Results Include $0.23 Gain on Sale of Mervyn's
MINNEAPOLIS, Nov. 11 /PRNewswire-FirstCall/ -- Target Corporation
(NYSE: TGT) today reported net income of $537 million, or $0.60 per share, for
the third quarter ended October 30, 2004, compared with $302 million, or $0.33
per share, in the third quarter ended November 1, 2003. These results include
earnings from continuing operations of $330 million, or $0.37 per share, in
the current year, compared with $271 million, or $0.30 per share, in the prior
year. Current year results also include earnings from discontinued operations
of $4 million, and a gain of $203 million, or $0.23 per share, related to the
sale of Mervyn's. Earnings from continuing operations in 2004 were reduced by
a pre-tax adjustment of $18 million, or $0.01 per share, related to accounting
for certain store leases. Discontinued operations include the results of
Mervyn's for the month of August. All earnings per share figures refer to
diluted earnings per share.
"We are pleased with our strong growth and continued market share gains
during the third quarter, particularly in light of last year's solid sales and
earnings performance," said Bob Ulrich, chairman and chief executive officer
of Target Corporation. "We remain confident in Target's strategy and believe
that we will continue to delight our guests and deliver superior value to our
shareholders throughout the remainder of 2004 and for many years to come."
Analysis of Continuing Operations
Total revenues in the third quarter increased 11.0 percent to
$10.909 billion from $9.827 billion in 2003, driven by a 4.5 percent increase
in comparable store sales combined with the contribution from new store
expansion and our credit card operations. (Total revenues include retail sales
and net credit revenues. Comparable-store sales are sales from stores open
longer than one year.)
For the quarter, earnings before interest and income taxes increased
14.4 percent to $644 million, compared with $563 million in the third quarter
2003. The contribution from the company's credit card operations to pre-tax
earnings in the quarter was $120 million, an increase of $13 million, or
13.0 percent.
In the third quarter, the company's gross margin rate improved from the
prior year primarily due to improvement in markup, while the company's expense
rate was unfavorable to prior year primarily due to the lease accounting
adjustment. (Gross margin rate represents sales less cost of sales expressed
as a percentage of sales. Expense rate represents selling, general and
administrative expenses expressed as a percentage of sales.)
Other Factors
Net interest expense for the quarter decreased $18 million compared with
third quarter 2003, reflecting the benefit of lower average funded balances
partially offset by higher average portfolio rate.
For the third quarter, the company's effective income tax rate was
37.8 percent in the current year compared with 37.3 percent a year ago. The
company's annual effective income tax rate was 37.8 percent in both years.
In June 2004, the company announced a $3 billion share repurchase program.
Under this program, the company repurchased $503 million of its common stock
during the third quarter, acquiring 11.4 million shares at an average price of
$44.16 per share. Cumulatively under this program, the company has acquired
22.4 million shares of its common stock, reflecting a total investment of
$975 million. The company continues to expect that this share repurchase
program will be completed within two to three years of its inception.
Status of Mervyn's Transactions
During the third quarter, Target Corporation completed the sale of its
Mervyn's retail subsidiary, including 257 stores and four distribution
centers, to an investment group comprised of Sun Capital Inc., Cerberus
Capital Management, and Lubert-Adler/Klaff and Partners, and all of Mervyn's
credit card receivables to GE Consumer Finance, a unit of GE Capital, for an
aggregate price of approximately $1.65 billion.
Separately, while the transaction related to the sale of Marshall Field's
to The May Department Store Company was completed in the second quarter ended
July 31, 2004, the transaction to sell Mervyn's Minnesota stores to The May
Department Store Company was completed in the third quarter.
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 http://www.target.com (click on
"investors/webcasts"). A telephone replay of the call will be available
beginning at approximately 11:30am CST today through the end of business on
November 12, 2004. The replay number is (402) 220-9657.
Forward-looking statements in this release should be read in conjunction
with the cautionary statements in Exhibit (99)C to the company's 2003 Form
10-K.
Target Corporation's continuing operations include large, general
merchandise discount stores, as well as an on-line business called Target.com.
