TGT (TGT)

“Notably, in the quarter just ended, we faced the easiest prior year comparison of the year, and we'll be facing the hardest comparison in Q2, a nearly 2 percentage point difference as we begin lapping last year's launch of the Nintendo Switch 2.”

“I'll be shocked if the headline isn't top line growth translates to margin opportunity over time.”

“In Q1, we opened 7 new stores, including our 2,000th location and we remain on track to open more than 30 this year.”

“And in beauty, we're preparing for this fall's launch of our Target beauty studio in more than 600 stores, building on the momentum we've been seeing in the beauty category.”

“In food, we'll be executing our largest transition in over a decade, resetting nearly half of our center store grocery assortment, accelerating our pace of newness by nearly 50% and better aligning to wellness trends, including the elimination of all certified synthetic colors from our cereal assortment.”

“Just a quick note on shortage, we expect -- we continue to expect us to be in line with last year.”

“In addition, we continue to expect more challenging cost headwinds in the first half of the year that are expected to moderate in the second half.”

“We previously provided an EPS range of $750 million to $850 million. Given the profit upside we saw in the first quarter, we are now expecting to end the year near the high end of that range.”

“For the full year, we are now planning for a net sales increase in a range centered around 4%.”

“We plan to request that our Board approved another small increase in the quarterly dividend later this year, allowing us to build on our record of annual increases while moving us closer to our long-term goal of a 40% payout ratio over time.”

“Regarding the first priority, we deployed about $1 billion for capital expenditures in the first quarter and continue to expect about $5 billion of CapEx for the full year as we invest behind the growth priorities we outlined at our financial meeting in March.”

“The Houston facility alone is expected to process around 25 million cartons annually, significantly expanding upstream network capacity.”

“Later this year, we'll introduce that same level of change to kids home and bedding categories as we continue to clarify our offerings and value proposition in these ever-important style categories.”

“These focus areas represent about half of our sales today and are expected to drive roughly 3/4 of our growth going forward.”

“Looking ahead and assuming our business continues to perform well, we should have some capacity to repurchase shares later in the year with the magnitude and pace governed by our outlook and our goal to maintain our current middle A credit ratings.”

“In May, we will become one of the first national retailers with no certified synthetic colors in any of the cereal that we sell, a decisive step that reflects where families are heading and where Target intends to lead.”

“We often get the question of whether we believe operating margin rates can get back to pre-pandemic levels. The answer to that question is a definitive yes.”

“Second, this year's step-up in CapEx will drive higher start-up costs for new stores in the first half of the year.”

“This summer, we will relaunch Threshold, and we'll introduce dedicated shop-in-shop destinations starting in 200 stores.”

“And finally, the expected timing of some SG&A expenses will be more front-loaded compared with last year.”

“We're also expecting to see some pressure on the D&A line resulting from accelerated depreciation on a larger number of remodels, most notably in the first quarter.”

“And we are resetting our stores' operating model this spring, organizing around 3 clear principles.”

“As an example, by June, we'll have overhauled 75% of our decorative accessories assortment.”

“We believe the optimal rate is well above where we performed last year. And until we reach that optimal rate, we have the opportunity to grow operating margin dollars more quickly than sales over the next few years.”

“I want to be clear, these investments are not onetime costs, but reflect an ongoing step-up in spending levels as we're investing to win and restore reliable profitable growth to our business.”

“As a result, I'm very confident in our ability to get back to profitable growth this year and deliver strong returns to our shareholders in 2026 and beyond.”

“So obviously, getting to low to mid-single-digit rates over time on overall sales drives leverage. And I think we're going to start seeing that -- the beginnings of that this year.”

“And you saw from this morning's earnings release, we posted more than 30% growth in marketplace last year, and we see that accelerating.”

“And then as you scale, as we say, growth drives scale, that drives a lot of productivity through our supply chain, which sits in the gross margin line as well.”

“On an ongoing basis, I think you hit on the right points, which is including merchandising, mix management and expansion, we should have positive tailwinds from things like Roundel for sure.”

“Yes, there's probably 2 dynamics. I'll take 2026 and the long term. So 2026, yes, you should expect gross margin expansion because we're lapping -- the costs that we're lapping last year primarily sit in gross margin because those were tariff-related costs and the inventory adjustment costs, markdowns and clearance”

“We see 2% to 4% lifts in year 1. We see lifts in year 2 as well.”

“we plan to expand this capability into many more markets this year.”

