Target Corporation (TGT)

TGT 
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Target Corporation (TGT)

Q2 2014 Earnings Conference Call

August 20, 2014 10:30 ET

Executives

John Hulbert - Senior Director, Investor Communications

Brian Cornell - Chairman and Chief Executive Officer

John Mulligan - Chief Financial Officer

Kathee Tesija - Chief Merchandising and Supply Chain Officer

Analysts

Wayne Hood - BMO Capital

David Strasser - Janney

Matthew Fassler - Goldman Sachs

Greg Melich - ISI Group

Matt Nemer - Wells Fargo Securities

Matt McClintock - Barclays

Simeon Gutman - Morgan Stanley

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation Second Quarter Earnings Release Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will invite you to participate in a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, August 20, 2014.

I would now like to turn the conference over to Mr. John Hulbert, Senior Director, Investor Communications. Please go ahead, sir.

John Hulbert - Senior Director, Investor Communications

Good morning and thank you for joining us on our 2014 second quarter earnings conference call. On the line with me today are Brian Cornell, Chairman and Chief Executive Officer; John Mulligan, Chief Financial Officer; and Kathee Tesija, Chief Merchandising and Supply Chain Officer.

This morning, Brian will provide his initial impressions on joining Target and his priorities going forward, then Kathee will discuss results in the U.S and Canada and plans for the third quarter and beyond, and finally, John will provide more detail on our financial performance, along with our financial outlook for the third quarter and the full year. Following their remarks, we will 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 will turn it over to Brian for his initial impressions of Target and his priorities going forward. Brian?

Brian Cornell - Chairman and Chief Executive Officer

Thank you, John. Before Kathee and John provide their perspective on Target’s second quarter performance, I want to take a few minutes and discuss why I made the decision to come to Target and outline my priorities over the next few months. Even before I accepted the offer to lead this company, I have known and admired Target for multiple perspectives throughout my career. As a vendor partner, I have known Target as a smart, savvy, innovative, ethical and guest focused merchandiser. As a competitor, I have known Target as a disciplined, tough, focused retailer. A company that redefined the discount space by delivering outstanding design, world-class fashion, innovative products, at amazing prices.

As a guest, my family and I have known Target as unique place that makes shopping fun, saves us time and offers a differentiated experience based on newness and discovery. And finally, as a member of the community, I have known and admired Target for its commitment to making the places where we live and work better, both through its corporate giving programs and the commitment, the voluntarism from our team members. With my appointment as Chairman and CEO, I now have the opportunity to learn about Target from the inside and I could not be more thrilled to have the opportunity to lead this great company.

In the weeks and months ahead, I am planning to spend a great deal of my time listening to the team here in the U.S. and Canada in both our stores and headquarter locations, hearing directly from them about what’s working and importantly what we need to change. In fact, I just got back from a visit to Canada, where I spent time with the team to get a firsthand update on their review of strategy and operations. While that review is not yet complete, based on what they have learned already, the Canadian team is making broad changes as they focused on improving performance in time for the key holiday season.

In the U.S., I have been spending time with John, Kathee and others on the leadership team to understand in detail our plans for the remainder of the year. In those discussions, I am ensuring that this team is focused on execution across every aspect of our business, particularly in the holiday season. In addition, I am deepening my understanding of Target’s pipeline of omni-channel innovation and I am focused on our opportunities going forward. While I am very impressed with the progress the team has made recently, including innovations on our mobile platform, subscription service, Cartwheel and flexible fulfillment, we need to continue to move faster and grow faster than the marketplace. We need to build capabilities focused on satisfying the wants and the needs of our guest and ensuring that our digital and store operations operate seamlessly to provide a single superior experience.

Finally, I am working with the leadership team to begin detailed planning of next year’s strategy and financial results. I am impressed with the progress that John and the team made in the last three months, including a strategy review that is the most comprehensive effort I have seen in my career. Their foundational work is providing me with a fresh fact-based perspective on Target’s strengths and opportunities serving as the foundation for next year’s plan and beyond.

Now, before I turn the call over to Kathee, I want to thank Roxanne Austin and John for their commitment to Target and to the team, which they demonstrated through their willingness to serve as Interim Chair and CEO over the last three months. In addition to the critical strategy work they initiated, Roxanne, John and the leadership team moved forward confidently to make important changes to internal processes, removing roadblocks, empowering teams and accelerating the pace of decision-making. While there is a lot of work ahead, I have been blown away by the passion and commitment displayed by team members across the country. This team is focused on winning in the marketplace by better serving our guests in both stores and digital channels. I look forward to working with this team to harness their passion and develop the appropriate strategies that position Target for success both today and over time.

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