TARGET CORP Quarterly Report for Q1 Ended May 4, 2013

Summary

Target Corporation's (TGT) first quarter of fiscal year 2013, ending May 4, 2013, was marked by a significant strategic shift with the sale of its U.S. consumer credit card portfolio to TD Bank Group. This transaction generated a $391 million gain but also incurred a $445 million loss on early debt retirement. While total sales saw a modest 1.0% increase to $16.7 billion, diluted earnings per share decreased significantly by 26.0% to $0.77 from $1.04 in the prior year, largely due to these one-time items and a substantial loss in its nascent Canadian segment. The company is actively managing its capital structure, using proceeds from the credit card sale to reduce debt and continuing its share repurchase program, demonstrating a commitment to returning value to shareholders. Despite the earnings dip and challenges in Canada, Target's core U.S. retail operations showed slight sales growth, with a notable increase in REDcard penetration, indicating continued customer engagement with its loyalty programs.

Key Highlights

• 1Completed the sale of its U.S. consumer credit card portfolio to TD Bank Group for $5.7 billion, resulting in a $391 million gain.
• 2Incurred a $445 million loss on early retirement of debt related to the credit card portfolio sale.
• 3Total sales increased by 1.0% to $16.7 billion for the quarter, but comparable-store sales decreased by 0.6%.
• 4Diluted earnings per share (EPS) declined by 26.0% to $0.77, impacted by one-time transaction costs and losses in the Canadian segment.
• 5Operating cash flow significantly improved to $3.23 billion from $1.31 billion in the prior year, boosted by cash proceeds from the credit card sale.
• 6REDcard penetration increased to 17.1% of sales, up from 11.6% in the prior year, highlighting the growing adoption of its loyalty program.
• 7The Canadian segment reported a substantial loss of $205 million as the company continued its market entry and store openings.

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