01—Abstract
Summary
Summary of the 10-K filed March 14, 2018. Cited figures are marked; the original filing is the authoritative source.
Target Corporation's 2018 10-K filing details a year of strategic investments and operational adjustments, reporting increased sales driven by comparable sales growth and strong digital channel performance.
The company highlighted a 1.3% increase in comparable sales, with digital channels contributing significantly to this growth at 27%. A notable strategic move was the acquisition of Shipt, Inc. for approximately $550 milliona, aimed at enhancing same-day delivery capabilities. Financial performance in fiscal year 2017 (a 53-week period) saw GAAP diluted earnings per share from continuing operations at $5.32, which included discrete benefits from the Tax Cuts and Jobs Act.
Adjusted diluted earnings per share were $4.71b, excluding these tax benefits. The company demonstrated a commitment to returning capital to shareholders, disbursing $2.4 billion through dividends and share repurchases. Despite increased digital fulfillment costs impacting gross margin, Target continued to invest in store remodels and supply chain infrastructure, anticipating higher capital expenditures in the upcoming fiscal year.
02—Key points
Key Highlights
- Target reported a 3.4% increase in total sales to $71.9 billion for fiscal year 2017, with comparable sales growing by 1.3%.
- Digital channel sales experienced robust growth of 27%, contributing 1.2 percentage points to the overall comparable sales increase.
- The company acquired Shipt, Inc., an online same-day delivery company, for approximately $550 million to bolster its fulfillment capabilities.
- Fiscal year 2017 benefited from a 53rd week, contributing $1.2 billion in sales, and also saw a significant positive impact from the Tax Cuts and Jobs Act, reducing the effective tax rate and boosting earnings.
- Target returned $2.4 billion to shareholders through dividends and share repurchases during fiscal year 2017.
- Gross margin rate slightly decreased to 28.9% from 29.3% in the prior year, primarily due to increased digital fulfillment costs.
- Capital expenditures increased, with a significant portion allocated to accelerating store remodels and supply chain investments, signaling continued investment in the store fleet and operations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Target Corp kept $0.04.
- Revenue$71.88B100.0%
- Cost of revenue−$51.13B71.1%
- Gross profit$20.75B28.9%
- Operating costs−$16.53B23.0%
- Operating income$4.22B5.9%
- Interest, other & tax−$1.31B1.8%
- Net income$2.91B4.1%
Where FY2018 revenue went
$71.88B- Cost of revenue: $51.13B, 71% of revenue
- SG&A: $15.14B, 21% of revenue
- Net income: $2.91B, 4.1% of revenue
- Other operating costs: $1.39B, 1.9% of revenue
- Interest, other & tax: $1.31B, 1.8% of revenue
Kept 4.1% as net incomeNet income $2.91B · 4.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed March 14, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $71.88B$69.50B | +3.4% |
| Cost of Revenue | $51.13B$49.15B | +4.0% |
| Gross Profit | $20.75B$20.35B | +2.0% |
| SG&A Expenses | $15.14B$14.22B | +6.5% |
| Operating Income | $4.22B$4.86B | −13.2% |
| Interest Expense | $653.00M$991.00M | −34.1% |
| Net Income | $2.91B$2.73B | +6.6% |
| EPS (Basic) | $5.32$4.73 | +12.5% |
| EPS (Diluted) | $5.29$4.69 | +12.8% |
| Shares Outstanding (Basic) | 546.80M577.60M | −5.3% |
| Shares Outstanding (Diluted) | 550.30M582.50M | −5.5% |
05—Questions
Frequently Asked Questions
What was Target's financial performance in fiscal year 2017?
In fiscal year 2017 (a 53-week period), Target reported total sales of $71.9 billion, a 3.4% increase from the prior year. Comparable sales grew by 1.3%, driven by a 1.6% increase in transactions. GAAP diluted earnings per share from continuing operations were $5.32, benefiting from discrete items related to the Tax Cuts and Jobs Act. Adjusted diluted earnings per share, excluding these tax benefits, were $4.71.
How did Target's digital channels perform, and what strategic acquisitions were made?
Target's digital channels showed strong performance with a 27% sales growth, contributing significantly to the overall comparable sales increase. A key strategic investment during the year was the acquisition of Shipt, Inc., an online same-day delivery company, for approximately $550 million, aimed at enhancing same-day delivery services to guests.
What is the company's approach to returning capital to shareholders?
Target demonstrated a balanced approach to capital allocation. In fiscal year 2017, the company returned $2.4 billion to shareholders through dividends and share repurchases. This aligns with their stated priority to invest in profitable growth, maintain a competitive dividend, and return excess cash through share repurchases.
What were the key impacts on profitability and margins?
The gross margin rate slightly declined to 28.9% from 29.3% in the prior year, mainly due to increased costs associated with fulfilling digital orders. Selling, General, and Administrative (SG&A) expenses as a percentage of sales increased to 19.8% from 19.2% in the prior year, primarily due to higher compensation costs. The effective income tax rate significantly decreased to 19.7% from 32.7% in 2016, largely due to the U.S. corporate tax rate reduction from the Tax Cuts and Jobs Act.
06—Continue