Target Announces Third Quarter Earnings
Wednesday, November 17, 2021 7:30 AM

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Results Reflect Income Tax Benefit

Nov. 17, 2010 (Business Wire) -- Target Corporation (NYSE:TGT) today reported net earnings of $535 million for the quarter ended October 30, 2010, compared with $436 million in the quarter ended October 31, 2009. Earnings per share in the third quarter increased 28.5 percent to 74 cents from 58 cents in the same period a year ago. All earnings per share figures refer to diluted earnings per share.

“We’re pleased with Target’s third quarter financial performance, and we are well-positioned for the fourth quarter,” said Gregg Steinhafel, chairman, president and chief executive officer of Target Corporation. “We’ve built our holiday season plans to create excitement and provide our guests unbeatable value. In addition, our guests can save more than ever with our new 5% REDcard rewards program. Based on our merchandising and marketing plans, combined with the expected impact of REDcard rewards and our newly completed remodel program, we expect Target’s fourth quarter comparable-store performance will be the best of any quarter in the last three years.”

Retail Segment Results

Sales increased 3.0 percent in the third quarter to $15.2 billion in 2010 from $14.8 billion in 2009, due to a 1.6 percent increase in comparable-store sales combined with the contribution from new stores. Retail segment earnings before interest expense and income taxes (EBIT) were $816 million in third quarter 2010, an increase of 3.2 percent from $791 million in 2009.

Third quarter EBITDA and EBIT margin rates were 8.8 percent and 5.4 percent, respectively, compared with 9.0 percent and 5.3 percent in 2009. These changes were the result of a modest decline in the gross margin rate, offset by favorability in the selling, general and administrative (SG&A) expense rate and the depreciation and amortization (D&A) expense rate.

Third quarter gross margin rate was 30.6 percent, down from 30.8 percent in 2009. The impact of sales mix on gross margin rate was essentially neutral, as sales increased at a similar pace in both higher-margin and lower-margin categories.

Third quarter SG&A expense rate was 21.8 percent, down from 21.9 percent in 2009.

Credit Card Segment Results

Third quarter segment profit increased to $130 million from $60 million a year ago, as bad debt expense declined 64 percent from $301 million in third quarter 2009 to $110 million this year.

Third quarter average receivables decreased 16.3 percent to $6.9 billion in 2010 from $8.2 billion in 2009. Average receivables directly funded by Target increased in the third quarter to $2.8 billion from $2.7 billion in 2009.

Annualized segment pre-tax return on invested capital was 18.5 percent in the third quarter 2010, compared with 9.0 percent a year ago.

Interest Expense and Taxes

Net interest expense for the quarter increased $3 million from third quarter 2009, driven by a higher average portfolio interest rate, partially offset by lower average debt balances reflecting lower average credit card receivables.

The company’s effective tax rate for the third quarter was 30.8 percent in 2010, down from 36.1 percent in 2009, primarily as a result of the favorable resolution of various state income tax matters which increased earnings per share by approximately 6 cents in third quarter 2010.

Share Repurchase

In third quarter 2010, under the share repurchase program originally announced in November 2007 and resumed in January 2010, the company repurchased 15.2 million shares of its common stock at an average price of $52.29, for a total investment of $793 million.

Program-to-date through the end of third quarter 2010, the company has acquired 143.8 million shares of its common stock at an average price per share of $51.55, reflecting a total investment of $7.4 billion.

Miscellaneous

Target Corporation will webcast its third quarter earnings conference call at 9:30am CST today. Investors and the media are invited to listen to the call through the company’s website at www.target.com/investors (click on “events + presentations” and then “archives + webcasts”). A telephone replay of the call will be available beginning at approximately 11:30am CST today through the end of business on November 19, 2010. The replay number is (800) 642-1687 (passcode: 49646072).

The statement on expected sales performance is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the company's actual results to differ materially. The most important risks and uncertainties are described in the Risk Factors sections of the company's Form 10-K for the fiscal year ended January 30, 2022 and the Form 10-Q for the fiscal quarter ended July 31, 2010.

