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Target Corporation (TGT)
Q1 2014 Earnings Conference Call
May 21, 2014 10:30 a.m. ET
John Mulligan – Interim President and Chief Executive Officer
Kathryn Tesija – Chief Merchandising and Supply Chain officer
John Hulbert – Senior Director Investor, Communications
Matthew Fassler – Goldman Sachs
Robert Drbul – Nomura Securities
Greg Melich – ISI Group
Matthew Nemer – Wells Fargo Securities
Sean Naughton – Piper Jaffray
Joe Feldman – Telsey Advisory Group
Previous Statements by TGT
» Target (TGT) Q1 2014 Results - Earnings Call Webcast
» Target Corporation's CEO Discusses Q4 2013 Results - Earnings Call Transcript
» Target's CEO Hosts Financial Community Meeting (Transcript)
I would now like to turn the conference over to Mr. John Hulbert, Senior Director, Investor Communications. Please go ahead, sir.
Good morning and thank you for joining us on our 2014 first quarter earnings conference call. On the line with me today are John Mulligan, Interim President and Chief Executive Officer and Chief Financial Officer; and Kathee Tesija, Chief Merchandising and Supply Chain officer.
This morning, John will provide a high level summary of our first quarter results and strategic priorities for the remainder of the year, then Kathee will discuss results in the U.S and Canada, guest insights, and plans for the second quarter and beyond. And finally, John will provide more detail on our financial performance, along with our outlook for the second quarter and the full year. Following their remarks, we’ll open the phone lines for a question-and-answer session.
As a reminder, we are joined on this conference call by investors and others who are listening to our comments via webcast. Following this conference call, John and I 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. Finally, in these remarks, we refer to adjusted earnings per share, which is a non-GAAP financial measure. A reconciliation to our GAAP EPS is included in this morning’s press release posted on our Investor Relations website.
With that, I’ll turn it over to John for a review of the quarter and our priorities going forward. John?
Thanks, John. First off today, I want to thank the Target team for their energy and commitment. The first quarter was unusually challenging as we worked hard to help our guests recover from the data breach. Because of the team’s efforts, traffic and sales trends have improved substantially and we’re in a much better position today than we were just three months ago.
Also, before I turn to the first quarter operating results, I want to briefly discuss the board’s recent announcement of Gregg Steinhafel’s departure and the initiation of a comprehensive internal and external search for a permanent replacement. I want to thank Greg for all his contributions to Target over his 35 year career and I’m humbled to follow him into this role, even on an interim basis. With the full support of the board, Kathee and I, along with the rest of the leadership team, have made it clear to the entire Target team that we are not going to wait for a permanent CEO to improve our operations and performance. We are already taking important steps, including management changes announced yesterday to move the organization forward.
This morning we reported adjusted earnings per share of $0.70, above the midpoint of our guidance. This is the result of generally in line performance in both the U.S and Canada, combined with a better than expected tax rate driven by a variety of small matters, none of which was individually significant. Our U.S segment comparable sales decline of 0.3% was near the upper end of our guidance and reflects meaningful improvement from trends we were experiencing shortly after the breach.
When we survey consumers, we increasingly hear that they have put the breach behind them and they’re resuming their Target shopping habits. We’re pleased with this progress and continuing to take steps that reinforce our commitment to earn back the trust of our guests. We recently announced that we’ve hired Bob DeRodes as our new Chief Information Officer and I’m confident that Bob is the right person to lead our technology transformation and data security remediation efforts. That same day, we also announced the important decision to move all of our REDcards under MasterCard’s industry leading chip-and-PIN technology. This decision, along with our accelerated rollout of chip-enabled card readers to all of our stores by this September, are among many crucial steps we’re taking to restore confidence among our guests, that it’s safe to shop at Target.
The first quarter Canadian segment results were also largely in line with our expectations. Sales were just below the expected range, driven by softness early in the quarter. While losses were meaningfully in the fourth quarter, we’re still far from where we need to be. We continued to roll out enhanced tools and technology. We’ve increased the intensity of our volume messaging, and we’ve made several important changes to the Target Canada leadership team during the quarter. As a result, we’re beginning to see improved guest satisfaction measures regarding in-stocks and price perception. While these early signs of progress indicate that we're moving in the right direction, we're committed to moving faster.
As we look ahead to the second quarter and beyond, the Board and our team are aligned on three priorities. The first is growing traffic and sales in our U.S. segment. While the environment is challenging, we can do better. We need to improve on something we've historically done well, delivering unique products and services at great prices. As a result, we're working quickly to drive more newness in our merchandising and presentation, helping to keep Target top in mind with guests by continually reminding them why they fell in love with Target in the first place.