MINNEAPOLIS--(BUSINESS WIRE)--Aug. 21, 2007--Target Corporation
(NYSE:TGT) today reported net earnings for the second quarter ended
August 4, 2007 of $686 million, or 80 cents per share, compared with
$609 million, or 70 cents per share in the second quarter ended July
29, 2006, representing a 14.0 percent increase in earnings per share.
All earnings per share figures refer to diluted earnings per share.
"We are pleased with our second quarter and year-to-date results,"
said Bob Ulrich, chairman and chief executive officer of Target
Corporation. "We continue to believe Target will deliver strong sales
and profit performance in 2007 and generate another year of profitable
market share growth. We also continue to believe that $3.60 remains
within the range of likely outcomes for our full-year 2007 earnings
per share."
Total revenues in the second quarter increased 9.5 percent to
$14.620 billion from $13.347 billion in 2006, reflecting a 4.9 percent
increase in comparable-store sales combined with the contribution from
new store expansion and 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 and income taxes (EBIT) in the second
quarter of 2007 increased 11.8 percent to $1.267 billion, compared
with $1.134 billion in the second quarter a year ago. Key contributors
to this EBIT growth included gross margin rate improvement offset by
unfavorable expense rate performance, combined with strong profit
growth in our credit card operations. (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 $14 million
compared with second quarter 2006 primarily due to higher average debt
balances, including the debt to fund the growth in our accounts
receivable.
The contribution from the company's credit card operations to
second quarter earnings before taxes (EBT), net of the allocated
interest expense, was $163 million, an increase of $41 million, or
34.0 percent, from the same period in 2006. This favorability is
attributable to growth in net interest income as well as other finance
charges.
Other Factors
The company's effective income tax rate for the second quarter was
38.4 percent in 2007 compared with 38.8 percent in 2006. For the full
year, the effective income tax rate is still expected to increase
modestly from last year's 38.0 percent rate.
Under a share repurchase program that began in 2004 and was
increased by the Board to an $8 billion authorization in June 2007,
the company repurchased $476 million of its common stock during the
second quarter of 2007, acquiring 7.5 million shares at an average
price of $63.23 per share. During the first half of 2007, the company
repurchased $1,025 million of its common stock, acquiring 16.7 million
shares at an average price of $61.34 per share. Program-to-date, the
company has acquired 87.8 million shares of its common stock at an
average price per share of $50.99, reflecting a total investment of
approximately $4.5 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
2010, or sooner.
Miscellaneous
Target Corporation will webcast its second quarter earnings
conference call at 9:30am CDT today. Investors and the media are
invited to listen to the call through the company's website at
www.target.com/investors (click on "webcasts"). A telephone replay of
the call will be available beginning at approximately 11:30am CDT
today through the end of business on August 23, 2007. The replay
number is (800) 642-1687 (passcode: 7389853).
Forward-looking statements in this release, which include our
outlook for full year tax rate, full year EPS and the timing to
complete our share repurchase program, should be read in conjunction
with the cautionary statements in Exhibit (99)A to the company's 2006
Form 10-K.
Target Corporation's continuing operations include large, general
merchandise and food discount stores, as well as an on-line business
called Target.com. At quarter-end, the company operated 1,537 Target
stores in 47 states.
Target Corporation news releases are available at www.target.com.
