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Nov. 17, 2021, 6:30 a.m. EST

Target Corporation Reports Third Quarter Earnings

MINNEAPOLIS, Nov. 17, 2021 /PRNewswire/ --

Target Corporation /zigman2/quotes/207799045/composite TGT +1.53% today announced its third quarter 2021 financial results, which reflected growth in both sales and profitability on top of record increases a year ago. The Company reported third quarter GAAP earnings per share (EPS) of $3.04, up 51.6 percent from $2.01 in 2020. Third quarter Adjusted EPS of $3.03 grew 8.7 percent compared with $2.79 in 2020. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

1Adjusted EPS, a non-GAAP financial measure, excludes the impact of certain discretely managed items. See the tables of this release for additional information about the items that have been excluded from Adjusted EPS.

"The consistently strong growth we're seeing in our business, quarter after quarter, is a testament to the passion and commitment our team brings to serving our guests, and the trust we've built with them as a result," said Brian Cornell, chairman and chief executive officer of Target Corporation.

"Following comp growth of nearly 21 percent a year ago, our third quarter comp increase of 12.7 percent was driven entirely by traffic, and reflects continued strength in our store sales, same-day digital fulfillment services and double-digit growth in all five of our core merchandising categories. With a strong inventory position heading into the peak of the holiday season, our team and our business are ready to serve our guests and poised to deliver continued, strong growth, through the holiday season and beyond."

Fiscal 2021 Guidance

For the fourth quarter 2021, the Company expects high-single digit to low-double digit growth in comparable sales, compared with the previous guidance for a high-single digit increase.

The Company continues to expect its full-year operating income margin rate will be 8 percent or higher.

Operating Results

Comparable sales grew 12.7 percent in the third quarter, reflecting comparable store sales growth of 9.7 percent and comparable digital sales growth of 29 percent. Total revenue of $25.7 billion grew 13.3 percent compared with last year, driven by total sales growth of 13.2 percent and a 22.3 percent increase in other revenue. Operating income was $2.0 billion in third quarter 2021, up 3.9 percent from $1.9 billion in 2020.

Third quarter operating income margin rate was 7.8 percent in 2021 compared with 8.5 percent in 2020. Third quarter gross margin rate was 28.0 percent, compared with 30.6 percent in 2020. This year's gross margin rate reflected pressure from higher merchandise and freight costs, increased inventory shrink, and increased supply chain costs from increased compensation and headcount in the Company's distribution centers.  These pressures were partially offset by a slight benefit from favorable category mix. Third quarter SG&A expense rate was 18.9 percent in 2021, compared with 20.5 percent in 2020, driven by leverage on strong revenue growth.

Interest Expense and Taxes

The Company's third quarter 2021 net interest expense was $105 million, compared with $632 million last year, which included a $512 million loss on early debt retirement.

Third quarter 2021 effective income tax rate was 22.1 percent, in line with the prior year rate of 21.9 percent.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $440 million in the third quarter, compared with $340 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count.

The Company repurchased $2.2 billion worth of its shares in third quarter 2021, retiring 8.8 million shares of common stock at an average price of $246.80.  As of the end of the third quarter, the Company had approximately $14.6 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in August 2021.

For the trailing twelve months through third quarter 2021, after-tax return on invested capital (ROIC) was 31.3 percent, compared with 19.9 percent for the trailing twelve months through third quarter 2020. The increase in ROIC was driven primarily by increased profitability. The tables in this release provide additional information about the Company's ROIC calculation.

Webcast Details

Target will webcast its third quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Investors.Target.com (click on link under "Upcoming Events"). A replay of the webcast will be provided when available. The replay number is 1-866-461-2736.

Miscellaneous

Statements in this release regarding fourth quarter comparable sales growth and full year operating margin rates 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 the Company's actions to differ materially.  The most important risks and uncertainties are described in Item 1A of the Company's Form 10-K for the fiscal year ended January 30, 2021. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statement.

About Target

Minneapolis-based Target Corporation /zigman2/quotes/207799045/composite TGT +1.53% serves guests at more than 1,900 stores and at Target.com, with the purpose of helping all families discover the joy of everyday life. Since 1946, Target has given 5% of its profit to communities, which today equals millions of dollars a week. Additional company information can be found by visiting its corporate website and press center and by following @TargetNews.

For more on the Target Foundation, click here .

