MINNEAPOLIS--(BUSINESS WIRE)--Target Corporation (NYSE: TGT) today reported net earnings of $555 million for the quarter ended October 29, 2011, compared with $535 million in the quarter ended October 30, 2010. Earnings per share in the third quarter increased 10.2 percent to $0.82 from $0.74 in the same period a year ago. As previously disclosed, third quarter 2010 earnings per share included the benefit of approximately 6 cents related to favorable state income tax settlements. Third quarter 2011 results included expenses related to Target’s investments in its 2013 Canadian market entry, which reduced earnings per share by approximately 5 cents. Excluding those two items, adjusted earnings per share increased 28 percent to $0.87 in third quarter 2011 from $0.68 in the same period a year ago. A reconciliation of non-GAAP financial measures to GAAP measures is provided in the tables attached to this press release. All earnings per share figures refer to diluted earnings per share.
“We’re very pleased with our third quarter financial results, which reflect strong performance in our U.S. Retail and U.S. Credit Card segments,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation. “We’re confident that we have the right strategy and team in place to drive continued strong performance this holiday season and well into the future, allowing us to continue rewarding our shareholders while investing millions of dollars each week to support the many local communities where our guests and team members live, work and shop.”
Fourth Quarter 2011 Earnings Guidance
The company currently expects fourth quarter 2011 diluted EPS of $1.43 to $1.53, on a GAAP basis. This estimate excludes any reduction in income tax expense from the resolution of income tax uncertainties, which the company expects to be approximately $50 million in the quarter. It also excludes the impact of a potential credit-card receivables sale transaction, and excludes the impact of any potential early extinguishment of non-recourse debt collateralized by credit card receivables.
U.S. Retail Segment Results
As the company first reported in its sales release on November 3, 2011, Target’s sales in third quarter 2011 increased 5.4 percent to $16.1 billion from $15.2 billion a year ago, due to a 4.3 percent increase in comparable-store sales and the contribution from new stores. Segment earnings before interest expense and income taxes (EBIT) were $931 million in the third quarter of 2011, an increase of 14.1 percent from $816 million in 2010.
Third quarter 2011 EBITDA and EBIT margin rates were 9.1 percent and 5.8 percent, respectively, compared with 8.8 percent and 5.4 percent in 2010. Third quarter gross margin rate declined to 30.5 percent in 2011 from 30.6 percent in 2010, reflecting the impact of the company’s integrated growth strategies partially offset by rate improvements within categories. The company’s third quarter selling, general and administrative (SG&A) expense rate improved to 21.4 percent in 2011, compared with 21.8 percent in 2010.
U.S. Credit Card Segment Results
Third quarter average receivables decreased 9.9 percent to $6.2 billion in 2011 from $6.9 billion in 2010. Average receivables directly funded by Target decreased 14 percent in the third quarter to $2.4 billion from $2.8 billion in 2010.
Third quarter bad debt expense was $40 million in 2011, down from $110 million in 2010, driven by improved trends in key measures of risk. Segment profit for the quarter increased 10 percent to $143 million in 2011, compared with $130 million in third quarter 2010. Annualized segment pre-tax return on invested capital was 23.6 percent in third quarter 2011, compared with 18.5 percent in 2010.
Canadian Segment Results
Third quarter 2011 EBIT was $(35) million due to start-up expenses and depreciation related to the company’s expected market entry in 2013.
Interest Expense and Taxes
Net interest expense for the quarter was $200 million, including $15 million of interest on capitalized leases related to Target’s Canadian market entry. Net interest expense was $194 million in third quarter 2010.
The company’s effective income tax rate was 35.3 percent in third quarter 2011, up from 30.8 percent in 2010. Target’s third quarter 2010 income tax rate reflected the favorable resolution of various state income tax matters which increased earnings per share by approximately 6 cents.
Share Repurchase
In third quarter 2011, the company repurchased approximately 4.5 million shares of its common stock at an average price of $50.45, for a total investment of $226 million. Year-to-date, the company has repurchased approximately 34.1 million shares of its common stock at an average price of $50.76, for a total investment of $1.7 billion.
Miscellaneous
Target Corporation will webcast its third quarter earnings conference call at 9:30 a.m. 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 11:30 a.m. CST today through the end of business on November 18, 2011. The replay number is (800) 642-1687 (passcode: 20428017).
