Minnesota | 1-6049 | 41-0215170 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
1000 Nicollet Mall, Minneapolis, Minnesota 55403 | ||||
(Address of principal executive offices, including zip code) | ||||
(612) 304-6073 | ||||
(Registrant’s telephone number, including area code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common stock, par value $0.0833 per share | TGT | New York Stock Exchange |
Emerging growth company o |
TARGET CORPORATION | |
Date: August 21, 2019 | /s/ Cathy R. Smith |
Cathy R. Smith | |
Executive Vice President and Chief Financial Officer |
Contacts: | John Hulbert, Investors, (612) 761-6627 |
Erin Conroy, Media, (612) 761-5928 | |
Target Media Hotline, (612) 696-3400 |
• | Second quarter comparable sales grew 3.4 percent, driven by 2.4 percent traffic growth. |
• | Comparable sales have grown approximately 10 percent over the last two years — the best performance in more than a decade. |
• | Second quarter comparable digital channel sales grew 34 percent. |
• | Same-day fulfillment services (Order Pick Up, Drive Up and Shipt) accounted for nearly 1.5 percentage points of the Company’s overall comparable sales growth. |
• | Second quarter operating income of $1.324 billion was 16.9 percent higher than a year ago. Operating income margin rate improved 80 basis points compared with last year, reflecting year-over-year improvement in both gross margin and SG&A rates. |
• | GAAP EPS from continuing operations and Adjusted EPS of $1.82 were up over 20 percent from last year and established new all-time highs for the Company. |
• | Target now expects full-year 2019 GAAP EPS from continuing operations and Adjusted EPS of $5.90 to $6.20, compared with the prior range of $5.75 to $6.05. |
• | For additional media materials, please visit: |
• | Dividends of $328 million, compared with $330 million in second quarter 2018, reflecting a decline in share count partially offset by a 3.2 percent increase in the dividend per share. |
• | Share repurchases totaling $341 million that retired 4.3 million shares of common stock at an average price of $80.02. |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
(millions, except per share data) (unaudited) | August 3, 2019 | August 4, 2018 | Change | August 3, 2019 | August 4, 2018 | Change | ||||||||||||||||
Sales | $ | 18,183 | $ | 17,552 | 3.6 | % | $ | 35,584 | $ | 34,108 | 4.3 | % | ||||||||||
Other revenue | 239 | 224 | 6.3 | 465 | 450 | 3.4 | ||||||||||||||||
Total revenue | 18,422 | 17,776 | 3.6 | 36,049 | 34,558 | 4.3 | ||||||||||||||||
Cost of sales | 12,625 | 12,239 | 3.1 | 24,874 | 23,865 | 4.2 | ||||||||||||||||
Selling, general and administrative expenses | 3,912 | 3,865 | 1.2 | 7,575 | 7,410 | 2.2 | ||||||||||||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) | 561 | 539 | 4.1 | 1,142 | 1,109 | 3.0 | ||||||||||||||||
Operating income | 1,324 | 1,133 | 16.9 | 2,458 | 2,174 | 13.1 | ||||||||||||||||
Net interest expense | 120 | 115 | 4.3 | 246 | 237 | 3.8 | ||||||||||||||||
Net other (income) / expense | (13 | ) | (4 | ) | 202.0 | (27 | ) | (12 | ) | 119.7 | ||||||||||||
Earnings from continuing operations before income taxes | 1,217 | 1,022 | 19.1 | 2,239 | 1,949 | 14.9 | ||||||||||||||||
Provision for income taxes | 279 | 223 | 25.2 | 509 | 433 | 17.5 | ||||||||||||||||
Net earnings from continuing operations | 938 | 799 | 17.4 | 1,730 | 1,516 | 14.1 | ||||||||||||||||
Discontinued operations, net of tax | — | — | 3 | 1 | ||||||||||||||||||
Net earnings | $ | 938 | $ | 799 | 17.4 | % | $ | 1,733 | $ | 1,517 | 14.3 | % | ||||||||||
Basic earnings per share | ||||||||||||||||||||||
Continuing operations | $ | 1.83 | $ | 1.50 | 21.9 | % | $ | 3.37 | $ | 2.84 | 18.7 | % | ||||||||||
Discontinued operations | — | — | 0.01 | — | ||||||||||||||||||
Net earnings per share | $ | 1.83 | $ | 1.50 | 21.9 | % | $ | 3.37 | $ | 2.84 | 18.8 | % | ||||||||||