 

TARGET CORPORATION

Consolidated Statements of Operations


Three Months Ended


Nine Months Ended

(millions, except per share data) (unaudited)
October 30, 2021
October 31, 2020
Change
October 30, 2021
October 31, 2020
Change
Sales
$ 25,290

$ 22,336

13.2 %
$ 73,995

$ 64,403

14.9 %
Other revenue
362

296

22.3

1,014

819

23.9
Total revenue
25,652

22,632

13.3

75,009

65,222

15.0
Cost of sales
18,206

15,509

17.4

52,202

45,692

14.2
Selling, general and administrative expenses
4,859

4,647

4.6

14,217

13,167

8.0
Depreciation and amortization (exclusive of depreciation included in cost of sales)
577

541

6.4

1,739

1,660

4.8
Operating income
2,010

1,935

3.9

6,851

4,703

45.7
Net interest expense
105

632

(83.2)

317

871

(63.5)
Net other (income) / expense
(6)

5

NM(a)
(356)

16

NM(a)
Earnings before income taxes
1,911

1,298

47.2

6,890

3,816

80.6
Provision for income taxes
423

284

48.7

1,488

828

79.7
Net earnings
$ 1,488

$ 1,014

46.8 %
$ 5,402

$ 2,988

80.8 %
Basic earnings per share
$ 3.07

$ 2.02

51.6 %
$ 10.97

$ 5.97

83.8 %
Diluted earnings per share
$ 3.04

$ 2.01

51.6 %
$ 10.87

$ 5.91

83.9 %
Weighted average common shares outstanding











Basic
484.8

500.6

(3.1) %
492.2

500.6

(1.7) %
Diluted
489.4

505.4

(3.2) %
496.8

505.2

(1.7) %
Antidilutive shares











Dividends declared per share
$ 0.90

$ 0.68

32.4 %
$ 2.48

$ 2.02

22.8 %
(a)      Not meaningful.

 

TARGET CORPORATION

Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited)
October 30, 2021
January 30, 2021
October 31, 2020
Assets





Cash and cash equivalents
$ 5,753

$ 8,511

$ 5,996
Inventory
14,958

10,653

12,712
Other current assets
1,865

1,592

1,601
Total current assets
22,576

20,756

20,309
Property and equipment





Land
6,146

6,141

6,063
Buildings and improvements
32,478

31,557

31,398
Fixtures and equipment
6,144

5,914

5,843
Computer hardware and software
2,447

2,765

2,706
Construction-in-progress
1,302

780

518
Accumulated depreciation
(20,602)

(20,278)

(19,755)
Property and equipment, net
27,915

26,879

26,773
Operating lease assets
2,539

2,227

2,208
Other noncurrent assets
1,381

1,386

1,371
Total assets
$ 54,411

$ 51,248

$ 50,661
Liabilities and shareholders' investment





Accounts payable
$ 16,250

$ 12,859

$ 14,203
Accrued and other current liabilities
5,925

6,122

5,023
Current portion of long-term debt and other borrowings
1,176

1,144

131
Total current liabilities
23,351

20,125

19,357
Long-term debt and other borrowings
11,586

11,536

12,490
Noncurrent operating lease liabilities
2,494

2,218

2,196
Deferred income taxes
1,246

990

1,171
Other noncurrent liabilities
1,931

1,939

2,128
Total noncurrent liabilities
17,257

16,683

17,985
Shareholders' investment





Common stock
40

42

42
Additional paid-in capital
6,381

6,329

6,285
Retained earnings
8,069

8,825

7,789
Accumulated other comprehensive loss
(687)

(756)

(797)
Total shareholders' investment
13,803

14,440

13,319
Total liabilities and shareholders' investment
$ 54,411

$ 51,248

$ 50,661

Common Stock  Authorized 6,000,000,000 shares, $0.0833 par value; 480,905,493, 500,877,129 and 500,754,729 shares issued and outstanding as of October 30, 2021, January 30, 2021, and October 31, 2020, respectively.

