Michael Fiddelke:

We have a lot of confidence in the team's ability to find efficiencies to offset some of those headwinds over time. But it's not always appropriate or prudent to do that within a month or a quarter. You can do some short-sighted things if you pull the wrong levers too quickly there. But given this team's track record of building back profitability over time, I have a lot of confidence we'll find the right efficiencies for us. Jim Lee: Specifically on the SG&A line, we mentioned general liability and healthcare costs. You can dimensionalize that as approximately one percent of the increase in SG&A that you saw in the quarter. Robbie Ohmes: Okay. Can I ask a follow-up maybe for Brian or Rick? This year was about reinvigorating the top line, and you've introduced newness and innovation to try to push through this backdrop. The consumer's not showing up. And, you know, I know you're not discouraged by it, but does your approach or the risk appetite in what you're doing change, especially as you, you know, holiday and you're going to try to end the year clean? Do you step back, or do you keep pushing through, you know, and taking a little more risk? Thank you. Brian Cornell: Yeah. So, I mean, while we certainly have to embrace some of the short-term macro challenges, you've heard me say this for years. We're going to play the long game and make sure we're doing the right thing for the long-term interest of our company and shareholders. And even in a difficult Q3 environment, one of the things we've highlighted is the strength in traffic. Up 2.4 percent. That equated to ten million incremental transactions during the quarter. So we feel really good about the fact that consumers are choosing Target, whether it's in-store or online. We feel really good about the expansion of our digital performance. And it bodes well for the short term, certainly long term, we're going to continue to lean into our digital assets. So seeing digital grow by almost 11 percent is really encouraging. We've talked about the importance of our Target Circle 360 delivery to home program. And that grew at almost 20 percent. And we'll continue to make sure we're investing in building awareness around that unique capability. Drive up continues to be a point of differentiation for us. And, again, saw double-digit growth. And it's a really important part of our digital offering. So while there are some unique short-term headwinds we're facing, we're going to play the long game, continue to invest in value and newness, and we saw some bright spots even in discretionary categories. Michael and Rick have both talked about the deceleration we saw in apparel. But we continue to take share in those categories. And even within apparel, there are some real bright spots. We think about how we're performing with All In Motion and the apparel performance category. Growing double digits, taking share, in that very important category, both short term and long term. So continue to make sure we're investing in newness, investing in value, investing in our stores and digital channel, and playing the long game. I think there are a number of green shoots in front of us that we're going to continue to leverage in the fourth quarter but certainly into 2025 and beyond. Robbie Ohmes: Thanks. Good luck. Operator: Thank you. Our next question is from Rupesh Parikh with Oppenheimer. You may go ahead. Rupesh Parikh: Good morning, and thanks for taking my question. So just going back to the lingering grocery category weakness, what's your team's latest thoughts on the recovery in discretionary? Do you expect a better outlook in 2025? Brian Cornell: You want to spend some time talking about what we're seeing in some of our discretionary categories? Rick Gomez: Sure. I'd be happy to. And I'd start with apparel. We are pleased with our apparel performance. While it was slightly down in the third quarter, there are lots of bright spots. In particular, we are very pleased about what we're seeing with performance, our All In Motion brands delivering double-digit growth. We are excited about that. It's based on new fabrication, new colors, and out. And we're also seeing bright spots in women's apparel. Both A New Day and Wild Fable, our young contemporary brand, both of which are bringing new styles, new fashion, new colors, and we're seeing the consumer respond to that. And we expect that to continue. It's, you know, it's also worth noting when we saw the weather break in select markets, we saw a 600 basis point improvement. And that really bodes well for our apparel assortment as the weather turns colder consistently. And then if you think about some of our other discretionary categories, both home and hardlines, you know, they're challenged from an industry perspective, and we're not happy with where we are. We want to get these businesses to grow. But what we would say is there are some bright spots. In particular, I would focus on home. When we deliver newness in home, we see the consumer respond. We're seeing that right now with some of our key partnerships, whether it's Hearth in Hand with Magnolia or it's Threshold with Studio McGee. When we launch that fall newness, the consumer is responding. And so that is very encouraging for us. And then within hardlines, as I said, is, you know, challenged from an industry perspective. We don't see consumers buying big-ticket items like TVs. However, they are looking for affordable ways to freshen up their home. They're looking for ways to add a little bit of seasonal decor. So we see decorative accessories, things like frames, candles, vases, performing really well, delivering growth. And that we think also bodes well as we go into the holidays. Brian Cornell: So as we look at the discretionary business, what we see is the consumer is willing to shop as long as it's new, it's on trend, and at an affordable price. Rupesh Parikh: Great. Thanks for the call. I'll pass it along. Operator: Thank you. Our next question is from Kate McShane with Goldman Sachs. You may go ahead. Kate McShane: Hi. Good morning. Thanks for taking our question. You made a pointed comment about how consumers are waiting for sales and leaning into promotions more so than they did previously. It sounds like even compared to last quarter. I was just curious why do you think this is happening now as I think the consumer has been joyful and, you know, making decisions for a while now. And has this caused you to alter how you're approaching Q4 when it comes to pricing and promotions? Brian Cornell: Yeah. Kate, it is a trend we've seen for quite some time now, and I think over the last