Target 2017 Annual Report

2017Annual Report

Explore the key stories of the past year and find out what’s in store for the year ahead.

image of CEO Brian Cornell, (center) with three of Target’s senior leaders, Michelle Wlazlo, Laysha Ward and Caroline Wanga (left-right)CEO Brian Cornell, (center) with three of Target’s senior leaders, Michelle Wlazlo, Laysha Ward and Caroline Wanga (left-right)

In early 2017 we laid out an ambitious, multi-year strategy to modernize every dimension of our business. We committed to invest billions of dollars to advance several key priorities that will set us apart from our competitors and give our guests new reasons to choose Target every time they shop.

Our plan called for:

  • • Blending the best of our digital and physical shopping experiences;

  • • Reimagining our network of more than 1,800 stores as inspiring showrooms and neighborhood fulfillment centers;

  • • Moving into new markets by opening new small-format stores;

  • • And doing what Target does better than anyone else in the marketplace – creating great brands – at scale and with style.

And I couldn’t be more proud of what our team delivered.

In just 12 months, we rolled out new guest-facing technology in our stores, introduced a mobile wallet, simplified our flagship app and invested in new capabilities to deliver a user experience that makes shopping our digital channels feel like shopping our stores. We completed 110 store remodels, opened nearly 30 new small formats in key urban markets and unveiled our next-generation prototype outside of Houston, Texas.

Considering almost every doorstep in America is close to a Target store, we leveraged that proximity to fulfill digital orders faster and more efficiently than ever. We expanded services like Order Pick Up, introduced Drive Up and developed a new capability for next-day service for pantry staples. We acquired two technology platforms – Grand Junction and Shipt – to unlock unrivaled same-day capabilities that close the “Last Mile” fulfillment gap from days to minutes and do it more cost-effectively.

We also committed to reinventing our portfolio of owned and exclusive brands – introducing a dozen new brands within 18 months. Not only have we already surpassed that goal, three of those brands are on pace to generate more than $1 billion each in annual sales.

And most important of all, we leaned into our greatest competitive advantage by making industry-leading investments in our team. We elevated our service model to teach and train our team and develop greater expertise in key categories. We automated tasks and added hundreds of thousands of payroll hours to the sales floor, allocating more resources to the areas of the store where our guests are looking for help and a human touch. And we took a leadership position on wage, raising our starting wage to $11 an hour in October and committed to a series of incremental increases leading to a starting wage of $15 an hour by the end of 2020. And, already this spring we announced another increase, moving our starting wage up to $12 an hour. In all, we believe these investments will not only help us attract and retain great talent, but also ensure Target remains an employer of choice for many years to come.

While I am proud of our team’s progress, I am equally pleased with the company’s operating performance and the momentum we generated during 2017. We saw topline sales and traffic accelerate in both our stores and our digital channels throughout the year. And we finished strong, delivering a 3.6 percent comp for the fourth quarter – our best holiday performance in many years. During that period, we saw strength across our entire business, as we gained market share in all five core merchandise categories.

We finished the fourth quarter with Adjusted EPSof $1.37 and $4.71 for the full year, far exceeding our original expectations. What’s so encouraging to me is that we can’t credit these results on a single aspect of our strategy. Rather, it was the sum of the parts – everything working and working together – that carried the day.

But I want to be clear, we have a lot of work left to do. So, while 2017 was all about putting down a plan, 2018 is all about acceleration – leveraging our greatest assets, leaning into our competitive strengths.

In the year ahead, we will move faster than ever before. We’ll triple the number of store remodels and open more new small formats. We’ll expand services like Drive Up and same-day delivery nationwide with Shipt. We’ll continue to roll out exclusive new brands.  And we’ll invest in our people to support them as they power the enterprise strategy and take care of our guests.

Target is a company with a clear purpose, and we put our guests at the center of every decision we make. In 2018, we are focused more than ever on building a company that generates lasting value for our guests, our team, our shareholders and the communities we serve.

Brian Cornell's signature

Brian Cornell
Chairman and CEO

 

Statements in this Annual Report regarding annual sales of our owned and exclusive brands, wage levels, and our plans for the year ahead are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties which could cause Target’s actual results to differ materially. The most important risks and uncertainties are described in Item 1A of Target’s Form 10-K for the fiscal year ended Feb. 3, 2018. Forward-looking statements speak only as of the date they are made, and Target does not undertake any obligation to update any forward-looking statement.

[1] Adjusted EPS is a non-GAAP metric most directly comparable to GAAP EPS from continuing operations. Reconciliations of fourth quarter and full-year Adjusted EPS to GAAP EPS from continuing operations are provided in our Q4 earnings release posted on our investor relations website.

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