About Target

Minneapolis-based Target Corporation (NYSE:TGT) serves guests at 1,752 stores in 49 states nationwide and at Target.com. In addition, the company operates a credit card segment that offers branded proprietary credit card products. Since 1946, Target has given 5 percent of its income through community grants and programs; today, that giving equals more than $3 million a week. For more information about Target’s commitment to corporate responsibility, visit Target.com/hereforgood.

For more information, visit Target.com/Investors and Target.com/Pressroom.

TARGET CORPORATION
             
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
(millions, except per share data)   2010     2009   Change     2010     2009     Change  
(unaudited) (unaudited) (unaudited) (unaudited)
Sales $ 15,226 $ 14,789 3.0 % $ 45,509 $ 43,717 4.1 %
Credit card revenues     379       487   (22.1 )       1,220       1,459     (16.4 )  
Total revenues 15,605 15,276 2.2 46,729 45,176 3.4
Cost of sales 10,562 10,229 3.3 31,267 30,080 3.9
Selling, general and administrative expenses 3,345 3,255 2.8 9,749 9,405 3.7
Credit card expenses 198 381 (48.0 ) 693 1,153 (39.9 )
Depreciation and amortization     533       537   (0.6 )       1,545       1,487     3.9    
Earnings before interest expense and income taxes 967 874 10.6 3,475 3,051 13.9
Net interest expense

Nonrecourse debt collateralized
by credit card receivables

20 23 (14.4 ) 64 74 (13.6 )
Other interest expense 175 168 3.8 505 517 (2.3 )
  Interest income     (1 )     -   209.0         (2 )     (3 )   (33.6 )  
Net interest expense     194       191   1.4         567       588     (3.6 )  
Earnings before income taxes 773 683 13.2 2,908 2,463 18.1
Provision for income taxes     238       247   (3.5 )       1,023       911     12.3    
Net earnings   $ 535     $ 436   22.6   %   $ 1,885     $ 1,552     21.4   %
Basic earnings per share   $ 0.75     $ 0.58   28.8   %   $ 2.59     $ 2.06     25.3   %
Diluted earnings per share   $ 0.74     $ 0.58   28.5   %   $ 2.57     $ 2.06     24.7   %
Weighted average common shares outstanding
Basic 715.4 751.8 728.8 752.0
  Diluted     721.0       755.7           734.4       754.3        
 
Subject to reclassification
 
TARGET CORPORATION
       
Consolidated Statements of Financial Position      
October 30, January 30, October 31,
(millions)   2010     2010     2009  
Assets (unaudited) (unaudited)
Cash and cash equivalents, including marketable securities of $349, $1,617 and $273 $ 936 $ 2,200 $ 864
Credit card receivables, net of allowance of $775, $1,016 and $1,025 5,955 6,966 7,023
Inventory 9,550 7,179 9,382
Other current assets     1,905       2,079       2,314  
Total current assets 18,346 18,424 19,583
Property and equipment
Land 5,891 5,793 5,754
Buildings and improvements 23,101 22,152 22,250
Fixtures and equipment 4,908 4,743 4,732
Computer hardware and software 2,461 2,575 2,599
Construction-in-progress 448 502 291
  Accumulated depreciation     (11,219 )     (10,485 )     (10,035 )
Property and equipment, net 25,590 25,280 25,591
Other noncurrent assets     1,013       829       805  
Total assets   $ 44,949     $ 44,533     $ 45,979  
Liabilities and shareholders' investment
Accounts payable $ 7,761 $ 6,511 $ 7,641
Accrued and other current liabilities 3,179 3,120 3,117
Unsecured debt and other borrowings 814 796 577
Nonrecourse debt collateralized by credit card receivables     36       900       1,063  
Total current liabilities 11,790 11,327 12,398
Unsecured debt and other borrowings 11,737 10,643 11,432
Nonrecourse debt collateralized by credit card receivables 3,943 4,475 4,463
Deferred income taxes 814 835 804
Other noncurrent liabilities     1,786       1,906       1,911  
Total noncurrent liabilities 18,280 17,859 18,610
Shareholders' investment
Common stock 59 62 63
Additional paid-in capital 3,128 2,919 2,866
Retained earnings 12,254 12,947 12,559
  Accumulated other comprehensive loss     (562 )     (581 )     (517 )
  Total shareholders' investment     14,879       15,347       14,971  
Total liabilities and shareholders' investment   $ 44,949     $ 44,533     $ 45,979  
Common shares outstanding     707.9       744.6       752.2  
 