couple of years, we've talked about a very resilient consumer. I think sitting here today, we'll change that to a resourceful consumer. And I think as we look at shopping behavior, and certainly behavior we've seen in Q3 and we expect to see going into Q4, we know that consumers are looking for value. They're looking for promos and deals when they're shopping for those everyday essentials. And they're shopping carefully and taking some of those savings to find those unique items in discretionary categories that they really want. We think that's going to continue. So we're going to make sure that we're leaning into the right value throughout the holiday season, bundling that newness with great value, and recognizing that we've got to make sure we're staying again in step with that consumer, providing the value, the uniqueness they're looking for when they shop Target. That's a trend that I think we are going to see in the fourth quarter. And we'll certainly see some of that continue in 2025. Operator: Thank you. Our next question is from Michael Lasser with UBS. May go ahead. Michael Lasser: Good morning. Thank you so much for taking my question. My first question is in a world where consumers are concentrating their spending amongst a very few number of retailers, does Target need to do anything different or invest more to increasingly be amongst that consideration set and position itself in an even better way to generate more consistent performance? Brian Cornell: Michael, I'm happy to start and then invite Michael and Jim and Rick to add their perspective. But I think we better continue to make sure Target is being Target. And we're using our unique mix of great national brands, our strength in own brands, those unique partnerships Rick talked about an exciting partnership that'll come to life on Black Friday. Partnering with Taylor Swift, which will be a traffic driver for our business during an important holiday period. But we're going to continue to invest in our stores. Michael talked about, we're really encouraged with some of the new stores we've opened in 2024. We've got a big pipeline over the next ten years. We know expanding our footprint is going to be important. We'll continue to lean into our digital assets. And we saw some great proof points in Q3. We've had to continue to build out our digital assets, whether it's pickup, or drive up, or delivery to home, we'll continue to lean into those spaces. So we're going to continue to make sure we're delivering the delight and the joy consumers are looking for, they expect from us, whether they're shopping our stores, visiting our sites, we'll continue to deepen our partnerships with national brand partners, accelerate our own brand portfolio, and constantly look for those new partnerships that drive traffic and engagement in our brand. We'll continue to lean into our Circle program. And we talked about in Q3 alone, had another three million members. That's an important way for us to continue to deepen our engagement. We're very pleased with the work we're doing on the retail media side. And Rondell has become a critical asset for us. And we saw, again, mid-teen growth in the third quarter. We'll continue to deliver in that space for years to come. So we'll continue on our current strategy, stay in step with the consumer, make sure Target's doing the things that consumers across America expect from us. Michael Fiddelke: Yeah. I'm happy to build just a little bit on that. You know, you've heard us say before, Michael, we've got a consumer, our guest, who likes to shop. And, you know, I'll remind everyone that we round to maybe a three share. The categories in which we compete. So we see a lot of runway for growth over time, and we're excited about the foundation we're building now in support of that. Brian touched on a few of the things, but maybe just a double click into the strength of the digital business. That we saw in the quarter. I mean, digital up almost 11 percent. Real strength around some intentional work the team did to relaunch Circle with a Circle 360 program to see same-day delivery growing by 20 percent, and I'll remind everyone that that's a really important investment in the long term. We know when we make it easy to shop Target in all those different ways, guests reward us with more spend at Target over time. And so that increased spend in total, that increased spend even in-store that comes when a guest becomes a Circle 360 member that uses same-day delivery. We're really excited about some of the foundation that we're building for the long term. You can see it in the digital growth and the way that will pay off over time. You can see it in the traffic numbers. And so, you know, we're managing the short term appropriately, but making the right investments for the long term. Rick Gomez: I do think what differentiates Target is our multi-category business. And so as we go into the holiday season, you can get the turkey meal for twenty dollars for a family of four, but you can also get the tabletop decor. You can get the home decorations. And with our party shop, you can now get all of the apparel for those specifications through the season. So I do think that is something that really differentiates Target, is our one-stop shop for everything that you need for the holiday season. Jim Lee: And while I know Jim's still new to Target, I'd love to get his early perspective. Jim Lee: Yeah. I mean, Michael, it's a great question. I mean, I think just two months in, it's clear to me that making sure that we are unique and we are Target being Target. That's important for how we think about our business. And even just to extend it to our third-party marketplace, Target Plus. We carefully curate our partners to make sure that we're on brand as we think about growth in that category. And that business model. So it's important for us to ensure we stay on brand. Michael Lasser: Brian, I thought you did a terrific job on CNBC this morning kind of talking about the state of the state. And we've already spent a lot of time today talking about some of the macro headwinds we're facing in discretionary categories. We know over time those trends will reverse. And it's still going to be really important that we're a destination for apparel and provide great design and style and on-trend apparel. We know the home category will rebound over time. We know America's going to buy sporting goods and toys. There's some macro short-term headwinds that we've got to embrace and understand, but long term, we think the strength of our business model, our multi-category portfolio, that unique blend of national