5 Things I Learned From Target’s Q4 2022 Earnings Call

Target Corporation has been a long-standing and beloved retail destination for many years, renowned for its extensive selection of products, trendy designs, and affordable prices. In its latest earnings call, Target shared impressive results for Q4 2022, highlighting the company’s notable growth in sales and foot traffic.

This article delves into five key highlights from Target’s Q4 2022 earnings report, providing readers with valuable insights into the ever-evolving retail industry. Whether you are a loyal Target shopper or simply interested in the retail industry, there is much to gain from examining Target’s latest earnings. So, grab your favorite Target-branded coffee mug, settle in, and explore the exciting developments at Target.


  • Q4 2022 Comparable sales increased 0.7 percent, on top of 8.9 percent in Q4 2021, driven entirely by an increase in guest traffic
  • Full-Year Total revenue grew $3 billion to $109 billion from $106 billion in 2021. Total revenue has grown more than $30 billion since 2019
  • Full Year Comparable sales grew 2.2 percent, on top of 12.7 percent in 2021
  • Full Year Comparable traffic grew 2.1 percent, on top of 12.3 percent in 2021
  • Full Year All five core merchandise categories delivered unit share growth on top of strong share performance over the past several years
  • Guidance for the full year 2023, the Company expects comparable sales in a wide range from a low-single-digit decline to a low-single-digit increase

Current Challenges and Future Growth

Management acknowledged that the past year has been unpredictable, with inflation, supply chain issues, and the pandemic causing volatility and uncertainty. Despite these challenges, Target reported revenue growth and comp sales growth for 2022, showing the strength and flexibility of its business model.

Target plans to prioritize flexibility and retail fundamentals to continue its growth path, leaning into growth in non-discretionary categories in the near term. The company will also continue to invest in stores, supply chains, and digital through its stores as hubs model, which has been a critical driver of growth in recent years. Target will prioritize the differentiation and profit performance of its owned brand portfolio, which is unmatched in retail, while also curating national brands that guests love.

Navigating a Post-Pandemic Retail Environment

Management highlighted the importance of considering how the retail environment will continue to evolve post-pandemic. While some aspects of life and consumer behavior have returned to pre-pandemic levels, certain changes appear permanent. For instance, many office jobs are now hybrid, leading to implications for long-term buying patterns in multiple categories, notably Target’s Food business. In addition, the fulfillment mix has seen a permanent shift, with same-day services accounting for more than half of the company’s digital sales and over 10% of total sales. Target’s guests’ overall engagement with the company has also increased significantly over the last few years, with guests making about 2 billion trips to Target in 2021, about 300 million higher than in 2019.

However, several factors remain in transition, including transportation and the global supply chain, where there are still elevated costs and variability compared to the pre-pandemic period. Inventory shrink has also increased broadly across U.S. retail over the past two years. The broad macro economy is still in transition, making an inflationary period more pronounced than in decades.

To navigate these challenges, Target plans to focus on agility and strong execution in 2023, taking a cautious stance on inventory commitments and markdown-sensitive categories while continuing to invest in long-term strategic initiatives. The company also aims to strengthen its balance sheet by generating more cash and improving debt metrics. While Target will not be repurchasing any shares soon, they expect share repurchases to play a meaningful role within their broader, long-term capital deployment priorities after investing in the business, supporting dividend goals, and maintaining their credit ratings.

Regarding the financial outlook, Target expects its business to generate first-quarter comparable sales in a wide range from a low single-digit decline to a low single-digit increase due to continued strength in frequency businesses offset by softness in discretionary categories.

Question and Answer

Micheal Lasser from UBS asked about the company’s operating margin, changes from last year, and plans to reach a 6% operating margin by next year.

Target’s CFO Michael Fiddelke acknowledged that there is still a long journey ahead for the company to improve its profits and that 2023 is an important year for them to return to where they expect to be over time. He notes that they expect over $1 billion in net income growth year-over-year, even at the low end, and their primary focus is executing that plan. He further explains that they are hoping to achieve a 6% operating margin by 2024 under the right conditions, but, for now, they are more focused on recovering from their performance last year.

Fiddelke also emphasized that they have the next couple of years in focus and aim to maximize profit dollar growth over time. While a few variables still need to click into place, they are intently focused on dollar and dollar growth.

Target’s CEO Brian Cornell added that they recognized the uncertainties and the quick movement of consumer trends last year. He expresses pride in his team’s response to the challenge, stating that they made the necessary adjustments to their inventory and protected their guests’ experience, leading to continued traffic growth and unit share gains across their portfolio. He further notes that the company is well-positioned for 2023, with overall inventory down by 3% and discretionary inventory down by 13%. He concluded by saying they have learned valuable lessons from last year and are proud of how his team dealt with the issue upfront, protected their team and guests, and positioned the company for long-term growth.

Gregory Melich from Evercore ISI asked about the importance of keeping traffic and how they plan to balance that with promotion and margin.

Target CEO’s Brian Cornell stated that traffic is critical for the company’s success. Cornell emphasized that traffic is one of the most critical indicators of a retailer’s health. The company has had 23 consecutive quarters of comp store sales growth, primarily due to increased traffic. Cornell explained that the company is getting more footsteps into their stores, more visits to their site, greater engagement, and their guests are spending more with them. He stated that they are rewarding the company with more trips and are shopping more categories. Cornell emphasized that looking at trips is a key indicator of the health of their business, especially in the current inflationary environment.

Target’s COO John Mulligan added they are encouraged by the traffic trends they have seen. He also mentioned that the company expects a promotional environment next year, as guests respond well to promotions. However, the company also expects some tailwinds on the margin side as they are anniversary-ing a level of markdowns in salvage and have seen some improvement in supply chain and freight.

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