 
Subject to reclassification
 
TARGET CORPORATION
       
Consolidated Statements of Cash Flows  
Nine Months Ended
October 30, October 31,
(millions)   2010     2009  
Operating activities (unaudited) (unaudited)
Net earnings $ 1,885 $ 1,552
Reconciliation to cash flow
Depreciation and amortization 1,545 1,487
Share-based compensation expense 77 72
Deferred income taxes 249 451
Bad debt expense 445 900
Loss/impairment of property and equipment, net 12 85
Other non-cash items affecting earnings 128 44
Changes in operating accounts providing/(requiring) cash
Accounts receivable originated at Target 241 190
Inventory (2,371 ) (2,677 )
Other current assets (187 ) (251 )
Other noncurrent assets (118 ) 27
Accounts payable 1,250 1,303
Accrued and other current liabilities (141 ) (148 )
    Other noncurrent liabilities     (163 )     (8 )
Cash flow provided by operations     2,852       3,027  
Investing activities
Expenditures for property and equipment (1,607 ) (1,440 )
Proceeds from disposal of property and equipment 36 25
Change in accounts receivable originated at third parties 325 (29 )
  Other investments     (70 )     10  
Cash flow required for investing activities     (1,316 )    

(1,434

)
Financing activities
Additions to long-term debt 997

-

Reductions of long-term debt (1,450 )

(1,255

)

Dividends paid (432 )

(369

)

Repurchase of stock (2,055 )

-

Stock option exercises and related tax benefit 133

31

  Other     7        
Cash flow required for financing activities     (2,800 )     (1,593 )
Net (decrease)/increase in cash and cash equivalents (1,264 ) -
Cash and cash equivalents at beginning of period     2,200       864  
Cash and cash equivalents at end of period   $ 936     $ 864  
 
Subject to reclassification
TARGET CORPORATION
         
Retail Segment
                                   
Retail Segment Results Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
(millions) (unaudited)     2010       2009     Change       2010       2009   Change  
Sales $ 15,226 $ 14,789 3.0 % $ 45,509 $ 43,717 4.1 %
Cost of sales     10,562       10,229     3.3       31,267       30,080   3.9  
Gross margin 4,664 4,560 2.3 14,242 13,637 4.4
SG&A expenses(a)     3,319       3,236     2.6       9,689       9,345   3.7  
EBITDA 1,345 1,324 1.6 4,553 4,292 6.1
Depreciation and amortization     529       533     (0.8 )     1,532       1,476   3.8  
EBIT   $ 816     $ 791     3.2   % $ 3,021     $ 2,816   7.3 %
EBITDA is earnings before interest expense, income taxes, depreciation and amortization.
EBIT is earnings before interest expense and income taxes.

(a) Loyalty Program discounts are recorded as reductions to sales in our Retail Segment. Effective with the October 2010 nationwide launch of our new
5% REDcard Rewards loyalty program, we changed the formula under which our Credit Card segment reimburses our Retail Segment to better align
with the attributes of the new program. In the three months and nine months ended October 30, 2010, these reimbursed amounts were $26 million and
$60 million, respectively, compared with $19 million and $59 million in the corresponding periods in 2009. In all periods these amounts were
recorded as reductions to SG&A expenses within the Retail Segment and increases to operations and marketing expenses within the Credit Card
Segment.

                         
Retail Segment Rate Analysis Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
(unaudited)     2010       2009     2010       2009  
Gross margin rate 30.6 % 30.8 % 31.3 % 31.2 %
SG&A expense rate 21.8 % 21.9 % 21.3 % 21.4 %
EBITDA margin rate 8.8 % 9.0 % 10.0 % 9.8 %
Depreciation and amortization expense rate 3.5 % 3.6 % 3.4 % 3.4 %
EBIT margin rate     5.4 %     5.3 %   6.6 %     6.4 %
Retail Segment rate analysis metrics are computed by dividing the applicable amount by sales.
                         
