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financial news release

Target Corporation Reports Third Quarter Earnings

11/17/21

MINNEAPOLIS, Nov. 17, 2021 /PRNewswire/ --

  • Third quarter comparable sales grew 12.7 percent, on top of 20.7 percent growth last year.
    • Comparable sales growth was driven entirely by traffic.
    • Store comparable sales increased 9.7 percent, on top of 9.9 percent growth last year.
    • Digital comparable sales grew 29 percent, following growth of 155 percent last year.
    • Same-day services (Order Pickup, Drive Up and Shipt) grew nearly 60 percent this year, on top of 200 percent last year.
    • More than 95 percent of Target's third quarter sales were fulfilled by its stores.
  • All five core merchandise categories delivered double-digit comparable sales growth, on top of strong sales performance last year.
  • Third quarter GAAP EPS of $3.04 was 51.6 percent higher than last year, and Adjusted EPS1 of $3.03 was 8.7 percent higher than last year. Third quarter GAAP and Adjusted EPS have both more than doubled since Q3 2019.
  • For additional media materials, please visit: https://corporate.target.com/article/2021/11/q3-2021-earnings

Target Corporation (NYSE: TGT) today announced its third quarter 2021 financial results, which reflected growth in both sales and profitability on top of record increases a year ago. The Company reported third quarter GAAP earnings per share (EPS) of $3.04, up 51.6 percent from $2.01 in 2020. Third quarter Adjusted EPS of $3.03 grew 8.7 percent compared with $2.79 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.

"The consistently strong growth we're seeing in our business, quarter after quarter, is a testament to the passion and commitment our team brings to serving our guests, and the trust we've built with them as a result," said Brian Cornell, chairman and chief executive officer of Target Corporation.

"Following comp growth of nearly 21 percent a year ago, our third quarter comp increase of 12.7 percent was driven entirely by traffic, and reflects continued strength in our store sales, same-day digital fulfillment services and double-digit growth in all five of our core merchandising categories. With a strong inventory position heading into the peak of the holiday season, our team and our business are ready to serve our guests and poised to deliver continued, strong growth, through the holiday season and beyond."

Fiscal 2021 Guidance

For the fourth quarter 2021, the Company expects high-single digit to low-double digit growth in comparable sales, compared with the previous guidance for a high-single digit increase.

The Company continues to expect its full-year operating income margin rate will be 8 percent or higher.

Operating Results

Comparable sales grew 12.7 percent in the third quarter, reflecting comparable store sales growth of 9.7 percent and comparable digital sales growth of 29 percent. Total revenue of $25.7 billion grew 13.3 percent compared with last year, driven by total sales growth of 13.2 percent and a 22.3 percent increase in other revenue. Operating income was $2.0 billion in third quarter 2021, up 3.9 percent from $1.9 billion in 2020.

Third quarter operating income margin rate was 7.8 percent in 2021 compared with 8.5 percent in 2020. Third quarter gross margin rate was 28.0 percent, compared with 30.6 percent in 2020. This year's gross margin rate reflected pressure from higher merchandise and freight costs, increased inventory shrink, and increased supply chain costs from increased compensation and headcount in the Company's distribution centers.  These pressures were partially offset by a slight benefit from favorable category mix. Third quarter SG&A expense rate was 18.9 percent in 2021, compared with 20.5 percent in 2020, driven by leverage on strong revenue growth.

Interest Expense and Taxes

The Company's third quarter 2021 net interest expense was $105 million, compared with $632 million last year, which included a $512 million loss on early debt retirement.

Third quarter 2021 effective income tax rate was 22.1 percent, in line with the prior year rate of 21.9 percent.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $440 million in the third quarter, compared with $340 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count.

The Company repurchased $2.2 billion worth of its shares in third quarter 2021, retiring 8.8 million shares of common stock at an average price of $246.80.  As of the end of the third quarter, the Company had approximately $14.6 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in August 2021.