Statements in this release regarding expected earnings per share and gains realized from the resolution of income tax uncertainties are forward-looking statements 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 Item 1A of the company's Form 10-K for the fiscal year ended January 29, 2011.
In addition to the GAAP results provided in this release, the company provides non-GAAP adjusted diluted earnings per share (non-GAAP adjusted EPS) for the three and nine months ended October 29, 2011 and October 30, 2010. This measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The most comparable GAAP measure is diluted earnings per share. Management believes non-GAAP adjusted EPS is useful in providing period-to-period comparisons of the results of our U.S. operations. Non-GAAP adjusted EPS should not be considered in isolation or as a substitution for analysis of the company’s results as reported under GAAP. Other companies may calculate non-GAAP adjusted EPS differently than the company does, limiting the usefulness of the measure for comparative purposes.
About Target
Minneapolis-based Target Corporation (NYSE:TGT) serves guests at 1,767 stores across the United States and at Target.com. The company plans to open its first stores in Canada in 2013. 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/Pressroom.
| TARGET CORPORATION | ||||||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| October 29, | October 30, | October 29, | October 30, | |||||||||||||||||||||
| (millions, except per share data) (unaudited) | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
| Sales | $ | 16,054 | $ | 15,226 | 5.4 | % | $ | 47,529 | $ | 45,509 | 4.4 | % | ||||||||||||
| Credit card revenues | 348 | 379 | (8.2 | ) | 1,048 | 1,220 | (14.1 | ) | ||||||||||||||||
| Total revenues | 16,402 | 15,605 | 5.1 | 48,577 | 46,729 | 4.0 | ||||||||||||||||||
| Cost of sales | 11,165 | 10,562 | 5.7 | 32,874 | 31,267 | 5.1 | ||||||||||||||||||
| Selling, general and administrative expenses | 3,525 | 3,345 | 5.4 | 10,230 | 9,749 | 4.9 | ||||||||||||||||||
| Credit card expenses | 109 | 198 | (44.9 | ) | 283 | 693 | (59.0 | ) | ||||||||||||||||
| Depreciation and amortization | 546 | 533 | 2.4 | 1,568 | 1,545 | 1.5 | ||||||||||||||||||
| Earnings before interest expense and income taxes | 1,057 | 967 | 9.4 | 3,622 | 3,475 | 4.2 | ||||||||||||||||||
| Net interest expense | ||||||||||||||||||||||||
|
Nonrecourse debt collateralized by credit card receivables |
18 | 20 | (12.1 | ) | 55 | 64 | (14.3 | ) | ||||||||||||||||
| Other interest expense | 184 | 175 | 5.2 | 522 | 505 | 3.4 | ||||||||||||||||||
| Interest income | (2 | ) | (1 | ) | 149.4 | (3 | ) | (2 | ) | 48.0 | ||||||||||||||
| Net interest expense | 200 | 194 | 2.9 | 574 | 567 | 1.2 | ||||||||||||||||||
| Earnings before income taxes | 857 | 773 | 11.0 | 3,048 | 2,908 | 4.8 | ||||||||||||||||||
| Provision for income taxes | 302 | 238 | 27.5 | 1,100 | 1,023 | 7.5 | ||||||||||||||||||
| Net earnings | $ | 555 | $ | 535 | 3.7 | % | $ | 1,948 | $ | 1,885 | 3.4 | % | ||||||||||||
| Basic earnings per share | $ | 0.82 | $ | 0.75 | 10.2 | % | $ | 2.85 | $ | 2.59 | 10.4 | % | ||||||||||||
| Diluted earnings per share | $ | 0.82 | $ | 0.74 | 10.2 | % | $ | 2.84 | $ | 2.57 | 10.5 | % | ||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||
| Basic | 673.2 | 715.4 | 682.2 | 728.8 | ||||||||||||||||||||
| Diluted | 678.3 | 721.0 | 686.9 | 734.4 | ||||||||||||||||||||
| Subject to reclassification | ||||||||||||||||||||||||
| TARGET CORPORATION | ||||||||||||
| Consolidated Statements of Financial Position | ||||||||||||
| October 29, | January 29, | October 30, | ||||||||||
| (millions) | 2011 | 2011 | 2010 | |||||||||
| Assets | (unaudited) | (unaudited) | ||||||||||
| Cash and cash equivalents, including marketable securities of $66, $1,129 and $349 | $ | 821 | $ | 1,712 | $ | 936 | ||||||
| Credit card receivables, net of allowance of $431, $690 and $775 | 5,713 | 6,153 | 5,955 | |||||||||
| Inventory | 9,890 | 7,596 | 9,550 | |||||||||