The company currently operates 1,313 Target stores in 47 states.
Target Corporation news releases are available at http://www.target.com or
http://www.prnewswire.com .
(Tables Follow)
TARGET CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS
(Millions, except Three Months Ended Nine Months Ended
per share data) October November % October November %
(Unaudited) 30, 2004 1, 2003 Change 30, 2004 1, 2003 Change
Sales $10,619 $9,552 11.2 % $30,805 $27,539 11.9 %
Net credit revenues 290 275 5.5 840 810 3.7
Total revenues 10,909 9,827 11.0 31,645 28,349 11.6
Cost of sales 7,319 6,643 10.2 21,097 19,050 10.7
Selling, general and
administrative
expense 2,437 2,164 12.6 6,879 6,051 13.7
Credit expense 185 180 2.7 532 530 0.4
Depreciation and
amortization 324 277 16.9 915 812 12.7
Earnings from
continuing
operations before
interest expense
and income taxes 644 563 14.4 2,222 1,906 16.6
Interest expense 113 131 (13.5) 463 427 8.5
Earnings from
continuing
operations before
income taxes 531 432 22.9 1,759 1,479 18.9
Provision for income
taxes 201 161 24.5 665 559 18.9
Earnings from
continuing
operations 330 271 21.9 1,094 920 18.9
Earnings from
discontinued
operations,
net of $2, $18,
$46, $54 tax 4 31 (87.1) 75 89 (184.9)
Gain on disposal of
discontinued
operations,
net of $132 and
$782 tax 203 - - 1,222 - -
Net earnings $537 $302 78.2 % $2,391 $1,009 137.0 %
Basic earnings per
share:
Continuing
operations $0.37 $0.30 24.0 $1.21 $1.01 19.4
Discontinued
operations 0.00 0.03 (86.8) 0.08 0.10 (14.7)
Gain on
disposal of
discontinued
operations 0.23 - - 1.35 - -
Basic earnings
per share $0.60 $0.33 81.3 % $2.64 $1.11 138.1 %
Diluted earnings per
share:
Continuing
operations $0.37 $0.30 24.1 $1.20 $1.00 19.3
Discontinued
operations 0.00 0.03 (86.8) 0.08 0.10 (14.8)
Gain on disposal
of discontinued
operations 0.23 - - 1.34 - -
Diluted earnings
per share $0.60 $0.33 81.3 % $2.62 $1.10 137.9 %
Weighted average
common shares
outstanding:
Basic 896.0 911.3 906.7 910.8
Diluted 902.1 918.0 913.5 917.1
TARGET CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SUBJECT TO RECLASSIFICATION
(Millions) October 30, November 1,
(Unaudited) 2004 2003
ASSETS
Cash and cash equivalents $1,587 $487
Accounts receivable, net 4,551 4,293
Inventory 6,559 5,214
Other 1,080 1,042
Current assets of discontinued
operations - 2,248
Total current assets 13,777 13,284
Property and equipment, net 16,473 14,822
Other 1,536 1,392
Noncurrent assets of discontinued
operations - 1,926
Total assets $31,786 $31,424
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Accounts payable $6,164 $4,631
Current portion of long-term debt and
notes payable 506 1,471
Other 1,815 1,478
Current liabilities of discontinued
operations - 1,016
Total current liabilities 8,485 8,596
Long-term debt 9,082 10,940
Other 1,821 1,373
Noncurrent liabilities of
discontinued operations - 250
Shareholders' investment 12,398 10,265
Total liabilities and shareholders'
investment $31,786 $31,424
Common shares outstanding 895.4 911.5
TARGET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUBJECT TO RECLASSIFICATION Nine Months Ended
(Millions) October 30, November 1,
(Unaudited) 2004 2003
OPERATING ACTIVITIES
Net earnings $2,391 $1,009
Earnings from and gain on disposal of
discontinued operations, net of tax 1,297 89
Earnings from continuing operations 1,094 920
Reconciliation to cash flow:
Depreciation and amortization 915 812
Deferred tax provision 136 -
Bad debt provision 327 350
Loss on disposal of fixed assets,
