Target Short-Term Profit Challenges During 2022, Long-Term Outlook Still Strong

Anyone who wants to learn eCommerce and retail could do much worse than go back and listen to Target earnings calls for the past 8 years, highlighted by:

* Consistent strategy.

* Real data with explanations.

* Steady and experienced leadership

Here are a few callouts from today's Q1 2022 Earnings call.

Overall:

* 2022 Margin guidance ~6% as opposed to 8%+ normal target. Driven by inventory, supply chain issues and mix shift.

* Q1 comp sales 3.3% growth, on top of 23% growth a year ago.

* Mid-teen growth in store pickup.

* Digital same-day is half of digital 1Q sales. And Half of same-day is drive-up (rather than pick-up). Unbelievable multi-year deliberate strategic story here.

>Supply Chain Woes Will Persist Into 2023

* Will take over $1B in extra costs in 2022 due to freight availability and costs. Hundreds of millions in unexpected costs in 1Q due to use of spot rates -- inventory arrived both sooner and later, particularly bulky items.

* Difficult to move inventory where/when they need it to.

* No relief from supply chain challenges until 2023. Help is not on the way.

>Category Mix Shifted in Past 2 Months Faster Than Expected

* Apparel, hard lines, home small declines in same store comps. Big slowdown in electronics, appliances, TVs, outdoor furniture.

* Food & Beverage low double-digit unit growth led by owned brands.

* Growth in beauty, sunscreens, color cosmetics, toys, fashion-forward apparel, travel as baskets shift to experiences + going out + seasonal/holiday.

>Expansion Plans Largely Unchanged

* New stores still opening. 6 new local/metro sortation centers opened. 3 more planned by EOY.

* 3 current sort centers handled 4.5M packages in Q1.