| Other current assets | 1,948 | 1,752 | 1,905 | |||||||||
| Total current assets | 18,372 | 17,213 | 18,346 | |||||||||
| Property and equipment | ||||||||||||
| Land | 6,069 | 5,928 | 5,891 | |||||||||
| Buildings and improvements | 26,850 | 23,081 | 23,101 | |||||||||
| Fixtures and equipment | 5,153 | 4,939 | 4,908 | |||||||||
| Computer hardware and software | 2,457 | 2,533 | 2,461 | |||||||||
| Construction-in-progress | 546 | 567 | 448 | |||||||||
| Accumulated depreciation | (12,035 | ) | (11,555 | ) | (11,219 | ) | ||||||
| Property and equipment, net | 29,040 | 25,493 | 25,590 | |||||||||
| Other noncurrent assets | 1,035 | 999 | 1,013 | |||||||||
| Total assets | $ | 48,447 | $ | 43,705 | $ | 44,949 | ||||||
| Liabilities and shareholders' investment | ||||||||||||
| Accounts payable | $ | 8,053 | $ | 6,625 | $ | 7,761 | ||||||
| Accrued and other current liabilities | 3,273 | 3,326 | 3,179 | |||||||||
| Unsecured debt and other borrowings | 2,313 | 119 | 814 | |||||||||
| Nonrecourse debt collateralized by credit card receivables | 500 | - | 36 | |||||||||
| Total current liabilities | 14,139 | 10,070 | 11,790 | |||||||||
| Unsecured debt and other borrowings | 12,897 | 11,653 | 11,737 | |||||||||
| Nonrecourse debt collateralized by credit card receivables | 3,259 | 3,954 | 3,943 | |||||||||
| Deferred income taxes | 1,199 | 934 | 814 | |||||||||
| Other noncurrent liabilities | 1,689 | 1,607 | 1,786 | |||||||||
| Total noncurrent liabilities | 19,044 | 18,148 | 18,280 | |||||||||
| Shareholders' investment | ||||||||||||
| Common stock | 56 | 59 | 59 | |||||||||
| Additional paid-in capital | 3,431 | 3,311 | 3,128 | |||||||||
| Retained earnings | 12,340 | 12,698 | 12,254 | |||||||||
| Accumulated other comprehensive loss | (563 | ) | (581 | ) | (562 | ) | ||||||
| Total shareholders' investment | 15,264 | 15,487 | 14,879 | |||||||||
| Total liabilities and shareholders' investment | $ | 48,447 | $ | 43,705 | $ | 44,949 | ||||||
| Common shares outstanding | 671.4 | 704.0 | 707.9 | |||||||||
| Subject to reclassification | ||||||||||||
|
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| TARGET CORPORATION | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Nine Months Ended | ||||||||
| October 29, | October 30, | |||||||
| (millions) (unaudited) | 2011 | 2010 | ||||||
| Operating activities | ||||||||
| Net earnings | $ | 1,948 | $ | 1,885 | ||||
| Reconciliation to cash flow | ||||||||
| Depreciation and amortization | 1,568 | 1,545 | ||||||
| Share-based compensation expense | 61 | 77 | ||||||
| Deferred income taxes | 397 | 249 | ||||||
| Bad debt expense | 67 | 445 | ||||||
| Non-cash (gains)/losses and other, net | 76 | (112 | ) | |||||
| Changes in operating accounts: | ||||||||
| Accounts receivable originated at Target | 120 | 241 | ||||||
| Inventory | (2,294 | ) | (2,371 | ) | ||||
| Other current assets | (131 | ) | (61 | ) | ||||
| Other noncurrent assets | 49 | (113 | ) | |||||
| Accounts payable | 1,428 | 1,250 | ||||||
| Accrued and other current liabilities | (360 | ) | (141 | ) | ||||
| Other noncurrent liabilities | 46 | (42 | ) | |||||
| Cash flow provided by operations | 2,975 | 2,852 | ||||||
| Investing activities | ||||||||
| Expenditures for property and equipment | (3,750 | ) | (1,607 | ) | ||||
| Proceeds from disposal of property and equipment | 7 | 36 | ||||||
| Change in accounts receivable originated at third parties | 253 | 325 | ||||||
| Other investments | (114 | ) | (70 | ) | ||||
| Cash flow required for investing activities | (3,604 | ) | (1,316 | ) | ||||
| Financing activities | ||||||||
| Change in commercial paper, net | 1,211 | - | ||||||
| Additions to long-term debt | 1,000 | 997 | ||||||
| Reductions of long-term debt | (272 | ) | (1,450 | ) | ||||
| Dividends paid | (549 | ) | (432 | ) | ||||
| Repurchase of stock | (1,693 | ) | (2,055 | ) | ||||
| Stock option exercises and related tax benefit | 66 | 133 | ||||||
| Other | 1 | 7 | ||||||