brands and home brands, the strength we have in both a great physical experience and a digital experience, those are going to be the hallmarks of Target going forward. We've got to make sure we're focused on the long term and leaning into the things that American consumers expect from Target. Michael Lasser: Thank you very much, and have a good holiday. Brian Cornell: Thanks, Michael. Operator: Thank you. Our next question is from Karen Short with Melius Research. You may go ahead. Karen Short: Hi. Thanks very much. So I have three questions that are a little unrelated. The first is as it relates to apparel, what is fashion as a percent of sales versus basics? And would you look to pivot a little more to basics versus fashion? The second question is how to think about inventory risk if there is any in Q4. And then the third is just it's CapEx at four percent of sales. Is that now the steady state? Brian Cornell: Karen, how would Rick talk about apparel, let Michael talk about inventory, and we'll let Jim talk about our CapEx and think about the coming year. You want to start with apparel? Rick Gomez: Sure. I'll start with apparel. And kind of in short, how we think about apparel and how we think about trends is really listening to the consumer, putting the consumer first. We have a really talented design team who are always looking at what is emerging, what's going to be relevant, and what's going to resonate with the guest. And right now, what we're seeing is newness, fashion, style, trend at a really compelling price. And it's that combination that is really working. Wild Fable is a perfect example of that. When we get those both right, the fashion plus the right price point, right fabrication and colors, we see the consumer respond. Michael Fiddelke: On the inventory side, Karen, we've touched a little bit on this already. But if you look at the balance sheet, we're up about three percent year over year as we close the quarter. And we feel good that we're well-positioned to be in stock across the balance of the holiday season. If you walk through the front doors of a Target store right now or see us online, it's great to see an excellent trim set. It's great to see the newness in apparel, and so we think we're well-positioned for the holidays. It's also important that we finish the year clean from an inventory perspective, and we feel really good that we've got the fourth quarter guided in a position that allows us to accomplish that goal. Jim Lee: And then on CapEx, as I mentioned in my remarks, we'll close this year at about three billion or slightly lower than that. And then looking out to 2025, as we look at our pipeline of new stores and remodels, and technology and supply chain investments, we're entering in about four to five billion dollars of CapEx for 2025. Brian Cornell: Operator, I know we're running a little long, but why don't we take one last question today? Operator: Thank you. Our last question comes from Robbie Ohmes with Bank of America. You may go ahead. Robbie Ohmes: Oh, hey. Thanks for taking my question. I think one thing that would be helpful, is there any sort of how should we think of what the one-time impacts are from supply chain inefficiencies and receipt timing? And is there any way to quantify the pressures that were sort of, you know, one-time in the third quarter or maybe in the fourth quarter as well that you could get back next year? And then I also just wanted to clarify, was there any sales impacts related to supply chain or receipt of goods that impacted Q3 or that are also going to impact sales in the fourth quarter? And then the last question is, is the Target Circle relaunch impacting costs in a negative way more than you would have expected, you know, following that launch? Michael Fiddelke: Yeah. Thanks for the questions, Robbie. I'll kind of go back a little bit to my answer to Simeon's question. If you think about the big factors in Q3 and the things that are on our mind as we guide for the fourth quarter. It's, you know, being appropriately cautious based on the trends we've seen in the discretionary categories, and some of that deceleration shows up on the profit outcomes in Q3. In fact, into our guide for Q4. Apparel and home or high-margin category, them decelerate like they did, you know, that factors into our profit outcomes and our guidance. And important, we want to end the year clean in both of those categories. As you click further down the P&L, there were some things that were certainly, you know, more unique due to factors this year, like moving inventory around the port strike, and we feel good that we're on the other side of that now. Trends that they had had prior to. And then further down the P&L on the expense side, you know, we saw some expenses creep up versus we've seen earlier in the year. And we'll work to manage through those over time. And like I said, we have a lot of confidence in the team's ability to find efficiencies to offset some of those headwinds over time. But it's not always appropriate or prudent to do that within a month or a quarter. You can do some short-sighted things if you pull the wrong levers too quickly there. But given this team's track record of building back profitability over time, I have a lot of confidence we'll find the right efficiencies for us. Brian Cornell: Robbie, I think it's important to note that while there are some unique short-term headwinds we're facing, we're going to play the long game, continue to invest in value and newness, and we saw some bright spots even in discretionary categories. Michael and Rick have both talked about the deceleration we saw in apparel. But we continue to take share in those categories. And even within apparel, there are some real bright spots. We think about how we're performing with All In Motion and the apparel performance category. Growing double digits, taking share, in that very important category, both short term and long term. So continue to make sure we're investing in newness, investing in value, investing in our stores and digital channel, and playing the long game. I think there are a number of green shoots in front of us that we're going to continue to leverage in the fourth quarter but certainly into 2025 and beyond. Robbie Ohmes: Thanks. Good luck. Operator: Thank you. This concludes the question and answer session. I would like to turn the conference back over to Brian Cornell for any closing remarks. Brian Cornell: Thanks, everyone, for joining us today. We appreciate your engagement and your participation in this call. We look forward to sharing our progress with you over time. Have a great day.