Target Corporation Fourth Quarter Earnings Per Share $1.23
January 6th, 2009 |MINNEAPOLIS, Feb 26, 2008 (BUSINESS WIRE) -- Target Corporation (NYSE:TGT) today reported net earnings of $1,028 million for the fourth quarter ended February 2, 2008, a thirteen-week period, compared with $1,119 million in the fourth quarter ended February 3, 2007, a fourteen-week period. Earnings per share in the fourth quarter decreased 4.7 percent to $1.23 from $1.29 in the same period a year ago. All earnings per share figures refer to diluted earnings per share.
For the full fiscal year 2007, a 52-week period, net earnings were $2.849 billion, compared with $2.787 billion in fiscal 2006, a 53-week period. Earnings per share increased 3.9 percent to $3.33 from $3.21 a year ago.
"Our financial performance in 2007 fell short of our expectations as the pace of sales and earnings slowed considerably in the second half of the year," said Bob Ulrich, chairman and chief executive officer. "As we enter 2008, we remain keenly focused on the disciplined execution of our core strategy, positioning Target to deliver improved financial results, even in the face of continued challenges in the current economic environment."
Full-Year Results
For fiscal 2007, total revenues increased 6.5 percent to $63.367 billion from $59.490 billion in 2006, fueled by the contribution from new store expansion, a 3.0 percent increase in comparable store sales, and contribution from credit card operations, offset by the impact of an extra fiscal week in 2006. On a 52-week over 52-week basis, total revenues in 2007 increased 8.4 percent. 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) for the full year increased 4.0 percent to $5.272 billion, compared with $5.069 billion a year ago. EBIT in core retail operations grew 1.3 percent, while the contribution from credit card operations to total EBIT rose 18.9 percent. Within core retail operations, both gross margin rate and expense rate were slightly 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.
Earnings before taxes (EBT) for the full year totaled $4.625 billion, an increase of $128 million, or 2.8 percent over 2006. The contribution from the company's credit card operations to full year earnings before taxes, net of the allocated interest expense, was $600 million, an increase of $103 million, or 20.8 percent, over fiscal 2006. Credit card EBT performance was driven by strong growth in average receivables, combined with a moderate increase in the yield on those receivables.
Net interest expense for the year increased $75 million compared with 2006, due to higher average debt balances, including the debt to fund growth in accounts receivable.
The company's annual effective income tax rate was 38.4 percent in 2007 compared with 38.0 percent in 2006.
Fourth-Quarter Results
Total revenues in the fourth quarter increased 0.8 percent to $19.872 billion from $19.710 billion in 2006, due to the contribution from new store expansion, a 0.2 percent increase in comparable store sales, and contribution from credit card operations, offset by the impact of an extra fiscal week in 2006. On a 13-week over 13-week basis, total revenues in fourth-quarter 2007 increased 6.3 percent.
Fourth quarter 2007 EBIT decreased 5.8 percent to $1.846 billion from $1.960 billion in the fourth quarter a year ago. EBIT in core retail operations fell 7.6 percent, while the contribution from credit card operations to total EBIT rose 9.0 percent over last year's 14-week quarter. Within core retail operations, gross margin rate was unfavorable to the prior year while expense rate was essentially unchanged from a year ago.
Net interest expense for the quarter increased $30 million over fourth quarter 2006, due to higher average debt balances offset by the cost of funding an extra week in fourth quarter 2006.
EBT in the fourth quarter totaled $1.665 billion, representing a decrease of $144 million, or 7.9 percent, from the same period in 2006. The contribution from the company's credit card operations to these results was $137 million, an increase of $15 million, or 12.0 percent, from a year ago.
Other Factors
In the fourth quarter, under the share repurchase program announced in November 2007, the company repurchased approximately 26.5 million shares of its common stock at an average price of $54.64, for a total investment of $1.45 billion. For the full year, the company repurchased approximately 46.2 million shares of its common stock at an average price of $57.24, for a total investment of $2.64 billion.
In addition to its open market share repurchase activity, the company also invested $331 million in a related series of derivative transactions during the quarter involving the purchase and sale of call options on its common stock. These options expire in April, May and June, 2008, and give the company the right to purchase up to 30 million shares of its common stock at various prices. "These call options allowed Target to enjoy the economic benefits of controlling the additional repurchase of nearly 4 percent of our outstanding shares at a time when, prior to our January issuance of $4 billion in long-term debt, our share price presented a compelling opportunity," said Doug Scovanner, chief financial officer.
Miscellaneous
Target Corporation will webcast its fourth 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 "webcasts"). A telephone replay of the call will be available beginning at approximately 11:30am CST today through the end of business on February 28, 2008. The replay number is (800) 642-1687 (passcode: 7391399).
Forward-looking statements in this release, including the outlook for earnings, market share growth, credit card performance, full year tax rate, and the timing to complete the new 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 1,591 Target stores in 47 states.
Target Corporation news releases are available at www.target.com.
