WHEN: Today, Tuesday, March 6, 2018 at 2:15PM ET
WHERE: CNBC's "Power Lunch" - Live from Target headquarters in Minneapolis
Following is an unofficial transcript of a CNBC EXCLUSIVE interview with Target Chairman & CEO Brian Cornell and CNBC's Courtney Reagan on CNBC's "Power Lunch" (M-F 1PM-3PM) today, Tuesday, March 6th. Following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2018/03/06/target-ceo-were-on-the-right-path.html?play=1.
All references must be sourced to CNBC.
TYLER MATHISEN: THE DOW HAS TURNED BACK POSITIVE. NOT SO, SHARES OF TARGET. THEY ARE DOWN SHARPLY TODAY AFTER THE COMPANY REPORTED MIXED EARNINGS AND SAID THAT IT IS RAISING ITS STARTING WAGE TO $12 AN HOUR THIS SPRING. ANALYSTS MEANWHILE LEFT WITH QUESTIONS AS TO WHY NO NEW ANNOUNCEMENT MADE RELATED TO TAX REFORM SAVINGS. JOINING US NOW IN A "POWER LUNCH" EXCLUSIVE IS TARGET'S CHAIRMAN AND CEO, BRIAN CORNELL, ALONG WITH COURTNEY REAGAN OUT IN MINNEAPOLIS. COURTNEY OVER TO YOU.
COURTNEY REAGAN: HI, GOOD AFTERNOON TO YOU, TYLER. THANK YOU VERY MUCH. I AM JOINED HERE BY BRIAN CORNELL. YOU JUST SPOKE TO INVESTORS. YOU PUT UP A QUARTER THAT WAS PRETTY GOOD. SALES WERE STRONG. A SLIGHT MISS ON EARNINGS. THERE WAS DISAPPOINTMENT WHEN CFO CATHY SMITH STARTED GOING THROUGH THE DETAILS OF THE OPERATING MARGIN, THE AMPED UP CAPITAL EXPENDITURES PROGRAM. I THINK INVESTORS JUST WANT TO MAKE SURE THEY SEE A RETURN ON ALL OF THE SPENDING. ARE YOU GUYS GUIDING A LITTLE TOO CONSERVATIVE, AS HAS BEEN YOUR RECENT HISTORY?
BRIAN CORNELL: COURTNEY, I THINK WE MADE GREAT PROGRESS. I MEAN, 2017 WAS A YEAR THAT I'M REALLY PROUD OF, AND I'M PROUD OF THE TEAM. WE OBVIOUSLY STARTED REMODELING STORES, OVER 110. WE OPENED UP GREAT NEW STORES IN NEW NEIGHBORHOODS, WE SAW GREAT GROWTH FROM A DIGITAL STANDPOINT, AND ROLLED OUT GREAT NEW BRANDS. AND WHILE WE MADE BIG INVESTMENTS, WE TALKED ABOUT OUR RETURN OF INVESTED CAPITAL TODAY OF OVER 14%. AND WE GENERATED $7 BILLION IN PRE-CASH DURING THE YEAR. SO WE MADE GREAT PROGRESS. WE FINISHED WITH REALLY STRONG RESULTS. IT WAS ONLY A FEW WEEKS AGO ON JANUARY 8th WE PRE-ANNOUNCED, WE TALKED ABOUT OUR NOVEMBER/DECEMBER PERFORMANCE. AT THAT POINT, I THOUGHT WE WOULD GROW BY 3.4%, TODAY, WE SAID 3.6%. WE TALKED ABOUT DIGITAL AT THAT POINT, GROWING BY 25%, TODAY WE ANNOUNCED WE GREW BY 29%, AND WE ACTUALLY EXCEEDED THE MIDPOINT OF OUR GUIDANCE. WE GUIDED TO $1.3. WE BEAT THE NUMBER BY TWO CENTS. SO I FELT REALLY GOOD ABOUT OUR PERFORMANCE, AND AS WE LOOKED TO THE FUTURE, WE SAID WE'RE GOING TO CONTINUE TO INVEST TO GROW. WE'RE GOING TO CONTINUE TO INVEST IN NEW CAPABILITIES TO MAKE SURE WE MEET THE NEEDS OF OUR GUESTS, ACCELERATE OUR REMODEL PROGRAM, CONTINUE TO MOVE INTO NEW MARKETS, BRING GREAT NEW BRANDS TO MARKET, AND BUILD OUT THESE DIGITAL FULFILLMENT CAPABILITIES – EXPANDING THINGS LIKE DRIVE-UP, OUR NEW SHIP PERSONAL SHOPPER SERVICE, AND CATHY SAID DESPITE THE FACT THAT WE'RE TAKING OUR CAPX UP TO $3.5 BILLION, WE'LL ACTUALLY IMPROVE OUR RETURN ON INVESTED CAPITAL OVER THE YEAR. SO I FEEL GOOD ABOUT THE PROGRESS WE MADE, I'M REALLY PROUD OF THE TEAM, AND I'M EXCITED ABOUT 2018. SO I KNOW THERE WERE SOME QUESTIONS TODAY, BUT WE'RE ON A PATH TO GROWTH. WE'RE BUILDING MARKET SHARE AGAIN. WE'RE MEETING THE NEEDS OF THE CONSUMER BOTH IN OUR STORE AND ONLINE AND WE'RE PROVIDING GREAT RETURNS FOR OUR SHAREHOLDERS.