For the trailing twelve months through third quarter 2021, after-tax return on invested capital (ROIC) was 31.3 percent, compared with 19.9 percent for the trailing twelve months through third 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 third 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 1-866-461-2736.

Miscellaneous

Statements in this release regarding fourth quarter comparable sales growth and full year 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, with the purpose of helping all families discover the joy of everyday life. Since 1946, Target has given 5% of its profit to communities, which today equals millions of dollars a week. Additional company information can be found by visiting its corporate website and press center and by following @TargetNews.

For more on the Target Foundation, click here.

 

 

TARGET CORPORATION

 

Consolidated Statements of Operations

   

Three Months Ended

     

Nine Months Ended

   

(millions, except per share data) (unaudited)

 

October 30, 2021

 

October 31, 2020

 

Change

 

October 30, 2021

 

October 31, 2020

 

Change

Sales

 

$

25,290

   

$

22,336

   

13.2

%

 

$

73,995

   

$

64,403

   

14.9

%

Other revenue

 

362

   

296

   

22.3

   

1,014

   

819

   

23.9

 

Total revenue

 

25,652

   

22,632

   

13.3

   

75,009

   

65,222

   

15.0

 

Cost of sales

 

18,206

   

15,509

   

17.4

   

52,202

   

45,692

   

14.2

 

Selling, general and administrative expenses

 

4,859

   

4,647

   

4.6

   

14,217

   

13,167

   

8.0

 

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

 

577

   

541

   

6.4

   

1,739

   

1,660

   

4.8

 

Operating income

 

2,010

   

1,935

   

3.9

   

6,851

   

4,703

   

45.7

 

Net interest expense

 

105

   

632

   

(83.2)

   

317

   

871

   

(63.5)

 

Net other (income) / expense

 

(6)

   

5

   

NM(a)

 

(356)

   

16

   

NM(a)

Earnings before income taxes

 

1,911

   

1,298

   

47.2

   

6,890

   

3,816

   

80.6

 

Provision for income taxes

 

423

   

284

   

48.7

   

1,488

   

828

   

79.7

 

Net earnings

 

$

1,488

   

$

1,014

   

46.8

%

 

$

5,402

   

$

2,988

   

80.8

%

Basic earnings per share

 

$

3.07

   

$

2.02

   

51.6

%

 

$

10.97

   

$

5.97

   

83.8

%

Diluted earnings per share

 

$

3.04

   

$

2.01

   

51.6

%

 

$

10.87

   

$

5.91

   

83.9

%

Weighted average common shares outstanding

                       

Basic

 

484.8

   

500.6

   

(3.1)

%

 

492.2

   

500.6

   

(1.7)

%

Diluted

 

489.4

   

505.4

   

(3.2)

%

 

496.8

   

505.2

   

(1.7)

%

Antidilutive shares

 

   

       

   

     

Dividends declared per share

 

$

0.90

   

$

0.68

   

32.4

%

 

$

2.48

   

$

2.02

   

22.8

%

(a)      Not meaningful.

 

TARGET CORPORATION

 

Consolidated Statements of Financial Position

(millions, except footnotes) (unaudited)

 

October 30, 2021

 

January 30, 2021

 

October 31, 2020

Assets

           

Cash and cash equivalents

 

$

5,753

   

$

8,511

   

$

5,996

 

Inventory

 

14,958

   

10,653

   

12,712

 

Other current assets

 

1,865

   

1,592

   

1,601

 

Total current assets

 

22,576

   

20,756

   

20,309

 

Property and equipment

           

Land

 

6,146

   

6,141

   

6,063

 

Buildings and improvements

 

32,478

   

31,557

   

31,398

 

Fixtures and equipment

 

6,144

   

5,914

   

5,843

 

Computer hardware and software

 

2,447

   

2,765

   

2,706

 

Construction-in-progress

 

1,302

   

