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financial news release

Target Corporation Reports First Quarter Earnings

05/19/21

MINNEAPOLIS, May 19, 2021 /PRNewswire/ -- 

  • First quarter comparable sales grew 22.9 percent, on top of 10.8 percent growth last year.
    • Store comparable sales increased 18.0 percent, on top of 0.9 percent growth last year. Digital comparable sales grew 50 percent, on top of 141 percent growth a year ago.
    • Same-day services (Order Pickup, Drive Up and Shipt) grew more than 90 percent, led by growth in Drive Up of 123 percent.
    • More than 95 percent of Target's first quarter sales were fulfilled by its stores.
  • The Company gained more than $1 billion in market share in the first quarter, on top of a $1 billion share gain in first quarter 2020.
  • First quarter GAAP EPS of $4.17 was 643.2 percent higher than last year. First quarter Adjusted EPS1 of $3.69 was 525.0 percent higher than last year.
  • For additional media materials, please visit: https://corporate.target.com/article/2021/05/q1-2021-earnings

Target Corporation (NYSE: TGT) today announced its first quarter 2021 financial results, which reflected robust growth in both sales and profitability. The Company reported first quarter GAAP earnings per share (EPS) of $4.17, up 643.2 percent from $0.56 in 2020. First quarter Adjusted EPS of $3.69, which excluded a $0.53 gain on the sale of Dermstore, grew 525.0 percent compared with $0.59 in 2020. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

1Adjusted EPS, a non-GAAP financial measure, excludes the impact of certain discretely managed items. See the tables of this release for additional information about the items that have been excluded from Adjusted EPS.  

"Our performance in the first quarter was outstanding on every measure, and showcased the power of putting our stores at the center of our strategy. Store comp sales grew 18.0 percent in the quarter, even as they also fulfilled more than three quarters of Target's digital sales - including more than 90-percent growth of our same-day services. Importantly, market-share gains of more than $1 billion in the first quarter, on top of $1 billion in share gains a year ago, demonstrate Target's continued relevance with our guests, even as they have many more shopping options compared with a year ago," said Brian Cornell, chairman and chief executive officer of Target Corporation

"Given the trust we've built with our guests quarter after quarter and our commitment to adjusting along with them to the ongoing shifts in the macro environment, we're confident in continued comp growth in the second quarter and through the remainder of the year, as well as a healthy full-year operating margin rate."

Fiscal 2021 Guidance

For the second quarter of 2021, the Company expects mid-to-high single digit growth in comparable sales. The Company expects its second-quarter operating margin rate will be well above the second quarter 2019 rate of 7.2 percent, but likely not as high as last year's unprecedented 10.0 percent.

The Company expects positive single-digit comparable sales growth in the last two quarters of the year, and expects its full-year operating margin rate will be well above the 2020 rate of 7.0 percent, with the potential to reach 8 percent or somewhat higher.

Operating Results

Comparable sales grew 22.9 percent in the first quarter, reflecting comparable store sales growth of 18.0 percent and comparable digital sales growth of 50 percent. Total revenue of $24.2 billion grew 23.4 percent compared with last year, driven by total sales growth of 23.3 percent and a 30.4 percent increase in other revenue. Operating income was $2.4 billion in first quarter 2021, up 407 percent from $0.5 billion in 2020.

First quarter operating income margin rate was 9.8 percent in 2021 compared with 2.4 percent in 2020. First quarter gross margin rate was 30.0 percent, compared with 25.1 percent in 2020. This year's gross margin rate reflected the benefit of favorable category mix and merchandising actions, primarily from low markdown rates, while last year's gross margin rate reflected elevated inventory costs and impairment charges. First quarter SG&A expense rate was 18.6 percent in 2021, compared with 20.7 percent in 2020, reflecting the benefit of leverage from strong sales growth, partially offset by the net impact of other factors, primarily investments in team member pay, benefits, and safety.

Interest Expense and Taxes

The Company's first quarter 2021 net interest expense was $108 million, compared with $117 million last year. The decrease was primarily due to a lower weighted-average interest rate on the Company's debt portfolio.

First quarter 2021 effective income tax rate was 19.6 percent, compared with 13.9 percent last year. The rate increase was driven by significantly higher earnings, diluting the benefit of fixed and discrete tax items.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $340 million in the first quarter, compared with $332 million last year, reflecting a 3.0 percent increase in the dividend per share, partially offset by a decline in average share count.

The Company resumed share repurchases in first quarter 2021, consistent with its long-standing capital deployment policies and within the limits of its strong, middle-A credit ratings.  Share repurchases of $1.2 billion retired 6.1 million shares of common stock at an average price of $190.77.

