TGT
$166.37
Target
$1.00
.60%
Earnings Details
3rd Quarter October 2022
Wednesday, November 16, 2022 6:30:00 AM
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Summary

Target Misses

Target (TGT) reported 3rd Quarter October 2022 earnings of $1.54 per share on revenue of $26.5 billion. The consensus earnings estimate was $2.15 per share on revenue of $26.4 billion. The Earnings Whisper number was $2.07 per share. Revenue grew 3.4% on a year-over-year basis.

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

Results
Reported Earnings
$1.54
Earnings Whisper
$2.07
Consensus Estimate
$2.15
Reported Revenue
$26.52 Bil
Revenue Estimate
$26.37 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Target Corporation Reports Third Quarter Earnings

MINNEAPOLIS, Nov. 16, 2022 /PRNewswire/ --

  • Comparable sales increased 2.7 percent, on top of 12.7 percent growth last year.
  • Comparable sales growth was driven by 1.4 percent traffic growth and a 1.3 percent increase in average ticket.
  • Category performance was led by growth in frequency businesses including Beauty, Food and Beverage and Household Essentials, which offset continued softness in discretionary categories.
  • The Company saw unit share gains across all five core merchandising categories.
  • Third quarter operating margin rate of 3.9 percent improved meaningfully compared with the second quarter results, but fell far short of expectations.
  • In light of an increasingly challenging environment, the Company lowered its topline and bottom line expectations for the fourth quarter.
  • The Company announced an enterprise initiative to simplify and gain efficiencies across its business, representing an estimated cumulative savings opportunity of $2 to $3 billion over the next three years.

For additional media materials, please visit: 
https://corporate.target.com/article/2022/11/q3-2022-earnings

Target Corporation (NYSE: TGT) today announced its third quarter 2022 financial results, which reflected continued sales and traffic growth in an increasingly challenging environment.

The Company reported third quarter GAAP earnings per share (EPS) of $1.54, down 49.3 percent from $3.04 in 2021. Third quarter Adjusted EPS1 of $1.54 decreased 49.1 percent compared with $3.03 in 2021. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

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.

"In the third quarter, our business delivered comparable sales growth of 2.7 percent, and we saw unit share gains across all of our core merchandise categories.  This performance demonstrates the durability of our business model which continues to serve our guests and drive loyalty despite the challenging economic environment," said Brian Cornell, chairman and chief executive officer of Target Corporation. "In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests' shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty. This resulted in a third quarter profit performance well below our expectations. 

While we're ready to deliver exceptional value for our guests this holiday season, supported by the decisive inventory actions we took earlier this year, the rapidly evolving consumer environment means we're planning the balance of the year more conservatively. We're also taking new actions to drive efficiencies now and in the future, optimizing our operations to match the scale of our business and drive continued growth. The strides we have made in recent years to build a truly differentiated, guest-centered retail offering, punctuated by a balanced, multi-category portfolio, positions us well to navigate in any environment. Looking ahead, we remain laser-focused on delivering the best of Target to our guests, and continuing to invest in our long-term, profitable growth."

Fiscal 2022 Guidance

Based on softening sales and profit trends that emerged late in the third quarter and persisted into November, the Company believes it is prudent to plan for a wide range of sales outcomes in the fourth quarter, centered around a low-single digit decline in comparable sales, consistent with those recent trends. Similarly, the Company is now planning a wide range for its fourth quarter operating margin rate centered around 3 percent.

Enterprise Efficiency

The Company announced today it was undertaking an enterprise-wide effort to simplify and gain efficiencies across its business with a focus on reducing complexities and lowering costs while continuing to support its team. The Company believes it can save a total of $2 to $3 billion over the next three years through this work. These savings will support the company's investments in driving deeper guest engagement and long-term growth while also delivering on its profit goals. This opportunity is enabled by the rapid growth since 2019, in which Target's total revenue has grown approximately 40 percent. In light of this growth, this effort is focused on fully leveraging the scale that's been gained to best-position the Company to continue growing efficiently over time.

