TGT
$152.61
Target
($.35)
(.23%)
Earnings Details
2nd Quarter July 2022
Wednesday, August 17, 2022 6:30:00 AM
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Summary

Target Misses

Target (TGT) reported 2nd Quarter July 2022 earnings of $0.39 per share on revenue of $26.0 billion. The consensus earnings estimate was $0.71 per share on revenue of $26.1 billion. The Earnings Whisper number was $0.67 per share. Revenue grew 3.5% on a year-over-year basis.

The company said it continues to expect fiscal 2023 revenue of $107.1 billion to $112.4 billion. The current consensus revenue estimate is $109.99 billion for the year ending January 31, 2023.

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

Results
Reported Earnings
$0.39
Earnings Whisper
$0.67
Consensus Estimate
$0.71
Reported Revenue
$26.04 Bil
Revenue Estimate
$26.08 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Target Corporation Reports Second Quarter Earnings

MINNEAPOLIS, Aug. 17, 2022  /PRNewswire/ --

  • Comparable sales grew 2.6 percent, on top of 8.9 percent growth last year.
    • Comparable sales growth reflected 2.7 percent traffic growth.
    • Growth reflected continued strength in Food & Beverage, Beauty and Household Essentials.
    • The Company gained unit share in all five of its core merchandising categories in the second quarter.
    • Store comparable sales increased 1.3 percent, on top of 8.7 percent growth last year.
    • Digital comparable sales grew 9.0 percent, following growth of 9.9 percent last year.
    • Same-day services (Order Pickup, Drive Up and Shipt) grew nearly 11 percent this year, led by Drive Up, which grew in the mid-teens on top of more than 80 percent last year.
    • More than 95 percent of Target's second quarter sales were fulfilled by its stores.
  • Operating margin rate of 1.2 percent reflected gross margin pressure from actions to reduce excess inventory as well as higher freight and transportation costs.
  • As a result of the Company's inventory actions in the second quarter, the Company reduced its inventory exposure in discretionary categories while investing in rapidly-growing frequency categories. Additionally, Fall season receipts in discretionary categories were reduced by more than $1.5 billion.

For additional media materials, please visit:
https://corporate.target.com/article/2022/08/q2-2022-earnings

Target Corporation (NYSE: TGT) today announced its second quarter 2022 financial results, which reflected continued sales and traffic growth on top of unprecedented increases over the last two years, and profit pressure driven primarily by the Company's inventory reduction efforts. 

The Company reported second quarter GAAP earnings per share (EPS) of $0.39, down 89.2 percent from $3.65 in 2021. Second quarter Adjusted EPS1 of $0.39 decreased 89.2 percent compared with $3.64 in 2021. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

 "I'm really pleased with the underlying performance of our business, which continues to grow traffic and sales while delivering broad-based unit-share gains in a very challenging environment," said Brian Cornell, chairman and chief executive officer of Target Corporation. "I want to thank our team for their tireless work to deliver on the inventory rightsizing goals we announced in June. While these inventory actions put significant pressure on our near-term profitability, we're confident this was the right long-term decision in support of our guests, our team and our business. Looking ahead, the team is energized and ready to serve our guests in the back half of the year, with a safe, clean, uncluttered shopping experience, compelling value across every category, and a fresh assortment to serve our guests' wants and needs."

Fiscal 2022 Guidance

While the Company is planning cautiously for the remainder of the year, current trends support the company's prior guidance for full-year revenue growth in the low- to mid-single digit range, and an operating margin rate in a range around 6% in the back half of the year.

Operating Results

Comparable sales grew 2.6 percent in the second quarter, reflecting comparable store sales growth of 1.3 percent and comparable digital sales growth of 9.0 percent. Total revenue of $26.0 billion grew 3.5 percent compared with last year, reflecting total sales growth of 3.3 percent and a 14.8 percent increase in other revenue. Operating income was $321 million in second quarter 2022, down 87.0 percent from $2.5 billion in 2021, reflecting a decline in the Company's gross margin rate.

Second quarter operating income margin rate was 1.2 percent in 2022, compared with 9.8 percent in 2021. Second quarter gross margin rate was 21.5 percent, compared with 30.4 percent in 2021. This year's gross margin rate reflected higher markdown rates, driven primarily by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as higher merchandise, inventory shrink, and freight costs.  Additionally, gross margin rate was pressured by increased compensation and headcount in our distribution centers, the costs of managing excess inventory, and higher per-unit last-mile shipping costs. Second quarter SG&A expense rate was 19.2 percent in 2022, compared with 19.3 percent in 2021, reflecting the impact of lower incentive compensation, partially offset by cost increases across our business, including investments in hourly team member wages.