“We expect that the aggregate tailwind from these profit rate opportunities will exceed any P&L investments we will choose to make, allowing operating margin rates to increase.”

“With this level of top line expansion, we also expect to increase operating margin rates from the relatively low levels we've seen over the last few years.”

“While we're planning for low single-digit top line growth in 2026, we expect that will further accelerate to the low to mid-single-digit range over time.”

“We plan to recommend that our Board of Directors approve a small increase in our quarterly dividend later this year, resulting in another annual increase in 2026.”

“I also want to note within this CapEx -- this year's CapEx plan, more than $1 billion will be spent in support of our food and beverage business.”

“We're also ramping up our remodel program and expect to complete more than 130 full store remodels in 2026.”

“This year, we're excited about our plans to open more than 30 new stores and nearly all of them will be full sized.”

“Regarding our first priority, we continue to expect that full year capital expenditures will be approximately $5 billion in 2026, up more than $1 billion from last year.”

“For the full year, we expect this year's shrink rate will be in line with last year.”

“we're planning for stronger profit growth in the back half of the year based on 3 primary timing considerations.”

“The center of this range represents healthy growth of 5% to 6% when compared with last year's adjusted EPS.”

“On the operating income line, we're planning for a 2026 rate that's approximately 20 basis points higher than the 4.6% adjusted rate we earned in 2025 as the savings opportunities I outlined earlier are expected to fully fund our P&L investments.”

“I'll add that we're planning for top line growth in every quarter of the year.”

“In total, those sources are expected to add more than 1 percentage point of growth this year.”

“In support of the strategic decisions that Michael and Cara outlined earlier and our goal to move our business back to sustainable growth, we're planning to reinvest $1 billion into our P&L this year.”

“And more importantly, the productivity and efficiency we gained last year will benefit our financial performance in 2026 and beyond.”

“These actions put significant pressure on our adjusted earnings per share, which we don't expect to repeat this year.”

“And we will continue to grow Good & Gather, which is on pace to become our first $4 billion owned brand, leaning into innovation and driving awareness for this powerful brand.”

“we're on track to double the number of unique items in our assortment over the next 3 years because 40% of our guests tell us they're looking for something new when they shop food at Target.”

“And this fall, I'm thrilled to share that we will introduce Target Beauty Studio in 600 stores, a new immersive destination, which will establish Target as a true beauty authority by pairing specialty level presentation and service with the accessibilities our guests expect from us.”

“You'll start to see us use this model in other areas of our businesses this year.”

“And by the fall, we'll have touched more than 3/4 of our top-of-bed assortment and more than 80% of kids home.”

“So we're making a more than $2 billion incremental investment across the business this year, including an additional $1 billion in CapEx to support new stores and remodels and another $1 billion to elevate the guest experience.”

“And finally, once we fully supported our first 2 capital priorities, we plan to repurchase shares to the extent that's supported by our business results and forecasts and can be accomplished within the limits of our middle A credit ratings.”

“You've heard us describe our support and strong support over time of the dividend, Michael, you shouldn't expect anything to change there.”

“We'll be more and more in stock as we move through 2026 than we were in 2025.”

“We expect that dynamic to continue in Q4. We do expect a continued volatile environment, which is why there's a little bit still, I guess, a wider range in place because we want to make sure we are -- we have the ability to react quickly to change this new environment that will represent the range that we're looking at.”

“On the adjusted EPS line, our updated range is from $7 to $8 for the full year.”

“With that as context, on the top line for the fourth quarter, we're continuing to expect a low single-digit decline in our comparable sales.”

“Regarding our first priority, we've invested about $2.8 billion in capital expenditures so far this year and continue to expect full year CapEx of around $4 billion.”

“Regarding our outlook for inventory shrink. Consistent with our prior commentary, we expect that shrink improvements will account for approximately 80 to 90 basis points of gross margin rate favorability for the full year.”

“Given current real estate opportunities, we expect to continue opening these bigger boxes in more and more markets across the U.S.”

“Our current plan envisions 2026 CapEx dollars increasing by approximately 25% or $1 billion versus 2025.”

“And next year, we're planning to take these learnings and make bold investments to transform the in-store shopping experience and assortment. In fact, we already have plans to introduce more changes to our stores than we have in any year in the past decade.”

“While we ended the quarter with a healthy cash position and expect to have continued capacity within the limits of our middle A ratings, we'll continue to exercise caution in our repurchase program in the face of continued uncertainty in the external environment.”