Diluted earnings per share | ||||||||||||||||||||||
Continuing operations | $ | 1.82 | $ | 1.49 | 22.0 | % | $ | 3.34 | $ | 2.81 | 18.7 | % | ||||||||||
Discontinued operations | — | — | 0.01 | — | ||||||||||||||||||
Net earnings per share | $ | 1.82 | $ | 1.49 | 22.0 | % | $ | 3.35 | $ | 2.82 | 18.9 | % | ||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||
Basic | 512.1 | 531.7 | (3.7 | )% | 513.9 | 534.3 | (3.8 | )% | ||||||||||||||
Diluted | 516.1 | 536.3 | (3.8 | )% | 517.8 | 538.6 | (3.9 | )% | ||||||||||||||
Antidilutive shares | — | — | — | — | ||||||||||||||||||
Dividends declared per share | $ | 0.66 | $ | 0.64 | 3.1 | % | $ | 1.30 | $ | 1.26 | 3.2 | % |
(millions, except footnotes) (unaudited) | August 3, 2019 | February 2, 2019 | August 4, 2018 | |||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 1,656 | $ | 1,556 | $ | 1,180 | ||||||
Inventory | 9,122 | 9,497 | 9,112 | |||||||||
Other current assets | 1,341 | 1,466 | 1,211 | |||||||||
Total current assets | 12,119 | 12,519 | 11,503 | |||||||||
Property and equipment | ||||||||||||
Land | 6,054 | 6,064 | 6,074 | |||||||||
Buildings and improvements | 29,908 | 29,240 | 28,629 | |||||||||
Fixtures and equipment | 5,622 | 5,912 | 5,356 | |||||||||
Computer hardware and software | 2,627 | 2,544 | 2,575 | |||||||||
Construction-in-progress | 667 | 460 | 685 | |||||||||
Accumulated depreciation | (18,866 | ) | (18,687 | ) | (18,147 | ) | ||||||
Property and equipment, net | 26,012 | 25,533 | 25,172 | |||||||||
Operating lease assets | 2,062 | 1,965 | 1,976 | |||||||||
Other noncurrent assets | 1,373 | 1,273 | 1,345 | |||||||||
Total assets | $ | 41,566 | $ | 41,290 | $ | 39,996 | ||||||
Liabilities and shareholders’ investment | ||||||||||||
Accounts payable | $ | 9,152 | $ | 9,761 | $ | 9,116 | ||||||
Accrued and other current liabilities | 4,059 | 4,201 | 3,878 | |||||||||
Current portion of long-term debt and other borrowings | 1,153 | 1,052 | 1,044 | |||||||||
Total current liabilities | 14,364 | 15,014 | 14,038 | |||||||||
Long-term debt and other borrowings | 10,365 | 10,223 | 10,108 | |||||||||
Noncurrent operating lease liabilities | 2,111 | 2,004 | 2,028 | |||||||||
Deferred income taxes | 1,082 | 972 | 828 | |||||||||
Other noncurrent liabilities | 1,808 | 1,780 | 1,827 | |||||||||
Total noncurrent liabilities | 15,366 | 14,979 | 14,791 | |||||||||
Shareholders’ investment | ||||||||||||
Common stock | 43 | 43 | 44 | |||||||||
Additional paid-in capital | 6,114 | 6,042 | 5,788 | |||||||||
Retained earnings | 6,461 | 6,017 | 6,058 | |||||||||
Accumulated other comprehensive loss | (782 | ) | (805 | ) | (723 | ) | ||||||
Total shareholders’ investment | 11,836 | 11,297 | 11,167 | |||||||||
Total liabilities and shareholders’ investment | $ | 41,566 | $ | 41,290 | $ | 39,996 |
Six Months Ended | ||||||||
(millions) (unaudited) | August 3, 2019 | August 4, 2018 | ||||||
Operating activities | ||||||||
Net earnings | $ | 1,733 | $ | 1,517 | ||||
Earnings from discontinued operations, net of tax | 3 | 1 | ||||||
Net earnings from continuing operations | 1,730 | 1,516 | ||||||
Adjustments to reconcile net earnings to cash provided by operations | ||||||||
Depreciation and amortization | 1,267 | 1,234 | ||||||
Share-based compensation expense | 86 | 71 | ||||||
Deferred income taxes | 104 | 129 | ||||||
Noncash losses / (gains) and other, net | 42 | 99 | ||||||
Changes in operating accounts | ||||||||
Inventory | 375 | (515 | ) | |||||
Other assets | 64 | 1 | ||||||
Accounts payable | (731 | ) | 342 | |||||
Accrued and other liabilities | (127 | ) | (154 | ) | ||||
Cash provided by operating activities—continuing operations | 2,810 | 2,723 | ||||||
Cash provided by operating activities—discontinued operations | 2 | 1 | ||||||
Cash provided by operations | 2,812 | 2,724 | ||||||
Investing activities | ||||||||