As of the end of the first quarter, the Company had approximately $3.4 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in September 2019.

For the trailing twelve months through first quarter 2021, after-tax return on invested capital (ROIC) was 30.7 percent, compared with 13.4 percent for the trailing twelve months through first quarter 2020. The increase in ROIC was driven primarily by increased profitability. The tables in this release provide additional information about the Company's ROIC calculation.

Webcast Details

Target will webcast its first quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Investors.Target.com (click on link under "Upcoming Events"). A replay of the webcast will be provided when available. The replay number is 1-800-876-9512.

Miscellaneous

Statements in this release regarding second quarter and full year comparable sales growth and operating margin rates are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties which could cause the Company's actions 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 30, 2021. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statement.

About Target

Minneapolis-based Target Corporation (NYSE: TGT) serves guests at more than 1,900 stores and at Target.com. Since 1946, Target has given 5% of its profit to communities, which today equals millions of dollars a week. For the latest store count or for more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.

For more on the Target Foundation, click here.

TARGET CORPORATION

 

Consolidated Statements of Operations

   

Three Months Ended

   

(millions, except per share data) (unaudited)

 

May 1, 2021

 

May 2, 2020

 

Change

Sales

 

$

23,879

   

$

19,371

   

23.3

%

Other revenue

 

318

   

244

   

30.4

 

Total revenue

 

24,197

   

19,615

   

23.4

 

Cost of sales

 

16,716

   

14,510

   

15.2

 

Selling, general and administrative expenses

 

4,509

   

4,060

   

11.0

 

Depreciation and amortization (exclusive of depreciation included in cost of sales)

 

598

   

577

   

3.9

 

Operating income

 

2,374

   

468

   

407.0

 

Net interest expense

 

108

   

117

   

(7.6)

 

Net other (income) / expense

 

(343)

   

22

   

(1,663.1)

 

Earnings before income taxes

 

2,609

   

329

   

692.2

 

Provision for income taxes

 

512

   

45

   

1,017.1

 

Net earnings

 

$

2,097

   

$

284

   

639.8

%

Basic earnings per share

 

$

4.20

   

$

0.57

   

643.0

%

Diluted earnings per share

 

$

4.17

   

$

0.56

   

643.2

%

Weighted average common shares outstanding

           

Basic

 

498.6

   

501.0

   

(0.5)

%

Diluted

 

503.4

   

505.8

   

(0.5)

%

Antidilutive shares

 

   

0.2

     

Dividends declared per share

 

$

0.68

   

$

0.66

   

3.0

%

 

Note: Per share amounts may not foot due to rounding.

 

TARGET CORPORATION

 

Consolidated Statements of Financial Position

(millions, except footnotes) (unaudited)

 

May 1, 2021

 

January 30, 2021

 

May 2, 2020

Assets

           

Cash and cash equivalents

 

$

7,816

   

$

8,511

   

$

4,566

 

Inventory

 

10,539

   

10,653

   

8,584

 

Other current assets

 

1,576

   

1,592

   

1,465

 

Total current assets

 

19,931

   

20,756

   

14,615

 

Property and equipment

           

Land

 

6,146

   

6,141

   

6,034

 

Buildings and improvements

 

31,710

   

31,557

   

30,756

 

Fixtures and equipment

 

5,496

   

5,914

   

5,486

 

Computer hardware and software

 

2,256

   

2,765

   

2,597

 

Construction-in-progress

 

973

   

780

   

803

 

Accumulated depreciation

 

(19,777)

   

(20,278)

   

(19,087)

 

Property and equipment, net

 

26,804

   

26,879

   

26,589

 

Operating lease assets

 

2,362

   

2,227

   

2,235

 

Other noncurrent assets

 

1,374

   

1,386

   

1,367

 

Total assets

 

$

50,471

   

$

51,248

   

$

44,806

 

Liabilities and shareholders' investment

           

Accounts payable

 

$

11,637

   

$

12,859

   

$

9,625

 

Accrued and other current liabilities

 

5,788

   

6,122

   

4,619

 

Current portion of long-term debt and other borrowings

 

1,173

   

1,144

   

168

 

Total current liabilities

 

18,598

   

20,125

   

14,412

 

Long-term debt and other borrowings

 

11,509

   

11,536

   

14,073

 

Noncurrent operating lease liabilities

 

2,337

   

2,218

   

2,249

 

Deferred income taxes

 

1,169

   

990

   

1,122

 

Other noncurrent liabilities

 

1,899

   