“while this is a strong after-tax return on an absolute basis, it's one of the many financial measures we expect will improve over time.”

“So we'll very much be leaning into our own brands, which deliver outstanding value, great pricing, great quality, great trend, great taste as a way to help consumers navigate the challenging macro environment.”

“What we've said and it continues to be our position is that we'll take price as a last resort.”

“Looking ahead, we're maintaining our full year guidance, which anticipates a low single-digit decline in our comparable sales, GAAP EPS of $8 to $10 and adjusted EPS of approximately $7 to $9.”

“However, given the performance of the business in Q2 and the agility our team has demonstrated in navigating the tariff environment, we should have the capacity to repurchase shares in the back half of the year.”

“Regarding the first priority, we've invested approximately $1.9 billion in capital expenditures so far this year and continue to expect full year CapEx in the $4 billion range as we open new stores, remodel existing ones and invest in our supply chain and technology”

“Looking ahead, we expect more favorable comparisons in the back half of the year as we've already made all the necessary inventory adjustments and expect that the bulk of this year's onetime tariff costs are also behind us.”

“For the full year, we continue to expect about 80 basis points of operating margin rate benefit from lower shrink, which when combined with the 40 basis points of benefit last year, will bring this year's shrink rate down to pre-pandemic levels.”

“Also in FUN 101, trend forward tech accessories like brightly colored headphones and phone cases and toys priced under $20 are leading to share growth in these categories, a trend we intend to build on in the coming quarters.”

“making us a top market share player in this category and putting trading cards on track to deliver more than $1 billion in sales this year.”

“The affinity between the Nintendo and Target brands has long been incredibly strong, and we are excited about the continued strength we expect to see in the back half of the year, both from hardware sales as well as the attachment of software and related apparel, toys and collectibles.”

“And we're on track to open around 20 for the year.”

“As we sit here today, we have been certainly contemplating the impact of tariffs on our business and the current tariff rates are built into the scenarios we have been working with.”

“For the balance of the year, you can expect that we'll recover the vast majority of the shrink that we saw -- the headwinds we saw over the last couple of years.”

“Based on these lower expected sales, we anticipate downward pressure on profitability with meaningful offsets from lower shrink and cost initiatives.”

“For the full year, we believe it's prudent to plan for a low single-digit decline in our sales, in line with our first quarter performance.”

“In the back half of the year, we will be lapping easier comparisons from 2024 and expect to have inventory and receipt adjustment costs behind us.”

“We expect many of those Q1 themes to persist in the second quarter with headwinds including continued sales pressure, tariff impacts, and some additional costs to adjust inventory and receipts with continued benefits from lower shrink and productivity gains.”

“Regarding the second priority, we paid $510 million in dividends in the first quarter and will recommend that the Board authorize a small increase in the quarterly dividend later this year.”

“CapEx in the first quarter was $790 million, and based on updated estimates of project timing, we're now expecting our full year CapEx will be near the lower end of the $4 billion to $5 billion range we laid out for the year.”

“All in, these efforts are expected to offset the vast majority of the incremental tariff exposure, thanks to the incredible work of our team.”

“In planning for the remainder of the year, we believe it's prudent to expect that current top line pressures will continue in the near term.”

“So going back to 2017, we were 60% coming out of China. We brought that down to 30%, and we are well on our way to be less than 25% by the end of next year.”

“Another way we deliver newness and value is through our Target Plus marketplace, where we have set ambitious goals to grow GMV to $5 billion by 2030 by offering even more brands and products guests want and expect from Target.”

“Recent news of moderating tariff rates has been very encouraging and may open the door for additional repurchase activity later in the year.”

“we've got the fourth quarter guided in a position that allows us to accomplish that goal.”

“That's a trend that I think we are going to see in the fourth quarter, and we'll certainly see some of that continue in 2025.”

“we expect consumers to want to continue to refresh in their home with the new holiday decor.”

“Consistent with our prior guidance, we believe the P&L impact of inventory shrink will be approximately flat in Q4, and we expect to continue to benefit from our ongoing efficiency work.”

“we expect to continue repurchasing shares in Q4 as well.”

“we expect our full year CapEx will be near the low end of our guidance range for the year at $3 billion or slightly lower.”

“as weather turns colder more consistently, this should bode well for our apparel sales trends.”

“We're investing in our new store program based on strong performance of this year's openings and a robust pipeline of new locations planned for 2025.”

“And our Q4 plan is focused on ending this year with an inventory position that will best position our business going into 2025.”