Expenditures for property and equipment | (1,394 | ) | (1,856 | ) | ||||
Proceeds from disposal of property and equipment | 10 | 15 | ||||||
Other investments | — | 3 | ||||||
Cash required for investing activities | (1,384 | ) | (1,838 | ) | ||||
Financing activities | ||||||||
Additions to long-term debt | 994 | — | ||||||
Reductions of long-term debt | (1,026 | ) | (255 | ) | ||||
Dividends paid | (658 | ) | (665 | ) | ||||
Repurchase of stock | (662 | ) | (954 | ) | ||||
Accelerated share repurchase pending final settlement | — | (525 | ) | |||||
Stock option exercises | 24 | 50 | ||||||
Cash required for financing activities | (1,328 | ) | (2,349 | ) | ||||
Net increase / (decrease) in cash and cash equivalents | 100 | (1,463 | ) | |||||
Cash and cash equivalents at beginning of period | 1,556 | 2,643 | ||||||
Cash and cash equivalents at end of period | $ | 1,656 | $ | 1,180 |
Three Months Ended | Six Months Ended | ||||||||||
Rate Analysis (unaudited) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||
Gross margin rate | 30.6 | % | 30.3 | % | 30.1 | % | 30.0 | % | |||
SG&A expense rate | 21.2 | 21.7 | 21.0 | 21.4 | |||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate | 3.0 | 3.0 | 3.2 | 3.2 | |||||||
Operating income margin rate | 7.2 | 6.4 | 6.8 | 6.3 |
Three Months Ended | Six Months Ended | ||||||||||
Comparable Sales (unaudited) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||
Comparable sales change | 3.4 | % | 6.5 | % | 4.1 | % | 4.8 | % | |||
Drivers of change in comparable sales | |||||||||||
Number of transactions | 2.4 | 6.4 | 3.3 | 5.0 | |||||||
Average transaction amount | 0.9 | 0.1 | 0.7 | (0.3 | ) |
Contribution to Comparable Sales Change (unaudited) | Three Months Ended | Six Months Ended | |||||||||
August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | ||||||||
Stores channel comparable sales change | 1.5 | % | 4.9 | % | 2.1 | % | 3.4 | % | |||
Digital channel contribution to comparable sales change | 1.8 | 1.5 | 1.9 | 1.3 | |||||||
Total comparable sales change | 3.4 | % | 6.5 | % | 4.1 | % | 4.8 | % |
Three Months Ended | Six Months Ended | ||||||||||
Sales by Channel (unaudited) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||
Stores originated | 92.7 | % | 94.4 | % | 92.8 | % | 94.6 | % | |||
Digitally originated | 7.3 | 5.6 | 7.2 | 5.4 | |||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % |
Three Months Ended | Six Months Ended | ||||||||||
REDcard Penetration (unaudited) | August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||
Target Debit Card | 12.5 | % | 13.0 | % | 12.8 | % | 13.2 | % | |||
Target Credit Cards | 10.7 | 10.9 | 10.6 | 10.8 | |||||||
Total REDcard Penetration | 23.2 | % | 23.9 | % | 23.4 | % | 24.0 | % |
Number of Stores and Retail Square Feet (unaudited) | Number of Stores | Retail Square Feet (a) | |||||||||||
August 3, 2019 | February 2, 2019 | August 4, 2018 | August 3, 2019 | February 2, 2019 | August 4, 2018 | ||||||||
170,000 or more sq. ft. | 272 | 272 | 274 | 48,619 | 48,604 | 48,952 | |||||||
50,000 to 169,999 sq. ft. | 1,499 | 1,501 | 1,502 | 188,711 | 188,900 | 189,258 | |||||||
49,999 or less sq. ft. | 82 | 71 | 59 | 2,357 | 2,077 | 1,644 | |||||||
Total | 1,853 | 1,844 | 1,835 | 239,687 | 239,581 | 239,854 |
(a) | In thousands, reflects total square feet less office, distribution center, and vacant space. |
Three Months Ended | |||||||||||||||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||||||||||||||
(millions, except per share data) (unaudited) | Pretax | Net of Tax | Per Share Amounts | Pretax | Net of Tax | Per Share Amounts | Change | ||||||||||||||||
GAAP diluted earnings per share from continuing operations | $ | 1.82 | $ | 1.49 | 22.0 | % | |||||||||||||||||
Adjustments | |||||||||||||||||||||||
Income tax matters (a) | — | — | — | — | (12 | ) | (0.02 | ) | |||||||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 1.82 | $ | 1.47 | 23.9 | % |
