10-QPeriod: Q2 FY2011

TARGET CORP Quarterly Report for Q2 Ended Jul 31, 2010

Filed August 27, 2010For Securities:TGT

Summary

Target Corporation's (TGT) Q2 2010 results show a solid performance with increased sales and improved profitability, particularly in the Credit Card Segment. Total revenues rose to $15.53 billion for the quarter, driven by a 3.8% increase in Retail Segment sales, which benefited from comparable-store sales growth. The Credit Card Segment saw a significant boost in profit primarily due to a substantial reduction in bad debt expense, reflecting improved credit trends. Financially, the company maintained healthy margins and generated strong operating cash flow. Despite a decrease in average credit card receivables, management's focus on risk management and cost control contributed to overall financial stability. Looking ahead, Target anticipates continued growth, supported by strategic initiatives like the upcoming REDcard rewards program and store remodel program, though some of these initiatives are expected to impact gross margin rates in the short term.

Financial Highlights

49 data points
Beta

Revenue

$15.53B

33.7% Gross Margin

Net Income

$679.00M

4.4% Net Margin

EPS (Diluted)

$0.92

Total Assets

$43.66B

Free Cash Flow

$86.00M

Financial Statements
Beta
Revenue$15.53B
Cost of Revenue$10.29B
Gross Profit$5.24B
SG&A Expenses$3.26B
Operating Income$1.25B
Interest Expense$185.00M
Net Income$679.00M
EPS (Basic)$0.93
EPS (Diluted)$0.92
Shares Outstanding (Basic)731.10M
Shares Outstanding (Diluted)736.60M

Key Highlights

  • 1Total revenues for the quarter ended July 31, 2010, increased to $15.53 billion from $15.07 billion in the prior year period.
  • 2Retail Segment sales grew by 3.8% to $15.13 billion, with comparable-store sales increasing by 1.7%.
  • 3Credit Card Segment profit saw a significant increase to $149 million from $63 million year-over-year, largely driven by a 42.8% decrease in bad debt expense.
  • 4Net earnings for the quarter were $679 million, or $0.92 per diluted share, up from $594 million, or $0.79 per diluted share, in the prior year.
  • 5The company repurchased approximately 17.5 million shares of common stock for $907 million during the quarter.
  • 6Inventory levels increased by 2.7% year-over-year to support higher retail square footage and strategic initiatives.
  • 7Target issued $1 billion in long-term debt at a 3.875% interest rate maturing in July 2020 to fund general corporate purposes.

Frequently Asked Questions

Target reported total revenues of $15.53 billion for the quarter ended July 31, 2010, an increase from $15.07 billion in the same period of the prior year. The Retail Segment showed a 3.8% sales increase, contributing to overall growth.

The significant increase in Credit Card Segment profit was primarily driven by a substantial reduction in bad debt expense, which decreased by 42.8% year-over-year. This reflects improved credit trends and effective risk management by the company.

Target anticipates continued growth, with comparable-store sales expected to increase between 1% and 3% in the third quarter and at a faster pace in the fourth quarter. This outlook is supported by a new 5% REDcard rewards program launching in October 2010 and an ongoing store remodel program. While these initiatives are expected to drive incremental sales, they are also projected to have a lower gross margin rate and SG&A expense rate than the base business.

Target generated $1.83 billion in cash flow from operations for the first six months of 2010. The company also issued $1 billion in long-term debt in July 2010. They are committed to share repurchases and dividend payments, while maintaining compliance with debt covenants and having access to a $2 billion unsecured revolving credit facility.