“our long-term plans anticipate further expansion of this metric into the high teens over time.”

“we estimate they could amount to nearly 1 percentage point headwind to our fourth quarter comps.”

“And based on our growth initiatives, ongoing efficiency work and continued opportunity to reduce the impact of inventory shrink, we expect to see additional progress in the years ahead.”

“we continue to see runway on that going forward.”

“We expect to continue to grow in Q3. We expect to have a growth story for the year.”

“Our guidance for the remainder of the year implies further expansion of both of those metrics.”

“We expect to have continued repurchase capacity in the back half of 2024 and in years ahead.”

“we continue to expect full year CapEx in the $3 billion to $4 billion range.”

“And for Q4, given the financial benefit we were already seeing a year ago, we're expecting shrink costs will be approximately flat to last year.”

“Based on these updated accounts, we're now expecting our Q3 gross margin rate will also benefit from lower shrink costs, but expect the magnitude of that benefit will be less than half of what we just experienced in the second quarter.”

“And while our in-stock measures have been improving rapidly for some time now, we're going to continue our work to improve them even more.”

“We're focused on continued expansion of our operating margin rate as we move back towards and potentially beyond the 6% annual rate we were earning before the pandemic.”

“While this is already a very strong after-tax return, our long-term financial plans envision continued growth of this metric into the high teens over time.”

“While it's encouraging to see this progress, we'll continue our work to move shrink rates down to more sustainable levels in the years ahead, given the steep increase in shrink that our business has absorbed over the last five years.”

“By 2028, this facility is expected to process up to 60,000 packages daily while operating in a smaller-than-average footprint.”

“For the full year, we're maintaining our prior guidance for a comparable sales increase in the 0% to 2% range and EPS of $8.60 to $9.60.”

“Regarding the first priority, first quarter CapEx was just under $700 million, and we remain on track to invest a total of $3 billion to $4 billion for the full year.”

“We continue to be thrilled with the strength we see in our Roundel ad business. It grew another 20% plus this quarter, and I think that speaks to the value that we're providing guests and some of our partners with that offering. That's been a sustained source of growth, and we would expect that to continue to be a source of growth going forward.”

“Later this quarter, we plan to recommend that our Board approve a small increase in the quarterly dividend in support of our goal to build on our decades-long record of annual dividend increases and move toward a 40% payout ratio over time.”

“Given that this growth in sales was largely driven by an increase in our sales per store, an increase in our inventory turns is something we'd expect to see and something that should be sustainable over time.”

“As a result, we now expect to see a full year gross margin rate benefit related to shrink, most notably in the second quarter.”

“We are excited to expand offerings with current partners and introduce new brands to the platform in Q2 and beyond.”

“As we shared previously, we think our digital marketplace, Target Plus, will play an outsized role in our growth in the quarters and years to come, even as we continue to prioritize the curation of both our assortment and digital partners on the platform.”

“Notably, we expect discretionary trends will continue to remain pressured in the short term, but to normalize over time.”

“We expect that will begin in the second quarter as we build on the remarkable gains we've seen over time.”

“As I also mentioned that day, given our expectation for Target's financial performance for the remainder of 2024, we may have the ability to resume share repurchase activity later this year while maintaining our debt ratings at the middle A level.”

“As we look at the first quarter, I think the key thing there is our cautious approach on the top line, and there's some differences year-over-year in what we anniversary, but that's a source of pressure in the first quarter. As we get back to growth, deeper in the year, we'll see some of that pressure subsides.”

“But we've seen outsized growth there, and we would expect that to continue this year.”

“I also -- I mean we touched on a little bit in the conversation already, but it warrants another shout out... And so I feel really good about the team's work there in 2023. I feel great about our inventory position as we step into 2024. And I would expect our teams to continue taking the growth we've seen and the growth we expect and to translate that more into more efficiencies over time.”

“You asked a question specifically on the cadence as we move through the year. I touched on it a little bit in my remarks, we anniversaried some of the strongest business last year in Q1, and so we would expect to see a build as we move through 2024.”

“So we've seen that discretionary comp acceleration through the year. That's what we plan to build on in 2024.”

“More than $0.5 billion in cost savings from our ongoing efficiency efforts, giving us a fast start on our multiyear efficiency goals and realistic expectations for additional improvement in our operating margin rate this year as we move towards our 6% goal.”

“Later in the year, we'll recommend that our Board approved another increase in our per share dividend.”