| Cash flow required for financing activities | (236 | ) | (2,800 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (26 | ) | - | |||||
| Net decrease in cash and cash equivalents | (891 | ) | (1,264 | ) | ||||
|
Cash and cash equivalents at beginning of period |
1,712 | 2,200 | ||||||
| Cash and cash equivalents at end of period | $ | 821 | $ | 936 | ||||
| Subject to reclassification | ||||||||
|
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| TARGET CORPORATION | ||||||||||||||||||||||||
| U.S. Retail Segment | ||||||||||||||||||||||||
| U.S. Retail Segment Results | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 29, | October 30, | October 29, | October 30, | |||||||||||||||||||||
| (millions) (unaudited) | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
| Sales | $ | 16,054 | $ | 15,226 | 5.4 | % | $ | 47,529 | $ | 45,509 | 4.4 | % | ||||||||||||
| Cost of sales | 11,165 | 10,562 | 5.7 | 32,874 | 31,267 | 5.1 | ||||||||||||||||||
| Gross margin | 4,889 | 4,664 | 4.8 | 14,655 | 14,242 | 2.9 | ||||||||||||||||||
| SG&A expenses(a) | 3,433 | 3,319 | 3.5 | 9,988 | 9,689 | 3.1 | ||||||||||||||||||
| EBITDA | 1,456 | 1,345 | 8.2 | 4,667 | 4,553 | 2.5 | ||||||||||||||||||
| Depreciation and amortization | 525 | 529 | (0.8 | ) | 1,527 | 1,532 | (0.3 | ) | ||||||||||||||||
| EBIT | $ | 931 | $ | 816 | 14.1 | % | $ | 3,140 | $ | 3,021 | 3.9 | % | ||||||||||||
| 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 U.S. Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard Rewards loyalty program, we changed the formula under which our U.S. Credit Card segment reimburses our U.S. Retail Segment to better align with the attributes of the new program. In the three and nine months ended October 29, 2011, these reimbursed amounts were $74 million and $189 million, respectively, compared with $26 million and $60 million in the corresponding periods in 2010. In all periods these amounts were recorded as reductions to SG&A expenses within the U.S. Retail Segment and increases to operations and marketing expenses within the U.S. Credit Card Segment. |
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| U.S. Retail Segment Rate Analysis | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 29, | October 30, | October 29, | October 30, | |||||||||||||||||||||
| (unaudited) | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||
| Gross margin rate | 30.5 | % | 30.6 | % | 30.8 | % | 31.3 | % | ||||||||||||||||
| SG&A expense rate | 21.4 | % | 21.8 | % | 21.0 | % | 21.3 | % | ||||||||||||||||
| EBITDA margin rate | 9.1 | % | 8.8 | % | 9.8 | % | 10.0 | % | ||||||||||||||||
| Depreciation and amortization expense rate | 3.3 | % | 3.5 | % | 3.2 | % | 3.4 | % | ||||||||||||||||
| EBIT margin rate | 5.8 | % | 5.4 | % | 6.6 | % | 6.6 | % | ||||||||||||||||
| U.S. Retail Segment rate analysis metrics are computed by dividing the applicable amount by sales. | ||||||||||||||||||||||||
| Comparable-Store Sales | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 29, | October 30, | October 29, | October 30, | |||||||||||||||||||||
| (unaudited) | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||
| Comparable-store sales change | 4.3 | % | 1.6 | % | 3.4 | % | 2.0 | % | ||||||||||||||||
| Drivers of changes in comparable-store sales: | ||||||||||||||||||||||||
| Number of transactions | 0.3 | % | 2.1 | % | 0.4 | % | 2.3 | % | ||||||||||||||||
| Average transaction amount | 4.1 | % | (0.5 | )% | 3.1 | % | (0.2 | )% | ||||||||||||||||
| Units per transaction | 2.5 | % | 3.0 | % | 2.9 | % | 2.1 | % | ||||||||||||||||
| Selling price per unit | 1.6 | % | (3.3 | )% | 0.2 | % | (2.2 | )% | ||||||||||||||||
|
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. |
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| REDcard Penetration | Three Months Ended |
Nine Months Ended |
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| October 29, | October 30, | October 29, | October 30, | |||||||||||||||||||||
| (unaudited) | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||||||