780

   

518

 

Accumulated depreciation

 

(20,602)

   

(20,278)

   

(19,755)

 

Property and equipment, net

 

27,915

   

26,879

   

26,773

 

Operating lease assets

 

2,539

   

2,227

   

2,208

 

Other noncurrent assets

 

1,381

   

1,386

   

1,371

 

Total assets

 

$

54,411

   

$

51,248

   

$

50,661

 

Liabilities and shareholders' investment

           

Accounts payable

 

$

16,250

   

$

12,859

   

$

14,203

 

Accrued and other current liabilities

 

5,925

   

6,122

   

5,023

 

Current portion of long-term debt and other borrowings

 

1,176

   

1,144

   

131

 

Total current liabilities

 

23,351

   

20,125

   

19,357

 

Long-term debt and other borrowings

 

11,586

   

11,536

   

12,490

 

Noncurrent operating lease liabilities

 

2,494

   

2,218

   

2,196

 

Deferred income taxes

 

1,246

   

990

   

1,171

 

Other noncurrent liabilities

 

1,931

   

1,939

   

2,128

 

Total noncurrent liabilities

 

17,257

   

16,683

   

17,985

 

Shareholders' investment

           

Common stock

 

40

   

42

   

42

 

Additional paid-in capital

 

6,381

   

6,329

   

6,285

 

Retained earnings

 

8,069

   

8,825

   

7,789

 

Accumulated other comprehensive loss

 

(687)

   

(756)

   

(797)

 

Total shareholders' investment

 

13,803

   

14,440

   

13,319

 

Total liabilities and shareholders' investment

 

$

54,411

   

$

51,248

   

$

50,661

 

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 480,905,493, 500,877,129 and 500,754,729 shares issued and outstanding as of October 30, 2021, January 30, 2021, and October 31, 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

   

Nine Months Ended

(millions) (unaudited)

 

October 30, 2021

 

October 31, 2020

Operating activities

       

Net earnings

 

$

5,402

   

$

2,988

 

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

       

Depreciation and amortization

 

1,952

   

1,848

 

Share-based compensation expense

 

187

   

161

 

Deferred income taxes

 

233

   

26

 

Gain on Dermstore sale

 

(335)

   

 

Loss on debt extinguishment

 

   

512

 

Noncash losses / (gains) and other, net

 

18

   

124

 

Changes in operating accounts:

       

Inventory

 

(4,305)

   

(3,720)

 

Other assets

 

(117)

   

(174)

 

Accounts payable

 

3,284

   

4,287

 

Accrued and other liabilities

 

(722)

   

992

 

Cash provided by operating activities

 

5,597

   

7,044

 

Investing activities

       

Expenditures for property and equipment

 

(2,483)

   

(2,009)

 

Proceeds from disposal of property and equipment

 

23

   

27

 

Proceeds from Dermstore sale

 

356

   

 

Other investments

 

14

   

(3)

 

Cash required for investing activities

 

(2,090)

   

(1,985)

 

Financing activities

       

Additions to long-term debt

 

   

2,480

 

Reductions of long-term debt

 

(112)

   

(2,395)

 

Dividends paid

 

(1,116)

   

(1,002)

 

Repurchase of stock

 

(5,042)

   

(741)

 

Stock option exercises

 

5

   

18

 

Cash required for financing activities

 

(6,265)

   

(1,640)

 

Net (decrease) / increase in cash and cash equivalents

 

(2,758)

   

3,419

 

Cash and cash equivalents at beginning of period

 

8,511

   

2,577

 

Cash and cash equivalents at end of period

 

$

5,753

   

$

5,996

 

 

 

TARGET CORPORATION

 

Operating Results

 

Rate Analysis

 

Three Months Ended

 

Nine Months Ended

(unaudited)

 

October 30, 2021

 

October 31, 2020

 

October 30, 2021

 

October 31, 2020

Gross margin rate

 

28.0

%

 

30.6

%

 

29.5

%

 

29.1

%

SG&A expense rate

 

18.9

   

20.5

   

19.0

   

20.2

 

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

 

2.2

   

2.4

   

2.3

   

2.5

 

Operating income margin rate

 

7.8

   

8.5

   

9.1

   

7.2

 

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 $184 million and $527 million of profit-sharing income under our credit card program agreement for the three and nine months ended October 30, 2021, respectively, and $164 million and $488 million for the three and nine months ended October 31, 2020, respectively.