Interest Expense and Taxes

The Company's second quarter 2022 net interest expense was $112 million, compared with $104 million last year, reflecting higher commercial paper and average long-term debt levels.

Second quarter 2022 effective income tax rate was 15.8 percent, compared with the prior year rate of 23.4 percent, reflecting the impact of tax benefits on lower pre-tax earnings compared with last year.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $417 million in the second quarter, compared with $336 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count.

Final settlement of an Accelerated Share Repurchase (ASR) arrangement, which the Company initiated during the first quarter of 2022 occurred in early June.  As a result, the Company recorded the repurchase of $2.6 billion worth of its shares through the ASR, reflecting the retirement of 12.5 million shares of common stock at an average price of $211.58. As of the end of the second quarter, the Company had approximately $9.7 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in August 2021.

For the trailing twelve months through second quarter 2022, after-tax return on invested capital (ROIC) was 18.4 percent, compared with 31.7 percent for the trailing twelve months through second quarter 2021. The decrease in ROIC was driven primarily by lower profitability in second quarter 2022. The tables in this release provide additional information about the Company's ROIC calculation.

Webcast Details

Target will webcast its second 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 on link under "Upcoming Events"). A replay of the webcast will be provided when available. The replay number is 1-866-430-8795.

Miscellaneous

Statements in this release regarding second half and full year revenue growth and operating margin rates are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are 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 January 29, 2022. 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 2,000 stores and at Target.com, with the purpose of helping all families discover the joy of everyday life. 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 more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.

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




Six Months Ended



(millions, except per share data) (unaudited)


July 30, 2022


July 31, 2021


Change


July 30, 2022


July 31, 2021


Change

Sales


$       25,653


$       24,826


3.3 %


$       50,483


$       48,705


3.7 %

Other revenue


384


334


14.8


724


652


10.9

Total revenue


26,037


25,160


3.5


51,207


49,357


3.7

Cost of sales


20,142


17,280


16.6


38,603


33,996


13.6

Selling, general and administrative expenses


5,002


4,849


3.1


9,764


9,358


4.3

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


572


564


1.5


1,173


1,162


0.9

Operating income


321


2,467


(87.0)


1,667


4,841


(65.6)

Net interest expense


112


104


8.0


224


212


5.8

Net other (income) / expense


(8)


(7)


5.2


(23)


(350)


(93.5)

Earnings before income taxes


217


2,370


(90.8)


1,466


4,979


(70.6)

Provision for income taxes


34


553


(93.8)


274


1,065


(74.3)

Net earnings


$            183


$         1,817


(89.9) %


$         1,192


$         3,914


(69.6) %

Basic earnings per share


$           0.40


$           3.68


(89.2) %


$           2.57


$           7.89


(67.4) %

Diluted earnings per share


$           0.39


$           3.65


(89.2) %


$           2.55


$           7.82


(67.4) %

Weighted average common shares
     outstanding













Basic


461.5


493.1


(6.4) %


463.8


495.8


(6.5) %

Diluted


463.6


497.5


(6.8) %


466.8


500.4


(6.7) %

Antidilutive shares


1.3





1.0




Dividends declared per share


$           1.08


$           0.90


20.0 %


$           1.98


$           1.58


25.3 %

 

TARGET CORPORATION
 

Consolidated Statements of Financial Position


(millions, except footnotes) (unaudited)


July 30, 2022


January 29, 2022


July 31, 2021

Assets







Cash and cash equivalents


$             1,117


$             5,911


$             7,368

Inventory


15,320


13,902


11,259

Other current assets


2,016


1,760


1,604

Total current assets


18,453


21,573


20,231

Property and equipment







Land


6,161


6,164


6,148

Buildings and improvements


33,694


32,985


32,133

Fixtures and equipment


6,744


6,407


5,892

Computer hardware and software


2,684


2,505


2,260

Construction-in-progress


2,245


1,257


944

Accumulated depreciation


(21,708)


(21,137)


(20,133)