| Target Credit Cards | 6.9 | % | 4.9 | % | 6.5 | % | 4.7 | % | ||||||||||||||||
| Target Debit Cards | 2.6 | % | 0.6 | % | 2.1 | % | 0.5 | % | ||||||||||||||||
| Total Store REDcard Penetration | 9.5 | % | 5.5 | % | 8.6 | % | 5.2 | % | ||||||||||||||||
| 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 29, | January 29, | October 30, | October 29, | January 29, | October 30, | |||||||||||||||||||
| (unaudited) | 2011 | 2011 | 2010 | 2011 | 2011 | 2010 | ||||||||||||||||||
| Target general merchandise stores | 640 | 1,037 | 1,039 | 77,349 | 127,292 | 127,532 | ||||||||||||||||||
| Expanded food assortment | 875 | 462 | 462 | 114,218 | 61,823 | 61,823 | ||||||||||||||||||
| SuperTarget stores | 252 | 251 | 251 | 44,681 | 44,503 | 44,503 | ||||||||||||||||||
| Total | 1,767 | 1,750 | 1,752 | 236,248 | 233,618 | 233,858 | ||||||||||||||||||
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(a) In thousands; reflects total square feet, less office, distribution center and vacant space. |
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| Subject to reclassification | ||||||||||||||||||||||||
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| TARGET CORPORATION | |||||||||||||||||||||||||||||||||||
| U.S. Credit Card Segment | |||||||||||||||||||||||||||||||||||
| U.S. Credit Card Segment Results | Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| October 29, 2011 | October 30, 2010 | October 29, 2011 | October 30, 2010 | ||||||||||||||||||||||||||||||||
| 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 | $ | 279 | 18.1 | % | $ | 315 | 18.4 | % | $ | 849 | 18.0 | % | $ | 989 | 18.4 | % | |||||||||||||||||||
| Late fees and other revenue | 47 | 3.1 | 38 | 2.2 | 133 | 2.8 | 152 | 2.8 | |||||||||||||||||||||||||||
| Third party merchant fees | 22 | 1.4 | 26 | 1.5 | 66 | 1.4 | 79 | 1.5 | |||||||||||||||||||||||||||
| Total revenues | 348 | 22.5 | 379 | 22.1 | 1,048 | 22.2 | 1,220 | 22.7 | |||||||||||||||||||||||||||
| Bad debt expense | 40 | 2.6 | 110 | 6.4 | 67 | 1.4 | 445 | 8.3 | |||||||||||||||||||||||||||
| Operations and marketing expenses(a) | 143 | 9.2 | 114 | 6.7 | 405 | 8.6 | 307 | 5.7 | |||||||||||||||||||||||||||
| Depreciation and amortization | 4 | 0.3 | 5 | 0.3 | 13 | 0.3 | 14 | 0.3 | |||||||||||||||||||||||||||
| Total expenses | 187 | 12.1 | 229 | 13.4 | 485 | 10.3 | 766 | 14.3 | |||||||||||||||||||||||||||
| EBIT | 161 | 10.4 | 150 | 8.8 | 563 | 11.9 | 454 | 8.4 | |||||||||||||||||||||||||||
|
Interest expense on nonrecourse debt collateralized by credit card receivables |
18 | 20 | 55 | 64 | |||||||||||||||||||||||||||||||
| Segment profit | $ | 143 | $ | 130 | $ | 508 | $ | 390 | |||||||||||||||||||||||||||
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Average gross credit card receivables funded by Target(b) |
$ | 2,427 | $ | 2,811 | $ | 2,443 | $ | 2,705 | |||||||||||||||||||||||||||
| Segment pretax ROIC(c) | 23.6 | % | 18.5 | % | 27.7 | % | 19.2 | % | |||||||||||||||||||||||||||
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(a) Loyalty Program discounts are recorded as reductions to sales in our U.S. Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard Rewards loyalty program, we changed the formula under which our U.S. Credit Card segment reimburses our U.S. Retail Segment to better align with the attributes of the new program. In the three and nine months ended October 29, 2011, these reimbursed amounts were $74 million and $189 million, respectively, compared with $26 million and $60 million in the corresponding periods in 2010. In all periods these amounts were recorded as reductions to SG&A expenses within the U.S. Retail Segment and increases to operations and marketing expenses within the U.S. Credit Card Segment. |
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(b) Amounts represent the portion of average gross credit card receivables funded by Target. These amounts exclude $3,754 million and $3,843 million for the three and nine months ended October 29, 2011, respectively, and $4,048 million and $4,461 million for the three and nine months ended October 30, 2010, respectively, of receivables funded by nonrecourse debt collateralized by credit card receivables. |
