01—Abstract
Summary
Summary of the 10-K filed March 8, 2017. Cited figures are marked; the original filing is the authoritative source.
Target Corporation's 2016 10-K report for the fiscal year ending January 28, 2017, highlights a challenging year marked by a significant sales decline primarily due to the divestiture of its Canadian operations and the sale of its pharmacy and clinic businesses to CVS.
While comparable sales saw a slight decrease, digital channel sales demonstrated robust growth of 27%, indicating a positive shift towards online engagement. The company continued its commitment to returning capital to shareholders, with $5.0 billiona distributed through dividends and share repurchases, underscoring a focus on shareholder value amidst operational changes. Financially, Target navigated a complex operational landscape.
Despite the reported GAAP earnings per share from continuing operations of $4.58b, adjusted earnings per share stood at $5.01, reflecting the impact of specific non-operational items. The company maintained a strong balance sheet with total assets of $37.4 billion and long-term debt of $12.7 billion.
Significant strategic decisions, such as exiting the Canadian market and divesting the pharmacy business, have reshaped the company's operational footprint and financial reporting, with discontinued operations showing a net profit of $68 millionc in the current year, a stark contrast to the prior year's loss. Investors should monitor the ongoing integration of digital strategies and the company's ability to drive comparable sales growth across its physical and online channels.
02—Key points
Key Highlights
- Significant sales decrease of 5.8% in fiscal year 2016, largely attributable to the divestiture of the Canadian operations and the sale of the pharmacy and clinic businesses to CVS.
- Comparable sales decreased by 0.5%, with a notable 0.8% decrease in store traffic, indicating challenges in physical store performance.
- Digital channel sales experienced strong growth of 27%, contributing positively to overall comparable sales and highlighting the success of online strategies.
- The company returned a substantial $5.0 billion to shareholders through dividends and share repurchases, demonstrating a commitment to capital return.
- Adjusted diluted earnings per share from continuing operations (Adjusted EPS) were $5.01, excluding certain items not related to routine retail operations.
- The company reported total assets of $37.4 billion and total liabilities of $23.7 billion as of January 28, 2017.
- Discontinued operations, primarily related to the Canada exit, resulted in a net profit of $68 million for the fiscal year 2016, a positive swing from the prior year's loss.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Target Corp kept $0.04.
- Revenue$69.50B100.0%
- Cost of revenue−$49.15B70.7%
- Gross profit$20.35B29.3%
- Operating costs−$15.49B22.3%
- Operating income$4.86B7.0%
- Interest, other & tax−$2.13B3.1%
- Net income$2.73B3.9%
Where FY2017 revenue went
$69.50B- Cost of revenue: $49.15B, 71% of revenue
- SG&A: $14.22B, 20% of revenue
- Net income: $2.73B, 3.9% of revenue
- Other operating costs: $1.27B, 1.8% of revenue
- Interest, other & tax: $2.13B, 3.1% of revenue
Kept 3.9% as net incomeNet income $2.73B · 3.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 8, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $69.50B$73.78B | −5.8% |
| Cost of Revenue | $49.15B$52.24B | −5.9% |
| Gross Profit | $20.35B$21.54B | −5.5% |
| SG&A Expenses | $14.22B$14.66B | −3.1% |
| Operating Income | $4.86B$3.32B | +46.5% |
| Interest Expense | $991.00M$607.00M | +63.3% |
| Net Income | $2.73B$3.36B | −18.7% |
| EPS (Basic) | $4.73$5.35 | −11.6% |
| EPS (Diluted) | $4.69$5.31 | −11.7% |
| Shares Outstanding (Basic) | 577.60M627.70M | −8.0% |
| Shares Outstanding (Diluted) | 582.50M632.90M | −8.0% |
05—Questions
Frequently Asked Questions
What were the main factors impacting Target's sales performance in fiscal year 2016?
The primary drivers for the sales decrease in fiscal year 2016 were the divestiture of the company's Canadian operations and the sale of its pharmacy and clinic businesses to CVS. These events significantly reduced reported revenue compared to the prior year.
How did Target perform in terms of comparable sales and store traffic?
Target experienced a slight decrease of 0.5% in comparable sales, which was influenced by a 0.8% decline in store traffic. This indicates that while the overall sales mix was challenged, the digital channel saw substantial growth, partially offsetting the decline in physical store performance.
What is Target's strategy for returning capital to shareholders?
Target demonstrated a strong commitment to shareholder returns by distributing $5.0 billion in fiscal year 2016 through a combination of dividends and share repurchases. This aligns with their capital allocation strategy prioritizing profitable growth, dividends, and then share repurchases.
How does the sale of the pharmacy and clinic business affect Target's financial reporting?
The sale of the pharmacy and clinic businesses to CVS in December 2015 resulted in a gain recognized in that fiscal year and has been classified under 'continuing operations' for financial reporting. This transaction, along with the prior exit from Canada, has reshaped the company's operational and reporting segments.
06—Continue