1,939

   

1,781

 

Total noncurrent liabilities

 

16,914

   

16,683

   

19,225

 

Shareholders' investment

           

Common stock

 

41

   

42

   

42

 

Additional paid-in capital

 

6,271

   

6,329

   

6,206

 

Retained earnings

 

9,372

   

8,825

   

5,775

 

Accumulated other comprehensive loss

 

(725)

   

(756)

   

(854)

 

Total shareholders' investment

 

14,959

   

14,440

   

11,169

 

Total liabilities and shareholders' investment

 

$

50,471

   

$

51,248

   

$

44,806

 

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 496,093,160, 500,877,129 and 499,919,691 shares issued and outstanding as of May 1, 2021, January 30, 2021, and May 2, 2020, respectively.

Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

TARGET CORPORATION

 

Consolidated Statements of Cash Flows

   

Three Months Ended

(millions) (unaudited)

 

May 1, 2021

 

May 2, 2020

Operating activities

       

Net earnings

 

$

2,097

   

$

284

 

Adjustments to reconcile net earnings to cash provided by operating activities:

       

Depreciation and amortization

 

667

   

641

 

Share-based compensation expense

 

79

   

49

 

Deferred income taxes

 

170

   

(4)

 

Gain on Dermstore sale

 

(335)

   

 

Noncash losses / (gains) and other, net

 

(30)

   

5

 

Changes in operating accounts:

       

Inventory

 

114

   

408

 

Other assets

 

(5)

   

11

 

Accounts payable

 

(1,205)

   

(280)

 

Accrued and other liabilities

 

(413)

   

170

 

Cash provided by operating activities

 

1,139

   

1,284

 

Investing activities

       

Expenditures for property and equipment

 

(540)

   

(751)

 

Proceeds from disposal of property and equipment

 

12

   

6

 

Proceeds from Dermstore sale

 

356

   

 

Other investments

 

7

   

1

 

Cash required for investing activities

 

(165)

   

(744)

 

Financing activities

       

Additions to long-term debt

 

   

2,480

 

Reductions of long-term debt

 

(21)

   

(17)

 

Dividends paid

 

(340)

   

(332)

 

Repurchase of stock

 

(1,310)

   

(686)

 

Stock option exercises

 

2

   

4

 

Cash (required for) / provided by financing activities

 

(1,669)

   

1,449

 

Net (decrease) / increase in cash and cash equivalents

 

(695)

   

1,989

 

Cash and cash equivalents at beginning of period

 

8,511

   

2,577

 

Cash and cash equivalents at end of period

 

$

7,816

   

$

4,566

 

 

TARGET CORPORATION

 

Operating Results

Rate Analysis

Three Months Ended

(unaudited)

May 1, 2021

 

May 2, 2020

Gross margin rate

30.0

%

 

25.1

%

SG&A expense rate

18.6

   

20.7

 

Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate

2.5

   

2.9

 

Operating income margin rate

9.8

   

2.4

 
 

Note:  Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue. Other revenue includes $171 million and $166 million of profit-sharing income under our credit card program agreement for the three months ended May 1, 2021, and May 2, 2020, respectively.

 
 

Comparable Sales

Three Months Ended

(unaudited)

May 1, 2021

 

May 2, 2020

Comparable sales change

22.9

%

 

10.8

%

Drivers of change in comparable sales

     

Number of transactions

17.1

   

(1.5)

 

Average transaction amount

5.0

   

12.5

 
 

Comparable Sales by Channel

Three Months Ended

(unaudited)

May 1, 2021

 

May 2, 2020

Stores originated comparable sales change

18.0

%

 

0.9

%

Digitally originated comparable sales change

50.2

   

140.6

 
 

Sales by Channel

Three Months Ended

(unaudited)

May 1, 2021

 

May 2, 2020

Stores originated

81.7

%

 

84.7

%

Digitally originated

18.3

   

15.3

 

Total

100

%

 

100

%

 

Sales by Fulfillment Channel

Three Months Ended

(unaudited)

May 1, 2021

 

May 2, 2020

Stores

96.3

%

 

96.7

%

Other

3.7

   

3.3

 

Total

100

%

 

100

%

 

Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Shipt.

 
 

RedCard Penetration

Three Months Ended

(unaudited)

May 1, 2021

 

May 2, 2020

Target Debit Card

12.1

%

 

12.7

%

Target Credit Cards

8.4

   

9.7

 

Total RedCard Penetration

20.5

%

 

22.4

%

 

Number of Stores and Retail Square Feet

Number of Stores

 

Retail Square Feet (a)

(unaudited)

May 1,

2021

 

January 30,
2021

 

May 2,

2020

 

May 1,

2021

 

January 30,
2021

 

May 2,

2020

170,000 or more sq. ft.