“Turning to our balance sheet and capital deployment. We continue to expect a CapEx range of $3 billion to $4 billion for the year and are planning for another strong year of cash generation.”

“We're also planning for continued outsized growth in our Roundel ad business, contributing to both gross margin and other revenue.”

“In terms of tailwinds, we're planning for modest improvement -- modest rate improvement in shipping and transportation as we annualize the benefit of the lower rate contracts negotiated throughout 2023.”

“In addition, given our cautious top line expectations and continued investments in long-term growth, we'll likely see some deleveraging on the SG&A line.”

“After that, we're planning for a resumption of top line growth over the remaining 3 quarters of the year.”

“In our frequency businesses, we're anticipating a further recovery in unit trends this year as inflation continues to moderate.”

“We made enormous progress and moving back towards 6% last year and expect to make continued progress in 2024 and beyond.”

“just unlimited same-day delivery that we're rolling out to guests at the promotional price of $49, which will be the standard price for Target Circle cardholders.”

“Over the coming year, you'll see us experimenting to bring off-platform content on to our digital properties, so guests can find inspiration right on their sight in our app.”

“And we'll continue to expand Favorite Day into those big seasonal moments that are so important to our guests and important to keeping Target relevant.”

“soon we'll launch books, puzzles and toys with all items in our spring assortment priced under $20.”

“Expect plenty of new offerings in this partnership in 2024 and for years to come.”

“We certainly expect new stores to be a major contributor as we go forward.”

“Altogether, we believe we can deliver high single-digit growth in earnings per share in a typical year, at or above the average you've seen over the last 10 years.”

“As for our third capital priority, we expect share repurchases will continue to play a meaningful role in our EPS growth in years ahead.”

“we believe annual CapEx will typically range between $3.5 billion and $5.5 billion in 2025 and beyond.”

“By the end of those 10 years, we expect those new stores will be generating incremental sales of around $15 billion annually.”

“Comps are expected to be the primary source of growth with increases in the low to mid-single-digit range in a normal year, consistent with our average over the last decade.”

“Going forward, we expect to offset at least a portion of this decline over time as we work to achieve an optimal and sustainable operating margin rate.”

“And then what we've said over the next few years, we've got at least 5 more of these to open.”

“So that's probably worth spending just a second on so that we all interpret what we're likely to see in Q4 the right way. Given the pace of some of our accruals last year, we would expect shrink to not to be quarter-over-quarter headwind in Q4 that we've seen throughout the balance of the year.”

“But more directly, based on where we are today, we believe we can successfully deliver both top line growth and rate improvement over time.”

“We estimate that extra week will add about $1.7 billion in sales and result in about 30 basis points of operating margin rate leverage on the quarter.”

“As such, we're planning a wide range for our fourth quarter EPS of $1.90 to $2.60, which represents approximately flat growth to last year on the low end and growth of about 37% on the high end.”

“Importantly, we've seen sequential improvement in this metric over the last couple of quarters, and we're focused on continuing that momentum in the years ahead.”

“While we're still in the early stages of developing next year's capital plan, our current expectation is that next year's CapEx will be somewhat lower than this year in the $3 billion to $4 billion range, reflecting our current view of the optimal timing for key investments we're planning over the next several years.”

“Regarding the first priority, capital investment through the first 3 quarters of the year was just under $4 billion, and we expect full year CapEx will be near the high end of the $4 billion to $5 billion range we laid out for the year.”

“This holiday season, we'll be supplementing our existing team by hiring nearly 100,000 seasonal team members to meet expected demand and ensure we can deliver a joyful shopping experience.”

“sortation centers are a perfect example. We've got many more facilities open this year. They'll do a lot of business in the back half of the year.”

“we're pleased to see headwind on a year-over-year basis. From freight, we're in a better place now than we were a year ago certainly on that front, and that will continue as we get into the back part of the year based on how we currently have things projected.”

“we do believe that there's some market share upside in key categories, especially in home, where we believe Back-to-College will benefit strongly from market disruptions in categories like domestic and kitchen appliances.”

“In the near term, we'll maintain that approach and don't intend to resume repurchase activity until it's compatible with our long-term credit rating goals.”

“With 1 quarter of the year behind us, we continue to expect our full year CapEx will be in the $4 billion to $5 billion range.”

“We expect to grow our full year operating income by $1 billion or more, and we expect our business to generate full year GAAP and adjusted EPS of $7.75 to $8.75.”

“we're planning for full year comparable sales in a wide range centered around flat.”