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(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. |
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(d) As an annualized percentage of average gross credit card receivables. |
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| Spread Analysis - Total Portfolio | Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| October 29, 2011 | October 30, 2010 | October 29, 2011 | October 30, 2010 | ||||||||||||||||||||||||||||||||
| Yield | Yield | Yield | Yield | ||||||||||||||||||||||||||||||||
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Amount |
Annualized |
Amount |
Annualized |
Amount |
Annualized |
|
Amount |
Annualized |
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| (unaudited) | (in millions) | Rate | (in millions) | Rate | (in millions) | Rate | (in millions) | Rate | |||||||||||||||||||||||||||
| EBIT | $ | 161 | 10.4 | % | (c) | $ | 150 | 8.8 | % | (c) | $ |
563 |
11.9 | % | (c) | $ | 454 | 8.4 | % | (c) | |||||||||||||||
| LIBOR(a) | 0.2 | % | 0.3 | % | 0.2 | % | 0.3 | % | |||||||||||||||||||||||||||
| Spread to LIBOR(b) | $ | 158 | 10.2 | % | (c) | $ | 146 | 8.5 | % | (c) | $ | 552 | 11.7 | % | (c) | $ | 439 | 8.1 | % | (c) | |||||||||||||||
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(a) Balance-weighted one-month LIBOR. |
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(b) 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. |
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(c) As a percentage of average gross credit card receivables. |
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| Receivables Rollforward Analysis | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||
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October 29, |
October 30, |
October 29, |
October 30, |
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| (millions) (unaudited) | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||||||||||||
| Beginning gross credit card receivables | $ | 6,202 | $ | 6,988 | (11.2 | ) | % | $ | 6,843 | $ | 7,982 | (14.3 | ) | % | |||||||||||||||||||||
| Charges at Target | 1,205 | 811 | 48.5 | 3,348 | 2,295 | 45.9 | |||||||||||||||||||||||||||||
| Charges at third parties | 1,283 | 1,409 | (9.0 | ) | 3,886 | 4,357 | (10.8 | ) | |||||||||||||||||||||||||||
| Payments | (2,784 | ) | (2,643 | ) | 5.3 | (8,577 | ) | (8,350 | ) | 2.7 | |||||||||||||||||||||||||
| Other | 238 | 165 | 43.5 | 644 | 446 | 44.6 | |||||||||||||||||||||||||||||
| Period-end gross credit card receivables | $ | 6,144 | $ | 6,730 | (8.7 | ) | % | $ | 6,144 | $ | 6,730 | (8.7 | ) | % | |||||||||||||||||||||
| Average gross credit card receivables | $ | 6,181 | $ | 6,859 | (9.9 | ) | % | $ | 6,287 | $ | 7,166 | (12.3 | ) | % | |||||||||||||||||||||
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Accounts with three or more payments (60+ days) past due as a percentage of period-end gross credit card receivables |
3.3 | % | 4.9 | % | 3.3 | % | 4.9 | % | |||||||||||||||||||||||||||
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Accounts with four or more payments (90+ days) past due as a percentage of period-end gross credit card receivables |
2.2 | % | 3.5 | % | 2.2 | % | 3.5 | % | |||||||||||||||||||||||||||
| Allowance for Doubtful Accounts | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||
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October 29, |
October 30, |
October 29, |
October 30, |
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| (millions) (unaudited) | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||||||||||||
| Allowance at beginning of period | $ | 480 | $ | 851 | (43.7 | ) | % | $ | 690 | $ | 1,016 | (32.1 | ) | % | |||||||||||||||||||||
| Bad debt expense | 40 | 110 | (63.6 | ) | 67 | 445 | (84.9 | ) | |||||||||||||||||||||||||||
