Laser focus on washington today as President Trump gears up for his first address to a joint session to congress tonight. What you can expect from the big speech straight ahead. Im melissa lee. The battle for your trades. Fidelity cutting fees. Take a snapshot of that, schwab, etrade, tdameritrade firmly in the red this hour. What every investor wants to see, exclusive of the ceo of target. Courtney reagan is live with Brian Cornell in new york city. Courtney . Hi there, brian. Thank you very much. Thats right, target just wrapped up its 2017 financial meeting. Im 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 . Courtney, were really confident about the direction were setting. Today was about taking our shareholders through the new direction of the company. The investments were 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 weve got the right plan in place. In fact, we know we have the right plan in place. Well be investing in reimagining our stores, remodeling hundreds of Stores Across the country. Weve seen great response to these Small Format Stores weve opened up. Youll see us accelerate that Going Forward. Transforming our supply chain to meet the needs of todays business model. Well be launching new brands and continuing to make very important digital investments. We think todays with a very important day to set the tone for where were going in the future and position the company for future growth and market share gains. So, today you definitely reset the guidance numbers. But theyre not really new investments. Theyre investments that you talked about and initiatives youve been doing for several years. I dont quite understand why you think it will work Going Forward if it hasnt worked so far. Well, the fact of the matter is it has been working. Weve been very disciplined about testing and validating. Now were ready to roll out. We have to increase one thing. Thats 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. Were taking a learning from that, making minor adjustments and now youll 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 and chicago, youll see us double those Stores Next Year and we see a path to continued growth Going Forward. Weve been reworking our supply chain system. Youll see us advance that in the next couple of years. We had a very successful new brand launch this year, two big brands. Theyre on the path to being billion dollar brands. We talked today about the fact that well have over a dozen new brands well roll out over the next few years. And weve 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, weve more than doubled our digital footprint. Were going to accelerate Going Forward. To do that, we had to make investments, both in operating margin and in capital. But theyre the right investments for the business, for the brand and our shareholders Going Forward. And today we just talked about the fact were ready to go a lot faster. Im still just a little confused about how its different Going Forward, though. Your comp sales trend has been declining about the last nine quarters if you look at that trend. What youre saying is that youre investing this your stores, in online. But youve been doing that and its not working yet. So, what is different . Well, well be doing it at scale. This last year, we remodeled 25 stores. We have 1800. Over the next few years, well take that learning to over 600 stores. As we reimagine these stores, we know how the guest reacts. It drives more traffic. It brings our guests back more often, brings greater engagement. We have to do that to scale. It will take some time. Next year well remodel 100 stores but in the next three years well touch over 600 stores. A handful of these Small Format Stores we opened up are delivering great productivity, three to four times productivity. Well double that next year and youll see hundreds new locations. Strengthening our supply chain so we take costs out and build more speed. Weve been testing that very carefully and now well start to roll it out at scale. Well 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 shoppers 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. Youre not Closing Stores at all. In fact, youre opening 100 new stores, remodeling 600. If you already lost shoppers and these stores are losing productivity, at what point do you say we have to close stores . This doesnt make sense for us financially. When do you get to that point . We look at our store base all the time. Over the last few years, we have closed stores, dozens of stores each year. Over the last few years, a couple hundred stores over the last decade. But were fortunate. Theyre in great locations. Were not attached to dying shopping malls. Were in great locations across the country. Now, weve got to bring those stores to life differently. We know some of our stores have gotten tired, theyve gotten old. Ive got stores that havent 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 todays guest expects from target. Walmart did a couple of years ago, cleaned up their stores, invested in digital. Kind of sounds like your plan. How are you going to make it for you . How are you going to get back shoppers and sales that youve lost as theyve grown share and youve fallen . Were 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 instore 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 one of our stores. We to have bring all those elements together. Weve got lots of work to do. What we talked to the Investment Community about today is this isnt going to be overnight but a threeyear plan we put in place. This first year is about investment. We have to mature and transition these initiatives but ultimately well return to a point of stability and growth. With the disruption in retail today, theres 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. Part of what youre trying to do to pick up market share is drop your prices, lower your prices, be more price competitive. To do that, youre 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 . Lets talk pricing first and then ill 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. Youll 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. Were really going back to where we have been in the past, a model thats worked for us before. Now certainly you know im 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. Were looking at that very carefully. I think weve 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. They understand it. Are they willing to do it . Where does President Trump stand . They dont 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 were going to end up in a much better place. 