Summary
Target Corporation's first quarter 2011 report shows modest revenue growth of 2.2% to $15.9 billion, with earnings before interest and taxes (EBIT) slightly increasing by 1.8% to $1.26 billion. The company is strategically focusing on its U.S. Retail and U.S. Credit Card segments, while making significant investments for international expansion into Canada. The U.S. Retail segment experienced a 2.8% sales increase, driven by comparable-store sales growth, though its gross margin rate declined due to the new 5% REDcard Rewards program and expansion of food assortments. Conversely, the U.S. Credit Card segment saw a notable profit increase, primarily due to a significant reduction in bad debt expense, reflecting improved credit risk trends. The company also announced plans to explore the sale of its credit card receivables portfolio, contingent on favorable strategic and financial conditions. The company continues to execute its capital allocation strategy, repurchasing $819 million in stock during the quarter, and increasing dividends by 38% year-over-year. A major strategic development is the agreement to acquire leasehold interests for up to 220 Zellers sites in Canada, with plans to invest $1.8 billion to $2.3 billion over three years to establish its Canadian retail presence, expected to primarily launch in 2013. This expansion, while promising long-term growth, is projected to have a near-term dilutive impact on earnings per share. Management remains confident in its liquidity and ability to fund operations and strategic initiatives.
Financial Highlights
45 data points| Revenue | $15.94B |
| Cost of Revenue | $10.84B |
| Gross Profit | $5.10B |
| SG&A Expenses | $3.23B |
| Operating Income | $1.25B |
| Interest Expense | $183.00M |
| Net Income | $689.00M |
| EPS (Basic) | $0.99 |
| EPS (Diluted) | $0.99 |
| Shares Outstanding (Basic) | 693.00M |
| Shares Outstanding (Diluted) | 697.00M |
Key Highlights
- 1Consolidated revenues increased 2.2% to $15.9 billion, with EBIT up 1.8% to $1.26 billion for the first quarter of 2011.
- 2U.S. Retail segment sales grew 2.8%, but gross margin declined due to the new 5% REDcard Rewards program and expanded food assortment.
- 3U.S. Credit Card segment profit rose significantly due to a sharp decrease in bad debt expense, indicating improved credit quality.
- 4Target announced plans to acquire leasehold interests for up to 220 sites in Canada, signaling a major international expansion initiative.
- 5The company repurchased $819 million of its common stock and increased its dividend payment by 38% year-over-year.
- 6Management is exploring the potential sale of its credit card receivables portfolio.
- 7Expansion into Canada is expected to incur initial start-up costs and has a projected dilutive EPS impact for 2011 and 2012.