“we also have multiple actions underway to mitigate them, including ongoing efficiency work and cost saving efforts that we expect to flow into the P&L in the second half of the year.”

“Altogether, our expectations translate to a second quarter GAAP and adjusted EPS range of $1.30 to $1.70.”

“we believe our Q2 operating margin rate will be much higher than the very low rate we earned a year ago, but lower than the 5.2% we saw in Q1.”

“if our second quarter comp sales end up declining in the low single digits, which is where they are trending currently, we'll see greater SG&A rate pressure related to cost deleverage than we experienced in Q1.”

“we believe that many of the same trends that emerged in Q1 will continue in the second quarter, including a meaningful tailwind from freight and transportation costs, and a significant headwind resulting from inventory shrink.”

“we're anticipating second quarter sales in a wide range centered around a low single-digit decline, consistent with those recent trends.”

“Based on these expectations, we anticipate a recovery in the ROIC metric this year and expect to continue building back toward our longer-term potential in 2024 and beyond.”

“As we move further into the year, we expect to see higher profitability than a year ago and continue to benefit from the inventory efficiency reflected in this quarter's cash flow.”

“And an expected total of 15 or more in 2026.”

“in doing so, we expect to see benefits from assortment planning, to supply chain, all the way down to guest fulfillment.”

“we think there's hundreds of million dollars to continue to unlock with our investment in sortation centers.”

“our initial scoping says, we'll deliver $2 billion to $3 billion of cost savings over the next 3 years.”

“Once we see a normalization of consumer demand and a resumption of growth in discretionary categories, you'll see that reflected in a stronger top line performance and a meaningful increase in our operating margin rate beyond what we're planning for this year.”

“On the SG&A line this year, we expect continued strong discipline in managing costs across the enterprise, but we're also not backing away from investments in our team and guest experience, and we'll face potential rate deleverage given our outlook for comparable sales.”

“we're positioned to benefit from a number of significant tailwinds on the gross margin line, most notably as we cycle over last year's inventory actions. In addition, we're expecting hundreds of millions of dollars of additional opportunity from lapping last year's unusually high freight and transportation costs.”

“Altogether, on the bottom line, we expect our business to generate first quarter GAAP and adjusted EPS in a range from $1.50 to $1.90.”

“Over time, as our cash flow recovers and our debt metrics improve, we expect share repurchases will play a meaningful role within our broader, long-term capital deployment priorities.”

“In the near term, until those expectations play out and our cash generation increases, we're not planning to repurchase any shares, consistent with our goal to maintain our middle A credit ratings.”

“given our cautious inventory positioning and rapidly improving lead times in global shipping, we're planning for faster inventory turns in 2023, driving higher payables leverage and recovery in working capital as we move through the year.”

“Today, we're announcing the next phase of our Drive-Up services with Drive-Up Returns, which started as a pilot last year and will be available across the chain by the end of the summer.”

“We delivered more than 25 million packages through sortation centers last year, and we expect to double that amount in 2023 with the help of our local and national carriers.”

“Earlier this month, we announced the expansion of our sortation center network to more than 15 facilities by the end of 2026.”

“We're also expecting some pressure from soft sales in our highest-margin discretionary categories. And finally, we see the potential for increased promotional intensity across the industry this year, given that we're competing in a constrained environment for consumer spending.”

“These include inventory shrink, which may continue to rise before we see rates begin to moderate over time.”

“On the frequency side of the business, our full year plans envision continued share gains and strong sales growth. But we're mindful that inflation in these categories may begin to moderate, pressuring dollar comps across the industry.”

“we are committed to being clean at the end of the holiday season.”

“one, we see the savings as being incremental for an operating plan; two, we do expect that the holiday season is going to be very promotional.”

“we believe it presents an opportunity to save a total of $2 billion to $3 billion over the next 3 years in support of our investments in long-term growth, along with our profit goals.”

“As we look beyond the holiday season, we're planning for a continued challenging environment as we move into next year.”

“Altogether, these expectations lead to a wide range for our expected Q4 operating margin rate centered around 3%.”

“And as I mentioned, we're planning for additional pressure from inventory shrink, given the worsening trends that have emerged so far this year.”

“In the near term, we will continue to take a very cautious approach to share repurchase in light of the volatility of the environment and our commitment to maintaining our middle A credit ratings.”

“we're now expecting our full year CapEx will come in around $5.5 billion in light of continued inflationary pressures affecting the cost of this year's projects.”