REAGAN: AND SALES WERE REALLY STRONG.
CORNELL: THEY WERE.
REAGAN: IN FACT, THEY WERE STRONGER IN JANUARY THAN WHAT WE HAD SEEN –
CORNELL: UP 4%.
REAGAN: -- IN NOVEMBER AND DECEMBER. HAS THAT SALES TREND CONTINUED IN FEBRUARY? YOU'RE ALREADY A WHOLE MONTH INTO THE NEW QUARTER.
CORNELL: WELL, WE GUIDED TO LOW SINGLE DIGIT COMP GROWTH OVER THE BALANCE OF THE YEAR, IN '18, STARTING IN THE FIRST QUARTER. SO WE'RE OFF TO A GOOD START. WE'RE ON A TRAJECTORY FOR POSITIVE GROWTH, BOTH IN STORE AND ONLINE. OUR NEW INITIATIVES ARE BEING WELL RECEIVED. SO, I THINK WE'RE GOING TO CONTINUE THE PROGRESS WE MADE IN 2017 THROUGHOUT 2018. SO WE'RE ON THE RIGHT PATH, AND I FEEL GREAT ABOUT THE PROGRESS WE'RE MAKING AND WE'RE JUST GOING TO CONTINUE TO EXECUTE OUR GAME PLAN THROUGHOUT 2018.
REAGAN: TARGET'S DOING AN AWFUL LOT AS PART OF THIS BIG STRATEGY, $7 BILLION, THREE YEARS, YEAR TO YEAR END. YOU'RE REMODELLING STORES, YOU'RE ADDING NEW STORES, EXPANDING YOUR FULFILLMENT CAPABILITIES, BUT YOU'RE ALSO, IN A WAY, PUTTING A STRAIN ON THE STORES. YOU'RE ASKING THE LABOR IN THE STORES TO DO MORE. WHAT IS THE TIPPING POINT? HOW DO YOU MAKE SURE YOU'RE SERVING THE CUSTOMER IN THE STORE, BUT ALSO REALLY DELIVERING ON ALL THESE NEW FULFILLMENT OPTIONS? I MEAN, THERE'S SO MANY, THERE'S RESTOCK, THERE'S DRIVE-UP, THERE'S BUY ONLINE PICK UP IN STORE. HOW ARE YOU GOING TO MAKE SURE THE STORES CAN DO THIS APPROPRIATELY?
