WHEN: Today, Tuesday, February 28th
WHERE: CNBC's "Power Lunch"
Following is the unofficial transcript of a CNBC EXCLUSVE interview with Target Chairman and CEO Brian Cornell and CNBC's Courtney Reagan live from the company's Financial Community Meeting in New York today, Tuesday, February 28th on "Power Lunch" (M-F, 1PM-3PM ET). Following is a link to video of the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000597061.
All references must be sourced to CNBC.
REAGAN: HI THERE, BRIAN. THANK YOU VERY MUCH. THAT'S RIGHT, TARGET JUST WRAPPED UP ITS 2017 FINANCIAL COMMUNITY MEETING. I'M HERE WITH CEO BRIAN CORNELL THANK YOU SO MUCH FOR JOINING US. YOUR STOCK PRICE IS DOWN 13%. WORST DAY IN 18 YEARS. DO YOU HAVE A CONFIDENCE PROBLEM WITH WALL STREET?
CORNELL: COURTNEY, WE'RE REALLY CONFIDENT ABOUT THE DIRECTION WE'RE SETTING. TODAY WAS ABOUT TAKING OUR SHAREHOLDERS THROUGH THE NEW DIRECTION OF THE COMPANY. THE INVESTMENTS WE'RE GOING TO MAKE, BOTH FROM AN OPERATING MARGIN STANDPOINT BUT IMPORTANTLY FROM A CAPITAL STANDPOINT TO REPOSITION THE COMPANY FOR THE FUTURE. SO, WE THINK WE'VE GOT THE RIGHT PLAN IN PLACE. IN FACT, WE KNOW WE HAVE THE RIGHT PLAN IN PLACE. WE'LL BE INVESTING IN REIMAGINING OUR STORES, REMODELING HUNDREDS OF STORES ACROSS THE COUNTRY. WE'VE SEEN GREAT RESPONSE TO THESE SMALL FORMAT STORES WE'VE OPENED UP. YOU'LL SEE US ACCELERATE THAT GOING FORWARD. TRANSFORMING OUR SUPPLY CHAIN TO MEET THE NEEDS OF TODAY'S BUSINESS MODEL. WE'LL BE LAUNCHING NEW BRANDS AND CONTINUING TO MAKE VERY IMPORTANT DIGITAL INVESTMENTS. WE THINK TODAYS WAS A VERY IMPORTANT DAY TO SET THE TONE FOR WHERE WE'RE GOING IN THE FUTURE AND POSITION THE COMPANY FOR FUTURE GROWTH AND MARKET SHARE GAINS.
REAGAN: SO, TODAY YOU DEFINITELY RESET THE GUIDANCE NUMBERS. BUT THEY'RE NOT REALLY NEW INVESTMENTS. THEY'RE INVESTMENTS THAT YOU TALKED ABOUT AND INITIATIVES YOU'VE BEEN DOING FOR SEVERAL YEARS. I DON'T QUITE UNDERSTAND WHY YOU THINK IT WILL WORK GOING FORWARD IF IT HASN'T WORKED SO FAR.