“I want to emphasize that we're not happy with this performance and expect to deliver much stronger dollar and rate performance over time.”

“we expect it will reduce our gross margin by more than $600 million for the full year.”

“In the near term, these pressures should begin to recede as we move through the fourth quarter and into next year as receipt flow naturally moderates following the holiday season and we'll begin to benefit from the reduction in order lead times John mentioned earlier.”

“we'll look to apply any learnings from that guest-facing test before rolling out the service more broadly next year.”

“While we'll continue to open new stores of all sizes in the next few years, we plan to lean into this new layout when appropriate and incorporate its features into other projects, including remodels.”

“And importantly, we expect to see further reductions in those rates going forward as they remain about 3x higher than we were paying in 2019.”

“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 softened further, profit could see additional pressure.”

“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.”

“Obviously, if recent softening consumer trends continue through the fourth quarter, that will put some pressure on our near-term financial performance.”

“And today, similar to my commentary on the top line, based on the success of our Q2 inventory actions and our current performance, we remain positioned to deliver an operating margin rate in a range around 6% in the fall season.”

“And today, based on our current performance and plans for the back half of the year, we remain positioned to deliver full year revenue growth in the low to mid-single-digit range.”

“keeping us on track to complete nearly 200 remodels this year.”

“We remain on track to open at least 250 of these unique spaces this year.”

“I'll maybe start at the end of your question. We expect Q4 to be promotional. It always is.”

“Looking forward, just as our inventory commitments reflect continued caution for the remainder of the year, we're taking a similar cautious stance in terms of our share repurchase activity.”

“And today, while we expect conditions to remain challenging in the near term, the operating margin rate improvement we're projecting in the back half of the year should serve as an early indicator of the continued rate improvement we should deliver in the years ahead.”

“In fact, if our performance in the fall is consistent with the revenue growth and operating margin rates I outlined earlier, we remain positioned in 2022 to generate higher operating margin dollars than we did in 2019.”

“including rapidly changing consumer preferences, inflation at 40-year highs, volatile supply chain conditions and rising fuel and transportation rates that are expected to add well over $1 billion of cost this year.”

“Most notably, in the third quarter, we'll continue to experience some spillover impact from our inventory actions in the range of $200 million.”

“Between the last 2 quarters of the year, we expect our third quarter rate will be well below our Q3 performance over the last couple of years, while our fourth quarter rate should be much more in line with our recent Q4 experience.”

“Looking forward, given that we anticipate a meaningful improvement in our operating performance in the back half of the year, we continue to expect our full year effective tax rate will be in a range around 21%.”

“We have 6 of these facilities operating today, including 3 that have opened in the last few months, and we have plans to add 5 more by early next year.”

“In support of this goal, we opened 2 upstream DCs near the end of 2021 and plan to open 6 new upstream facilities over the next several years, including 2 on track to open in 2023.”

“this year, we expect to meaningfully reduce our reliance on air freight by moving to early receipt dates for seasonal inventory.”

“In other words, for the first time I am aware of, our fall season inventory is projected to peak at a lower level than in spring, providing another vivid illustration of the unique dynamics we've encountered so far this year.”

“As a result, we've meaningfully reduced our fall season receipt commitments in many discretionary categories. With these reductions, we're projecting our DCs will remain at or below 85% capacity through the remainder of the year, even after the seasonal increase in holiday inventory that is set to occur over the next 2 months.”

“And we're committed to improving our operating performance over the second, third and fourth quarter and getting ourselves back on track for a more normalized environment in 2023.”

“So as we look ahead, it is clear that many of these pressures will persist in future quarters, but that hasn't affected our long-term plans and expectations, including our confidence in the ability of our business to grow mid-single digits and maintain an operating margin of 8% or higher over time.”

“That certainly impacted our business in the first quarter, and we expect that to continue in Q2.”

“But we do expect, and we continue to take product in early intentionally to protect against supply chain disruption. We expect to see some offset as we don't anniversary the same level of air freight that we saw in the back half of the year.”

“So the elevated costs we've been facing will continue to affect our profitability for the remainder of the year.”

“More specifically, given the elevated level of volatility we're currently facing and multiple sources of uncertainty going forward, we see a range of potential outcomes, centered around a 6% operating margin rate for the full year.”

“In terms of the top line, based on our first quarter results and the trends we've seen so far in May, we continue to expect full year revenue growth in the low to mid-single-digit range.”

“While we anticipate having continued ample capacity to return capital through share repurchases this year, given the current supply chain challenges we're facing and their impact on working capital, we now expect our total repurchases this year will be lower than the $7 billion we returned in 2021.”

