01—Abstract
Summary
Summary of the 10-K filed March 11, 2011. Cited figures are marked; the original filing is the authoritative source.
Target Corporation's 2011 10-K filing reveals a company focused on strengthening its retail operations and managing its credit card segment.
In fiscal year 2010, the Retail Segment saw sales increase by 3.7%a due to comparable store sales growth and new store contributions. Profitability in the Credit Card Segment improved significantly, driven by a decrease in bad debt expense from better risk management. The company announced a major strategic move into Canada, agreeing to acquire leasehold interests for up to 220 sites, with plans to open 100-150 stores primarily in 2013, requiring significant investment.
Furthermore, Target is actively pursuing the sale of its credit card receivables portfolio, aiming to streamline its financial operations. The company maintained a strong focus on shareholder returns, evidenced by substantial share repurchases and a consistent dividend payment history. Risk factors highlighted include intense competition, evolving consumer preferences, macroeconomic sensitivity, and the operational complexities of a large workforce and an expanding international presence.
02—Key points
Key Highlights
- Retail Segment sales grew by 3.7% in fiscal year 2010, driven by comparable store sales increases and new store openings.
- Significant improvement in the Credit Card Segment's profitability was achieved through a reduction in bad debt expense, attributed to enhanced risk management.
- Target announced a substantial expansion into Canada, agreeing to acquire leasehold interests for up to 220 locations, with plans for 100-150 stores to open primarily in 2013.
- The company is actively exploring the sale of its credit card receivables portfolio to optimize its financial strategy.
- Shareholder returns remain a priority, with continued share repurchases and dividend payments, including a 31.1% increase in declared dividends per share in 2010.
- The company is migrating its online platform (Target.com) from Amazon's operation to its own proprietary platform in 2011, which carries associated risks if not executed successfully.
- Risk factors emphasize the highly competitive retail landscape, susceptibility to macroeconomic conditions, and the importance of maintaining brand reputation and guest trust.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Target Corp kept $0.04.
- Revenue$67.39B100.0%
- Cost of revenue−$45.73B67.9%
- Gross profit$21.66B32.1%
- Operating costs−$16.50B24.5%
- Operating income$5.17B7.7%
- Interest, other & tax−$2.25B3.3%
- Net income$2.92B4.3%
Where FY2011 revenue went
$67.39B- Cost of revenue: $45.73B, 68% of revenue
- SG&A: $13.47B, 20% of revenue
- Net income: $2.92B, 4.3% of revenue
- Other operating costs: $3.03B, 4.5% of revenue
- Interest, other & tax: $2.25B, 3.3% of revenue
Kept 4.3% as net incomeNet income $2.92B · 4.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed March 11, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $67.39B$65.36B | +3.1% |
| Cost of Revenue | $45.73B$44.06B | +3.8% |
| Gross Profit | $21.66B$21.30B | +1.7% |
| SG&A Expenses | $13.47B$13.08B | +3.0% |
| Operating Income | $5.17B$4.58B | +13.0% |
| Interest Expense | $757.00M$801.00M | −5.5% |
| Net Income | $2.92B$2.49B | +17.4% |
| EPS (Basic) | $4.03$3.31 | +21.8% |
| EPS (Diluted) | $4.00$3.30 | +21.2% |
| Shares Outstanding (Basic) | 723.60M752.00M | −3.8% |
| Shares Outstanding (Diluted) | 729.40M754.80M | −3.4% |
05—Questions
Frequently Asked Questions
What is Target's strategy for international expansion?
Target is executing a significant international expansion by entering the Canadian retail market. This involves acquiring leasehold interests for up to 220 sites from Zellers Inc., with plans to renovate and open 100 to 150 Target stores primarily in 2013. This expansion is expected to require an investment of over C$1 billion in renovations.
What is Target's plan regarding its credit card business?
Target is actively pursuing the sale of its credit card receivables portfolio. This move aims to streamline financial operations and potentially provide additional funding. The gross balance of the credit card receivables portfolio was $6,843 million as of January 29, 2011.
How did Target perform in its fiscal year 2010, and what were the key financial drivers?
In fiscal year 2010, Target's Retail Segment experienced a 3.7% increase in sales, driven by a 2.1% comparable-store sales increase and contributions from new stores. The Credit Card Segment saw a significant rise in profit primarily due to declining bad debt expenses resulting from improved risk management and credit quality trends.
What are some of the major risks highlighted in the filing?
Key risks identified include intense competition in the retail sector, the need to adapt quickly to changing consumer preferences, the susceptibility of the business to U.S. macroeconomic conditions and consumer confidence, challenges in managing a large workforce, potential supply chain disruptions, and risks associated with the planned migration of Target.com to a proprietary platform and the expansion into Canada.
06—Continue