| Write-offs(a) | (122 | ) | (226 | ) | (46.3 | ) | (448 | ) | (799 | ) | (44.0 | ) | |||||||||||||||||||||||
| Recoveries(a) | 33 | 40 | (17.4 | ) | 122 | 113 | 7.5 | ||||||||||||||||||||||||||||
| Allowance at end of period | $ | 431 | $ | 775 | (44.4 | ) | % | $ | 431 | $ | 775 | (44.4 | ) | % | |||||||||||||||||||||
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As a percentage of period-end gross credit card receivables |
7.0 | % | 11.5 | % | 7.0 | % | 11.5 | % | |||||||||||||||||||||||||||
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Net write-offs as a percentage of average gross credit card receivables (annualized) |
5.7 | % | 10.9 | % | 6.9 | % | 12.8 | % | |||||||||||||||||||||||||||
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(a) Write-offs include the principal amount of losses (excluding accrued and unpaid finance charges), and recoveries include current period principal collections on previously written-off balances. These amounts combined represent net write-offs. |
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| Subject to reclassification | |||||||||||||||||||||||||||||||||||
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| TARGET CORPORATION | ||||||||||||||||
| Canadian Segment | ||||||||||||||||
| Canadian Segment Results | Three Months Ended | Nine Months Ended | ||||||||||||||
| October 29, | October 30, | October 29, | October 30, | |||||||||||||
| (millions) (unaudited) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Sales | $ | - | $ | - | $ | - | $ | - | ||||||||
| Cost of sales | - | - | - | - | ||||||||||||
| Gross margin | - | - | - | - | ||||||||||||
| SG&A expenses(a) | 18 | - | 53 | - | ||||||||||||
| EBITDA | (18 | ) | - | (53 | ) | - | ||||||||||
| Depreciation and amortization(b) | 17 | - | 28 | - | ||||||||||||
| EBIT | $ | (35 | ) | $ | - | $ | (81 | ) | $ | - | ||||||
| EBITDA is earnings before interest expense, income taxes, depreciation and amortization. | ||||||||||||||||
| EBIT is earnings before interest expense and income taxes. | ||||||||||||||||
| (a) SG&A expenses include our Canadian Segment start-up costs. These costs consisted primarily of legal, payroll, and consulting expenses. | ||||||||||||||||
| (b) Depreciation and amortization result from depreciation of capital lease assets and leasehold interests acquired in our Zellers asset purchase. For the three and nine months ended October 29, 2011, the lease payment obligation also gave rise to $15 million and $25 million of interest expense, respectively, recorded in our consolidated statements of operations. | ||||||||||||||||
| Subject to reclassification | ||||||||||||||||
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| TARGET CORPORATION | |||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures to GAAP Measures | |||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
| October 29, | October 30, | October 29, | October 30, | ||||||||||||||||||||||||||||||||||||||||||
| (millions) (unaudited) | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||||||||||||||||||||||
| GAAP diluted earnings per share | $ | 0.82 | $ | 0.74 | 10.2 | % | $ | 2.84 | $ | 2.57 | 10.4 | % | |||||||||||||||||||||||||||||||||
| Adjustments | 0.05 | (0.06 | ) | 0.11 | (0.06 | ) | |||||||||||||||||||||||||||||||||||||||
| Adjusted diluted earnings per share | $ | 0.87 | $ | 0.68 | 28.0 | % | $ | 2.95 | $ | 2.51 | 17.5 | % | |||||||||||||||||||||||||||||||||
| Please see the detailed reconciliation below. | |||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended October 29, 2011 | Three Months Ended October 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. | Consolidated | U.S. | Consolidated | ||||||||||||||||||||||||||||||||||||||||||
| U.S. | Credit | Total | GAAP | U.S. | Credit | Total | GAAP | ||||||||||||||||||||||||||||||||||||||
| (millions) (unaudited) | Retail | Card | U.S. | Canada | Other | Total | Retail | Card | U.S. | Canada | Other | Total | |||||||||||||||||||||||||||||||||
