Target Reports Fourth Quarter and Full-Year 2014 Earnings
Fourth quarter comparable sales increased 3.8 percent
Fourth Quarter Adjusted EPS of
- Fourth quarter comparable sales increased 3.8 percent, reflecting a 3.2 percent increase in comparable transactions. Digital channel sales contributed 0.9 percentage points to comparable sales growth.
-
Target’s fourth quarter 2014 Adjusted EPS of
$1.50 was above the company’s most recent guidance of$1.43 to $1.47 per share. - Target’s full-year comparable sales grew 1.3 percent. Digital channel sales growth of more than 30 percent contributed 0.7 percentage points to 2014 comparable sales growth.
-
Target paid dividends of$1.2 billion in fiscal 2014, an increase of 19.8 percent above 2013.
1Adjusted diluted earnings per share from continuing operations (“Adjusted EPS”), a non-GAAP financial measure, excludes the impact of certain matters not related to the Company’s single segment, such as discontinued operations, data breach expenses and certain other expenses that are discretely managed. See the “Discontinued Operations” and “Accounting Considerations” sections of this release for additional information about the items that have been excluded from Adjusted EPS. |
“We’re pleased with our fourth quarter financial results, which were
driven by better-than-expected sales and particularly strong performance
in our signature categories-style, baby, kids and wellness,” said
Fiscal 2015 Earnings Guidance
In first quarter 2015,
Results of Continuing Operations
Fourth quarter 2014 sales increased 4.1 percent to
Fourth quarter EBITDA and EBIT margin rates were 9.9 percent and 7.4 percent, respectively, compared with 9.2 percent and 6.8 percent in 2013. Fourth quarter gross margin rate was 28.5 percent, compared with 27.6 percent in 2013, reflecting the benefit of annualizing clearance markdowns associated with the fourth quarter 2013 data breach, combined with the benefit of a favorable merchandise mix in fourth quarter 2014. Fourth quarter SG&A expense rate was 18.6 percent in 2014 compared with 18.4 percent in 2013, reflecting higher marketing, technology and incentive expense rates this year.
Full-year 2014 sales increased 1.9 percent to
Full-year 2014 EBITDA and EBIT margin rates were 9.5 percent and 6.6 percent, respectively, compared with 9.8 percent and 7.0 percent in 2013. Full-year gross margin rate was 29.4 percent, compared with 29.8 percent in 2013, driven by increased promotional activity in the first three quarters of 2014. Full-year SG&A expense rate was 19.9 percent in 2014 compared with 20.0 percent in 2013, reflecting disciplined expense control across the organization.
Interest Expense and Taxes from Continuing Operations
The Company’s fourth quarter 2014 net interest expense was
The Company’s fourth quarter effective income tax rate from continuing operations was 33.0 percent in 2014 and 33.5 percent last year. Target’s full-year 2014 effective income tax rate from continuing operations decreased 1.6 percentage points to 33.0 percent from 34.6 percent in 2013, which was driven primarily by the net tax effect of the Company’s global sourcing operations and the favorable resolution of various income tax matters.
Capital Returned to Shareholders
Discontinued Operations
On
Certain of the assets and liabilities of Target’s discontinued
operations are based on estimates. The recorded assets include estimated
receivables, and the remaining liabilities include accruals for
estimated losses related to claims that may be asserted against
Accounting Considerations
During fourth quarter 2013,
At the close of the sale of its entire U.S. consumer credit card
receivables portfolio to
Miscellaneous
Statements in this release regarding first quarter 2015 earnings per
share guidance and future expenses related to discontinued operations
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements speak only as
of the date they are made and are subject to risks and uncertainties
which could cause the Company’s actual results 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
In addition to the GAAP results provided in this release, the Company