Consolidated Statements of Operations
---------------------------------------------------------------------
Three Months Ended Twelve Months Ended
------------------ -------------------
Feb. 2, Feb. 3, Feb. 2, Feb. 3,
(millions, except
per share data)
(unaudited) 2008 2007 Change 2008 2007 Change
----------------------------------------------------------------------
Sales $ 19,340 $ 19,269 0.4 % $ 61,471 $ 57,878 6.2%
Credit card
revenues 532 441 20.7 1,896 1,612 17.6
---------------------------------------------------------------------
Total revenues 19,872 19,710 0.8 63,367 59,490 6.5
Cost of sales 13,499 13,349 1.1 41,895 39,399 6.3
Selling, general
and
administrative
expenses 3,829 3,804 0.7 13,704 12,819 6.9
Credit card
expenses 263 195 34.9 837 707 18.3
Depreciation and
amortization 435 402 8.2 1,659 1,496 10.9
---------------------------------------------------------------------
Earnings before
interest expense
and income taxes 1,846 1,960 (5.8) 5,272 5,069 4.0
Net interest
expense 181 151 19.6 647 572 13.2
---------------------------------------------------------------------
Earnings before
income taxes 1,665 1,809 (7.9) 4,625 4,497 2.8
Provision for
income taxes 637 690 (7.6) 1,776 1,710 3.9
---------------------------------------------------------------------
Net earnings $ 1,028 $ 1,119 (8.2)% $ 2,849 $ 2,787 2.2%
---------------------------------------------------------------------
Basic earnings
per share $ 1.24 $ 1.30 (4.9)% $ 3.37 $ 3.23 4.2%
---------------------------------------------------------------------
Diluted earnings
per share $ 1.23 $ 1.29 (4.7)% $ 3.33 $ 3.21 3.9%
---------------------------------------------------------------------
Weighted average
common shares
outstanding
Basic 829.4 858.5 845.4 861.9
Diluted 834.3 865.4 850.8 868.6
Subject to reclassification
Consolidated Statements of Financial Position
----------------------------------------------------------------------
Feb. 2, Feb. 3,
(millions) (unaudited) 2008 2007
----------------------------------------------------------------------
Assets
Cash and cash equivalents $ 2,450 $ 813
Accounts receivable, net 8,054 6,194
Inventory 6,780 6,254
Other current assets 1,622 1,445
----------------------------------------------------------------------
Total current assets 18,906 14,706
Property and equipment
Land 5,522 4,934
Buildings and improvements 18,329 16,110
Fixtures and equipment 3,858 3,553
Computer hardware and software 2,421 2,188
Construction-in-progress 1,852 1,596
Accumulated depreciation (7,887) (6,950)
----------------------------------------------------------------------
Property and equipment, net 24,095 21,431
Other noncurrent assets 1,559 1,212
----------------------------------------------------------------------
Total assets $44,560 $37,349
----------------------------------------------------------------------
Liabilities and Shareholders' Investment
Accounts payable $ 6,721 $ 6,575
Accrued and other current liabilities 3,097 3,180
Current portion of long-term debt and notes payable 1,964 1,362
----------------------------------------------------------------------
Total current liabilities 11,782 11,117
Long-term debt 15,126 8,675
Deferred income taxes 470 577
Other noncurrent liabilities 1,875 1,347
----------------------------------------------------------------------
Shareholders' investment
Common stock 68 72
Additional paid-in-capital 2,656 2,387
Retained earnings 12,761 13,417
Accumulated other comprehensive loss (178) (243)
----------------------------------------------------------------------
Total shareholders' investment 15,307 15,633
----------------------------------------------------------------------
Total liabilities and shareholders' investment $44,560 $37,349
----------------------------------------------------------------------
Common shares outstanding 818.7 859.8
----------------------------------------------------------------------
Subject to reclassification
Consolidated Statements of Cash Flows
----------------------------------------------------------------------
Twelve Months Ended
-------------------
Feb. 2, Feb. 3,
(millions) (unaudited) 2008 2007
----------------------------------------------------------------------
Operating Activities
Net earnings $ 2,849 $ 2,787
Reconciliation to cash flow
Depreciation and amortization 1,659 1,496
Share-based compensation expense 73 99
Deferred income taxes (70) (201)
Bad debt provision 481 380
Loss on disposal of property and equipment, net 28 53
Other non-cash items affecting earnings 52 (35)
Changes in operating accounts providing /
(requiring) cash:
Accounts receivable originated at Target (602) (226)
Inventory (525) (431)
Other current assets (139) (30)
Other noncurrent assets 101 5
Accounts payable 111 435
Accrued and other current liabilities 62 430
Other noncurrent liabilities 124 100
Other (79) -
----------------------------------------------------------------------
Cash flow provided by operations 4,125 4,862
----------------------------------------------------------------------
Investing Activities
Expenditures for property and equipment (4,369) (3,928)
Proceeds from disposal of property and
equipment 95 62
Change in accounts receivable originated at
third parties (1,739) (683)
Other investments (182) (144)
----------------------------------------------------------------------
Cash flow required for investing activities (6,195) (4,693)
----------------------------------------------------------------------
Financing Activities