Property and equipment, net


29,820


28,181


27,244

Operating lease assets


2,542


2,556


2,503

Other noncurrent assets


1,655


1,501


1,407

Total assets


$          52,470


$          53,811


$          51,385

Liabilities and shareholders' investment







Accounts payable


$          14,891


$          15,478


$          12,632

Accrued and other current liabilities


5,905


6,098


5,600

Current portion of long-term debt and other borrowings


1,649


171


1,190

Total current liabilities


22,445


21,747


19,422

Long-term debt and other borrowings


13,453


13,549


11,589

Noncurrent operating lease liabilities


2,543


2,493


2,462

Deferred income taxes


1,862


1,566


1,146

Other noncurrent liabilities


1,575


1,629


1,906

Total noncurrent liabilities


19,433


19,237


17,103

Shareholders' investment







Common stock


38


39


41

Additional paid-in capital


6,502


6,421


6,332

Retained earnings


4,421


6,920


9,200

Accumulated other comprehensive loss


(369)


(553)


(713)

Total shareholders' investment


10,592


12,827


14,860

Total liabilities and shareholders' investment


$          52,470


$          53,811


$          51,385

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 460,236,393, 471,274,073 and 489,651,196 shares issued and outstanding as of July 30, 2022, January 29, 2022, and July 31, 2021, 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




Six Months Ended

(millions) (unaudited)


July 30, 2022


July 31, 2021

Operating activities





Net earnings


$           1,192


$           3,914

Adjustments to reconcile net earnings to cash (required for) provided by operating activities:





Depreciation and amortization


1,329


1,300

Share-based compensation expense


122


138

Deferred income taxes


227


143

Gain on Dermstore sale



(335)

Noncash losses / (gains) and other, net


108


7

Changes in operating accounts:





Inventory


(1,418)


(606)

Other assets


(179)


3

Accounts payable


(784)


(311)

Accrued and other liabilities


(644)


(831)

Cash (required for) provided by operating activities


(47)


3,422

Investing activities





Expenditures for property and equipment


(2,523)


(1,338)

Proceeds from disposal of property and equipment


4


15

Proceeds from Dermstore sale



356

Other investments


1


(5)

Cash required for investing activities


(2,518)


(972)

Financing activities





Change in commercial paper, net


1,545


Reductions of long-term debt


(113)


(72)

Dividends paid


(842)


(676)

Repurchase of stock


(2,821)


(2,850)

Stock option exercises


2


5

Cash required for financing activities


(2,229)


(3,593)

Net decrease in cash and cash equivalents


(4,794)


(1,143)

Cash and cash equivalents at beginning of period


5,911


8,511

Cash and cash equivalents at end of period


$           1,117


$           7,368

 

TARGET CORPORATION
 

Operating Results

 


Rate Analysis


Three Months Ended


Six Months Ended

(unaudited)


July 30, 2022


July 31, 2021


July 30, 2022


July 31, 2021

Gross margin rate


21.5 %


30.4 %


23.5 %


30.2 %

SG&A expense rate


19.2


19.3


19.1


19.0

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


2.2


2.2


2.3


2.4

Operating income margin rate


1.2


9.8


3.3


9.8

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 $181 million and $366 million of profit-sharing income under our credit card program agreement for the three and six months ended July 30, 2022, respectively, and $172 million and $343 million for the three and six months ended July 31, 2021, respectively.

 

Comparable Sales


Three Months Ended


Six Months Ended

(unaudited)


July 30, 2022


July 31, 2021


July 30, 2022


July 31, 2021

Comparable sales change


2.6 %


8.9 %


3.0 %


15.3 %

Drivers of change in comparable sales









Number of transactions (traffic)


2.7


12.7


3.3


14.8

Average transaction amount


0.0


(3.4)


(0.3)


0.5

 

Comparable Sales by Channel

Three Months Ended


Six Months Ended

(unaudited)

July 30, 2022


July 31, 2021


July 30, 2022


July 31, 2021

Stores originated comparable sales change

1.3 %


8.7 %


2.3 %


13.0 %

Digitally originated comparable sales change

9.0


9.9


6.1


27.3

 

Sales by Channel


Three Months Ended


Six Months Ended

(unaudited)


July 30, 2022


July 31, 2021


July 30, 2022


July 31, 2021

Stores originated


82.1 %


83.0 %


81.9 %


82.3 %

Digitally originated


17.9


17.0


18.1


17.7

Total


100 %


100 %


100 %


100 %

 

Sales by Fulfillment Channel


Three Months Ended


Six Months Ended

(unaudited)


July 30, 2022


July 31, 2021


July 30, 2022


July 31, 2021

Stores


96.6 %


96.6 %


96.6 %


96.4 %

Other


3.4


3.4


3.4


3.6

Total


100 %


100 %


100 %


100 %

Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Shipt.

