Fiscal 1999 Earnings Per Share $2.54 Before Unusual Items
MINNEAPOLIS, Feb. 29 /PRNewswire/ -- Target Corporation (NYSE: TGT) today reported earnings per share for the fourth quarter ended Jan. 29, 2000 of $1.12, compared with 97 cents in fourth quarter 1998, before unusual items in both periods. Including unusual items, fourth-quarter earnings per share were $1.06, compared with 90 cents in the 1998 quarter. All earnings per share figures refer to diluted earnings per share. Fourth-quarter net earnings increased 15 percent to $522 million, compared with $453 million in 1998, before unusual items in both periods. Including unusual items, net earnings were $494 million in the current period and $423 million in fourth-quarter 1998.
"We are pleased with our financial performance in 1999, led by exceptional performance at Target," said Bob Ulrich, chairman and chief executive officer of Target Corporation. "We look forward to delivering another year of growth in sales and earnings in 2000."
For the full year, diluted earnings per share were $2.54, compared with $2.06 in 1998, before unusual items in both periods. Including unusual items, full-year earnings per share were $2.45, compared with $1.98 in 1998. Net earnings were $1.188 billion, up 23 percent compared with $970 million in 1998, before unusual items in both periods. Including unusual items, full-year net earnings were $1.144 billion, compared with $935 million in 1998. Unusual items for the quarter and full year are described in a table that follows.
The company's 1999 results mark the fourth consecutive year of earnings per share growth in excess of 20 percent. The company said its exceptional growth in earnings per share in 1999 was driven by substantial expansion in Target's gross margin rate.
Full-Year Results
For fiscal 1999, total revenues increased 9.9 percent to $33.702 billion from $30.662 billion in 1998, driven by a 13.3 percent revenue increase at Target. Comparable-store sales for fiscal 1999 increased 5.1 percent. Total revenues include retail sales and net credit revenues. Revenue growth in 1999 reflected Target's strong comparable-store sales growth and new store expansion. (Comparable-store sales are sales from stores open longer than one year.)
The company's full-year gross margin rate increased primarily due to rate expansion at Target and the Department Stores. This increase was partially offset by the mix impact of strong growth at Target, our lowest margin rate division. (Gross margin rate represents gross margin as a percentage of sales.)
The full-year operating expense rate was essentially even with the prior year, benefiting from the overall growth of Target, our lowest expense rate division, and lower bad debt expense. These factors were offset by the lack of sales leverage in 1999 at Mervyn's and the Department Stores. (Operating expense rate represents selling, general and administrative expense, including buying and occupancy, advertising, start-up and other expense, as a percentage of revenues.)
For the year, pre-tax segment profit increased 20 percent to $2.523 billion, compared with $2.097 billion in 1998, driven by a 28 percent pre-tax profit increase at Target. Mervyn's pre-tax profit declined 14 percent for the full year; the Department Stores pre-tax profit increased 6 percent. (Pre-tax segment profit is earnings before LIFO, securitization effects, interest, other expense and unusual items.) Target's full-year pre-tax profit margin rate increased to 7.8 percent of revenues in 1999 from 6.9 percent in 1998.
Fourth-Quarter Results
Fourth-quarter revenues increased 8.7 percent to $10.930 billion from $10.055 billion in the same period last year. Comparable-store sales for fourth quarter 1999 increased 3.5 percent, driven by a 5.6 percent increase at Target.
The gross margin rate in the quarter improved slightly due to rate expansion at Target and the Department Stores, offset by Target's impact on overall mix. Mervyn's gross margin rate declined significantly in the quarter.
The operating expense rate in the quarter improved, benefiting from the overall growth of Target; lower bad debt expense; and expense relating to mainframe outsourcing in the prior year.
Fourth-quarter 1999 pre-tax segment profit increased 16 percent to $1.000 billion, compared with $865 million in fourth-quarter 1998, driven by a 26 percent pre-tax profit increase at Target.
Other Factors
Fourth-quarter and full-year gross margin results include a pre-tax LIFO credit of $7 million ($.01 per share), compared with an $18 million credit ($.02 per share) in the same periods in 1998.
Net interest expense and interest equivalent for the quarter increased $3 million compared with fourth quarter 1998 due to higher average funded balances, partially offset by a lower average portfolio interest rate. For the full year, net interest expense and interest equivalent decreased $4 million due to a lower average portfolio interest rate, partially offset by higher average funded balances.
The company's annual effective income tax rate was 38.8 percent, compared with 38.2 percent last year.
During the quarter, the company repurchased 2.3 million shares of its common stock, at an average price of $64 per share. For the year, the company repurchased 9.4 million shares at an average price of $63, investing $588 million in its common stock.
