to see our costs come down there. The timing for our small-format stores also shifted. Let's start with the gross margin line where in 2020, we experienced large but offsetting variances related to specific factors. A lot of you probably saw this last spring in observing our business or in your own lives. They've enabled us to use our stores as showrooms and service centers, but also as hubs for digital fulfillment. Since then, I've held a number of roles across merchandising. Despite wild growth, our net promoter scores that represent guest satisfaction stayed incredibly high. No sorting in the backroom or finding places to stash cases of excess product. Without you, we couldn't have delivered such an amazing amount of value on behalf of our stakeholders in 2020. Again, I think so much of it has been the investments we've made in safety, in the shopping experience throughout the last year. In Q4, we'll run them together at a small scale, doing what we always do to learn and iterate before we go bigger. Our next question is from Karen Short with Barclays. Beyond our pick-up options, the delivery capability we have in Shipt became even more important. I think one of the things that we underscored throughout the pandemic has been the strength of our stores, and despite many Americans really avoiding public places, we've seen very strong store comps, obviously in excess of 7%, and we saw very solid store traffic, so I think we've continued to build trust and I think coming out of the pandemic, our stores are going to continue to be very relevant, very important. Our revenue during the year increased another $15 billion. It's cheaper to ship a box a shorter distance from a local store after it's ridden our supply chain rails all the way to that store. They drove through our pick-up lanes when they were already out and no appointment required. I think we're well-positioned to continue to grow share, and I think the investments we're making in our stores, in that store experience, and in digital positions us well to continue to grow share for years to come. Hey, guys. The other thing that the stores give us that has been incredibly valuable this year is great flexibility. Any one of these brands alone would be a sizable retailer, and as you know, their contribution to profits is outsized. Is that the right way to think about it, because that definitely gets me closer to 7% on the operating margins, obviously depending on sales? Today, even though we already have an unmatched suite of digital fulfillment options, there's more we can do for our guests. Through the breadth of our assortment along with a single view of inventory and teams leading across all channels, we were able to move with speed and agility, meeting guests' needs despite the fastest-changing environment we've ever faced. This will help all of us to look through the extreme volatility in year-over-year comparisons we'll be seeing throughout the first half of this year. Target, the country’s second-largest retailer, said on Tuesday (Mar. In the meantime, we continue to make productive investments in new small-format stores, and we're eager to begin ramping up our remodel program in 2021 and beyond. I recognize that we'd certainly like to be in a different position today, providing more precision, but what I can tell you is we're going to continue to execute our strategy, leverage our capabilities, our own brands and national brands, our multi-category assortment, and our team to continue to build on the momentum we gained in 2020, leverage the additional $15 billion of revenue we now have inside of our P&L, and continue to build on the market share we gained in 2020 and make sure that's very sticky for years to come. We remain extremely bullish on our college sites. Today the majority of our store assortment is available through our same-day services, but we're continually working to give guests even more choices. While that had a positive near-term impact on working capital, we also saw really choppy in-stocks which isn't how we want to operate under normal conditions. So in theory, that would imply you lose about a billion dollars in SG&A dollars in 2021. Fast forward to 2020, we were ready for the world to change, but only because of the years we'd spent laying the operational foundation. What you'll see in our presentation today is that the one thing that's driving our success is a focused commitment to several things: an integrated collection of strategies and capabilities that all work together and are very difficult to replicate, and ultimately make Target unique. Target CEO Brian Cornell on Q4 earnings beat, 2021 outlook Target exceeded Wall Street’s expectations for the fourth quarter, thanks to a strong holiday season and stimulus checks. First, as I think about implications for Target's top line in the months and years ahead, I think about the drivers as three levels of a funnel. Our construction and store design teams also adjusted following the demonstrations for racial justice this summer. Target Corporation 1000 Nicollet Mall Minneapolis, MN 55403 Paul, the only other point I would add is as we've looked at the guest during the pandemic, we know they're consolidating where they shop, and we may have had a Target guest that was shopping for home or beauty, but they're now shopping for apparel, picking up food and beverage, exploring new categories. The story of Target in 2020 is the story of a team that wanted nothing more than to take care of those around us, drawing on capabilities that were equal to that ambition after years of building and investment. Altogether, our expectation is that this year's operating margin rate will move down from the 7% we recorded in 2020 but remain above our 2019 operating margin rate of 6%, with the most likely outcome in the lower half of that range. Specifically, as people resume working in offices, attending concerts, movies and sporting events, traveling and eating out, they're likely to focus more on their appearance and spend more on these categories than they did in 2020. With our small format strategy, we'll expand in urban markets like Portland, L.A., and New York City where there are still opportunities to serve new guests, and we'll continue our focus on college stores with the University of Georgia and the University of Michigan planned for later this year. Finally, we look to deploy excess cash through share repurchases only after we've fully supported the first two goals within the capacity of our middle-A credit ratings. Instead, we shaped our business decisions around what was happening in the world. That focus on execution will continue in 2021 and I wouldn't confuse guidance or the lack thereof with our confidence to continue to take market share and outperform in the coming months and years. Second, in today's remarks, we refer to non-GAAP financial measures, including adjusted earnings per share. The story of how we navigated the twists and turns of 2020 starts with replenishment because the whole operation relies on getting the