provides Adjusted diluted earnings per share for the three- and
twelve-month periods ended
About
TARGET CORPORATION | ||||||||||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
January 31, | February 1, | January 31, | February 1, | |||||||||||||||||||||||||
(millions, except per share data) (unaudited) | 2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||||||||
Sales | $ | 21,751 | $ | 20,893 | 4.1 | % | $ | 72,618 | $ | 71,279 | 1.9 | % | ||||||||||||||||
Cost of sales | 15,563 | 15,124 | 2.9 | 51,278 | 50,039 | 2.5 | ||||||||||||||||||||||
Selling, general and administrative expenses | 4,058 | 3,946 | 2.8 | 14,676 | 14,465 | 1.5 | ||||||||||||||||||||||
Depreciation and amortization | 545 | 508 | 7.3 | 2,129 | 1,996 | 6.7 | ||||||||||||||||||||||
Gain on receivables transaction | — | — |
n/a |
— | (391 | ) | (100.0 | ) | ||||||||||||||||||||
Earnings from continuing operations before interest expense and income taxes | 1,585 | 1,315 | 20.6 | 4,535 | 5,170 | (12.3 | ) | |||||||||||||||||||||
Net interest expense | 151 | 142 | 6.1 | 882 | 1,049 | (16.0 | ) | |||||||||||||||||||||
Earnings from continuing operations before income taxes | 1,434 | 1,173 | 22.3 | 3,653 | 4,121 | (11.4 | ) | |||||||||||||||||||||
Provision for income taxes | 474 | 393 | 20.7 | 1,204 | 1,427 | (15.6 | ) | |||||||||||||||||||||
Net earnings from continuing operations | 960 | 780 | 23.1 | % | 2,449 | 2,694 | (9.1 | )% | ||||||||||||||||||||
Discontinued operations, net of tax | (3,600 | ) | (260 | ) | (4,085 | ) | (723 | ) | ||||||||||||||||||||
Net earnings | $ | (2,640 | ) | $ | 520 | $ | (1,636 | ) | $ | 1,971 | ||||||||||||||||||
Basic earnings per share | ||||||||||||||||||||||||||||
Continuing operations | $ | 1.51 | $ | 1.23 | 22.1 | % | $ | 3.86 | $ | 4.24 | (9.0 | )% | ||||||||||||||||
Discontinued operations | (5.64 | ) | (0.41 | ) | (6.44 | ) | (1.14 | ) | ||||||||||||||||||||
Net earnings per share | $ | (4.14 | ) | $ | 0.82 | $ | (2.58 | ) | $ | 3.10 | ||||||||||||||||||
Diluted earnings per share | ||||||||||||||||||||||||||||
Continuing operations | $ | 1.49 | $ | 1.22 | 22.0 | % | $ | 3.83 | $ | 4.20 | (8.8 | )% | ||||||||||||||||
Discontinued operations | (5.59 | ) | (0.41 | ) | (6.38 | ) | (1.13 | ) | ||||||||||||||||||||
Net earnings per share | $ | (4.10 | ) | $ | 0.81 | $ | (2.56 | ) | $ | 3.07 | ||||||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||||||||
Basic | 637.9 | 632.3 | 0.9 | % | 634.7 | 635.1 | (0.1 | )% | ||||||||||||||||||||
Dilutive impact of share-based awards | 6.1 | 5.8 | 5.4 | 6.7 | ||||||||||||||||||||||||
Diluted | 644.0 | 638.1 | 0.9 | % | 640.1 | 641.8 | (0.3 | )% | ||||||||||||||||||||
Antidilutive shares | 0.5 | 2.5 | 3.3 | 2.3 | ||||||||||||||||||||||||
Subject to reclassification |
||||||||||||||||||||||||||||
TARGET CORPORATION | ||||||||||
Consolidated Statements of Financial Position | ||||||||||
January 31, | February 1, | |||||||||
(millions) (unaudited) | 2015 | 2014 | ||||||||
Assets | ||||||||||
Cash and cash equivalents, including short-term investments of $1,520 and $3 | $ | 2,210 | $ | 670 | ||||||
Inventory | 8,790 | 8,278 | ||||||||
Assets of discontinued operations | 1,321 | 793 | ||||||||
Other current assets | 1,754 | 1,832 | ||||||||
Total current assets | 14,075 | 11,573 | ||||||||
Property and equipment | ||||||||||
Land | 6,127 | 6,143 | ||||||||
Buildings and improvements | 26,614 | 25,984 | ||||||||
Fixtures and equipment | 5,346 | 5,199 | ||||||||
Computer hardware and software | 2,553 | 2,395 | ||||||||
Construction-in-progress | 424 | 757 | ||||||||
Accumulated depreciation | (15,106 | ) | (14,066 | ) | ||||||
Property and equipment, net | 25,958 | 26,412 | ||||||||
Noncurrent assets of discontinued operations | 454 | 5,461 | ||||||||
Other noncurrent assets | 917 | 1,107 | ||||||||
Total assets | $ | 41,404 | $ | 44,553 | ||||||
Liabilities and shareholders’ investment | ||||||||||
Accounts payable | $ | 7,759 | $ | 7,335 | ||||||
Accrued and other current liabilities | 3,783 | 3,610 | ||||||||
Current portion of long-term debt and other borrowings | 91 | 1,143 | ||||||||