net 40 25
Other noncash items affecting
earnings 79 31
Changes in operating accounts
providing/(requiring) cash:
Accounts receivable (257) (362)
Inventory (2,028) (1,262)
Other current assets (35) (301)
Other assets (155) (156)
Accounts payable 1,208 396
Accrued liabilities 135 1
Income taxes payable (53) (37)
Other (17) 19
Cash Flow Provided by Operations 1,389 436
INVESTING ACTIVITIES
Expenditures for property and
equipment (2,206) (2,110)
Proceeds from the disposal of fixed
assets 15 16
Proceeds from sale of discontinued
operations 4,893 -
Cash Flow Provided/(Required) by
Investing Activities 2,702 (2,094)
FINANCING ACTIVITIES
Increase/(decrease) in notes payable, net - 1,308
Additions to long term debt - 1,200
Reductions of long term debt (1,486) (1,178)
Dividends paid (200) (173)
Repurchase of stock (958) -
Other 87 21
Cash Flow (Required)/Provided by
Financing Activities (2,557) 1,178
Net Cash (Required)/Provided by
Discontinued Operations (655) 217
Net Increase / (Decrease) in Cash and
Cash Equivalents 879 (263)
Cash and Cash Equivalents at
Beginning of Year 708 750
Cash and Cash Equivalents at End of
Period $1,587 $487
Target Corporation
(Millions)
(Unaudited)
NUMBER OF STORES, RETAIL SQUARE FEET and COMPARABLE STORE SALES
Retail square feet in thousands; reflects total square feet less office,
warehouse and vacant space.
Number of Stores Retail Square Feet
October November October November %
30, 2004 1, 2003 30, 2004 1, 2003 Change
Target General
Merchandise Stores 1,177 1,109 141,503 131,832 7.3
SuperTarget Stores 136 118 24,057 20,925 15.0
Total 1,313 1,227 165,560 152,757 8.4 %
Three Months Ended Nine Months Ended
October November October November
30, 2004 1, 2003 30, 2004 1, 2003
Continuing Operations
Comparable Store Sales 4.5% 6.7% 5.2% 3.5%
CREDIT CARD CONTRIBUTION OF CONTINUING OPERATIONS
Three Months Ended Nine Months Ended
October November October November
30, 2004 1, 2003 30, 2004 1, 2003
Revenues
Finance charges, late fees and other
revenues $264 $255 $771 $751
Merchant fees
Intracompany 15 12 43 33
Third-party 26 20 69 59
Total revenues 305 287 883 843
Expenses
Bad debt 111 122 327 350
Operations and marketing 74 58 205 180
Total expenses 185 180 532 530
Pre-tax credit card contribution $120 $107 $351 $313
As a percent of total average
receivables (annualized) 10.0% 9.2% 9.8% 9.1%
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Three Months Ended Nine Months Ended
October November October November
30, 2004 1, 2003 30, 2004 1, 2003
Allowance at beginning of period $351 $334 $352 $320
Bad debt provision 111 122 327 350
Net write-offs (99) (115) (316) (329)
Allowance at end of period $363 $341 $363 $341
As a percent of period-end receivables 7.4% 7.3% 7.4% 7.3%
SUPPLEMENTAL DATA
October November
30, 2004 1, 2003
Period-end receivables $4,914 $4,634
Total past due as a percent of
period-end receivables* 3.8% 4.4%
* Accounts with three or more payments past due.
Three Months Ended Nine Months Ended
October November October November
30, 2004 1, 2003 30, 2004 1, 2003
Total revenues as a percent of
average receivables (annualized): 25.3% 24.7% 24.6% 24.6%
Net write-offs as a percent of
average receivables (annualized): 8.2% 9.9% 8.8% 9.6%
Total average receivables $4,821 $4,640 $4,786 $4,571
SOURCE Target Corporation
-0- 11/11/2004
/CONTACT: Susan Kahn, investors, +1-612-761-6735, or Cathy Wright,
financial media, +1-612-761-6627 or +1-847-615-1538, both of Target
Corporation/
/Web site: http://www.target.com /
(TGT)