Comparable-Store Sales Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
(unaudited)     2010       2009     2010       2009  
Comparable-store sales 1.6 % (1.6 )% 2.0 % (3.9 )%
Drivers of changes in comparable-store sales:
Number of transactions 2.1 % 0.6 % 2.3 % (1.1 )%
Average transaction amount (0.5 )% (2.2 )% (0.2 )% (2.8 )%
Units per transaction 3.0 % (1.6 )% 2.1 % (2.4 )%
Selling price per unit     (3.3 )%     (0.6 )%   (2.2 )%     (0.4 )%

The comparable-store sales increases or decreases above are calculated by comparing sales in fiscal year periods
with comparable prior year periods of equivalent length.

                         

REDcard Penetration

Three Months Ended Nine Months Ended
October 30, October 31, October 30, October 31,
(unaudited)     2010       2009     2010       2009  
Target Credit Penetration 4.9 % 5.1 % 4.7 % 5.2 %
Target Debit Penetration     0.6 %     0.4 %   0.5 %     0.4 %

Total Store REDcard Penetration

    5.5 %     5.5 %   5.2 %     5.6 %
Represents the percentage of Target store sales that are paid for using REDcards.
                                 
Number of Stores and Retail Square Feet Number of Stores Retail Square Feet(a)
October 30, January 30, October 31, October 30, January 30, October 31,
(unaudited)     2010       2010     2009       2010       2010   2009
Target general merchandise stores 1,501 1,489 1,491 189,354 187,449 187,481
SuperTarget stores     251       251     252       44,504       44,492   44,645
Total     1,752       1,740     1,743       233,858       231,941   232,126

(a) In thousands; reflects total square feet, less office, distribution center and vacant space.

 
Subject to reclassification
 
TARGET CORPORATION              
 
Credit Card Segment
                                                     
Credit Card Segment Results Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
October 30, 2021 October 31, 2021 October 30, 2021 October 31, 2021  
Amount Annualized Amount Annualized Amount Annualized Amount Annualized
(millions) (unaudited)   (in millions)   Rate(d)       (in millions)     Rate(d)       (in millions)     Rate(d)     (in millions)     Rate(d)  
Finance charge revenue $ 315 18.4 % $ 365 17.8 % $ 989 18.4 % $ 1,097 17.4 %
Late fees and other revenue 38 2.2 92 4.5 152 2.8 270 4.3
Third party merchant fees     26     1.5         30         1.5         79     1.5         92     1.5    
Total revenues     379     22.1         487         23.8         1,220     22.7         1,459     23.1    
Bad debt expense 110 6.4 301 14.7 445 8.3 900 14.3
Operations and marketing expenses(a) 114 6.7 99 4.8 307 5.7 312 4.9
Depreciation and amortization     5     0.3         4         0.2         14     0.3         11     0.2    
Total expenses     229     13.4         404         19.7         766     14.3         1,223     19.4    
EBIT 150 8.8 83 4.1 454 8.4 236 3.7

Interest expense on nonrecourse debt collateralized by credit card receivables

    20             23                 64             74        
Segment profit   $ 130           $ 60               $ 390           $ 162        

Average gross credit card receivables funded by Target(b)

$ 2,811 $ 2,677 $ 2,705 $ 2,910
Segment pretax ROIC(c)     18.5 %           9.0 %               19.2 %           7.4 %      

(a) Loyalty Program discounts are recorded as reductions to sales in our Retail Segment. Effective with the October 2010 nationwide launch
of our new 5% REDcard Rewards loyalty program, we changed the formula under which our Credit Card segment reimburses our Retail Segment to
better align with the attributes of the new program. In the three months and nine months ended October 30, 2010, these reimbursed amounts
were $26 million and $60 million, respectively, compared with $19 million and $59 million in the corresponding periods in 2009. In all periods
these amounts were recorded as reductions to SG&A expenses within the Retail Segment and increases to operations and marketing expenses within
the Credit Card Segment.

