10-QPeriod: Q3 FY2018

TARGET CORP Quarterly Report for Q3 Ended Oct 28, 2017

Filed November 20, 2017For Securities:TGT

Summary

Target Corporation's (TGT) third quarter fiscal year 2017 report shows a modest increase in sales, up 1.4% to $16.7 billion, driven by a 0.9% rise in comparable sales, primarily from increased store traffic. Digital channel sales showed strong growth, increasing by 24%. However, GAAP diluted earnings per share from continuing operations decreased by 17.7% to $0.87 compared to the prior year, impacted by a significant loss on early debt retirement and other adjustments. Despite the earnings dip, the company continued its capital allocation strategy by investing in the business, paying dividends, and repurchasing shares. Financially, Target experienced a notable increase in operating cash flow from continuing operations, largely due to improved payables leverage and changes in vendor payment terms. The company maintained a strong liquidity position with a cash and cash equivalents balance of $2.7 billion. Management highlighted strategic investments in digital channels and a disciplined approach to capital allocation, prioritizing profitable growth, dividends, and share repurchases. The company also reiterated its commitment to reinvestment and shareholder returns, while navigating economic and competitive landscapes.

Financial Highlights

48 data points
Beta

Revenue

$16.67B

29.7% Gross Margin

Net Income

$478.00M

2.9% Net Margin

EPS (Diluted)

$0.87

Total Assets

$42.01B

Free Cash Flow

$723.00M

Financial Statements
Beta
Revenue$16.67B
Cost of Revenue$11.71B
Gross Profit$4.96B
SG&A Expenses$3.73B
Operating Income$847.00M
Interest Expense$251.00M
Net Income$478.00M
EPS (Basic)$0.88
EPS (Diluted)$0.87
Shares Outstanding (Basic)544.50M
Shares Outstanding (Diluted)547.90M

Key Highlights

  • 1Total sales increased by 1.4% to $16.7 billion in the third quarter of fiscal year 2017.
  • 2Comparable sales grew by 0.9%, with digital channel sales experiencing a significant 24% increase.
  • 3GAAP diluted earnings per share from continuing operations decreased by 17.7% to $0.87.
  • 4A substantial loss on early debt retirement of $123 million ($75 million after tax) impacted net interest expense and earnings.
  • 5Operating cash flow from continuing operations significantly increased to $4.4 billion for the nine months ended October 28, 2017, up from $2.8 billion in the prior year, driven by improved payables leverage.
  • 6The company reported a strong cash and cash equivalents balance of $2.7 billion as of October 28, 2017.
  • 7Target continued its capital allocation strategy by investing in the business, paying dividends ($339 million in Q3), and repurchasing shares ($171 million in Q3).

Frequently Asked Questions

The decrease in GAAP diluted earnings per share from continuing operations was primarily driven by a $123 million loss on the early retirement of debt. Additionally, other adjustments, including income tax matters, also contributed to the year-over-year decline.

Total sales increased by 1.4% to $16.7 billion. Comparable sales saw a 0.9% increase, with a notable 24% growth in digital channel sales, indicating a continued shift towards online purchasing.

Target maintained a healthy liquidity position, with cash and cash equivalents totaling $2.7 billion as of October 28, 2017. This provides the company with financial flexibility to fund operations, investments, and shareholder returns.

Target is following a disciplined capital allocation strategy. This includes reinvesting in the business, paying a quarterly dividend of $0.62 per share, and repurchasing shares. Operating cash flow saw a significant increase due to improved payables leverage and changes in vendor payment terms.