“If these sales trends persist, we'd see far less of a benefit from leverage on fixed expenses than we've seen so far this year.”

In context

“e unusual headwinds that have been affecting our business this year. Now let me turn briefly to our expectations for the fourth quarter. In the current environment, we're facing an even higher degree of uncertainty than a quarter ago given the volatility we've been seeing recently. And in light of the dramatic changes in shopping patterns we've seen both at Target and across the industry, we believe it's prudent to plan for a wide range of comparable sales outcomes in the fourth quarter that's centered around a low single-digit comp decline, consistent with recent trends. Underlying the sales expectation, we're planning for softer discretionary category comps than we've seen in the last 2 quarters, partially offset by the benefit of continued strong growth in our frequency businesses. If these sales trends persist, we'd see far less of a benefit from leverage on fixed expenses than we've seen so far this year. In addition, we'd expect greater markdown pressure from Q4 promotions given the increase in price sensitivity our guests have shown recently and our commitments to end the year with a clean inventory position, especially in those categories where trends have softened. And as I mentioned, we're planning for additional pressure from inventory shrink, given the worsening trends that have emerged so far this year. Altogether, these expectations lead to a wide range for our expected Q4 operating margin rate centered around 3%. The single-most sensitive input to this profit projection is the level of demand for our discretionary businesses. If that demand improves from recent trends, we would expect fewer markdowns and would likely outperform our updated profit expectations; while if demand”