TGT
$190.15
Target
($1.76)
(.92%)
Earnings Details
3rd Quarter October 2020
Wednesday, November 18, 2020 6:30:00 AM
Tweet Share Watch
Summary

Target Beats

Target (TGT) reported 3rd Quarter October 2020 earnings of $2.79 per share on revenue of $22.6 billion. The consensus earnings estimate was $1.61 per share on revenue of $20.7 billion. The Earnings Whisper number was $1.70 per share.

Target Corp is engaged in operating general merchandise discount stores in the United States.

Results
Reported Earnings
$2.79
Earnings Whisper
$1.70
Consensus Estimate
$1.61
Reported Revenue
$22.63 Bil
Revenue Estimate
$20.68 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Target Corporation Reports Third Quarter Earnings

MINNEAPOLIS, Nov. 18, 2020 /PRNewswire/ --

  • Third quarter comparable sales grew 20.7 percent
    • Comparable traffic grew 4.5 percent, and average ticket grew 15.6 percent
    • Store comparable sales increased 9.9 percent
    • Digital comparable sales grew 155 percent, accounting for 10.9 percentage points of Target's comparable sales growth
    • Same-day services (Order Pick Up, Drive Up and Shipt) grew 217 percent
    • More than 95 percent of Target's third quarter sales were fulfilled by its stores
  • Throughout the third quarter, the Company continued to gain market share across all five of its core merchandising categories. Year to date, the Company has gained more than $6 billion in market share.
  • Third quarter GAAP EPS from continuing operations of $2.01 was 46.3 percent higher than last year. Third quarter Adjusted EPS1 of $2.79 was 105.1 percent higher than last year, as strong operating performance offset continued investments in team member pay and benefits and safety measures to protect guests and team members.
  • For additional media materials, please visit: https://corporate.target.com/article/2020/11/q3-2020-earnings

Target Corporation (NYSE: TGT) today announced its third quarter 2020 financial results, which reflected continued, robust growth in both sales and profitability. The Company reported third quarter GAAP earnings per share (EPS) from continuing operations of $2.01, up 46.3 percent from $1.37 in 2019. GAAP EPS included a $0.75 loss on debt extinguishment, which was excluded from Adjusted EPS. Third quarter Adjusted EPS of $2.79 grew 105.1 percent compared with $1.36 in 2019. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

"Our strong results in 2020 reflect the benefits of our multi-year effort to build a durable and flexible model, with a differentiated assortment and a suite of industry-leading fulfillment options all brought to life through the passion and effort of our team. As a result, we've seen a deepening level of engagement and trust from our guests. The result is unprecedented market share gains and historically strong sales growth, both in our stores and our digital channels," said Brian Cornell, chairman and chief executive officer of Target Corporation. "In preparation for the holiday season, we focused first on the safety of our guests and our team, making changes to eliminate crowds while enhancing our fast-growing, contactless options like in-store pickup, Drive Up and Shipt. In a holiday season that will feel different for our guests, we're committed to helping them navigate the season safely, as they find new ways to celebrate with family and friends."

Fiscal 2020 Guidance

During the first quarter, the Company withdrew its guidance given the unusually wide range of potential outcomes, in light of the highly fluid and uncertain outlook for consumer shopping patterns and the impact of COVID-19.

Operating Results

The Company's total comparable sales grew 20.7 percent in the third quarter, reflecting comparable stores sales growth of 9.9 percent and digital sales growth of 155 percent. Total revenue of $22.6 billion grew 21.3 percent compared with last year, driven by sales growth of 21.3 percent and an 18.1 percent increase in other revenue. Operating income was $1.9 billion in third quarter 2020, up 93.1 percent from $1.0 billion in 2019.

Third quarter operating income margin rate was 8.5 percent in 2020 compared with 5.4 percent in 2019. Third quarter gross margin rate was 30.6 percent, compared with 29.8 percent in 2019, reflecting the benefit of merchandising actions, primarily from exceptionally low markdown rates, partially offset by the impact of higher digital fulfillment and supply chain costs, along with unfavorable category mix. Third quarter SG&A expense rate was 20.5 percent in 2020, compared with 22.3 percent in 2019, reflecting the benefit of leverage from strong sales growth, partially offset by the net impact of other factors, primarily investments in team member pay, benefits, and safety.