Consolidated Statements of Operations
---------------------------------------------------------------------
Three months ended Six months ended
------------------ ------------------
August 4, July 29, August 4, July 29,
(millions,
except per
share data)
(unaudited) 2007 2006 Change 2007 2006 Change
---------------------------------------------------------------------
Sales $14,167 $12,959 9.3% $27,790 $25,453 9.2%
Net credit card
revenues 453 388 17.0 871 757 15.0
---------------------------------------------------------------------
Total revenues 14,620 13,347 9.5 28,661 26,210 9.4
Cost of sales 9,439 8,686 8.7 18,625 17,159 8.5
Selling, general
and
administrative
expenses 3,328 2,987 11.4 6,421 5,865 9.5
Credit card
expenses 182 170 7.1 351 330 6.5
Depreciation and
amortization 404 370 9.0 796 704 12.9
---------------------------------------------------------------------
Earnings before
interest
expense and
income taxes 1,267 1,134 11.8 2,468 2,152 14.7
Net interest
expense 154 140 9.9 290 272 6.9
---------------------------------------------------------------------
Earnings before
income taxes 1,113 994 12.0 2,178 1,880 15.9
Provision for
income taxes 427 385 10.9 841 718 17.2
---------------------------------------------------------------------
Net earnings $ 686 $ 609 12.7% $ 1,337 $ 1,162 15.0%
---------------------------------------------------------------------
Basic earnings
per share $ 0.81 $ 0.71 14.1% $ 1.57 $ 1.34 16.7%
---------------------------------------------------------------------
Diluted earnings
per share $ 0.80 $ 0.70 14.0% $ 1.55 $ 1.33 16.7%
---------------------------------------------------------------------
Weighted average
common shares
outstanding
Basic 850.8 860.8 853.4 865.7
Diluted 857.4 867.2 860.1 872.4
Subject to reclassification
Consolidated Statements of Financial Position
----------------------------------------------------------------------
August 4, July 29,
(millions) (unaudited) 2007 2006
----------------------------------------------------------------------
Assets
Cash and cash equivalents $ 555 $ 477
Accounts receivable, net 6,397 5,540
Inventory 6,645 6,275
Other current assets 1,535 1,297
----------------------------------------------------------------------
Total current assets 15,132 13,589
Property and equipment
Land 5,239 4,612
Buildings and improvements 16,483 14,549
Fixtures and equipment 3,516 3,223
Computer hardware and software 2,209 2,002
Construction-in-progress 2,848 2,261
Accumulated depreciation (7,268) (6,390)
----------------------------------------------------------------------
Property and equipment, net 23,027 20,257
Other non-current assets 1,307 1,577
----------------------------------------------------------------------
Total assets $39,466 $35,423
----------------------------------------------------------------------
Liabilities and Shareholders' Investment
Accounts payable $ 6,101 $ 5,868
Accrued and other current liabilities 2,761 2,535
Current portion of long-term debt and notes payable 2,160 1,257
----------------------------------------------------------------------
Total current liabilities 11,022 9,660
Long-term debt 10,152 9,351
Deferred income taxes 408 768
Other non-current liabilities 1,930 1,271
----------------------------------------------------------------------
Shareholders' investment
Common stock 71 71
Additional paid-in-capital 2,610 2,217
Retained earnings 13,451 12,087
Accumulated other comprehensive loss (178) (2)
----------------------------------------------------------------------
Total shareholders' investment 15,954 14,373
----------------------------------------------------------------------
Total liabilities and shareholders' investment $39,466 $35,423
----------------------------------------------------------------------
Common shares outstanding 847.8 857.8
----------------------------------------------------------------------
Subject to reclassification
Consolidated Statements of Cash Flows
----------------------------------------------------------------------
Six months ended
------------------
August 4, July 29,
(millions) (unaudited) 2007 2006
----------------------------------------------------------------------
Operating Activities
Net earnings $ 1,337 $ 1,162
Reconciliation of net earnings to operating cash
flows
Depreciation and amortization 796 704
Share-based compensation expense 42 38
Deferred income taxes (65) (112)
Bad debt provision 182 181
Loss on disposal of property and equipment, net 35 47
Other non-cash items affecting earnings 61 20
Changes in operating accounts providing /
(requiring) cash:
Accounts receivable originated at Target (64) 17
Inventory (391) (437)
Other current assets (125) 48
Other non-current assets (12) 5
Accounts payable (475) (400)
Accrued and other current liabilities (161) (115)
Other non-current liabilities 43 --
Other -- 11
----------------------------------------------------------------------
Cash flow provided by operations 1,203 1,169
----------------------------------------------------------------------
Investing Activities
Expenditures for property and equipment (2,363) (1,899)
Proceeds from disposal of property and equipment 16 15
Change in accounts receivable originated at third
parties (321) (73)
Other investments (69) (111)
----------------------------------------------------------------------
Cash flow required for investing activities (2,737) (2,068)
----------------------------------------------------------------------
Financing Activities
Increase in notes payable, net 1,586 748
Additions to long-term debt 1,900 750
Reductions of long-term debt (1,253) (750)
Dividends paid (205) (174)
Repurchase of stock (940) (900)
Stock option exercises and related tax benefit 195 58
Other (7) (4)
----------------------------------------------------------------------
Cash flow provided by (required for) financing
activities 1,276 (272)
----------------------------------------------------------------------
Net decrease in cash and cash equivalents (258) (1,171)
Cash and cash equivalents at beginning of period 813 1,648
----------------------------------------------------------------------
Cash and cash equivalents at end of period $ 555 $ 477
----------------------------------------------------------------------
Subject to reclassification
Number of Stores, Retail Square Feet and Comparable-store Sales
----------------------------------------------------------------------
Number of Stores Retail Square Feet (a)
------------------ -------------------------
August 4, July 29, August 4, July 29,
(unaudited) 2007 2006 2007 2006 Change
----------------------------------------------------------------------
Target general
merchandise stores 1,345 1,282 165,672 156,036 6.2%
SuperTarget stores 192 162 33,890 28,641 18.3%
----------------------------------------------------------------------
Total 1,537 1,444 199,562 184,677 8.1%
----------------------------------------------------------------------
(a) In thousands; reflects total square feet, less office,
distribution center and vacant space.