CORNELL: WELL, THE FACT OF THE MATTER IS IT HAS BEEN WORKING. WE'VE BEEN VERY DISCIPLINED ABOUT TESTING AND VALIDATING. NOW WE'RE READY TO ROLL OUT. WE HAVE TO INCREASE ONE THING. THAT'S SPEED. SO WE SPENT A LOT OF TIME OVER THE LAST COUPLE OF YEARS TESTING A NEW STORE DESIGN, REMODELING STORES IN LOS ANGELES. WE CALL IT LA 25. WE'RE TAKING A LEARNING FROM THAT, MAKING MINOR ADJUSTMENTS AND NOW YOU'LL SEE US REMODEL HUNDREDS OF STORES OVER THE NEXT FEW YEARS. WE WERE VERY THOUGHTFUL ABOUT ENTERING NEW MARKETS, NEW NEIGHBORHOODS WITH SMALLER FORMATS, TAKING A LEARNING FROM TRIBECCA, BOSTON AND CHICAGO, YOU'LL SEE US DOUBLE THE NUMBER OF THOSE STORES NEXT YEAR AND WE SEE A PATH TO CONTINUED GROWTH GOING FORWARD. WE'VE BEEN REWORKING OUR SUPPLY CHAIN SYSTEM. YOU'LL SEE US ADVANCE THAT IN THE NEXT COUPLE OF YEARS. WE HAD A VERY SUCCESSFUL NEW BRAND LAUNCH THIS YEAR, TWO BIG BRANDS PILLOWFORT AND CAT AND JACK. THEY'RE ON THE PATH TO BEING BILLION DOLLAR BRANDS. WE TALKED TODAY ABOUT THE FACT THAT WE'LL HAVE OVER A DOZEN NEW BRANDS WE'LL ROLL OUT OVER THE NEXT FEW YEARS. AND WE'VE HAD TWO OR THREE REALLY SOLID YEARS OF DIGITAL PERFORMANCE. WE FINISHED THE FOURTH QUARTER, WE WERE UP 34%. IN THE LAST COUPLE OF YEARS, WE'VE MORE THAN DOUBLED OUR DIGITAL FOOTPRINT. WE'RE GOING TO ACCELERATE GOING FORWARD. TO DO THAT, WE HAD TO MAKE INVESTMENTS, BOTH IN OPERATING MARGIN AND IN CAPITAL. BUT THEY'RE THE RIGHT INVESTMENTS FOR THE BUSINESS, FOR THE BRAND AND OUR SHAREHOLDERS GOING FORWARD. AND TODAY WE JUST TALKED ABOUT THE FACT WE'RE READY TO GO A LOT FASTER.
REAGAN: I'M STILL JUST A LITTLE CONFUSED ABOUT HOW IT'S DIFFERENT GOING FORWARD, THOUGH. YOUR COMP SALES TREND HAS BEEN DECLINING ABOUT THE LAST NINE QUARTERS IF YOU LOOK AT THAT TREND. WHAT YOU'RE SAYING IS THAT YOU'RE INVESTING THIS YOUR STORES, IN ONLINE. BUT YOU'VE BEEN DOING THAT AND IT'S NOT WORKING YET. SO, WHAT IS DIFFERENT?
CORNELL: WELL, WE'LL BE DOING IT AT SCALE. THIS LAST YEAR, WE REMODELED 25 STORES. WE HAVE 1800. OVER THE NEXT FEW YEARS, WE'LL TAKE THAT LEARNING TO OVER 600 AS WE REIMAGINE THESE STORES, WE KNOW HOW THE GUEST REACTS. IT DRIVES MORE TRAFFIC. IT BRINGS OUR GUESTS BACK MORE OFTEN, BUILDS GREATER ENGAGEMENT. WE HAVE TO DO THAT TO SCALE. IT WILL TAKE SOME TIME. NEXT YEAR WE'LL REMODEL OVER 100 STORES BUT IN THE NEXT THREE YEARS WE'LL TOUCH OVER 600 STORES. WE'VE HAD A HANDFUL OF THESE SMALL FORMAT STORES WE OPENED UP ARE DELIVERING GREAT PRODUCTIVITY, TWO OR THREE TIMES PRODUCTIVITY WE SEE IN A TRADITIONAL STORE. WE'LL DOUBLE THAT NEXT YEAR AND OVER THE NEXT FEW YEARS YOU'LL SEE HUNDREDS NEW LOCATIONS. WE'RE STRENGTHENING OUR SUPPLY CHAIN SO WE TAKE COSTS OUT AND BUILD MORE SPEED. WE'VE BEEN TESTING THAT VERY CAREFULLY AND NOW WE'LL START TO ROLL IT OUT AT SCALE. WE'LL POPULATE OUR BUSINESS WITH MORE PROPRIETARY BRANDS. ALL THESE THINGS COME TOGETHER. WHAT WE ALSO TALK ABOUT TODAY IS EMBRACING THE NEW REALITY OF RETAIL. WE HAVE TO EMBRACE DIGITAL, RECOGNIZE HOW CONSUMERS ARE SHOPPING AND MAKE THE RIGHT INVESTMENTS TO BUILD MARKET SHARE OVER THE NEXT FEW YEARS, TO MAKE SURE TARGET IS ONE OF THE FUTURE WINNERS OF RETAIL.