Preferred Stock  Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

TARGET CORPORATION

Consolidated Statements of Cash Flows


Nine Months Ended
(millions) (unaudited)
October 30, 2021
October 31, 2020
Operating activities



Net earnings
$ 5,402

$ 2,988
Adjustments to reconcile net earnings to cash provided by operating activities:



Depreciation and amortization
1,952

1,848
Share-based compensation expense
187

161
Deferred income taxes
233

26
Gain on Dermstore sale
(335)


Loss on debt extinguishment


512
Noncash losses / (gains) and other, net
18

124
Changes in operating accounts:



Inventory
(4,305)

(3,720)
Other assets
(117)

(174)
Accounts payable
3,284

4,287
Accrued and other liabilities
(722)

992
Cash provided by operating activities
5,597

7,044
Investing activities



Expenditures for property and equipment
(2,483)

(2,009)
Proceeds from disposal of property and equipment
23

27
Proceeds from Dermstore sale
356


Other investments
14

(3)
Cash required for investing activities
(2,090)

(1,985)
Financing activities



Additions to long-term debt


2,480
Reductions of long-term debt
(112)

(2,395)
Dividends paid
(1,116)

(1,002)
Repurchase of stock
(5,042)

(741)
Stock option exercises
5

18
Cash required for financing activities
(6,265)

(1,640)
Net (decrease) / increase in cash and cash equivalents
(2,758)

3,419
Cash and cash equivalents at beginning of period
8,511

2,577
Cash and cash equivalents at end of period
$ 5,753

$ 5,996

 

TARGET CORPORATION

Operating Results

Rate Analysis
Three Months Ended
Nine Months Ended
(unaudited)
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Gross margin rate
28.0 %
30.6 %
29.5 %
29.1 %
SG&A expense rate
18.9

20.5

19.0

20.2
Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate
2.2

2.4

2.3

2.5
Operating income margin rate
7.8

8.5

9.1

7.2
Note:  Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue. Other revenue includes $184 million and $527 million of profit-sharing income under our credit card program agreement for the three and nine months ended October 30, 2021, respectively, and $164 million and $488 million for the three and nine months ended October 31, 2020, respectively.

Comparable Sales
Three Months Ended
Nine Months Ended
(unaudited)
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Comparable sales change
12.7 %
20.7 %
14.4 %
18.7 %
Drivers of change in comparable sales







Number of transactions
12.9

4.5

14.0

2.6
Average transaction amount
(0.2)

15.6

0.3

15.7













Comparable Sales by Channel Three Months Ended
Nine Months Ended
(unaudited) October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Stores originated comparable sales change 9.7 %
9.9 %
11.9 %
7.3 %
Digitally originated comparable sales change 28.9

154.5

27.8

163.9












Sales by Channel
Three Months Ended
Nine Months Ended
(unaudited)
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Stores originated
82.4 %
84.3 %
82.3 %
83.9 %
Digitally originated
17.6

15.7

17.7

16.1
Total
100 %
100 %
100 %
100 %













Sales by Fulfillment Channel
Three Months Ended
Nine Months Ended
(unaudited)
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Stores
96.7 %
96.1 %
96.5 %
96.2 %
Other
3.3

3.9

3.5

3.8
Total
100 %
100 %
100 %
100 %
Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Shipt.

 

RedCard Penetration
Three Months Ended
Nine Months Ended
(unaudited)
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Target Debit Card
11.7 %
12.2 %
11.8 %
12.2 %
Target Credit Cards
8.9

9.3

8.7

9.2
Total RedCard Penetration
20.7 %
21.5 %
20.5 %
21.4 %
Note: Amounts may not foot due to rounding.

 

Number of Stores and Retail Square Feet
Number of Stores
Retail Square Feet(a)
(unaudited)
October 30,2021
January 30,2021
October 31,2020
October 30,2021
January 30,2021
October 31,2020
170,000 or more sq. ft.
274

273

273

49,071

48,798

48,798
50,000 to 169,999 sq. ft.
1,515

1,509

1,509

190,116

189,508

189,508
49,999 or less sq. ft.
135

115

115

3,952

3,342

3,342
Total
1,924

1,897

1,897

243,139

241,648

241,648
(a)     In thousands, reflects total square feet less office, distribution center, and vacant space.

TARGET CORPORATION

Reconciliation of Non-GAAP Financial Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). The most comparable GAAP measure is diluted earnings per share. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies.

