Target 2021 Q4 Earnings Roundup Highlights Continued Focus on Teams, Stores as Hubs and Merchandise

Overall, Target continues to go from strength to strength.

backward-looking:

* Went from $70B in sales in 2017 to $106B today.

* 19 consecutive quarters of comp store sales growth

* Digital sales now 21% penetration

* Q4 comp sales 8.9% y/y, 2021 full year 12.7%

forward-looking:

* Annual Capex expected to be $4-5B going forward.

* After-tax return on invested capital should be consistent ~30% going forward, compared to 15-17% prior to the pandemic. best in industry.

* slightly increased markdown rates expected in 2022

* similar guidance to walmart, slower in first half, accelerated second half.

* operating margins should be ~8%

Teams

* Investing $300M in employees to set a new starting wage between $15 and $24.

* Expanded and earlier access to healthcare benefits, even for hourly employees.

* Goal is to be wage leader in every market.

Stores as Hubs aka #SupplyChain

* 45% growth in same day services

* Opened 32 new stores in 2021. 30 more to come in 2022.

* Shipping from Store saves 40% per unit fulfillment costs compared to upstream shipping.

* Average per unit digital fulfillment costs decline more than 50% in last few years. same-day service penetration CANNOT be compared apples to apples across retailers like #Walmart, #Macys, etc. Target is just plain better at it.

Merchandise

* Owned brands now 28% of sales. Growing 18%, faster than rest of business. Q4 produced $30B in owned brands revenue.

Growth should be driven by a few areas:

1 - Better merchandise mix + new brands: mix of owned + national partnerships.

2 - New stores plus store remodels which greatly improve guest experience.

3 - Improved operating margins due to greater store productivity and fulfillment efficiency upstream and downstream of stores.

4 - Superior staff retention compared to competition, enabling better service.