---------------------------------------------------------------
Three months ended Six months ended
------------------ ------------------
August 4, July 29, August 4, July 29,
(unaudited) 2007 2006 2007 2006
---------------------------------------------------------------
Comparable-store sales
(b) 4.9% 4.6% 4.6% 4.9%
---------------------------------------------------------------
(b) Comparable-store sales growth is calculated by comparing sales in
current year periods to comparable, prior year periods of equivalent
length.
Credit Card Contribution to Earnings Before Tax
Effective February 2007, the Company redefined Credit Card
Contribution to Earnings Before Taxes (EBT). We have reclassified
prior period amounts to conform to the current year disclosure. These
reclassifications had no effect on our Consolidated Statements of
Operations.
----------------------------------------------------------------------
Three months ended Six months ended
------------------ ------------------
August 4, July 29, August 4, July 29,
(millions) (unaudited) 2007 2006 2007 2006
----------------------------------------------------------------------
Revenues
Finance charges $ 305 $ 273 $ 601 $ 532
Interest expense (a) (80) (68) (157) (131)
----------------------------------------------------------------------
Net interest income 225 205 444 401
----------------------------------------------------------------------
Late fees and other revenues 109 80 197 160
Third-party merchant fees 39 35 73 65
New account and loyalty rewards
discounts (b) (25) (25) (49) (49)
----------------------------------------------------------------------
Non-interest income 123 90 221 176
----------------------------------------------------------------------
Total credit card revenues 348 295 665 577
----------------------------------------------------------------------
Expenses
Bad debt provision 95 93 182 181
Operations and marketing 87 77 169 149
Allocated depreciation charge
(c) 3 3 8 7
----------------------------------------------------------------------
Total expenses 185 173 359 337
----------------------------------------------------------------------
Credit card contribution to EBT $ 163 $ 122 $ 306 $ 240
----------------------------------------------------------------------
As a percentage of average
receivables (annualized) 9.7% 8.2% 9.2% 8.1%
Net interest margin (annualized)
(d) 13.4% 13.9% 13.3% 13.5%
----------------------------------------------------------------------
----------------------------------------------------------------------
Receivables
(millions)
----------------------------------------------------------------------
Period-end receivables $6,906 $6,041 $6,906 $6,041
Average receivables $6,718 $5,936 $6,670 $5,945
Accounts with three or more
payments (60+ days) past due as
a percentage of period-end
receivables 3.5% 3.4%
Accounts with four or more
payments (90+ days) past due as
a percentage of period-end
receivables 2.3% 2.2%
----------------------------------------------------------------------
----------------------------------------------------------------------
Allowance for Doubtful Accounts
(millions)
----------------------------------------------------------------------
Allowance at beginning of period $ 504 $ 476 $ 517 $ 451
Bad debt provision 95 93 182 181
Net write-offs (90) (68) (190) (131)
----------------------------------------------------------------------
Allowance at end of period $ 509 $ 501 $ 509 $ 501
----------------------------------------------------------------------
As a percentage of period-end
receivables 7.4% 8.3% 7.4% 8.3%
----------------------------------------------------------------------
Net write-offs as a percentage
of average receivables
(annualized) 5.4% 4.6% 5.7% 4.4%
----------------------------------------------------------------------
(a) Represents an allocation of consolidated interest expense based on
estimated funding costs for average net accounts receivable and other
financial services assets and is included in net interest expense in
our Consolidated Statements of Operations.
(b) Primarily consists of new account and loyalty rewards program
discounts on our REDcard products, which are included as reductions
of sales in our Consolidated Statements of Operations.
(c) Included in depreciation and amortization in our Consolidated
Statements of Operations.
(d) Net interest income divided by average accounts receivable.
CONTACT: Target Corporation
Susan Kahn, 612-761-6735
SOURCE: Target Corporation