“Beyond those full remodels, we're planning to complete just over 200 fulfillment remodels in 2022 as well.”

“For the year, we have plans to complete remodel projects in nearly 400 stores.”

“a number that's expected to grow significantly throughout the year.”

“In addition, capacity in our supply chain will continue to build throughout the year as the new buildings we opened last fall continue to ramp up their productivity while we work to open additional buildings in the years ahead.”

“More specifically, as we move beyond the front half of the year, we'll have had enough time to adjust inventory levels and receipt volumes to match the pace of sales, even in longer lead time categories.”

“And for the full year, we're now expecting about $1 billion of incremental freight costs, even compared to our expectations only 3 months ago.”

“Yes, we're going to keep growing in 2022. and knowing this, we've upgraded our long-term financial algorithm.”

“And I'm excited that for the first time, we're going to have a holiday-themed Favorite Day assortment this year.”

“But by changing the way we work, working hard to build new relationships and by using our size and scale to help brands grow for success in mass retail, we'll end 2022 with more than 50 Black-owned brands in our Food & Beverage assortment.”

“Looking ahead, the rollout of sortation centers presents a compelling opportunity to further reduce the unit cost of last-mile delivery.”

“Looking ahead, we expect our first quarter 2022 rate will move to something that's relatively high to our history but well below last year's 9.8% rate, which was unusually high due to some unique factors.”

“Putting all of our expectations together, a low to mid-single-digit revenue increase, an operating margin rate of 8% or higher and continued robust share repurchase activity, we're positioned to generate high single-digit growth in adjusted earnings per share this year, on top of a 112% increase over the last 2 years.”

“In addition, given our current cash position and expectations for strong cash flow, we believe our 2022 share repurchases will be at or above the $7 billion we accomplished in 2021.”

“Consistent with the longer term, we expect CapEx in the $4 billion to $5 billion range this year.”

“Altogether, given our expectations for revenue growth and purposeful operating margin rate investments, we're positioned to deliver low single-digit growth in operating income dollars this year.”

“As a result, product costs within our assortment have risen faster than retail in recent quarters, reflecting this intentional approach in deliberate pacing. We expect this trend to continue, particularly in the first half of this year as we maintain our focus on affordability for our guests.”

“And we're planning for a small increase in markdown rates in 2022 as we move past the dramatically low rates we've seen over the last couple of years.”

“So as we keep driving awareness and trial and adding new experiences, we anticipate continued growth.”

“And lastly, I'm really excited we're going to pilot the ability to order Starbucks for Drive Up so guests can get everything on their list and request their morning latte when they're on the way while never even unbuckling their seatbelt.”

“As we invest in existing -- in our existing store portfolio, we'll continue to open around 30 new stores a year.”

“This year, we'll remodel around 200 stores and keep that pace in the years that follow.”

“Today, we have 4 more currently in development that will open over the next few years with plans for several more to follow.”

“By the end of the year, we're committing 5% of our annual media spend to Black-owned media partners and another 5% to Hispanic-owned media partners.”

“But we think there's an opportunity over the next 4 or 5 years to continue to build at least that pace, perhaps a little bit faster.”

“Yes. As we think about the long-term algorithm, comp growth will certainly be the biggest driver there. Where that lands in a given year, might be up or down. But I'll tell you, we expect to be a business that continues to grow and gain share year-over-year.”

“We'll maintain our focus on growing the annual dividend, something we've accomplished for 50 consecutive years and look to maintain a 40% payout ratio over time.”

“We'll take a test-and-learn approach in select markets throughout the summer and fall with a goal of eventually making this option available from coast to coast.”

“And given that we don't expect it to end anytime soon, we are committed to growing our physical footprint and our team so they can continue to deliver on behalf of all of our stakeholders in Q4 and beyond.”

“But as John can attest, we know that we're going to still face some supply chain challenges as we go into 2022.”

“Chris, as we sit here today, we see continued momentum in the marketplace, and our guests to shopping, all of our categories, utilizing both our stores and our digital channels, and we think that's going to continue throughout the holiday season.”

“I've mentioned before that the time line to move those metrics fully back to historical levels will likely be a multiyear journey.”

“As a result, going forward, we expect to increase our leverage and reduce our cash position at a pace that's consistent with our financial expectations, credit rating goals and assessment of the external environment.”

“we expect to reach about $3.3 billion for the full year.”