10-QPeriod: Q3 FY2013

TARGET CORP Quarterly Report for Q3 Ended Oct 27, 2012

Filed November 21, 2012For Securities:TGT

Summary

Target Corporation reported solid financial results for the third quarter and the first nine months of fiscal 2012. Total revenues increased to $16.9 billion for the quarter and $50.6 billion for the nine-month period, reflecting growth driven by comparable store sales and new store contributions. Net earnings also saw a healthy increase, with diluted EPS rising to $0.96 for the third quarter. A significant development during the quarter was the agreement to sell Target's entire consumer credit card portfolio to TD Bank Group, expected to close in the first half of 2013. This strategic move is anticipated to free up capital, with approximately 90% of the net proceeds intended for debt reduction. The company also continued its share repurchase program and increased its dividend payout, signaling confidence in its financial health and commitment to shareholder returns.

Financial Highlights

46 data points
Beta

Revenue

$16.93B

31.7% Gross Margin

Net Income

$637.00M

3.8% Net Margin

EPS (Diluted)

$0.96

Total Assets

$49.58B

Free Cash Flow

$142.00M

Financial Statements
Beta
Revenue$16.93B
Cost of Revenue$11.57B
Gross Profit$5.36B
SG&A Expenses$3.70B
Operating Income$1.01B
Interest Expense$192.00M
Net Income$637.00M
EPS (Basic)$0.97
EPS (Diluted)$0.96
Shares Outstanding (Basic)654.80M
Shares Outstanding (Diluted)662.20M

Key Highlights

  • 1Total revenues for the third quarter increased by 3.2% to $16.9 billion compared to the prior year.
  • 2Diluted earnings per share (EPS) for the third quarter increased by 17.6% to $0.96, up from $0.82 in the same period last year.
  • 3Target reached an agreement to sell its entire U.S. consumer credit card portfolio to TD Bank Group, expected to close in the first half of 2013.
  • 4The company recorded a $156 million gain on receivables held for sale in the third quarter due to the credit card portfolio sale agreement.
  • 5Cash flow provided by operations was robust, totaling $3.3 billion for the first nine months of the fiscal year.
  • 6Share repurchases continued under a $5 billion program authorized in January 2012, with $1.26 billion invested year-to-date.
  • 7Dividends paid increased by 15.6% for the nine-month period compared to the prior year, reflecting a commitment to returning capital to shareholders.

Frequently Asked Questions

Target has agreed to sell its entire U.S. consumer credit card portfolio to TD Bank Group. This transaction is expected to close in the first half of 2013. The company recorded a $156 million gain on receivables held for sale in the third quarter of 2012 as a result of this agreement. Proceeds are expected to be used primarily for debt reduction (approximately 90%), which should strengthen the balance sheet and preserve credit ratings.

Target reported a 3.2% increase in consolidated revenues for the third quarter, reaching $16.9 billion. Net earnings also showed strong growth, with diluted earnings per share rising by 17.6% to $0.96. This performance was driven by a 3.4% increase in sales for the U.S. Retail Segment, including a 2.9% comparable-store sales increase.

Target continues to actively return capital to shareholders. The company is repurchasing shares under its $5 billion program and has invested $1.26 billion year-to-date. Additionally, Target increased its quarterly dividend by 17.0% to $0.36 per share. The expected proceeds from the credit card portfolio sale will also be largely applied to debt reduction, further enhancing financial flexibility.

The U.S. Retail Segment experienced a 3.4% increase in sales, driven by a 2.9% comparable-store sales increase and contributions from new stores. However, the gross margin rate slightly decreased due to the impact of the 5% REDcard Rewards program and store remodel initiatives, though the EBIT margin rate remained consistent.