Reconciliation of Non-GAAP
Three Months Ended


October 30, 2021
October 31, 2020

(millions, except per share data) (unaudited)
Pretax
Net of Tax
Per Share
Pretax
Net of Tax
Per Share
Change
GAAP diluted earnings per share




$ 3.04





$ 2.01

51.6 %
Adjustments













Loss on debt extinguishment
$

$

$

$ 512

$ 379

$ 0.75


Loss on investment (a)






8

9

0.02


Other (b)
(9)

(7)

(0.01)

8

6

0.01


Adjusted diluted earnings per share




$ 3.03





$ 2.79

8.7 %





Reconciliation of Non-GAAP
Nine Months Ended


October 30, 2021
October 31, 2020

(millions, except per share data) (unaudited)
Pretax
Net of Tax
Per Share
Pretax
Net of Tax
Per Share
Change
GAAP diluted earnings per share




$ 10.87





$ 5.91

83.9 %
Adjustments













Gain on Dermstore sale
$ (335)

$ (269)

$ (0.54)

$

$

$


Loss on debt extinguishment






512

379

0.75


Loss on investment (a)






19

18

0.03


Other (b)
27

20

0.04

33

24

0.05


Adjusted diluted earnings per share




$ 10.37





$ 6.75

53.7 %
Note: Amounts may not foot due to rounding.
(a) Represented a loss on our investment in Casper Sleep Inc., which was not core to our operations. We sold this investment during the fourth quarter of 2020.
(b) Other items unrelated to current period operations, none of which were individually significant.

Earnings before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation and amortization (EBITDA) are non-GAAP financial measures. We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.

EBIT and EBITDA
Three Months Ended


Nine Months Ended

(dollars in millions) (unaudited)
October 30, 2021
October 31, 2020
Change
October 30, 2021
October 31, 2020
Change
Net earnings
$ 1,488

$ 1,014

46.8 %
$ 5,402

$ 2,988

80.8 %
 + Provision for income taxes
423

284

48.7

1,488

828

79.7
 + Net interest expense
105

632

(83.2)

317

871

(63.5)
EBIT
$ 2,016

$ 1,930

4.5 %
$ 7,207

$ 4,687

53.8 %
 + Total depreciation and amortization (a)
652

603

7.9

1,952

1,848

5.6
EBITDA
$ 2,668

$ 2,533

5.3 %
$ 9,159

$ 6,535

40.2 %
(a) Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.

After-Tax Return on Invested Capital

(dollars in millions) (unaudited)





Trailing Twelve Months

Numerator
October 30, 2021
October 31, 2020

Operating income
$ 8,687

$ 5,901


 + Net other income / (expense)
358

(46)


EBIT
9,045

5,855


 + Operating lease interest (a)
85

87


  - Income taxes (b)
1,947

1,277


Net operating profit after taxes
$ 7,183

$ 4,665









Denominator
October 30, 2021
October 31, 2020
November 2, 2019
Current portion of long-term debt and other borrowings
$ 1,176

$ 131

$ 1,159
 + Noncurrent portion of long-term debt
11,586

12,490

10,513
 + Shareholders' investment
13,803

13,319

11,545
 + Operating lease liabilities (c)
2,737

2,400

2,390
  - Cash and cash equivalents
5,753

5,996

969
Invested capital
$ 23,549

$ 22,344

$ 24,638
Average invested capital (d)
$ 22,947

$ 23,491











After-tax return on invested capital

31.3 %

19.9 %
(a) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A. Operating lease interest is added back to Operating Income in the ROIC calculation to control for differences in capital structure between us and our competitors.
(b) Calculated using the effective tax rates, which were 21.3 percent and 21.5 percent for the trailing twelve months ended October 30, 2021, and October 31, 2020, respectively. For the twelve months ended October 30, 2021, and October 31, 2020, includes tax effect of $1.9 billion and $1.3 billion, respectively, related to EBIT, and $18 million and $19 million, respectively, related to operating lease interest.
(c) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.
(d) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

 

 

Cision
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SOURCE Target Corporation

COMTEX_397121172/2454/2021-11-17T06:30:18

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/zigman2/quotes/207799045/composite
US : U.S.: NYSE
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+3.33 +1.53%
Volume: 5.62M
Jan. 24, 2022 4:03p
P/E Ratio
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Dividend Yield
1.63%
Market Cap
$104.09 billion
Rev. per Employee
$252,685
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/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 220.58
+3.33 +1.53%
Volume: 5.62M
Jan. 24, 2022 4:03p
P/E Ratio
16.24
Dividend Yield
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Market Cap
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$252,685
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