00:00Target had a really good first quarter, much better than most people expected.
00:04And I think that it really is a reflection that some of the tactics they're putting in place
00:07as part of their turnaround are taking hold and that consumers are responding.
00:12But as you kind of sort of implied in your introduction,
00:15they really didn't nudge much with regards to their guidance in response to a strong fiscal first quarter.
00:21And so I think people are looking at that as a very conservative outlook for the rest of the year.
00:25The comp sales for the quarter that ended was pretty eye-opening, up 5.6%.
00:31That was the biggest increase since the end of 2021 and also three times the average analyst estimate.
00:36Is this more than just easy comparisons?
00:39Well, in part, Scarlett, it's easy comparisons, but we also had other things like the tax refund season.
00:46There were some good tax refunds out there that people were spending.
00:49There were a few of those sort of tailwinds.
00:52And so when you strip that out, it's really about how much of this is sustainable going forward.
00:59And because the company didn't really adjust much of their guidance for the balance of the year,
01:04it really implies that that pace of same-store sales is going to drop way off starting in second quarter.
01:09Still positive, but in the very, very low single-digit range.
01:13Right.
01:13Could this be a case of Target managing expectations to lower the bar so much that it becomes an easy
01:19beat later on?
01:21I think that it's not necessarily trying to really underestimate, but I think there is a level of conservatism there.
01:30And that's just really based out of the track record that they've had.
01:34When they go too soon in raising guidance, they get held with their feet to the fire.
01:39And then if they, for some reason, don't meet that, the stock gets hit even harder.
01:44And so I think that there's that level of prudence in there of saying it's only one quarter.
01:48There's four quarters in a year, three more to go.
01:51You know, let's see where we go.
01:53Now, if we get to second quarter and they have strong results and they don't make an adjustment,
01:56then I would say that they're definitely sort of under-promising so they can over-deliver.
02:02Talk to us about this, the turnaround.
02:04What is Target trying to do and are they making any headway there?
02:09Yeah.
02:10So, you know, a lot of the issues with Target, you know, they sort of lost their way with what
02:17they used to deliver
02:17in that sense of like target and the joy and the discovery.
02:21And so they're going back into sort of key topics and key categories where they think that they can be
02:27differentiated.
02:28So things like baby, things like beauty, areas of health and wellness where they think that they can have a
02:35competitive advantage
02:36and bring people back into stores.
02:38So they've been changing their assortment, changing what's in the stores.
02:41And at the same time, I think what's maybe underappreciated is the amount of work they've done with their backhouse
02:47operations
02:48in terms of supply chain to really improve availability of products in the stores.
02:53There's nothing more, worse than a bad experience when you go in looking for something and it just isn't even
02:58there.
02:58So those are the kinds of like small wins that Target is starting to see that are helping to build
03:04a little bit of momentum.
03:05Yeah.
03:06The comparison between Target and Walmart always seemed to be that Target appealed to the aspirational shopper
03:11in a way that Walmart hadn't quite mastered.
03:14Have those roles reversed?
03:16I mean, Walmart, we keep hearing about how there's a lot of customers trading down to Walmart now.
03:21Yeah, I would say Walmart has definitely invested in recent years in categories where Target had always been a leader.
03:28Apparel is a really good example of that.
03:30So, you know, Walmart has gone from being content of just being a fashion basics,
03:35where you go to buy your socks and your underwear, to being a little bit more fashion forward.
03:39And they have seen their apparel sales improving.
03:42So there's definitely more competition for Target in areas where they used to have a historical advantage.
03:49But we'll see whether this new refresh is going to be enough to overcome anything that they've lost.
03:55Jen, you talk to a lot of these retail companies.
03:59What are they saying about the inflation we're seeing out there in the economy, particularly at the gas pump?
04:05Yeah, it's a great question, Paul.
04:07And, you know, there are some reports out there that say that we haven't seen consumers have a huge reaction
04:14yet to the higher gas prices.
04:15When we look back historically, it's usually when gas prices are at a high level for a sustained period of
04:21time that you start to see consumer behavior shift.
04:23And that shift really takes place into going fewer stops, fewer retailers, maximizing your trips, that sort of thing.
04:31It's still a little early to see that much of a consumer reaction to high gas prices, which is why
04:37we haven't really seen that flow through in results yet.
04:40But the longer gas prices stay higher, the more that actually is an advantage to companies like Walmart and Target
04:46that have that broad assortment where people can make one stop and shop in multiple categories.
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