Interest Expense and Taxes

The Company's third quarter 2020 net interest expense was $632 million, compared with $113 million last year. The increase was driven primarily by a $512 million charge related to the early retirement of debt in third quarter 2020.

Third quarter 2020 effective income tax rate was 21.9 percent, in line with 21.7 percent last year.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $340 million in the third quarter, compared with $337 million last year, reflecting a 3.0 percent increase in the dividend per share, partially offset by a decline in average share count.

The Company has recently taken a number of actions in light of its strong operating performance and cash position. 

  • Today, the Company announced it has lifted its share repurchase suspension, which it had announced on March 25, at a time of unusually high uncertainty following the onset of the COVID-19 pandemic. The Company expects to resume share repurchases in 2021, consistent with its long-standing capital deployment policies and within the limits of its strong, middle-A credit ratings. As of the end of the third quarter, the Company had approximately $4.5 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in September 2019.
  • In October, the Company executed a debt tender offer, deploying $2.3 billion in cash to retire $1.8 billion of long-term debt.
  • In early November, the Company terminated a supplementary 364 day credit facility, which had been secured in April given the uncertainty around COVID-19.

For the trailing twelve months through third quarter 2020, after-tax return on invested capital (ROIC) was 19.9 percent, compared with 15.0 percent for the twelve months through third quarter 2019. The increase to ROIC was driven primarily by increased profitability combined with a decrease in the base of invested capital. The tables in this release provide additional information about the Company's ROIC calculation.

Webcast Details

Target will webcast its third quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Investors.Target.com (click "investors" then click on "events & presentations"). A replay of the webcast will be provided when available. The replay number is 1-866-454-1406.

Miscellaneous

The statement in this release regarding the Company's expected resumption of share repurchase activity in 2021 is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. Such statement is subject to risks and uncertainties which could cause the Company's actions to differ materially.  The most important risks and uncertainties are described in Item 1A of the Company's Form 10-K for the fiscal year ended Feb. 1, 2020 and Item 1A of the Company's Form 10-Q for the fiscal quarter ended May 2, 2020. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statement.

About Target

Minneapolis-based Target Corporation (NYSE: TGT) serves guests at nearly 1,900 stores and at Target.com. Since 1946, Target has given 5% of its profit to communities, which today equals millions of dollars a week. For the latest store count or for more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.

For more on the Target Foundation, click here.

1Adjusted EPS, a non-GAAP financial measure, excludes the impact of certain discretely managed items. See the tables of this release for additional information about the items that have been excluded from Adjusted EPS.

 

TARGET CORPORATION

 

Consolidated Statements of Operations



Three Months Ended




Nine Months Ended



(millions, except per share data) (unaudited)


October 31,

2020


November 2,

2019


Change


October 31,

2020


November 2,

2019


Change

Sales


$

22,336



$

18,414



21.3

%


$

64,403



$

53,997



19.3

%

Other revenue


296



251



18.1



819



716



14.3


Total revenue


22,632



18,665



21.3



65,222



54,713



19.2


Cost of sales


15,509



12,935



19.9



45,692



37,808



20.9


Selling, general and administrative expenses


4,647



4,153



11.9



13,167



11,728



12.3


Depreciation and amortization (exclusive of depreciation included in cost of sales)


541



575



(5.8)



1,660



1,717



(3.3)


Operating income


1,935



1,002



93.1



4,703



3,460



35.9


Net interest expense


632



113



457.7



871



359



142.6


Net other (income) / expense


5



(12)



(148.5)



16



(38)



(144.1)