REAGAN: YOU'RE NOT CLOSING STORES AT ALL. IN FACT, YOU'RE OPENING 100 NEW SMALL FORMAT STORES OVER THE NEXT FEW YEARS, AND REMODELING 600 LIKE YOU JUST SAID. IF YOU ALREADY LOST SHOPPERS AND THESE STORES ARE LOSING PRODUCTIVITY, AT WHAT POINT DO YOU SAY WE HAVE TO CLOSE STORES? THIS DOESN'T MAKE SENSE FOR US FINANCIALLY. WHEN DO YOU GET TO THAT POINT?
CORNELL: WE LOOK AT OUR STORE BASE ALL THE TIME. OVER THE LAST FEW YEARS, WE HAVE CLOSED STORES, WEE CLOSED DOZENS OF STORES EACH YEAR. OVER THE LAST FEW YEARS, A COUPLE HUNDRED STORES OVER THE LAST DECADE. BUT WE'RE FORTUNATE. WE'RE NOT MALL BASED. THEY'RE IN GREAT LOCATIONS. WE'RE NOT ATTACHED TO DYING SHOPPING MALLS. WE'RE IN GREAT LOCATIONS ACROSS THE COUNTRY. NOW, WE'VE GOT TO BRING THOSE STORES TO LIFE DIFFERENTLY. WE KNOW SOME OF OUR STORES HAVE GOTTEN TIRED, THEY'VE GOTTEN OLD. I'VE GOT STORES THAT HAVEN'T BEEN REMODELLED IN OVER A DECADE. WE HAVE TO GO BACK AND BRING THE BEST OF TARGET TO THOSE STORES. WHEN WE DO THAT, THE GUEST RESPONDS, IT BRINGS TRAFFIC BACK AND DELIVERS THE EXPERIENCE HAD AN TODAY'S GUEST EXPECTS FROM TARGET.
REAGAN: THIS IS A LOT OF WHAT WALMART DID A COUPLE OF YEARS AGO, CLEANED UP THEIR STORES, IMPROVED THEIR IN STOCKS, INVESTED IN DIGITAL. KIND OF SOUNDS LIKE YOUR PLAN. HOW ARE YOU GOING TO MAKE IT WORK FOR YOU? HOW ARE YOU GOING TO GET BACK SHOPPERS AND SALES THAT YOU'VE LOST AS THEY'VE GROWN SHARE AND YOU'VE FALLEN?
CORNELL: WE'RE LOOKING TO CREATE A SMART NETWORK OF STORES WHERE OUR STORES, OUR DISTRIBUTION CENTERS, DIGITAL CAPABILITIES REALLY ALLOW THE GUEST TO CONNECT WITH TARGET ANY WAY THEY WANT. WE HAVE TO MAKE SURE WE PROVIDE A GREAT IN-STORE EXPERIENCE AND CONTINUE TO ELEVATE OUR STYLE BRANDS BUT ALSO DELIVER THE VALUE OUR GUEST IS LOOKING FOR. WE HAVE TO MAKE IT REALLY EASY TO SHOP ONLINE. WE HAVE TO MAKE SURE WE TAKE ALL THE FRICTION AWAY AND MAKE IT EASY AND RELIABLE. AND WE WANT TO MAKE SURE, IF YOU WANT TO ORDER ONLINE, YOU CAN PICK UP AT ONE OF OUR STORES. WE TO HAVE BRING ALL THOSE ELEMENTS TOGETHER. WE'VE GOT LOTS OF WORK TO DO. WHAT WE TALKED TO THE INVESTMENT COMMUNITY ABOUT TODAY IS THIS ISN'T GOING TO HAPPEN OVERNIGHT BUT A THREE-YEAR PLAN WE PUT IN PLACE. THIS FIRST YEAR IS ABOUT INVESTMENT. WE HAVE TO MATURE AND TRANSITION THESE INITIATIVES BUT ULTIMATELY WE'LL RETURN TO A POINT OF STABILITY AND GROWTH. AND WE THINK WITH THE DISRUPTION IN RETAIL TODAY, THERE'S SIGNIFICANT MARKET SHARE OPPORTUNITIES BECAUSE PEOPLE ARE CLOSING STORES, AS YOU MENTIONED. AND AS THEY CLOSE, WE HAVE AN OPPORTUNITY TO BE ONE OF THE FUTURE WINNERS. TO PICK UP MARKET SHARE BOTH IN STORE AND ONLINE.