Liabilities of discontinued operations | 103 | 689 | ||||||||
Total current liabilities | 11,736 | 12,777 | ||||||||
Long-term debt and other borrowings | 12,705 | 11,429 | ||||||||
Deferred income taxes | 1,321 | 1,349 | ||||||||
Noncurrent liabilities of discontinued operations | 193 | 1,296 | ||||||||
Other noncurrent liabilities | 1,452 | 1,471 | ||||||||
Total noncurrent liabilities | 15,671 | 15,545 | ||||||||
Shareholders’ investment |
|
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Common stock | 53 | 53 | ||||||||
Additional paid-in capital | 4,899 | 4,470 | ||||||||
Retained earnings | 9,644 | 12,599 | ||||||||
Accumulated other comprehensive loss | ||||||||||
Pension and other benefit liabilities | (561 | ) | (422 | ) | ||||||
Currency translation adjustment and cash flow hedges | (38 | ) | (469 | ) | ||||||
Total shareholders’ investment | 13,997 | 16,231 | ||||||||
Total liabilities and shareholders’ investment | $ | 41,404 | $ | 44,553 |
Common Stock Authorized 6,000,000,000 shares,
Preferred Stock Authorized 5,000,000 shares,
Subject to reclassification
TARGET CORPORATION | ||||||||||
Consolidated Statements of Cash Flows | ||||||||||
Twelve Months Ended | ||||||||||
January 31, | February 1, | |||||||||
(millions) (unaudited) | 2015 | 2014 | ||||||||
Operating activities | ||||||||||
Net earnings | $ | (1,636 | ) | $ | 1,971 | |||||
Losses from discontinued operations, net of tax | (4,085 | ) | (723 | ) | ||||||
Net earnings from continuing operations | 2,449 | 2,694 | ||||||||
Adjustments to reconcile net earnings to cash provided by operations | ||||||||||
Depreciation and amortization | 2,129 | 1,996 | ||||||||
Share-based compensation expense | 71 | 106 | ||||||||
Deferred income taxes | 7 | 58 | ||||||||
Gain on receivables transaction | — | (391 | ) | |||||||
Loss on debt extinguishment | 285 | 445 | ||||||||
Noncash losses/(gains) and other, net (a) | 40 | 121 | ||||||||
Changes in operating accounts: | ||||||||||
Accounts receivable originated at Target | — | 157 | ||||||||
Proceeds on sale of accounts receivable originated at Target | — | 2,703 | ||||||||
Inventory | (512 | ) | (504 | ) | ||||||
Other assets | (115 | ) | (79 | ) | ||||||
Accounts payable and accrued liabilities | 777 | 213 | ||||||||
Cash provided by operating activities—continuing operations | 5,131 | 7,519 | ||||||||
Cash required for operating activities—discontinued operations | (692 | ) | (999 | ) | ||||||
Cash provided by operations | 4,439 | 6,520 | ||||||||
Investing activities | ||||||||||
Expenditures for property and equipment | (1,786 | ) | (1,886 | ) | ||||||
Proceeds from disposal of property and equipment | 95 | 70 | ||||||||
Change in accounts receivable originated at third parties | — | 121 | ||||||||
Proceeds from sale of accounts receivable originated at third parties | — | 3,002 | ||||||||
Cash paid for acquisitions, net of cash assumed | (20 | ) | (157 | ) | ||||||
Other investments | 106 | 130 | ||||||||
Cash (required for)/provided by investing activities—continuing operations | (1,605 | ) | 1,280 | |||||||
Cash required for investing activities—discontinued operations | (321 | ) | (1,551 | ) | ||||||
Cash required for investing activities | (1,926 | ) | (271 | ) | ||||||
Financing activities | ||||||||||
Change in commercial paper, net | (80 | ) | (890 | ) | ||||||
Additions to long-term debt | 1,993 | — | ||||||||
Reductions of long-term debt | (2,079 | ) | (3,463 | ) | ||||||
Dividends paid | (1,205 | ) | (1,006 | ) | ||||||
Repurchase of stock | — | (1,461 | ) | |||||||
Stock option exercises and related tax benefit | 373 | 456 | ||||||||
Cash required for financing activities | (998 | ) | (6,364 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | — | 26 | ||||||||
Net increase/(decrease) in cash and cash equivalents | 1,515 | (89 | ) | |||||||
Cash and cash equivalents at beginning of period (b) | 695 | 784 | ||||||||
Cash and cash equivalents at end of period (c) | $ | 2,210 | $ | 695 |
(a) Includes net write-offs of credit card receivables
prior to the sale of our U.S. consumer credit card receivables on
March 13, 2013.
