MINNEAPOLIS--(BUSINESS WIRE)--Nov. 14, 2006--Target Corporation
(NYSE:TGT) today reported net earnings for the third quarter ended
October 28, 2006 of $506 million, or 59 cents per share, compared with
$435 million, or 49 cents per share in the third quarter ended October
29, 2005. All earnings per share figures refer to diluted earnings per
share.
"We are pleased with our third quarter and year-to-date results,"
said Bob Ulrich, chairman and chief executive officer of Target
Corporation. "We continue to believe that our strategic discipline,
consistent execution, and commitment to deliver the right combination
of innovation, design and value will delight our guests and produce
profitable market share growth in this year's fourth quarter and well
beyond."
Total revenues in the third quarter increased 11.2 percent to
$13.570 billion from $12.206 billion in 2005, driven by the
contribution from new store expansion, a 4.6 percent increase in
comparable store sales and the contribution from our credit card
operations. (Total revenues include retail sales and net credit card
revenues. Comparable-store sales are sales from stores open longer
than one year.)
Earnings before interest expense and income taxes (EBIT) in the
third quarter of 2006 increased 15.0 percent to $957 million, compared
with $831 million in the third quarter a year ago. Both our core
retail operations and our credit card operations contributed to this
EBIT growth. Within our core retail operations, gross margin rate was
slightly favorable to the prior year, while the company's expense rate
in the quarter was unfavorable to the prior year. (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.)
Net interest expense for the quarter increased $31 million
compared with third quarter 2005, primarily due to growth in the cost
of funding our credit card operations.
Earnings before taxes (EBT) in the third quarter totaled $808
million, representing an increase of $95 million, or 13.2 percent,
from the same period in 2005. The contribution from the company's
credit card operations to these results was $176 million, an increase
of $68 million, or 62.9 percent, from a year ago.
Other Factors
The company's effective income tax rate for the third quarter was
37.4 percent in 2006 compared with 39.0 percent in 2005. For the full
year, the effective income tax rate is now expected to be between 37.9
and 38.4 percent.
The company repurchased $59 million of its common stock during the
third quarter of 2006, acquiring 1.2 million shares at an average
price of $48.86 per share, under a $5 billion program which began in
2004. Program to-date, the company has acquired 70.7 million shares of
its common stock at an average price per share of $48.56, reflecting a
total investment of approximately $3.43 billion. The company expects
to continue to execute this program primarily in open market
transactions, subject to market conditions, and expects to complete
the total program by year-end 2008, or sooner.
Miscellaneous
Target Corporation will webcast its third quarter earnings
conference call at 9:00am 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 + Calendar", then
"webcasts"). A telephone replay of the call will be available
beginning at approximately 11:00am CST today through the end of
business on November 16, 2006. The replay number is (800) 642-1687
(passcode: 1291513).
Forward-looking statements in this release should be read in
conjunction with the cautionary statements in Exhibit (99)C to the
company's 2005 Form 10-K.
Target Corporation's operations include large, general merchandise
discount stores and a fully integrated on-line business through which
we offer a fun and convenient shopping experience with thousands of
highly differentiated and affordably priced items. The company gives
back more than $2 million each week to its local communities through
grants and special programs. The company currently operates 1,494
Target stores in 47 states.
Target Corporation news releases are available at www.target.com.
CONSOLIDATED RESULTS OF OPERATIONS
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------------- --------------------------
(Millions,
except per
share data) Oct. 28, Oct. 29, % Oct. 28, Oct. 29, %
(Unaudited) 2006 2005 Change 2006 2005 Change
-------- -------- -------- -------- -------- --------
Sales $13,156 $11,863 10.9% $38,609 $34,701 11.3%
Net credit card
revenues 414 343 20.7 1,171 972 20.6
-------- -------- -------- -------- -------- --------
Total revenues 13,570 12,206 11.2 39,780 35,673 11.5
Cost of sales 8,891 8,034 10.7 26,050 23,418 11.2
Selling, general
and
administrative
expenses 3,151 2,786 13.1 9,016 7,931 13.7
Credit card
expenses 182 201 (9.4) 512 567 (9.7)
Depreciation and
amortization 389 354 9.8 1,094 1,040 5.1
-------- -------- -------- -------- -------- --------
Earnings before
interest
expense and
income taxes 957 831 15.0 3,108 2,717 14.4
-------- -------- -------- -------- -------- --------
Net interest
expense 149 118 26.0 421 339 24.1
-------- -------- -------- -------- -------- --------
Earnings before
income taxes 808 713 13.2 2,687 2,378 13.0
Provision for
income taxes 302 278 8.6 1,019 909 12.2
-------- -------- -------- -------- -------- --------
Net earnings $506 $435 16.2% $1,668 $1,469 13.6%
======== ======== ======== ======== ======== ========
Basic earnings
per share: $0.59 $0.49 19.3% $1.93 $1.66 16.3%
======== ======== ======== ======== ======== ========
Diluted earnings
per share: $0.59 $0.49 19.2% $1.92 $1.65 16.3%
======== ======== ======== ======== ======== ========
Weighted average
common shares
outstanding:
Basic 857.8 881.2 863.1 883.8
Diluted 864.4 887.0 869.7 890.6
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SUBJECT TO RECLASSIFICATION
(Millions) Oct. 28, Oct. 29,
(Unaudited) 2006 2005
----------- -----------
ASSETS
Cash and cash equivalents $451 $503
Accounts receivable, net 5,634 5,127
Inventory 7,797 7,488