Miscellaneous
The preceding discussion is based on the reclassified Consolidated Results of Operations. Historical reclassified statements are included in a separate news release.
Target Corporation will webcast its fourth quarter earnings conference call at 9:30am central time today. Investors and the media are invited to listen to the call through the company's website at http://www.targetcorp.com (click on "investor information/investors overview").
Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)c to the company's 1998 Form 10-K.
Target Corporation operates large-store general merchandise formats, including discount stores, moderate-priced promotional and traditional department stores. The company currently operates 1,238 stores in 44 states. This includes 907 Target stores, 267 Mervyn's stores and 64 Department Stores.
Target Corporation news releases are available through Company News on Call by fax at 800-758-5804 extension 342677 or at www.targetcorp.com or prnewswire.com.
(Tables Follow)
TARGET CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS
(Millions, (Unaudited)
except Three Months Ended Year Ended
per share Jan 29, Jan 30, % Jan 29, Jan 30, %
data) 2000 1999 Change 2000 1999 Change
Sales $10,804 $9,935 8.7% $33,212 $30,203 10.0%
Net credit
revenues 126 120 5.2 490 459 6.9
Total revenues 10,930 10,055 8.7 33,702 30,662 9.9
Cost of sales 7,620 7,010 8.7 23,029 21,085 9.2
Selling, general
and administrative
expense 2,135 2,040 4.7 7,490 6,843 9.5
Depreciation and
amortization 223 203 9.9 854 780 9.5
Interest expense 99 97 1.6 393 398 (1.3)
Earnings before
income taxes
and extraordinary
charges 853 705 20.8 1,936 1,556 24.4
Provision for
income taxes 331 258 27.9 751 594 26.3
Net earnings
before extra-
ordinary charges 522 447 16.6 1,185 962 23.2
Extraordinary charges
from purchase and
redemption of debt,
net of tax 28 24 41 27
Net earnings $494 $423 16.7% $1,144 $935 22.4%
Earnings before
extraordinary
charges $1.17 $1.00 17.0% $2.64 $2.14 23.4%
Extraordinary
charges (0.06) (0.05) (0.09) (0.06)
Basic earnings
per share $1.11 $0.95 16.8% $2.55 $2.08 22.6%
Earnings before
extraordinary
charges $1.12 $0.95 17.9% $2.54 $2.04 24.5%
Extraordinary
charges (0.06) (0.05) (0.09) (0.06)
Diluted earnings
per share $1.06 $0.90 17.8% $2.45 $1.98 23.7%
Weighted average
common shares
outstanding:
Basic 442.5 441.3 441.3 440.0
Diluted 463.0 468.8 465.7 467.3
TARGET CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
January 29, January 30,
(Millions) 2000 1999
ASSETS
Cash and cash equivalents $220 $255
Retained securitized
receivables 1,837 1,656
Inventory 3,798 3,475
Other 628 619
Total current assets 6,483 6,005
Property and equipment, net 9,899 8,969
Other 761 692
Total assets $17,143 $15,666
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Accounts payable $3,514 $3,150
Current portion of long-term
debt and notes payable 498 256
Other 1,838 1,651
Total current liabilities 5,850 5,057
Long-term debt 4,521 4,452
Other 910 846
Shareholders' investment 5,862 5,311
Total liabilities and
shareholders' investment $17,143 $15,666
Common shares outstanding 455.8 441.8
Target Corporation
(Millions)
REVENUES
Revenues include retail sales and net credit revenues.
(Unaudited)
Three Months Ended Year Ended
Jan 29, Jan 30, % Jan 29, Jan 30, %
2000 1999 Change 2000 1999 Change
Target $8,563 $7,590 12.8% $26,080 $23,014 13.3%
Mervyn's 1,273 1,342 (5.2) 4,099 4,150 (1.2)
Department Stores 935 947 (1.2) 3,074 3,064 0.3
Other 159 176 (9.9) 449 434 3.5
TOTAL $10,930 $10,055 8.7% $33,702 $30,662 9.9%
COMPARABLE-STORE SALES
(Unaudited)
Comparable-store sales are sales from stores open longer than one year.
% Change % Change
Three Months Ended Year Ended
Jan. 29, 2000 Jan. 29, 2000
Target 5.6% 6.7%
Mervyn's (4.8) (0.7)
Department Stores (1.6) 0.8
TOTAL 3.5% 5.1%
INVENTORY
January 29, January 30, %
2000 1999 Change
Target $2,739 $2,427 12.8%
Mervyn's 501 502 (0.1)
Department Stores 438 430 1.8
Other 120 116 3.5
TOTAL $3,798 $3,475 9.3%
Target Corporation
(Millions)
PRE-TAX SEGMENT PROFIT AND EARNINGS RECONCILIATION
Pre-tax segment profit is earnings before LIFO, securitization effects,
interest, other expense and unusual items.