Earnings from continuing operations before income taxes


1,298



901



44.1



3,816



3,139



21.6


Provision for income taxes


284



195



45.7



828



703



17.8


Net earnings from continuing operations


1,014



706



43.6



2,988



2,436



22.6


Discontinued operations, net of tax




8







11




Net earnings


$

1,014



$

714



41.9

%


$

2,988



$

2,447



22.1

%

Basic earnings per share













Continuing operations


$

2.02



$

1.38



46.2

%


$

5.97



$

4.75



25.6

%

Discontinued operations




0.02







0.02




Net earnings per share


$

2.02



$

1.40



44.5

%


$

5.97



$

4.77



25.0

%

Diluted earnings per share













Continuing operations


$

2.01



$

1.37



46.3

%


$

5.91



$

4.71



25.5

%

Discontinued operations




0.02







0.02




Net earnings per share


$

2.01



$

1.39



44.5

%


$

5.91



$

4.74



24.9

%

Weighted average common shares outstanding













Basic


500.6



509.7



(1.8)

%


500.6



512.5



(2.3)

%

Diluted


505.4



514.8



(1.8)

%


505.2



516.8



(2.2)

%

Antidilutive shares













Dividends declared per share


$

0.68



$

0.66



3.0

%


$

2.02



$

1.96



3.1

%


Note:  Per share amounts may not foot due to rounding.

 

TARGET CORPORATION

 

Consolidated Statements of Financial Position

(millions, except footnotes) (unaudited)


October 31,

2020


February 1,

2020


November 2,

2019

Assets







Cash and cash equivalents


$

5,996



$

2,577



$

969


Inventory


12,712



8,992



11,396


Other current assets


1,601



1,333



1,440


Total current assets


20,309



12,902



13,805


Property and equipment







Land


6,063



6,036



6,040


Buildings and improvements


31,398



30,603



30,467


Fixtures and equipment


5,843



6,083



6,032


Computer hardware and software


2,706



2,692



2,636


Construction-in-progress


518



533



298


Accumulated depreciation


(19,755)



(19,664)



(19,089)


Property and equipment, net


26,773



26,283



26,384


Operating lease assets


2,208



2,236



2,151


Other noncurrent assets


1,371



1,358



1,401


Total assets


$

50,661



$

42,779



$

43,741


Liabilities and shareholders' investment







Accounts payable


$

14,203



$

9,920



$

11,258


Accrued and other current liabilities


5,023



4,406



4,191


Current portion of long-term debt and other borrowings


131



161



1,159


Total current liabilities


19,357



14,487



16,608


Long-term debt and other borrowings


12,490



11,338



10,513


Noncurrent operating lease liabilities


2,196



2,275



2,208


Deferred income taxes


1,171



1,122



1,215


Other noncurrent liabilities


2,128



1,724



1,652


Total noncurrent liabilities


17,985



16,459



15,588


Shareholders' investment







Common stock


42



42



42


Additional paid-in capital


6,285



6,226



6,006


Retained earnings


7,789



6,433



6,270


Accumulated other comprehensive loss


(797)



(868)



(773)


Total shareholders' investment


13,319



11,833



11,545


Total liabilities and shareholders' investment


$

50,661



$

42,779



$

43,741


Common Stock  Authorized 6,000,000,000 shares, $0.0833 par value; 500,754,729, 504,198,962 and 506,677,740 shares issued and outstanding as of October 31, 2020, February 1, 2020, and November 2, 2019, respectively.

Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

 

TARGET CORPORATION

 

Consolidated Statements of Cash Flows



Nine Months Ended

(millions) (unaudited)


October 31,

2020


November 2,

2019

Operating activities





Net earnings


$

2,988



$

2,447


Earnings from discontinued operations, net of tax




11


Net earnings from continuing operations


2,988



2,436


Adjustments to reconcile net earnings to cash provided by operations:





Depreciation and amortization


1,848



1,905


Share-based compensation expense


161



116


Deferred income taxes


26



235


Loss on debt extinguishment


512




Noncash losses / (gains) and other, net


124



6


Changes in operating accounts:





Inventory


(3,720)



(1,899)


Other assets


(174)



(10)