 

Comparable Sales

 

Three Months Ended

 

Nine Months Ended

(unaudited)

 

October 30, 2021

 

October 31, 2020

 

October 30, 2021

 

October 31, 2020

Comparable sales change

 

12.7

%

 

20.7

%

 

14.4

%

 

18.7

%

Drivers of change in comparable sales

               

Number of transactions

 

12.9

   

4.5

   

14.0

   

2.6

 

Average transaction amount

 

(0.2)

   

15.6

   

0.3

   

15.7

 
                         

Comparable Sales by Channel

Three Months Ended

 

Nine Months Ended

(unaudited)

October 30, 2021

 

October 31, 2020

 

October 30, 2021

 

October 31, 2020

Stores originated comparable sales change

9.7

%

 

9.9

%

 

11.9

%

 

7.3

%

Digitally originated comparable sales change

28.9

   

154.5

   

27.8

   

163.9

 
                       

Sales by Channel

 

Three Months Ended

 

Nine Months Ended

(unaudited)

 

October 30, 2021

 

October 31, 2020

 

October 30, 2021

 

October 31, 2020

Stores originated

 

82.4

%

 

84.3

%

 

82.3

%

 

83.9

%

Digitally originated

 

17.6

   

15.7

   

17.7

   

16.1

 

Total

 

100

%

 

100

%

 

100

%

 

100

%

                         

Sales by Fulfillment Channel

 

Three Months Ended

 

Nine Months Ended

(unaudited)

 

October 30, 2021

 

October 31, 2020

 

October 30, 2021

 

October 31, 2020

Stores

 

96.7

%

 

96.1

%

 

96.5

%

 

96.2

%

Other

 

3.3

   

3.9

   

3.5

   

3.8

 

Total

 

100

%

 

100

%

 

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

 

Nine Months Ended

(unaudited)

 

October 30, 2021

 

October 31, 2020

 

October 30, 2021

 

October 31, 2020

Target Debit Card

 

11.7

%

 

12.2

%

 

11.8

%

 

12.2

%

Target Credit Cards

 

8.9

   

9.3

   

8.7

   

9.2

 

Total RedCard Penetration

 

20.7

%

 

21.5

%

 

20.5

%

 

21.4

%

Note: Amounts may not foot due to rounding.

 

Number of Stores and Retail Square Feet

 

Number of Stores

 

Retail Square Feet (a)

(unaudited)

 

October 30,
2021

 

January 30,
2021

 

October 31,
2020

 

October 30,
2021

 

January 30,
2021

 

October 31,
2020

170,000 or more sq. ft.

 

274

   

273

   

273

   

49,071

   

48,798

   

48,798

 

50,000 to 169,999 sq. ft.

 

1,515

   

1,509

   

1,509

   

190,116

   

189,508

   

189,508

 

49,999 or less sq. ft.