Other current assets 1,466 1,293
----------- -----------
Total current assets 15,348 14,411
----------- -----------
Property and equipment, net 20,926 18,573
Other non-current assets 1,593 1,514
----------- -----------
Total assets $37,867 $34,498
=========== ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Accounts payable $7,086 $6,966
Current portion of long-term debt and notes
payable 2,253 752
Other current liabilities 2,582 1,923
----------- -----------
Total current liabilities 11,921 9,641
----------- -----------
Long-term debt 9,123 9,143
Deferred income taxes 714 973
Other non-current liabilities 1,309 1,185
Shareholders' investment 14,800 13,556
----------- -----------
Total liabilities and shareholders'
investment $37,867 $34,498
=========== ===========
Common shares outstanding 858.9 879.2
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUBJECT TO RECLASSIFICATION Thirty-Nine Weeks Ended
-----------------------
(Millions) Oct. 28, Oct. 29,
(Unaudited) 2006 2005
----------- -----------
OPERATING ACTIVITIES
Net earnings $1,668 $1,469
Reconciliation to cash flow:
Depreciation and amortization 1,094 1,040
Share-based compensation expense 64 68
Deferred income taxes (167) -
Bad debt provision 278 337
Loss on disposal of property and equipment,
net 58 48
Other non-cash items affecting earnings 33 (18)
Changes in operating accounts
providing/(requiring) cash:
Accounts receivable originated at Target (44) (26)
Inventory (1,961) (2,104)
Other current assets (118) (69)
Other non-current assets 4 (14)
Accounts payable 817 1,187
Accrued liabilities 271 185
Income taxes payable (337) (303)
Other non-current liabilities 44 2
Other - 18
----------- -----------
Cash flow provided by operations 1,704 1,820
----------- -----------
INVESTING ACTIVITIES
Expenditures for property and equipment (3,004) (2,657)
Proceeds from disposal of property and
equipment 20 22
Change in accounts receivable originated at
third parties (203) (369)
Other investment (111) -
----------- -----------
Cash flow required by investing activities (3,298) (3,004)
----------- -----------
FINANCING ACTIVITIES
Increase in notes payable, net 955 924
Additions to long-term debt 1,250 13
Reductions of long-term debt (752) (527)
Dividends paid (277) (230)
Repurchase of stock (901) (898)
Stock option exercises and related tax benefit 126 161
Other (4) (1)
----------- -----------
Cash flow provided by/(required for) financing
activities 397 (558)
----------- -----------
Net decrease in cash and cash equivalents (1,197) (1,742)
Cash and cash equivalents at beginning of
period 1,648 2,245
----------- -----------
Cash and cash equivalents at end of period $451 $503
=========== ===========
NUMBER OF STORES, RETAIL SQUARE FEET and COMPARABLE-STORE SALES
Retail square feet in thousands; reflects total square feet less
office, distribution center and vacant space.
Number of Stores Retail Square Feet
----------------- --------------------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
(Unaudited) 2006 2005 2006 2005 Change
-------- -------- -------- -------- --------
Target General
Merchandise Stores 1,318 1,243 161,152 150,879 6.8%
SuperTarget Stores 176 157 31,073 27,764 11.9%
-------- -------- -------- -------- --------
Total 1,494 1,400 192,225 178,643 7.6%
======== ======== ======== ======== ========
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
----------------- -----------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
(Unaudited) 2006 2005 2006 2005
-------- -------- -------- --------
Comparable-Store Sales 4.6% 5.9% 4.8% 6.3%
======== ======== ======== ========
CREDIT CARD CONTRIBUTION TO EBT
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
----------------- -----------------
(Millions) Oct. 28, Oct. 29, Oct. 28, Oct. 29,
(Unaudited) 2006 2005 2006 2005
-------- -------- -------- --------
Revenues
Finance charges $279 $232 $812 $656
Interest expense (a) (72) (50) (202) (133)
-------- -------- -------- --------
Net interest income 207 182 610 523
-------- -------- -------- --------
Late fees and other
revenues 101 79 261 227
Merchant fees
Intracompany 16 16 50 48
Third-party 34 32 98 89
-------- -------- -------- --------
Non-interest income 151 127 409 364
-------- -------- -------- --------
Expenses
Bad debt 97 120 278 337
Operations and marketing 85 81 234 230
-------- -------- -------- --------
Total expenses 182 201 512 567
-------- -------- -------- --------
Credit card contribution
to EBT $176 $108 $507 $320
======== ======== ======== ========
As a percent of average
receivables (annualized) 11.5% 7.9% 11.2% 7.9%
======== ======== ======== ========
Net interest margin
(annualized) (b) 13.6% 13.3% 13.5% 12.9%
======== ======== ======== ========
RECEIVABLES
Period-end receivables $6,148 $5,544
Average receivables $6,123 $5,499 $6,007 $5,392
Accounts with three or
more payments past due
as a percent of period-
end receivables 3.9% 3.2%
ALLOWANCE FOR DOUBTFUL
ACCOUNTS
Allowance at beginning of
period $501 $409 $451 $387
Bad debt provision 97 120 278 337
Net write-offs (84) (112) (215) (307)
-------- -------- -------- --------
Allowance at end of
period $514 $417 $514 $417
======== ======== ======== ========
As a percent of period-
end receivables 8.4% 7.5% 8.4% 7.5%
======== ======== ======== ========
Net write-offs as a
percent of average
receivables (annualized) 5.5% 8.1% 4.8% 7.6%
======== ======== ======== ========
(a) Represents an allocation of consolidated interest expense based on
estimated funding costs for average net accounts receivable and other
financial services assets. Interest expense allocated to our credit
card operations for the first, second, third, and fourth quarters
2005 totaled $40, $43, $50, and $59, respectively.
(b) Net interest income divided by average accounts receivable.
CONTACT: Target Corporation
Susan Kahn (investor)
612-761-6735
or
Cathy Wright (financial media)
612-761-6627 or 847-615-1538
SOURCE: Target Corporation