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 . I talked about it. We modeled this is across the entire industry, not just target. As this plan is structured, we could see Consumer Price go up 20 or 25 . Thats not good for anyone in america and its certainly not good for families that shop our stores. Those 30 million guests in target every week. So weve been out there in washington really on behalf of the families and the target guests we served and making sure they dont see higher prices, because we all know as prices rise well see further retraction in retail. Its not good for america, for families and weve had great conversations to make sure everyone understands the unintended consequences of this plan. Theres a lot going none 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 . The board has been incredibly supportive. Obviously, we spent a lot of time with the board prior to today. Universally, they support the plan. Because they know its the right thing long term for the company. Its the right thing for the brand and its 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. Theyre really thinking about how we make sure ten years from now were 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 whats required to go forward, but tremendous support. So how long has the board given your fouryear plan you . Said its a long game not a short game but certainly its not forever. Its a threeyear initiative. Its going to take some time. This is year one. Weve got to invest. Well 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, were a marketshare winner, both physically and digitally. You dont want to become one of those distressed retailers . You dont want tonight one of those headlines . We will not be on that list. We want to make sure we move into that retail winners circle. Back over to you all in englewood cliffs. Courtney reagan, thank you so much for the exclusive with Brian Cornell, ceo of target. What do you think about how convincing he was, putting forth the strategy to reignite growth . I was surprised of about how he was on the physical presence of target, more stores reer s r the current ones in this day and age when more and more people are shopping online. Why he would focus so much on the physicality rather than cyber. Or maintaining the number of stores even. Increasing them, right. With all due respect to Brian Cornell. And i appreciate him sitting down with cnbc. There was a lot of buzz words in there but not a lot of meat. Reimagining, repositioning, our target guests. Target stock has unldperformed walmart in the last year, last five years and last ten years. That says it is not a macro retail situation as much as a target specific situation to me. I agree. Two target analysts, Michael Lasser and oliver chen. You heard what we had to say in terms of our review of how Brian Cornell did. Oliver, what do you think . This is where walmart was back in 2015. Why couldnt target have made that turn back then instead of finding itself behind the eight ball two years later . Yeah. I think what were witnessing now is really seismic shifts going on in retail. Theres a revolution here. Right now, target is really resetting itself, reinventing itself and thinking about how to best leverage its existing assets. This has been an ongoing problem. The bottom line is consumers have changed. They want more ease. They want value. They want convenience. Its about bricks and clicks. Keep in mind, 68 of digital orders were fulfilled by target stores. Online is growing by 44 , 7 prs of mix. Its about bricks and clicks. But these are issues that are all coming to a head and underlying this is price investment. What does that mean . Consumers want low prices. Target is putting up the money to invest here. So i think this is a reset. As we look at the long term. And target is playing the long game. We have a market perform rating on target. We are recommending walmart and have seen these changes earlier at walmart and have to acknowledge that. Target needs to play the long game. Theres a revolution in retail. Sure. Think about amazon, customers and its very different. Of course. The question, though, is can it do it at this point . Michael, an analyst made the point that two years ago when walmart was making this shift and reinvestment in its own business, it had a bigger footprint. It was a Bigger Company so it could afford to do it. For a company granted target is a very big company but for target to do it, it increases the risk profile for target to launch 12 new brands which they expect to be 10 billion in sales the next two years, to reduce to compete on margins almost at all costs. What do you think . I think theres two key questions here. Number one, theyre taking their margins down from 7 to 5. 5 . The key question is have they gone low enough . You want them to go lower . We dont know. If theres a border adjustment tax, its all gone. Well, that remains to be seen. Right. The other question is, if they have gone low enough, at what point are they going to drive sustainable sales and Earnings Growth . On the stock its trading at 14. 5 times base number dividend yield. Those provide some downside support. It probably hangs out at this high 50 level until we get more answers about those two key questions. Michael, what about the focus on the physical stores . When you heard that interview with courtney, yes, he talked about investing in digital. He talked about ease of buying, going from online to into the store. But ultimately it was about revamping the stores, making them look nicer. He said it doubles the productivity. At this day and age, is that the smart place to put your focus . Expanding the physical presence of the retailer rather than focusing more on the digital experience . Yeah. Lets keep everything in perspective. Right now about 15 of retail sales are done online. Over time, maybe that grows to 25 . So 75 of retail sales will still take place in a store. The consumer likes to see, touch and feel the products that theyre going to buy. Theres an immediacy of the need. Theres a plethora of value trends to go into a store. I think target is understanding that. And theyre aiming their strategying accordingly. I think the real question from here is does overall retail profitability by virtue of price transparency, the very low switch in costs for consumer does that all take a step lower . That remains to be seen. Oliver, this is an uncomfortable question. You may not want to address this the reality is, its out there. 1. 14 Million People have signed a pledge to boycott target because of their bathroom policy. I dont know if any of those people have actually boycotted target or theyre signing a pledge online. Who knows. The reality is this. Do you think target has stepped in it a little bit politically . Do they need to change certain policies . Have you noticed any impact . Managements take on this is that they have not noticed impact in terms of this. Target is an exclusive culture. For them its about back to the basics. Its about this lower price investment. Also, keep in mind another story here is target is a wellloved brand. Its also a Merchant Company that does a great job developing product. The cat and jack brand is a new brand that reached 1 billion very quickly. Its a wellloved brand, dividend yield as well. An earlier topic is stores, future of stores. The future of stores is really you shop on your phone first, then you go into a store. So, buy online pickup, ship from store sounds like youre almost at a buy, oliver. Well, i think theres a balancing act here. And giving them credit, theyre facing the music. So, you really are facing the music about this revolution thats happening. And thats what you have to do. A setback is a setup for a comeback. Well see. Its really a test of managerial leadership and how they allocate capital. You cant forget about amazon and the reality of the threat there. And also millenials and generation z, and drone sbts future of retail. Everybody wants their goods in ten minutes and less. Have you to worry about food, pharmacy, diversification. Theres a lot happening in retail. Its a very exciting time. Its going to come down to we have to go, michael. I find it odd that 1. 4 Million People, its not 3,000 angry people but 1. 4 million have sign aid pledge saying theyll boycott the store and the target ceo is not addressing it. Ultimately the skoorm wants a good experience, be treated fairly. Thats what matters most from an econ