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Target Corporation Reports Third Quarter Earnings

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Target Unveils First Look at Cyber Deals, Available Nov. 28-29
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MINNEAPOLIS, Nov. 17, 2021 /PRNewswire/ --

  • Third quarter comparable sales grew 12.7 percent, on top of 20.7 percent growth last year.

  • 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



...