REAGAN: PART OF WHAT YOU'RE TRYING TO DO TO PICK UP MARKET SHARE IS DROP YOUR PRICES, LOWER YOUR PRICES, BE MORE PRICE COMPETITIVE. TO DO THAT, YOU'RE WILLING TO PULL BACK ON THOSE MARGINS. WHAT HAPPENS, THOUGH, IF THE BORDER ADJUSTMENT TAX COMES THROUGH? DO YOU HAVE TO ABANDON YOUR PRICING PLAN ALL TOGETHER?
CORNELL: LET'S TALK PRICING FIRST AND THEN I'LL TALK ABOUT BORDER ADJUSTMENT. WHAT WE TALKED ABOUT TODAY IS GOING BACK TO OUR TRADITIONAL PRICING MODEL AND COMING OUT OF THE DATA BREACH, WE BECAME VERY PROMOTIONAL. YOU'LL SEE US GO BACK TO OUR TRADITIONAL, EVERYDAY LOW PRICE MODEL AND MAKING SURE WE DELIVER GREAT VALUE ACROSS THE STORE. BUT STARTING WITH HOUSEHOLD ESSENTIALS, PERSONAL CARE, FOOD AND BEVERAGE BUSINESS. WE'RE REALLY GOING BACK TO WHERE WE HAVE BEEN IN THE PAST, A MODEL THAT'S WORKED FOR US BEFORE. NOW CERTAINLY YOU KNOW I'M SPENDING A LOT OF TIME LOOKING AT THE NEW PLAN THAT THE HOUSE HAS PROPOSED FOR CORPORATE TAX REFORM, THE IMPACT OF THE BORDER ADJUSTABILITY COMPONENT. WE'RE LOOKING AT THAT VERY CAREFULLY. I THINK WE'VE HAD GREAT MEETINGS IN WASHINGTON, INCLUDING WITH PRESIDENT TRUMP AND MEMBERS OF THE HOUSE AND SENATE. I THINK THEY UNDERSTAND THAT THE CURRENT BORDER ADJUSTABILITY PLAN COULD HAVE A REALLY DETRIMENTAL IMPACT ON AMERICAN FAMILY.
REAGAN: THEY UNDERSTAND IT. ARE THEY WILLING TO DO IT? WHERE DOES PRESIDENT TRUMP STAND?
CORNELL: WE'VE HAD SOME GREAT MEETINGS AND I THINK THEY UNDERSTAND THEY DON'T WANT TO SEE PRICES GO UP 15, 20, 25% FOR FAMILIES BUYING CLOTHING FOR THEIR KIDS, SCHOOL SUPPLIES, BASIC STAPLES. THEY UNDERSTAND THE IMPACT OF RETAIL. TARGET PAYS 35% EFFECTIVE TAXES TODAY. IF THIS WERE TO GO FORWARD, OUR TAX RATE WOULD GO OVER 75%. AND SO THEY UNDERSTAND THE IMPLICATIONS AND I THINK WE'RE GOING TO END UP IN A MUCH BETTER PLACE.
REAGAN: WHAT DOES HAPPEN FOR TARGET? TARGET SPECIFICALLY, WHAT HAPPENS TO YOUR PROFIT? WHAT HAPPENS TO THE PRICES THAT CONSUMERS PAY IF BORDER ADJUSTABILITY GOES THROUGH?