(b) Includes cash of our
discontinued operations of
(c) Includes cash of our
discontinued operations of
Subject to reclassification
TARGET CORPORATION | ||||||||||||||||||||||||||||
Segment Results | ||||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
January 31, | February 1, | January 31, | February 1, | |||||||||||||||||||||||||
(millions) (unaudited) | 2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||||||||
Sales | $ | 21,751 | $ | 20,893 | 4.1 | % | $ | 72,618 | $ | 71,279 | 1.9 | % | ||||||||||||||||
Cost of sales | 15,563 | 15,124 | 2.9 | 51,278 | 50,039 | 2.5 | ||||||||||||||||||||||
Gross margin | 6,188 | 5,769 | 7.3 | 21,340 | 21,240 | 0.5 | ||||||||||||||||||||||
SG&A expenses(a) | 4,040 | 3,848 | 5.0 | 14,450 | 14,285 | 1.2 | ||||||||||||||||||||||
EBITDA | 2,148 | 1,921 | 11.8 | 6,890 | 6,955 | (0.9 | ) | |||||||||||||||||||||
Depreciation and amortization | 545 | 508 | 7.3 | 2,129 | 1,996 | 6.7 | ||||||||||||||||||||||
EBIT | $ | 1,603 | $ | 1,413 | 13.4 | % | $ | 4,761 | $ | 4,959 | (4.0 | )% |
Note: Effective
(a) SG&A includes credit card revenues and expenses
prior to the March 2013 sale of our U.S. consumer credit card portfolio
to
Three Months Ended | Twelve Months Ended | |||||||||||||||
Rate Analysis | January 31, | February 1, | January 31, | February 1, | ||||||||||||
(unaudited) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Gross margin rate | 28.5 | % | 27.6 | % | 29.4 | % | 29.8 | % | ||||||||
SG&A expense rate | 18.6 | 18.4 | 19.9 | 20.0 | ||||||||||||
EBITDA margin rate | 9.9 | 9.2 | 9.5 | 9.8 | ||||||||||||
Depreciation and amortization expense rate | 2.5 | 2.4 | 2.9 | 2.8 | ||||||||||||
EBIT margin rate | 7.4 | 6.8 | 6.6 | 7.0 |
Rate analysis metrics are computed by dividing the applicable amount by sales.
Three Months Ended | Twelve Months Ended | |||||||||||||||
Comparable Sales | January 31, | February 1, | January 31, | February 1, | ||||||||||||
(unaudited) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Comparable sales change | 3.8 | % | (2.5 | )% | 1.3 | % | (0.4 | )% | ||||||||
Drivers of change in comparable sales: | ||||||||||||||||
Number of transactions | 3.2 | (5.5 | ) | (0.2 | ) | (2.7 | ) | |||||||||
Average transaction amount | 0.6 | 3.2 | 1.5 | 2.3 | ||||||||||||
Selling price per unit | 4.5 | 2.0 | 3.2 | 1.6 | ||||||||||||
Units per transaction | (3.7 | ) | 1.1 | (1.6 | ) | 0.7 | ||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
Contribution to Comparable Sales Change | January 31, | February 1, | January 31, | February 1, | ||||||||||||
(unaudited) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Stores channel comparable sales change | 2.8 | % | (3.0 | )% | 0.7 | % | (0.7 | )% | ||||||||
Digital channel contribution to comparable sales change | 0.9 | 0.5 | 0.7 | 0.3 | ||||||||||||
Total comparable sales change | 3.8 | % | (2.5 | )% | 1.3 | % | (0.4 | )% |
The comparable sales increases or decreases above are calculated by comparing sales in fiscal year periods with comparable prior-year periods of equivalent length. Amounts may not foot due to rounding.
Three Months Ended | Twelve Months Ended | |||||||||||||||
REDcard Penetration | January 31, | February 1, | January 31, | February 1, | ||||||||||||
(unaudited) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Target Credit Cards | 9.9 | % | 10.0 | % | 9.7 | % | 9.3 | % | ||||||||
Target Debit Card | 11.1 | 10.9 | 11.2 | 9.9 | ||||||||||||
Total REDcard Penetration | 21.1 | % | 20.9 | % | 20.9 | % | 19.3 | % |
Note: The sum of Target Credit Cards and Target Debit Card penetration may not equal Total REDcard Penetration due to rounding.
