The story of Target the last 3 years is navigating the pandemic bullwhip. John Mulligan, the retiring COO of Target, told the story well:

* 2021: Could not secure enough inventory to meet demand due to digital growth.

* 2022: Growth in discretionary reversed. Way too much inventory. Operating margins at historical lows.

* 2023: Right-sizing inventory, control what we can control.

Target Q3 2023 Earnings quick recap:

* Comparable sales down 4.9%, revenue 4.2% lower

* Gross margin 27.4%, up 11% y/y.

* Operating margins at 5.2%, a full 1.3 points higher than last year.

A few odds and ends:

* Same-day sales up, led by Driveup up 12% y/y.

* Comp sales were expected to be flat y/y in 2023, but are down 5%. More than expected even given Target's huge efforts.

* Beauty an outlier: high single digit growth y/y. Rihanna by Fenty launching soon.

* Discretionary y/y down high single to low double digits. Electronics and apparel the worst. Home high single digit decline.

* Other revenue basically flat, proving Target is still a retail media outlier.

Macro-trends Target is reporting:

* Units and sales down for discretionary items 7 quarters in a row.

* Food & Beverage inflation still up 25% since pre-pandemic

* Consumers still making difficult choices, responding to heavy promotions.

In response to this, Target has identified four key factors that all multi-category retailers should be thinking about in the face of these trends:

1 - Right-size your inventory, particularly in declining discretionary segments. Everything else fails if you get this wrong. Target's inventory is down 14% y/y, and discretionary inventory is down even lower at 19% y/y.

2 - Below $25 is a critical price point across the assortment. This must be highlighted to consumers, especially during shopping seasons.

3 - Invest in newness, on-trend and freshness.

4 - On weeks without shopping, promotions the only thing driving demand. Don't chase unsustainable gains.

Finally, for Q4 2023, Target is forecasting mid-single digit comp declines, which feels about right in a balanced discretionary retailer and is probably about the best you can do with huge efforts in these categories.

These lessons from Target I think all retailers need to hear. We are not all in essentials or replenishable categories. Cautious category-by-category inventory planning is the essential watchword.