Additions to short-term notes payable 1,000 -
Reductions of short-term notes payable (500) -
Additions to long-term debt 7,617 1,256
Reductions of long-term debt (1,326) (1,155)
Dividends paid (442) (380)
Repurchase of stock (2,477) (901)
Premium paid on call options (331) -
Stock option exercises and related tax benefit 210 181
Other (44) (5)
----------------------------------------------------------------------
Cash flow provided by / (required for) financing
activities 3,707 (1,004)
----------------------------------------------------------------------
Net increase / (decrease) in cash and cash
equivalents 1,637 (835)
Cash and cash equivalents at beginning of period 813 1,648
----------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,450 $ 813
----------------------------------------------------------------------
Subject to reclassification
Number of Stores, Retail Square Feet and Comparable-store Sales
----------------------------------------------------------------------
Number of Stores Retail Square Feet (a)
------------------- ---------------------------
Feb. 2, Feb. 3, Feb. 2, Feb. 3,
(unaudited) 2008 2007 2008 2007 Change
----------------------------------------------------------------------
Target general
merchandise stores 1,381 1,311 170,858 160,806 6.3%
SuperTarget stores 210 177 37,087 31,258 18.6%
----------------------------------------------------------------------
Total 1,591 1,488 207,945 192,064 8.3%
----------------------------------------------------------------------
(a) In thousands; reflects total square feet, less office,
distribution center and vacant space.
---------------------------------------------------------------
Three Months Ended Twelve Months Ended
------------------- --------------------
Feb. 2, Feb. 3, Feb. 2, Feb. 3,
(unaudited) 2008 2007 2008 2007
---------------------------------------------------------------
Comparable-store sales
(b) 0.2% 4.8% 3.0% 4.8%
---------------------------------------------------------------
(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 Twelve Months Ended
------------------- --------------------
Feb. 2, Feb. 3, Feb. 2, Feb. 3,
(millions) (unaudited) 2008 2007 2008 2007
---------------------------------------------------------------
Revenues
Finance charges $ 373 $ 305 $ 1,308 $ 1,117
Interest expense (a) (87) (83) (330) (286)
---------------------------------------------------------------
Net interest income 286 222 978 831
---------------------------------------------------------------
Late fees and other
revenues 112 95 422 356
Third-party merchant
fees 47 41 166 139
New account and
loyalty rewards
discounts (b) (41) (37) (113) (107)
---------------------------------------------------------------
Non-interest income 118 99 475 388
---------------------------------------------------------------
Net credit card
revenues 404 321 1,453 1,219
---------------------------------------------------------------
Expenses
Bad debt provision 170 102 481 380
Operations and
marketing 93 93 356 327
Allocated depreciation
charge (c) 4 4 16 15
---------------------------------------------------------------
Total expenses 267 199 853 722
---------------------------------------------------------------
Credit card
contribution to EBT $ 137 $ 122 $ 600 $ 497
---------------------------------------------------------------
As a percentage of
average receivables
(annualized) 6.6% 6.9% 8.3% 7.9%
Net interest margin
(annualized) (d) 13.8% 12.6% 13.4% 13.2%
---------------------------------------------------------------
---------------------------------------------------------------
Receivables
(millions)
---------------------------------------------------------------
Period-end receivables $ 8,624 $ 6,711 $ 8,624 $ 6,711
Average receivables $ 8,285 $ 6,544 $ 7,275 $ 6,161
Accounts with three or
more payments (60+
days) past due as a
percentage of period-
end receivables 4.0% 3.5%
Accounts with four or
more payments (90+
days) past due as a
percentage of period-
end receivables 2.7% 2.4%
---------------------------------------------------------------
---------------------------------------------------------------
Allowance for Doubtful
Accounts
(millions)
---------------------------------------------------------------
Allowance at beginning
of period $ 532 $ 514 $ 517 $ 451
Bad debt provision 170 102 481 380
Net write-offs (132) (99) (428) (314)
---------------------------------------------------------------
Allowance at end of
period $ 570 $ 517 $ 570 $ 517
---------------------------------------------------------------
As a percentage of
period-end
receivables 6.6% 7.7% 6.6% 7.7%
---------------------------------------------------------------
Net write-offs as a
percentage of average
receivables
(annualized) 6.4% 6.1% 5.9% 5.1%
---------------------------------------------------------------
(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.SOURCE: Target Corporation
Target Corporation John Hulbert, 612-761-6627 or Susan Kahn, 612-761-6735
Copyright Business Wire 2008 ********************************************************************** As of Friday, 02-22-2008 23:59, the latest Comtex SmarTrend® Alert, an automated pattern recognition system, indicated an UPTREND on 01-23-2008 for TGT @ $54.38. For more information on SmarTrend, contact your market data provider or go to www.mysmartrend.com SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright © 2004-2008 Comtex News Network, Inc. All rights reserved.
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