right product to the right place at the right time. In 2016, our digital transformation was only beginning. Just looking at the growth rate of your fulfillment costs just generally, is that going to be able to go below the growth rate of sales, conceivably or conceptually? Thanks to the incredible experience our store teams provide, once guests try a service like that, they come back, and we've seen higher rates of stickiness this year than historically for some of those digital fulfillment services. It represents about one-third of our total sales and even more of our gross margin, which helps to sustain key enterprise investments. Just last week, in fact, we began rolling out a dedicated Apple experience starting in 17 stores across the country and online. That's the place where we focused a lot of that kind of deepening of the guest relationship and the things that we're tracking. Target Corporation (TGT:NYSE) investor contacts. Several years ago, we implemented a new operating model in our stores to lift up that drive. We might wander over and purchase some spring decor, and we'll probably need some more earbuds since the kids seem to be inventing new ways to lose or destroy them. Michael, I think, talked about this today, that when you start to disaggregate them, you start picking at things that don't make a hell of a lot of sense because of the way we package the whole thing together to deliver that for our guests and the economic returns that provides for us in total. In fact, the average sales per foot supported by our distribution centers rose nearly 30% between 2016 and 2020, thanks to a series of process and technology improvements. This year, we'll use it to order and position even more items in our assortment, so we can replenish the majority of the store faster for our guests. We added apparel to Shipt delivery offerings and tested adult beverage pick-up in a handful of markets. You may go ahead. As we think to the future, stores are going to play a very important role. One called Auto Rebin sorts individual items. We frontloaded those deliveries with the seasonal merchandise guests would expect so our stores would be stocked and ready, and we continued prioritizing essential products like cleaning supplies and healthcare items so we could keep meeting the pressing needs of our guests. Most importantly, we're continuing to invest in our team. To Michael's point, while most of America shops with Target, during the pandemic we've seen consumers consolidate the number of places where they shop, they're now experiencing and are active in more categories, and we think that provides lasting benefits for us for years to come. It was a plan based on carefully listening to our guests, it was differentiated, and we were fortunate to have the necessary resources to get there. But I'll go back to the fact that for most of the last year, we haven't provided guidance but we have focused on execution, and I think our team has proven to be very flexible, very agile. So as we consider how all of these rates come together on the operating margin line, we're facing a wide range of possibilities as we enter the year. Not every meeting I would herein be describing a one-point gap in operating margin between the incredibly strong 6 that we had in 2019 and the seven we just put up. The better we know them, the more effectively we can invest in what they want and develop new ways to deliver joy and inspiration while making their lives easier. At the heart of the platform was a belief that consumers would continue to flock to our stores for multi-category one-stop shopping, a friendly, well-trained, and knowledgeable team, and joyful experiences. A few consistent pillars have been and will continue to be at the heart of our playbook. From an engineer by training and a finance guy at heart, I can attest that you can't get too efficient or relevant enough. It's why we're stepping up our investments to drive additional profitable growth. In 2021, we expect our markdown rates will increase somewhat from these abnormally low levels, which will create some gross margin pressure compared with 2020. We're numbering our drive-up spaces so our teams can find guests sooner, for those times when a guest pulls up in a black SUV next to eight other black SUVs, and we're updating the team member app so they can more easily see what orders are in progress and where they can help. Christina has been obviously a merchant here for a number of years and understands the importance of balancing our multi-category portfolio, that balance between our own brands and national brands, and as John and Michael have talked about, periodically as we think about the future from a digital standpoint, we think that's going to continue to move more and more toward the same day, which from a mix standpoint is very advantageous to us. They're not just private labels, they're brands our guests' trust, they're brands our guests love. Sure. When our digital business picked up last spring, our fulfillment operation went into high gear. The second is the robotic ship sorter we've been building at our Perth Amboy facility. It's meant to give our team flexibility and empower them to do what's right for the guests in the moment. As we accelerate investment in stores, supply chain modernization, and replenishment capacity in support of those growth prospects, we'll likely see an increase in the invested capital portion of this metric over the next few years. Same-day fulfillment economics looks a lot like store economics to us, and that's the piece, to John's point, that's growing fastest, and so the stores give us an incredible advantage to have advantaged cost profiles as we fulfill. They're tired of the yoga pants and really appreciate some of the new assortment we have in apparel. Obviously, no one anticipated the kind of comps we were driving in 2020. Of course, we continued to ship online orders from the back of our local stores, saving 40% of the cost of shipping from a warehouse, an economic advantage for us as digital sales now account for even more of our total revenue. Even before athleisure became work-from-home apparel, this was a hot category and it was an area where we had room to raise our game, so early in 2020, we launched All In Motion, and last month it became a billion-dollar brand. Digital is a perfect example. We sent more inventory to stores than ever to prepare for an earlier holiday rush. We have always loved them because they're incredibly efficient. Appreciate that. As I get ready to turn things back over to Brian, I want to take you back to this meeting four years ago when I was listening from our headquarters in Minneapolis. To your question around design, the investments we've made in food and beverage, Good and Gather is off to a tremendous start, a multi-billion dollar brand in a short period of time. 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Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, and stay well lack...
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