Six Months Ended | |||||||||||||||||||||||
August 3, 2019 | August 4, 2018 | ||||||||||||||||||||||
(millions, except per share data) (unaudited) | Pretax | Net of Tax | Per Share Amounts | Pretax | Net of Tax | Per Share Amounts | Change | ||||||||||||||||
GAAP diluted earnings per share from continuing operations | $ | 3.34 | $ | 2.81 | 18.7 | % | |||||||||||||||||
Adjustments | |||||||||||||||||||||||
Income tax matters (a) | — | — | — | — | (18 | ) | (0.03 | ) | |||||||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 3.34 | $ | 2.78 | 20.1 | % |
(a) | Represents benefits from the resolution of certain income tax matters unrelated to current period operations. |
EBIT and EBITDA | Three Months Ended | Six Months Ended | ||||||||||||||||||||
(millions) (unaudited) | August 3, 2019 | August 4, 2018 | Change | August 3, 2019 | August 4, 2018 | Change | ||||||||||||||||
Net earnings from continuing operations | $ | 938 | $ | 799 | 17.4 | % | $ | 1,730 | $ | 1,516 | 14.1 | % | ||||||||||
+ Provision for income taxes | 279 | 223 | 25.2 | 509 | 433 | 17.5 | ||||||||||||||||
+ Net interest expense | 120 | 115 | 4.3 | 246 | 237 | 3.8 | ||||||||||||||||
EBIT | $ | 1,337 | $ | 1,137 | 17.6 | % | $ | 2,485 | $ | 2,186 | 13.6 | % | ||||||||||
+ Total depreciation and amortization (a) | 624 | 603 | 3.5 | 1,267 | 1,234 | 2.7 | ||||||||||||||||
EBITDA | $ | 1,961 | $ | 1,740 | 12.7 | % | $ | 3,752 | $ | 3,420 | 9.7 | % |
(a) | Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales. |
After-Tax Return on Invested Capital | ||||||||||||
(dollars in millions) (unaudited) | ||||||||||||
Trailing Twelve Months | ||||||||||||
Numerator | August 3, 2019 | August 4, 2018 (a) | ||||||||||
Operating income | $ | 4,395 | $ | 4,150 | ||||||||
+ Net other income / (expense) | 42 | 41 | ||||||||||
EBIT | 4,437 | 4,191 | ||||||||||
+ Operating lease interest (b) | 85 | 81 | ||||||||||
- Income taxes (c)(d) | 937 | 589 | ||||||||||
Net operating profit after taxes | $ | 3,585 | $ | 3,683 |
Denominator | August 3, 2019 | August 4, 2018 | July 29, 2017 | |||||||||
Current portion of long-term debt and other borrowings | $ | 1,153 | $ | 1,044 | $ | 1,365 | ||||||
+ Noncurrent portion of long-term debt | 10,365 | 10,108 | 10,706 | |||||||||
+ Shareholders' equity | 11,836 | 11,167 | 11,055 | |||||||||
+ Operating lease liabilities (e) | 2,285 | 2,183 | 2,032 | |||||||||
- Cash and cash equivalents | 1,656 | 1,180 | 2,291 | |||||||||
- Net assets of discontinued operations (f) | — | — | 10 | |||||||||
Invested capital | $ | 23,983 | $ | 23,322 | $ | 22,857 | ||||||
Average invested capital (g) | $ | 23,652 | $ | 23,090 |
After-tax return on invested capital (d) | 15.2 | % | 16.0 | % | ||||
After-tax return on invested capital excluding discrete impacts of Tax Act (d) | 15.0 | % | 14.2 | % |
(a) | Consisted of 53 weeks. |
(b) | Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A Expenses. Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors. |
(c) | Calculated using the effective tax rates for continuing operations, which were 20.7 percent and 13.8 percent for the trailing twelve months ended August 3, 2019, and August 4, 2018, respectively. For the trailing twelve months ended August 3, 2019, and August 4, 2018, includes tax effect of $919 million and $578 million, respectively, related to EBIT, and $18 million and $11 million, respectively, related to operating lease interest. |
(d) | The effective tax rate for the trailing twelve months ended August 3, 2019, and August 4, 2018, includes discrete tax benefits of $36 million and $343 million, respectively, related to the Tax Cuts and Jobs Act of 2017 (Tax Act). |
(e) | Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities. |
(f) | Included in Other Assets and Liabilities. |
(g) | Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period. |