Represents the percentage of
Number of Stores | Retail Square Feet(a) | ||||||||||||||
Number of Stores and Retail Square Feet | January 31, | February 1, | January 31, | February 1, | |||||||||||
(unaudited) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Expanded food assortment stores | 1,292 | 1,245 | 167,026 | 160,891 | |||||||||||
SuperTarget stores | 249 | 251 | 44,151 | 44,500 | |||||||||||
General merchandise stores | 240 | 289 | 27,945 | 33,843 | |||||||||||
CityTarget stores | 8 | 8 | 820 | 820 | |||||||||||
Target Express | 1 | — | 21 | — | |||||||||||
Total | 1,790 | 1,793 | 239,963 | 240,054 |
(a) In thousands: reflects total square feet, less office, distribution center and vacant space.
TARGET CORPORATION | ||||||||||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||||||||||||
Earnings Per Share From Continuing Operations |
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||
January 31, | February 1, | January 31, | February 1, | |||||||||||||||||||||||||
(unaudited) | 2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||||||||
GAAP diluted earnings per share | $ | 1.49 | $ | 1.22 | 22.0 | % | $ | 3.83 | $ | 4.20 | (8.8 | )% | ||||||||||||||||
Adjustments | 0.01 | 0.09 | 0.44 | 0.18 | ||||||||||||||||||||||||
Adjusted diluted earnings per share | $ | 1.50 | $ | 1.31 | 14.9 | % | $ | 4.27 | $ | 4.38 | (2.6 | )% | ||||||||||||||||
To provide additional transparency, we have disclosed non-GAAP adjusted
diluted earnings per share from continuing operations (Adjusted EPS).
This metric excludes the impact of the 2013 sale of our U.S. consumer
credit card receivables portfolio, losses on early retirement of debt,
net expenses related to the 2013 data breach and other matters presented
below. We believe this information is useful in providing
period-to-period comparisons of the results of our continuing
operations. This measure is not in accordance with, or an alternative
to, generally accepted accounting principles in
Three Months Ended | ||||||||||||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||||||||||
|
|
Per Share |
|
Per Share | ||||||||||||||||||||||||||||||
(millions, except per share data) (unaudited) |
Pretax |
Net of Tax |
Amounts | Pretax |
Net of Tax |
Amounts | Change | |||||||||||||||||||||||||||
GAAP diluted earnings per share from continuing operations | $ | 1.49 | $ | 1.22 | 22.0 | % | ||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||||||||
Reduction of beneficial interest asset | $ | 13 | $ | 8 | $ | 0.01 | $ | 16 | $ | 10 | $ | 0.02 | ||||||||||||||||||||||
Data Breach related costs, net of insurance receivable | 4 | 4 | 0.01 | 17 | 11 | 0.02 | ||||||||||||||||||||||||||||
Other (a) | — | — | — | 64 | 40 | 0.06 | ||||||||||||||||||||||||||||
Resolution of income tax matters | — | (5 | ) | (0.01 | ) | — | (6 | ) | (0.01 | ) | ||||||||||||||||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 1.50 | $ | 1.31 | 14.9 | % | ||||||||||||||||||||||||||||
Twelve Months Ended | ||||||||||||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||||||||||
|
Per Share |
|
Per Share | |||||||||||||||||||||||||||||||
(millions, except per share data) (unaudited) |
Pretax |
Net of Tax |
Amounts | Pretax |
Net of Tax |
Amounts | Change | |||||||||||||||||||||||||||
GAAP diluted earnings per share from continuing operations | $ | 3.83 | $ | 4.20 | (8.8 | )% | ||||||||||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||||||||||
Loss on early retirement of debt | $ | 285 | $ | 173 | $ | 0.27 | $ | 445 | $ | 270 | $ | 0.42 | ||||||||||||||||||||||
Data Breach related costs, net of insurance receivable (b) | 145 | 94 | 0.15 | 17 | 11 | 0.02 | ||||||||||||||||||||||||||||
Reduction of beneficial interest asset | 53 | 32 | 0.05 | 98 | 61 | 0.09 | ||||||||||||||||||||||||||||
Other (a) | 29 | 18 | 0.03 | 64 | 40 | 0.06 | ||||||||||||||||||||||||||||
Gain on receivables transaction | — | — | — | (391 | ) | (247 | ) | (0.38 | ) | |||||||||||||||||||||||||
Resolution of income tax matters | — | (35 | ) | (0.06 | ) | — | (16 | ) | (0.03 | ) | ||||||||||||||||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 4.27 | $ | 4.38 | (2.6 | )% |
Note: The sum of the non-GAAP adjustments may not equal the total adjustment amounts due to rounding.
(a) For the twelve months ended
(b) Along with legal and other professional services,
expenses for the twelve months ended
Subject to reclassification
Source:
Target Corporation
Investors:
John Hulbert, 612-761-6627
or
Media:
Eddie
Baeb, 612-761-9658
or
Target Media Hotline, 612-696-3400