10-QPeriod: Q3 FY2011

TARGET CORP Quarterly Report for Q3 Ended Oct 30, 2010

Filed December 3, 2010For Securities:TGT

Summary

Target Corporation's (TGT) third quarter ended October 30, 2010, showed a mixed financial performance. The Retail Segment experienced a modest sales increase of 3.0%, driven by a 1.6% comparable-store sales increase and new store contributions. Despite this top-line growth, profit margins in the Retail Segment remained relatively stable. In contrast, the Credit Card Segment saw a significant increase in segment profit, primarily due to a substantial decrease in bad debt expense, reflecting improved credit trends. However, overall credit card revenues declined due to lower average receivables and reduced late fees. The company also actively engaged in its share repurchase program, demonstrating a commitment to returning value to shareholders, and initiated a new 5% REDcard rewards program aimed at driving incremental sales and customer loyalty.

Financial Highlights

48 data points
Beta

Revenue

$15.61B

32.3% Gross Margin

Net Income

$535.00M

3.4% Net Margin

EPS (Diluted)

$0.74

Total Assets

$44.95B

Free Cash Flow

$408.00M

Financial Statements
Beta
Revenue$15.61B
Cost of Revenue$10.56B
Gross Profit$5.04B
SG&A Expenses$3.35B
Operating Income$947.00M
Interest Expense$194.00M
Net Income$535.00M
EPS (Basic)$0.75
EPS (Diluted)$0.74
Shares Outstanding (Basic)715.40M
Shares Outstanding (Diluted)721.00M

Key Highlights

  • 1Total revenues increased to $15.6 billion for the third quarter of 2010 from $15.3 billion in the prior year's comparable period.
  • 2Net earnings for the third quarter of 2010 rose to $535 million, or $0.74 per diluted share, compared to $436 million, or $0.58 per diluted share, in the third quarter of 2009.
  • 3The Retail Segment's sales grew by 3.0% to $15.2 billion, with comparable-store sales increasing by 1.6%.
  • 4The Credit Card Segment's profit significantly increased to $130 million from $60 million, largely driven by a substantial decrease in bad debt expense.
  • 5Target repurchased approximately 15.2 million shares of common stock for $793 million during the third quarter of 2010.
  • 6The company launched a new 5% REDcard rewards program in October 2010, replacing the previous points-based system, aimed at simplifying the program and driving incremental sales.
  • 7Inventory levels increased to $9.55 billion from $9.38 billion at the end of the prior fiscal year, reflecting inventory to support higher retail square footage and strategic initiatives.

Frequently Asked Questions

Target reported an increase in total revenues to $15.6 billion and net earnings of $535 million ($0.74 per diluted share) for the quarter ended October 30, 2010. The Retail Segment saw a modest sales increase, while the Credit Card Segment's profit grew significantly due to lower bad debt expenses.

The Retail Segment experienced a 3.0% increase in sales, with comparable-store sales up 1.6%. The Credit Card Segment saw a substantial rise in profit (from $60 million to $130 million) primarily due to a significant reduction in bad debt expense, although total credit card revenues declined.

Target continued its share repurchase program, buying back approximately 15.2 million shares for $793 million in the third quarter of 2010. The company also continued its dividend payments, with plans to maintain them in the future.

Target is focusing on a store remodel program and the new 5% REDcard rewards program, launched in October 2010. These initiatives are expected to drive comparable-store sales growth, although they may impact gross margin rates and SG&A expense rates.