CORNELL: I THINK THE BIGGEST INVESTMENT WE HAVE MADE OVER THE LAST YEAR AND THE MOST IMPORTANT ONE HAS BEEN WITH OUR TEAM. AND OUR TEAM IS READY FOR THE CHALLENGE. WE'VE INVESTED IN TRAINING AND DEVELOPMENT. WE'VE BROUGHT IN A NEW OPERATING MODEL TO OUR STORES SO THAT WE CAN PROVIDE GREAT VISUAL MERCHANDISING, A GREAT CUSTOMER EXPERIENCE, SO WE CAN MEET THE NEEDS OF THE GUEST WHO SHOPS IN OUR STORE ONE DAY AND NOW IS DRIVING UP IN THE PARKING LOT AND WE'RE PUTTING THAT PACKAGE RIGHT IN THEIR TRUNK. SO WE'RE INVESTING IN OUR TEAM. WE ANNOUNCED TODAY, AND I'M VERY PROUD WE ANNOUNCED TODAY, WE'RE INCREASING OUR STARTING WAGE FROM $11 TO $12. AND THAT'S GOING TO ATTRACT EVEN MORE TALENT TO TARGET. AND I WANT TO BE AN EMPLOYER OF CHOICE. AND IT ALL COMES DOWN TO OUR TEAM. EVERYTHING WE HAVE BEEN DOING IS FUELED BY THE INVESTMENT WE MADE IN OUR TEAM. STARTING WITH OUR STORE TEAMS. SO I THINK THE STORE TEAM IS EMBRACING THE CHALLENGE. WE'RE OPERATING DIFFERENTLY. BUT WE'RE ALL FOCUSED ON MEETING THE NEEDS OF TODAY'S CONSUMER.
REAGAN: AND SO YOU'RE INCREASING THE WAGES, WILL YOU HAVE TO ACTUALLY ADD STORE LABOR, MORE BODIES TO HELP YOU DO WHAT YOU'RE TRYING TO DO WITH THE STORES?
CORNELL: WE DID LAST YEAR. AND I CERTAINLY EXPECT THAT WE'LL BE INVESTING IN MORE STORE LABOR AS WE GO FORWARD. A LOT OF IT'S GOING TO BE MORE EXPERTISE: IN APPAREL AND HOME, IN FOOD AND BEVERAGE, IN A CATEGORY LIKE BEAUTY. SO WE'RE BUILDING EXPERTISE INTO OUR MODEL, WE'RE HIRING MORE TEAM MEMBERS, WE'RE INVESTING IN TRAINING AND DEVELOPMENT, WE'RE PAYING THEM A HIGHER WAGE, AND THAT'S GOING TO BE REFLECTED IN THE SERVICE WE OFFER THE GUEST. SO I FEEL GREAT ABOUT THE PATH. THE MOST IMPORTANT INVESTMENT WE MADE IS IN THAT TEAM AND I THINK THAT TEAM IS READY TO DELIVER LIKE THEY DID IN THE FOURTH QUARTER.
REAGAN: SOME QUESTIONS CAME UP TODAY, AND CATHY SMITH, YOUR CFO, TRIED TO ADDRESS THE TAX REFORM SAVINGS. NOT ONLY DID YOU NOT GET A BORDER ADJUSTMENT TAX, YOU GOT THIS NICE NEW TAX REFORM PACKAGE, BUT THAT CAME AFTER YOU PUT THE STRATEGY IN PLACE, AND YOU DIDN'T ANNOUNCE ANYTHING BIG YOU'RE DOING WITH THE SAVINGS. WHY NOT? WHAT ARE YOU DOING WITH THAT MONEY?
CORNELL: WELL, UNLIKE OTHERS, WE INVESTED IN ADVANCE OF TAX REFORM. WHAT WE LAID OUT A YEAR AGO, THE $7 BILLION INVESTMENT PLAN, WE ALREADY MADE THE COMMITMENTS TO ACCELERATE OUR CAPITAL EXPENDITURES, REMODELLING OUR STORES, BUILDING NEW CAPABILITIES, INVESTING IN OUR BRANDS. SO, AS CATHY TALKED ABOUT TODAY, THE BENEFITS OF TAX REFORM, AND THEY'RE SIGNIFICANT FOR US -- I MEAN, WE WERE A FULL FARE TAXPAYER, NOW OUR RATE WILL DROP DOWN TO THE MID 24% RANGE – SO THAT'S GOING TO FLOW BACK TO SHAREHOLDERS IN THE FORM OF IMPROVED EPS NEXT YEAR.
REAGAN: I THINK THAT'S WHAT A LOT OF THE RETAIL PEERS ARE COUNTING ON AS WELL. THANK YOU SO MUCH, BRIAN CORNELL. THERE'S A LOT MORE GROUND TO COVER, BUT YOU KNOW HOW THIS GOES. WE'VE GOT TO HIT THE HIGHLIGHTS. THANKS SO MUCH.
CORNELL: THANKS, COURTNEY.
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