CORNELL: I TALKED ABOUT IT. WE MODELED -- THIS IS ACROSS THE ENTIRE INDUSTRY, NOT JUST TARGET. AS THIS PLAN IS STRUCTURED, WE COULD SEE CONSUMER PRICES GO UP 20 OR 25%. THAT'S NOT GOOD FOR ANYONE IN AMERICA AND IT'S CERTAINLY NOT GOOD FOR FAMILIES THAT SHOP OUR STORES. THOSE 30 MILLION GUESTS IN TARGET EVERY WEEK. SO WE'VE BEEN OUT THERE IN WASHINGTON REALLY ON BEHALF OF THE FAMILIES AND THE TARGET GUESTS WE SERVED AND MAKING SURE THEY DON'T SEE HIGHER PRICES, BECAUSE WE ALL KNOW AS PRICES RISE WE'LL SEE FURTHER CONTRACTION IN RETAIL. IT'S NOT GOOD FOR AMERICA, FOR FAMILIES AND WE'VE HAD GREAT CONVERSATIONS TO MAKE SURE EVERYONE UNDERSTANDS THE UNINTENDED CONSEQUENCES OF THIS PLAN.
REAGAN: THERE'S A LOT GOING ON IN RETAIL RIGHT NOW, BOTH WITH TARGET AS WELL AS THE BROADER INDUSTRY. THERE IS A LOT YOU HAVE TO JUGGLE. DOES THE BOARD STILL SUPPORT YOU AND YOUR INITIATIVES?
CORNELL: THE BOARD HAS BEEN INCREDIBLY SUPPORTIVE. OBVIOUSLY, WE SPENT A LOT OF TIME WITH THE BOARD PRIOR TO TODAY. I CAN TELL YOU UNIVERSALLY, THEY SUPPORT THE PLAN. BECAUSE THEY KNOW IT'S THE RIGHT THING LONG TERM FOR THE COMPANY. IT'S THE RIGHT THING FOR THE BRAND AND IT'S THE RIGHT THING FOR OUR SHAREHOLDERS. SO, WHAT WE TALKED ABOUT TODAY IS BUILDING THE TARGET OF THE FUTURE. AND OUR BOARD IS NOT THINKING ABOUT NEXT QUARTER. THEY'RE REALLY THINKING ABOUT HOW WE MAKE SURE TEN YEARS FROM NOW WE'RE ONE OF THE FUTURE RETAIL WINNERS. SO A LOT OF TIME IN THE BOARD ROOM. A LOT OF TIME SITTING DOWN, SETTING PRIORITIES, MAKING SURE WE UNDERSTAND WHAT'S REQUIRED TO GO FORWARD, BUT TREMENDOUS SUPPORT.
REAGAN: SO HOW LONG HAS THE BOARD GIVEN YOUR FOR-YEAR PLAN YOU? SAID IT'S A LONG GAME NOT A SHORT GAME BUT CERTAINLY IT'S NOT FOREVER.
CORNELL: IT'S A THREE-YEAR INITIATIVE. IT'S GOING TO TAKE SOME TIME. THIS IS YEAR ONE. WE'VE GOT TO INVEST. WE'LL SEE THESE INITIATIVES MATURE OVER TIME. THREE YEARS FROM NOW, I HOPE TO BE SITTING HERE, TALKING ABOUT THE FACT THAT WE RETURNED A GROWTH, WE'RE A MARKETSHARE WINNER, BOTH PHYSICALLY AND DIGITALLY.
REAGAN: YOU DON'T WANT TO BECOME ONE OF THOSE DISTRESSED RETAILERS ON THE LIST? YOU DON'T WANT TONIGHT ONE OF THOSE HEADLINES?
CORNELL: WE WILL NOT BE ON THAT LIST. WHAT WE TALKED ABOUT TODAY IS MAKING SURE WE MOVE INTO THAT RETAIL WINNER'S CIRCLE.
REAGAN: THANK YOU VERY MUCH BRIAN CORNELL. BACK OVER TO YOU ALL IN ENGLEWOOD CLIFFS.
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