10-QPeriod: Q2 FY2013

TARGET CORP Quarterly Report for Q2 Ended Jul 28, 2012

Filed August 23, 2012For Securities:TGT

Summary

Target Corporation's (TGT) second quarter 2012 results show modest revenue growth and stable profitability, with total revenues increasing by 3.3% to $16.78 billion. Diluted earnings per share (EPS) saw a 3.4% rise to $1.06. The U.S. Retail Segment experienced a 3.5% sales increase, driven by comparable-store sales growth and new store contributions, while maintaining stable EBIT margins. The company also reported progress in its strategic initiatives, including ongoing store remodels and an increased REDcard penetration rate. Despite overall positive performance, the U.S. Credit Card Segment saw a decrease in segment profit due to annualizing a prior year reserve reduction and lower finance charge revenue from a smaller portfolio. The Canadian segment continues to incur startup costs, leading to a net loss for the quarter. Target is actively pursuing the sale of its credit card receivables portfolio, which could provide additional liquidity. The company also highlighted its commitment to shareholder returns through a significant share repurchase program and a consistent dividend policy.

Financial Highlights

45 data points
Beta

Revenue

$16.78B

32.7% Gross Margin

Net Income

$704.00M

4.2% Net Margin

EPS (Diluted)

$1.06

Total Assets

$47.33B

Free Cash Flow

$390.00M

Financial Statements
Beta
Revenue$16.78B
Cost of Revenue$11.30B
Gross Profit$5.48B
SG&A Expenses$3.59B
Operating Income$1.25B
Interest Expense$184.00M
Net Income$704.00M
EPS (Basic)$1.07
EPS (Diluted)$1.06
Shares Outstanding (Basic)656.70M
Shares Outstanding (Diluted)662.90M

Key Highlights

  • 1Total revenues increased by 3.3% to $16.78 billion for the three months ended July 28, 2012, compared to the prior year period.
  • 2Diluted earnings per share (EPS) rose to $1.06 from $1.03 in the same period last year, representing a 3.4% increase.
  • 3U.S. Retail Segment sales grew by 3.5% driven by a 3.1% comparable-store sales increase and new store openings.
  • 4REDcard penetration significantly increased, with total store REDcard penetration reaching 12.8% compared to 8.7% in the prior year.
  • 5The company repurchased $549 million of its common stock in the quarter as part of its ongoing share repurchase program.
  • 6Cash flow from operations was strong at $2.47 billion for the six months ended July 28, 2012.
  • 7Target is actively pursuing the sale of its credit card receivables portfolio, which is expected to provide additional liquidity.

Frequently Asked Questions

Target's revenue growth was primarily driven by the U.S. Retail Segment, which saw a 3.5% increase in sales. This was supported by a 3.1% comparable-store sales increase and the contribution from newly opened stores. Additionally, higher REDcard penetration indicates increased customer loyalty and spending.

The U.S. Credit Card Segment experienced a decrease in segment profit. This was due to annualizing a significant reserve reduction from the prior year and lower finance charge revenue resulting from a smaller portfolio. Target is actively pursuing the sale of this portfolio, which could impact its future financial performance.

Target demonstrated a commitment to shareholder returns through substantial share repurchases and consistent dividend payments. In the second quarter of 2012, the company repurchased $549 million of its common stock and declared dividends totaling $235 million, an increase of 15.8% over the prior year. Target intends to continue paying dividends.

The Canadian segment incurred significant start-up costs and depreciation, resulting in a net loss for the quarter. These costs are related to the planned market entry in 2013 and are expected to continue impacting segment results in the short term.