 

(b) Amounts represent the portion of average gross credit card receivables funded by Target. These amounts exclude $4,048 million and $4,461
million for the three and nine months ended October 30, 2010, respectively, and $5,520 million and $5,508 million for the three and nine months
ended October 31, 2009, respectively of receivables funded by nonrecourse debt collateralized by credit card receivables.

 

(c) ROIC is return on invested capital, and this rate equals our segment profit divided by average gross credit card receivables funded by Target,
expressed as an annualized rate.

 

(d) As an annualized percentage of average gross credit card receivables.

                                                     
Spread Analysis - Total Portfolio Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
October 30, 2021 October 31, 2021 October 30, 2021 October 31, 2021  
Yield Yield Yield Yield  
Amount Annualized Amount Annualized Amount Annualized Amount Annualized
(unaudited)   (in millions)   Rate       (in millions)     Rate       (in millions)     Rate     (in millions)     Rate  
EBIT $ 150 8.8 % (b) $ 83 4.1 % (b) $ 454 8.4 % (b) $ 236 3.7 % (b)
LIBOR(a) 0.3 % 0.3 % 0.3 % 0.3 %
Spread to LIBOR(c)   $ 146     8.5 % (b)   $ 78         3.8 % (b)   $ 439     8.1 % (b)   $ 213     3.4 % (b)

(a) Balance-weighted average one-month LIBOR

(b) As a percentage of average gross credit card receivables.

(c) Spread to LIBOR is a metric used to analyze the performance of our total credit card portfolio because the vast majority of our portfolio earns
finance charge revenue at rates tied to the Prime Rate, and the interest rate on all nonrecourse debt securitized by credit card receivables is tied
to LIBOR.

                                         
Receivables Rollforward Analysis Three Months Ended   Nine Months Ended  
October 30, October 31, October 30, October 31,
(millions) (unaudited)     2010     2009       Change         2010         2009     Change  
Beginning gross credit card receivables $ 6,988 $ 8,293 (15.7 ) % $ 7,982 $ 9,094 (12.2 ) %
Charges at Target 811 799 1.5 2,295 2,445 (6.2 )
Charges at third parties 1,409 1,648 (14.5 ) 4,357 5,080 (14.2 )
Payments (2,643 ) (2,870 ) (7.9 ) (8,350 ) (9,071 ) (8.0 )
Other     165     178         (7.1 )       446         500     (10.9 )  
Period-end gross credit card receivables   $ 6,730   $ 8,048         (16.4 ) %   $ 6,730       $ 8,048     (16.4 ) %
Average gross credit card receivables   $ 6,859   $ 8,197         (16.3 ) %   $ 7,166       $ 8,418     (14.9 ) %

Accounts with three or more payments (60+ days) past due as a percentage of period-end gross credit card receivables

    4.9 %   6.5 %               4.9 %       6.5 %      

Accounts with four or more payments (90+ days) past due as a percentage of period-end gross credit card receivables

    3.5 %   4.6 %               3.5 %       4.6 %      
                                         
Allowance for Doubtful Accounts Three Months Ended   Nine Months Ended  
October 30, October 31, October 30, October 31,
(millions) (unaudited)     2010     2009       Change         2010         2009     Change  
Allowance at beginning of period $ 851 $ 1,004 (15.3 ) % $ 1,016 $ 1,010 0.6 %
Bad debt provision 110 301 (63.5 ) 445 900 (50.6 )
Net write-offs(a)     (186 )   (280 )       (33.7 )       (686 )       (885 )   (22.5 )  
Allowance at end of period   $ 775   $ 1,025         (24.4 ) %   $ 775       $ 1,025     (24.4 ) %

As a percentage of period-end gross credit card receivables

    11.5 %   12.7 %               11.5 %       12.7 %      

Net write-offs as a percentage of average gross credit card receivables (annualized)

    10.9 %   13.7 %               12.8 %       14.0 %      

(a) Net write-offs include the principal amount of losses (excluding accrued and unpaid finance charges) less current period principal recoveries.

 
Subject to reclassification

Target Corporation
John Hulbert, Investors, 612-761-6627
or
Eric Hausman, Financial Media, 612-761-2054
or
Target Media Hotline, 612-696-3400


(Source: Business Wire )
(Source: Quotemedia)
 

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