| Segment profit | $ | 931 | $ | 143 | $ | 1,074 | $ | (35 | ) | $ | - | $ | 1,039 | $ | 816 | $ | 130 | $ | 947 | $ | - | $ | - | $ | 947 | ||||||||||||||||||||
| Other interest expense(a) | 167 | 15 | - | 182 | 174 | - | - | 174 | |||||||||||||||||||||||||||||||||||||
| Earnings before income taxes | 907 | (50 | ) | - | 857 | 773 | - | - | 773 | ||||||||||||||||||||||||||||||||||||
| Provision for income taxes(b) | 317 | (15 | ) | - | 302 | 283 | - | (45 | ) | (c) | 238 | ||||||||||||||||||||||||||||||||||
| Net earnings | $ | 590 | $ | (35 | ) | $ | - | $ | 555 | $ | 490 | $ | - | $ | 45 | $ | 535 | ||||||||||||||||||||||||||||
| Diluted earnings per share(d) | $ | 0.87 | $ | (0.05 | ) | $ | - | $ | 0.82 | $ | 0.68 | $ | - | $ | 0.06 | $ | 0.74 | ||||||||||||||||||||||||||||
| Nine Months Ended October 29, 2011 | Nine Months Ended October 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. | Consolidated | U.S. | Consolidated | ||||||||||||||||||||||||||||||||||||||||||
| U.S. | Credit | Total | GAAP | U.S. | Credit | Total | GAAP | ||||||||||||||||||||||||||||||||||||||
| (millions) (unaudited) | Retail | Card | U.S. | Canada | Other | Total | Retail | Card | U.S. | Canada | Other | Total | |||||||||||||||||||||||||||||||||
| Segment profit | $ | 3,140 | $ | 508 | $ | 3,648 | $ | (81 | ) | $ | - | $ | 3,567 | $ | 3,021 | $ | 390 | $ | 3,411 | $ | - | $ | - | $ | 3,411 | ||||||||||||||||||||
| Other interest expense(a) | 494 | 25 | - | 519 | 503 | - | - | 503 | |||||||||||||||||||||||||||||||||||||
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Earnings before income taxes |
3,154 | (106 | ) | - | 3,048 | 2,908 | - | - | 2,908 | ||||||||||||||||||||||||||||||||||||
| Provision for income taxes(b) | 1,130 | (30 | ) | - | 1,100 | 1,068 | - | (45 | ) | (c) | 1,023 | ||||||||||||||||||||||||||||||||||
| Net earnings | $ | 2,024 | $ | (76 | ) | $ | - | $ | 1,948 | $ | 1,840 | $ | - | $ | 45 | $ | 1,885 | ||||||||||||||||||||||||||||
| Diluted earnings per share(d) | $ | 2.95 | $ | (0.11 | ) | $ | - | $ | 2.84 | $ | 2.51 | $ | - | $ | 0.06 | $ | 2.57 | ||||||||||||||||||||||||||||
| Note: Our segment measure of profit is used by management to evaluate the return we are achieving on our investment and to make operating decisions. To provide additional transparency we have disclosed non-GAAP adjusted diluted earnings per share, which incorporates the diluted EPS impact of our 2013 Canadian market entry and favorable resolution of various state income tax matters. We believe this information is useful in providing period-to-period comparisons of the results of our U.S. operations. | |||||||||||||||||||||||||||||||||||||||||||||
| (a) Represents interest expense not included in U.S. Credit Card segment profit. For the three and nine months ended October 29, 2011, U.S. Credit Card segment profit included $18 million and $55 million of interest expense on nonrecourse debt collateralized by credit card receivables, respectively, compared with $20 million and $64 million in the respective prior year periods. These amounts, along with other interest expense, equal consolidated GAAP interest expense. | |||||||||||||||||||||||||||||||||||||||||||||
| (b) In 2011, taxes are allocated to our business segments based on estimated effective income tax rates for the period. | |||||||||||||||||||||||||||||||||||||||||||||
| (c) Represents reductions to income tax expense due to favorable resolution of state income tax matters that in the aggregate were significant during the three and nine months ended October 30, 2010. | |||||||||||||||||||||||||||||||||||||||||||||
| (d) For the three and nine months ended October 29, 2011, average diluted shares outstanding were 678.3 million and 686.9 million, respectively, and for the three and nine months ended October 30, 2010, average diluted shares outstanding were 721.0 million and 734.4 million, respectively. | |||||||||||||||||||||||||||||||||||||||||||||
| Subject to reclassification | |||||||||||||||||||||||||||||||||||||||||||||
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