Accounts payable


4,287



1,473


Accrued and other liabilities


992



(121)


Cash provided by operating activities—continuing operations


7,044



4,141


Cash provided by operating activities—discontinued operations




18


Cash provided by operations


7,044



4,159


Investing activities





Expenditures for property and equipment


(2,009)



(2,403)


Proceeds from disposal of property and equipment


27



29


Other investments


(3)



14


Cash required for investing activities


(1,985)



(2,360)


Financing activities





Additions to long-term debt


2,480



994


Reductions of long-term debt


(2,395)



(1,041)


Dividends paid


(1,002)



(995)


Repurchase of stock


(741)



(959)


Accelerated share repurchase pending final settlement




(450)


Stock option exercises


18



65


Cash required for financing activities


(1,640)



(2,386)


Net increase in cash and cash equivalents


3,419



(587)


Cash and cash equivalents at beginning of period


2,577



1,556


Cash and cash equivalents at end of period


$

5,996



$

969


 

TARGET CORPORATION

 

Operating Results

Rate Analysis


Three Months Ended


Nine Months Ended

(unaudited)


October 31,

2020


November 2,

2019


October 31,

2020


November 2,

2019

Gross margin rate


30.6

%


29.8

%


29.1

%


30.0

%

SG&A expense rate


20.5



22.3



20.2



21.4


Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate


2.4



3.1



2.5



3.1


Operating income margin rate


8.5



5.4



7.2



6.3



Note:  Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue. Other revenue includes $164 million and $488 million of profit-sharing income under our credit card program agreement for the three and nine months ended October 31, 2020, respectively, and $177 million and $505 million for the three and nine months ended November 2, 2019, respectively.



Comparable Sales


Three Months Ended


Nine Months Ended

(unaudited)


October 31,

2020


November 2,

2019


October 31,

2020


November 2,

2019

Comparable sales change


20.7

%


4.5

%


18.7

%


4.2

%

Drivers of change in comparable sales









Number of transactions


4.5



3.1



2.6



3.3


Average transaction amount


15.6



1.4



15.7



0.9



Contribution to Comparable Sales Change


Three Months Ended


Nine Months Ended

(unaudited)


October 31,

2020


November 2,

2019


October 31,

2020


November 2,

2019

Stores originated channel comparable sales change


9.9

%


2.8

%


7.3

%


2.3

%

Contribution from digitally originated sales


10.9



1.7



11.4



1.9


Total comparable sales change


20.7

%


4.5

%


18.7

%


4.2

%


Note: Amounts may not foot due to rounding.


Sales by Channel


Three Months Ended


Nine Months Ended

(unaudited)


October 31,

2020


November 2,

2019


October 31,

2020


November 2,

2019

Stores originated


84.3

%


92.5

%


83.9

%


92.7

%

Digitally originated


15.7



7.5



16.1



7.3


Total


100

%


100

%


100

%


100

%


RedCard Penetration


Three Months Ended


Nine Months Ended

(unaudited)


October 31,

2020


November 2,

2019


October 31,

2020


November 2,

2019

Target Debit Card


12.2

%


12.5

%


12.2

%


12.7

%

Target Credit Cards


9.3



10.7



9.2



10.6


Total RedCard Penetration


21.5

%


23.1

%


21.4

%


23.3

%


Note: Amounts may not foot due to rounding.

 

Number of Stores and Retail Square Feet


Number of Stores


Retail Square Feet (a)

(unaudited)


October 31,

2020


February 1,

2020


November 2,

2019


October 31,

2020


February 1,

2020


November 2,

2019

170,000 or more sq. ft.


273



272



272



48,798



48,619



48,619


50,000 to 169,999 sq. ft.


1,509



1,505



1,504



189,508



189,227



189,164


49,999 or less sq. ft.


115



91



86



3,342



2,670



2,475


Total


1,897



1,868



1,862



241,648



240,516



240,258



(a)           In thousands, reflects total square feet less office, distribution center, and vacant space.