(Unaudited)
Three Months Ended Year Ended
Jan 29, Jan 30, % Jan 29, Jan 30, %
2000 1999 Change 2000 1999 Change
Target $811 $646 25.5 $2,022 $1,578 28.1
Mervyn's 69 104 (33.9) 205 240 (14.5)
Department Stores 120 115 4.6 296 279 6.2
Total pre-tax
segment profit 1,000 865 15.6 2,523 2,097 20.3
LIFO provision
credit 7 18 7 18
Securitization adjustments:
Gain / (loss) -- -- -- (3)
Interest
equivalent (13) (12) (49) (48)
Interest expense (99) (97) (393) (398)
Mainframe
outsourcing -- (42) (5) (42)
Other (42) (27) (147) (68)
Earnings before
income taxes
and extraordinary
charges $853 $705 20.8% $1,936 $1,556 24.4%
EBITDA
(Unaudited)
EBITDA is pre-tax segment profit before depreciation and amortization.
Three Months Ended Year Ended
Jan 29, Jan 30, % Jan 29, Jan 30, %
2000 1999 Change 2000 1999 Change
Target $961 $779 23.4% $2,589 $2,074 24.8%
Mervyn's 103 140 (26.2) 343 378 (9.1)
Department Stores 153 147 4.7 429 414 3.8
TOTAL $1,217 $1,066 14.3% $3,361 $2,866 17.3%
Three Months Ended Year Ended
January 29, January 30, January 29, January 30,
2000 1999 2000 1999
Pre-tax Segment Profit
as a % of Revenues:
Target 9.5% 8.5% 7.8% 6.9%
Mervyn's 5.4% 7.7% 5.0% 5.8%
Department Stores 12.8% 12.1% 9.6% 9.1%
EBITDA as a % of Revenues:
Target 11.2% 10.3% 9.9% 9.0%
Mervyn's 8.1% 10.4% 8.4% 9.1%
Department Stores 16.4% 15.5% 14.0% 13.5%
Target Corporation
(Unaudited)
(Millions, except per share data)
EARNINGS ANALYSIS
Net earnings before unusual items is used by management to analyze results
and is not intended to be a GAAP measure. Each per share amount is
calculated independently.
Earnings
Three Months Ended Year Ended
Jan. 29, Jan. 30, Jan. 29, Jan. 30,
2000 1999 2000 1999
Net earnings
before unusual items $522 $453 $1,188 $970
Mainframe outsourcing
(pre-tax 1999 $5 mil,
1998 $42 mil) -- (26) (3) (26)
Favorable outcome of
inventory shortage
tax matter -- 20 -- 20
Securitization gain/(loss)
(pre-tax $3 mil) -- -- -- (2)
Net earnings before
extraordinary charges 522 447 1,185 962
Extraordinary charges -
debt repurchase (28) (24) (41) (27)
Net earnings $494 $423 $1,144 $935
Diluted Earnings Per Share
Three Months Ended Year Ended
Jan. 29, Jan. 30, Jan. 29, Jan. 30,
2000 1999 2000 1999
Net earnings
before unusual items $1.12 $.97 $2.54 $2.06
Mainframe outsourcing
(pre-tax 1999 $5 mil,
1998 $42 mil) -- (.06) (.01) (.06)
Favorable outcome of
inventory shortage
tax matter -- .04 -- .04
Securitization gain/(loss)
(pre-tax $3 mil) -- -- -- --
Net earnings before
extraordinary charges 1.12 .95 2.54 2.04
Extraordinary charges -
debt repurchase (.06) (.05) (.09) (.06)
Net earnings $1.06 $.90 $2.45 $1.98
NUMBER OF STORES AND RETAIL SQUARE FEET
Number of Stores Retail Square Feet
Jan 29, Jan 30, Jan 29, Jan 30,
2000 1999 2000 1999
Target 912 851 102,945 94,553
Mervyn's 267 268 21,635 21,729
Department Stores 64 63 14,060 13,890
TOTAL 1,243 1,182 138,640 130,172
Retail square feet in thousands; reflects total square feet less office, warehouse and vacant space.
Subsequent to year end, we closed five Target stores.
SOURCE Target Corporation
CONTACT: media, Susan Eich, 612-304-0700; investors, Susan Kahn, 612-370-6735, both of Target Corporation/