 

RedCard Penetration


Three Months Ended


Six Months Ended

(unaudited)


July 30, 2022


July 31, 2021


July 30, 2022


July 31, 2021

Target Debit Card


11.2 %


11.6 %


11.4 %


11.9 %

Target Credit Cards


8.9


8.7


8.8


8.6

Total RedCard Penetration


20.1 %


20.3 %


20.2 %


20.4 %

Note: Amounts may not foot due to rounding.

 

Number of Stores and Retail Square Feet


Number of Stores


Retail Square Feet (a)

(unaudited)


July 30,
2022


January 29,
2022


July 31,
2021


July 30,
2022


January 29,
2022


July 31,
2021

170,000 or more sq. ft.


273


274


273


48,798


49,071


48,798

50,000 to 169,999 sq. ft.


1,521


1,516


1,510


190,734


190,205


189,624

49,999 or less sq. ft.


143


136


126


4,256


4,008


3,709

Total


1,937


1,926


1,909


243,788


243,284


242,131

(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 (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 operations. This measure is not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is diluted earnings per share. 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




July 30, 2022


July 31, 2021



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP diluted earnings per share






$     0.39






$     3.65


(89.2) %

Adjustments















Other (a)


$        —


$         —


$        —


$         (5)


$          (4)


$   (0.01)



Adjusted diluted earnings per share






$     0.39






$     3.64


(89.2) %

 

Reconciliation of Non-GAAP

Adjusted EPS


Six Months Ended




July 30, 2022


July 31, 2021



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP diluted earnings per share






$     2.55






$     7.82


(67.4) %

Adjustments















Gain on Dermstore sale


$        —


$         —


$        —


$    (335)


$     (269)


$   (0.54)



Other (a)


20


15


0.03


36


27


0.05



Adjusted diluted earnings per share






$     2.59






$     7.34


(64.8) %

Note: Amounts may not foot due to rounding.

(a)

Other items unrelated to current period operations, none of which were individually significant.

Earnings before interest expense and income taxes (EBIT) and earnings 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 to, GAAP. The most comparable GAAP measure is net earnings. 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




Six Months Ended



(dollars in millions) (unaudited)


July 30, 2022


July 31, 2021


Change


July 30, 2022


July 31, 2021


Change

Net earnings


$            183


$         1,817


(89.9) %


$         1,192


$         3,914


(69.6) %

 + Provision for income taxes


34


553


(93.8)


274


1,065


(74.3)

 + Net interest expense


112


104


8.0


224


212


5.8

EBIT


$            329


$         2,474


(86.7) %


$         1,690


$         5,191


(67.4) %

 + Total depreciation and amortization (a)


650


633


2.8


1,329


1,300


2.3

EBITDA


$            979


$         3,107


(68.5) %


$         3,019


$         6,491


(53.5) %

(a)   

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

We have also disclosed after-tax 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) (unaudited)







Trailing Twelve Months



Numerator


July 30, 2022


July 31, 2021



Operating income


$         5,773


$           8,611



 + Net other income / (expense)


54


346



EBIT


5,827


8,957



 + Operating lease interest (a)


88


84



  - Income taxes (b)


1,282


1,918



Net operating profit after taxes


$         4,633


$           7,123



 

Denominator


July 30, 2022


July 31, 2021


August 1, 2020

Current portion of long-term debt and other borrowings


$         1,649


$           1,190


$            109

 + Noncurrent portion of long-term debt


13,453


11,589


14,188

 + Shareholders' investment


10,592


14,860


12,578

 + Operating lease liabilities (c)


2,823


2,695


2,448

  - Cash and cash equivalents


1,117


7,368


7,284

Invested capital


$       27,400


$         22,966


$       22,039

Average invested capital (d)


$       25,183


$         22,502



After-tax return on invested capital


18.4 %


31.7 %



(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, which were 21.7 percent and 21.2 percent for the trailing twelve months ended July 30, 2022, and July 31, 2021, respectively. For the twelve months ended July 30, 2022, and July 31, 2021, includes tax effect of $1.3 billion and $1.9 billion, respectively, related to EBIT, and $19 million and $18 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, respectively.

(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