273

   

273

   

272

   

48,798

   

48,798

   

48,613

 

50,000 to 169,999 sq. ft.

1,510

   

1,509

   

1,505

   

189,618

   

189,508

   

189,226

 

49,999 or less sq. ft.

126

   

115

   

94

   

3,690

   

3,342

   

2,745

 

Total

1,909

   

1,897

   

1,871

   

242,106

   

241,648

   

240,584

 
   

(a)

In thousands, reflects total square feet less office, distribution center, and vacant space.

TARGET CORPORATION

Reconciliation of Non-GAAP Financial Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). The most comparable GAAP measure is diluted earnings per share. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies.

Reconciliation of Non-GAAP

Three Months Ended

   

Adjusted EPS

May 1, 2021

 

May 2, 2020

   

(millions, except per share data) (unaudited)

Pretax

 

Net of Tax

 

Per Share

 

Pretax

 

Net of Tax

 

Per Share

 

Change

GAAP diluted earnings per share

       

$

4.17

           

$

0.56

   

643.2

%

Adjustments

                         

Gain on Dermstore sale

$

(335)

   

$

(269)

   

$

(0.53)

   

$

   

$

   

$

     

Loss on investment (a)

   

   

   

21

   

15

   

0.03

     

Other (b)

41

   

30

   

0.06

   

   

   

     

Adjusted diluted earnings per share

       

$

3.69

           

$

0.59

   

525.0

%

 

Note: Amounts may not foot due to rounding.

(a)

Represented an unrealized loss on our investment in Casper Sleep Inc., which was not core to our operations. We sold this investment during the fourth quarter of 2020.

(b)

Represents asset impairment charges resulting from the consolidation of our headquarters office space.

Earnings before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation and amortization (EBITDA) are non-GAAP financial measures. We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.

EBIT and EBITDA

Three Months Ended

   

(dollars in millions) (unaudited)

May 1, 2021

 

May 2, 2020

 

Change

Net earnings

$

2,097

   

$

284

   

639.8

%

 + Provision for income taxes

512

   

45

   

1,017.1

 

 + Net interest expense

108

   

117

   

(7.6)

 

EBIT

$

2,717

   

$

446

   

508.7

%

 + Total depreciation and amortization (a)

667

   

641

   

4.1

 

EBITDA

$

3,384

   

$

1,087

   

211.3

%

   

(a)

Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.

After-Tax Return on Invested Capital 

   

(dollars in millions)

       
   

Trailing Twelve Months

   

Numerator

 

May 1, 2021

 

May 2, 2020

   

Operating income

 

$

8,444

   

$

3,992

     

 + Net other income / (expense)

 

350

   

(26)

     

EBIT

 

8,794

   

3,966

     

 + Operating lease interest (a)

 

85

   

87

     

  - Income taxes (b)

 

1,864

   

855

     

Net operating profit after taxes

 

$

7,015

   

$

3,198

     
 

Denominator

 

May 1, 2021

 

May 2, 2020

 

May 4, 2019

Current portion of long-term debt and other borrowings

 

$

1,173

   

$

168

   

$

1,056

 

 + Noncurrent portion of long-term debt

 

11,509

   

14,073

   

11,357

 

 + Shareholders' investment

 

14,959

   

11,169

   

11,117

 

 + Operating lease liabilities (c)

 

2,563

   

2,448

   

2,231

 

  - Cash and cash equivalents

 

7,816

   

4,566

   

1,173

 

Invested capital

 

$

22,388

   

$

23,292

   

$

24,588

 

Average invested capital (d)

 

$

22,840

   

$

23,940

     
 

After-tax return on invested capital

 

30.7

%

 

13.4

%

   
   

(a)

Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A. Operating lease interest is added back to Operating Income in the ROIC calculation to control for differences in capital structure between us and our competitors.

(b)

Calculated using the effective tax rates, which were 21.0 percent and 21.1 percent for the trailing twelve months ended May 1, 2021, and May 2, 2020, respectively. For the twelve months ended May 1, 2021, and May 2, 2020, includes tax effect of $1.8 billion and $837 million, respectively, related to EBIT, and $18 million related to operating lease interest.

(c)

Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.

(d)

Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

 

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SOURCE Target Corporation

Contacts: John Hulbert, Investors, (612) 761-6627, or Erin Conroy, Media, (612) 761-5928, Target Media Hotline, (612) 696-3400







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