 

135

   

115

   

115

   

3,952

   

3,342

   

3,342

 

Total

 

1,924

   

1,897

   

1,897

   

243,139

   

241,648

   

241,648

 

(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

Adjusted EPS

 

Three Months Ended

   
 

October 30, 2021

 

October 31, 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

         

$

3.04

           

$

2.01

   

51.6

%

Adjustments

                           

Loss on debt extinguishment

 

$

   

$

   

$

   

$

512

   

$

379

   

$

0.75

     

Loss on investment (a)

 

   

   

   

8

   

9

   

0.02

     

Other (b)

 

(9)

   

(7)

   

(0.01)

   

8

   

6

   

0.01

     

Adjusted diluted earnings per share

         

$

3.03

           

$

2.79

   

8.7

%

         

Reconciliation of Non-GAAP

Adjusted EPS

 

Nine Months Ended

   
 

October 30, 2021

 

October 31, 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

         

$

10.87

           

$

5.91

   

83.9

%

Adjustments

                           

Gain on Dermstore sale

 

$

(335)

   

$

(269)

   

$

(0.54)

   

$

   

$

   

$

     

Loss on debt extinguishment

 

   

   

   

512

   

379

   

0.75

     

Loss on investment (a)

 

   

   

   

19

   

18

   

0.03

     

Other (b)

 

27

   

20

   

0.04

   

33

   

24

   

0.05

     

Adjusted diluted earnings per share

         

$

10.37

           

$

6.75

   

53.7

%

Note: Amounts may not foot due to rounding.

(a)

Represented a 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)

Other items unrelated to current period operations, none of which were individually significant.

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

     

Nine Months Ended

   

(dollars in millions) (unaudited)

 

October 30, 2021

 

October 31, 2020

 

Change

 

October 30, 2021

 

October 31, 2020

 

Change

Net earnings

 

$

1,488

   

$

1,014

   

46.8

%

 

$

5,402

   

$

2,988

   

80.8

%

 + Provision for income taxes

 

423

   

284

   

48.7

   

1,488

   

828

   

79.7

 

 + Net interest expense

 

105

   

632

   

(83.2)

   

317

   

871

   

(63.5)

 

EBIT

 

$

2,016

   

$

1,930

   

4.5

%

 

$

7,207

   

$

4,687

   

53.8

%

 + Total depreciation and amortization (a)

 

652

   

603

   

7.9

   

1,952

   

1,848

   

5.6

 

EBITDA

 

$

2,668

   

$

2,533

   

5.3

%

 

$

9,159

   

$

6,535

   

40.2

%

(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) (unaudited)

       
   

Trailing Twelve Months

   

Numerator

 

October 30, 2021

 

October 31, 2020

   

Operating income

 

$

8,687

   

$

5,901

     

 + Net other income / (expense)

 

358

   

(46)

     

EBIT

 

9,045

   

5,855

     

 + Operating lease interest (a)

 

85

   

87

     

  - Income taxes (b)

 

1,947

   

1,277

     

Net operating profit after taxes

 

$

7,183

   

$

4,665

     
             

Denominator

 

October 30, 2021

 

October 31, 2020

 

November 2, 2019

Current portion of long-term debt and other borrowings

 

$

1,176

   

$

131

   

$

1,159

 

 + Noncurrent portion of long-term debt

 

11,586

   

12,490

   

10,513

 

 + Shareholders' investment

 

13,803

   

13,319

   

11,545

 

 + Operating lease liabilities (c)

 

2,737

   

2,400

   

2,390

 

  - Cash and cash equivalents

 

5,753

   

5,996

   

969

 

Invested capital

 

$

23,549

   

$

22,344

   

$

24,638

 

Average invested capital (d)

 

$

22,947

   

$

23,491

     
                 

After-tax return on invested capital

   

31.3

%

   

19.9

%

(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 21.3 percent and 21.5 percent for the trailing twelve months ended October 30, 2021, and October 31, 2020, respectively. For the twelve months ended October 30, 2021, and October 31, 2020, includes tax effect of $1.9 billion and $1.3 billion, respectively, related to EBIT, and $18 million and $19 million, respectively, 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

John Hulbert, Investors, (612) 761-6627; Joe Poulos, Media, (612) 761-0042; Target Media Hotline, (612) 696-3400







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1.800.794.9871
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1000 Nicollet Mall
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1.800.775.3110
investorrelations@target.com