 

TARGET CORPORATION

Reconciliation of Non-GAAP Financial Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing operations (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). The most comparable GAAP measure is diluted earnings per share from continuing operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies.

Reconciliation of Non-GAAP

Adjusted EPS


Three Months Ended




October 31, 2020


November 2, 2019



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP diluted earnings per share from continuing operations






$

2.01







$

1.37



46.3

%

Adjustments















Loss on debt extinguishment


$

512



$

379



$

0.75



$



$



$




Loss on investment (a)


8



9



0.02










Other (b)


8



6



0.01



(9)



(6)



(0.01)




Adjusted diluted earnings per share from continuing operations






$

2.79







$

1.36



105.1

%






Reconciliation of Non-GAAP

Adjusted EPS


Nine Months Ended




October 31, 2020


November 2, 2019



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP diluted earnings per share from continuing operations






$

5.91







$

4.71



25.5

%

Adjustments















Loss on debt extinguishment


$

512



$

379



$

0.75



$



$



$




Loss on investment (a)


19



18



0.03










Other (b)


33



24



0.05



(9)



(6)



(0.01)




Adjusted diluted earnings per share from continuing operations






$

6.75







$

4.70



43.5

%


Note: Amounts may not foot due to rounding.

(a)       Includes an unrealized loss on our investment in Casper Sleep Inc., which is not core to our continuing operations.

(b)       For 2020, includes store damage and inventory losses related to civil unrest. For 2019, represents an insurance recovery related to the 2013 data breach.

Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings from continuing operations before interest expense, income taxes, depreciation and amortization (EBITDA) are non-GAAP financial measures. We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative for, GAAP. The most comparable GAAP measure is net earnings from continuing operations. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.

EBIT and EBITDA


Three Months Ended




Nine Months Ended



(dollars in millions) (unaudited)


October 31,

2020


November 2,

2019


Change


October 31,

2020


November 2,

2019


Change

Net earnings from continuing operations


$

1,014



$

706



43.6

%


$

2,988



$

2,436



22.6

%

 + Provision for income taxes


284



195



45.7



828



703



17.8


 + Net interest expense


632



113



457.7



871



359



142.6


EBIT


$

1,930



$

1,014



90.2

%


$

4,687



$

3,498



34.0

%

 + Total depreciation and amortization (a)


603



637



(5.1)



1,848



1,905



(2.9)


EBITDA


$

2,533



$

1,651



53.5

%


$

6,535



$

5,403



21.0

%


(a)       Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

We have also disclosed after-tax return on invested capital from continuing operations (ROIC), which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.

After-Tax Return on Invested Capital



(dollars in millions)







Trailing Twelve Months



Numerator


October 31,

2020


November 2,

2019



Operating income


$

5,901



$

4,577




 + Net other income / (expense)


(46)



45




EBIT


5,855



4,622




 + Operating lease interest (a)


87



86




  - Income taxes (b)


1,277



1,043




Net operating profit after taxes


$

4,665



$

3,665





Denominator


October 31,

2020


November 2,

2019


November 3,

2018

Current portion of long-term debt and other borrowings


$

131



$

1,159



$

1,535


 + Noncurrent portion of long-term debt


12,490



10,513



10,104


 + Shareholders' investment


13,319



11,545



11,080


 + Operating lease liabilities (c)


2,400



2,390



2,208


  - Cash and cash equivalents


5,996



969



825


Invested capital


$

22,344



$

24,638



$

24,102


Average invested capital (d)


$

23,491



$

24,369




After-tax return on invested capital


19.9

%


15.0

%





(a)      

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. 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.

(b)         

Calculated using the effective tax rates for continuing operations, which were 21.5 percent and 22.1 percent for the trailing twelve months ended October 31, 2020, and November 2, 2019, respectively. For the twelve months ended October 31, 2020, and November 2, 2019, includes tax effect of $1.3 billion and $1.0 billion, respectively, related to EBIT and $19 million and $19 million, respectively, related to operating lease interest.

(c)        

Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities.

(d)        

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.

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SOURCE Target Corporation