Operating Results

Comparable sales grew 2.7 percent in the third quarter, reflecting comparable store sales growth of 3.2 percent and comparable digital sales growth of 0.3 percent. Total revenue of $26.5 billion grew 3.4 percent compared with last year, reflecting total sales growth of 3.3 percent and a 9.5 percent increase in other revenue. Operating income was $1.0 billion in third quarter 2022, down 49.2 percent from $2.0 billion in 2021, driven primarily by a decline in the Company's gross margin rate.

Third quarter operating income margin rate was 3.9 percent in 2022, compared with 7.8 percent in 2021. Third quarter gross margin rate was 24.7 percent, compared with 28.0 percent in 2021. This year's gross margin rate reflected higher markdown rates, inventory shrink, and merchandise and freight costs, net of retail price increases, compared with last year.  Additionally, gross margin rate was pressured by increased compensation and headcount in our distribution centers and the costs of managing early receipts of inventory, with a slight offset from favorable category mix. Third quarter SG&A expense rate was 19.7 percent in 2022, compared with 18.9 percent in 2021. This reflected the impact of cost inflation across multiple parts of the business, including investments in hourly team member compensation, which was partially offset by lower incentive compensation.

Interest Expense and Taxes

The Company's third quarter 2022 net interest expense was $125 million, compared with $105 million last year, reflecting higher average long-term debt and commercial paper balances.

Third quarter 2022 effective income tax rate was 21.6 percent, compared with the prior year rate of 22.1 percent, reflecting the rate 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 $497 million in the third quarter, compared with $440 million last year, reflecting a 20.0 percent increase in the dividend per share, partially offset by a decline in average share count.

The Company did not repurchase stock in the third quarter.  As of the end of the third 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 third quarter 2022, after-tax return on invested capital (ROIC) was 14.6 percent, compared with 31.3 percent for the trailing twelve months through third quarter 2021. The decrease in ROIC was driven primarily by lower profitability in third quarter 2022. 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 on link under "Upcoming Events"). A replay of the webcast will be provided when available. The replay number is 1-800-391-9853.

Miscellaneous

Statements in this release regarding fourth quarter comparable sales levels and operating margin rate, and the potential benefits from the enterprise initiative to simplify and gain efficiencies across the business 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. These risk and uncertainties include difficulties and delays in identifying and achieving the potential cost savings associated with the enterprise initiative to simplify and gain efficiencies and the other risks and uncertainties 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.

TARGET CORPORATION


Consolidated Statements of Operations



Three Months Ended




Nine Months Ended



(millions, except per share data) (unaudited)


October 29,
2022


October 30,
2021


Change


October 29,
2022


October 30,
2021


Change

Sales


$       26,122


$       25,290


3.3 %


$       76,605


$       73,995


3.5 %

Other revenue


396


362


9.5


1,120


1,014


10.4

Total revenue


26,518


25,652


3.4


77,725


75,009


3.6

Cost of sales


19,680


18,206


8.1


58,283


52,202


11.6

Selling, general and administrative expenses


5,219


4,859


7.4


14,983


14,217


5.4

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


597


577


3.6


1,770


1,739


1.8

Operating income


1,022


2,010


(49.2)


2,689


6,851


(60.8)

Net interest expense


125


105


17.5


349


317


9.8

Net other (income) / expense


(12)


(6)


106.0


(35)


(356)


(90.3)

Earnings before income taxes


909


1,911


(52.4)


2,375


6,890


(65.5)

Provision for income taxes


197


423


(53.6)


471


1,488


(68.4)

Net earnings


$            712


$         1,488


(52.1) %


$         1,904


$         5,402


(64.7) %

Basic earnings per share


$           1.55


$           3.07


(49.5) %


$           4.11


$         10.97


(62.5) %

Diluted earnings per share


$           1.54


$           3.04


(49.3) %


$           4.09


$         10.87


(62.4) %

Weighted average common shares outstanding













Basic


460.3


484.8


(5.1) %


462.6


492.2


(6.0) %

Diluted


462.5


489.4


(5.5) %


465.3


496.8


(6.3) %

Antidilutive shares


1.3





1.1




Dividends declared per share


$           1.08


$           0.90


20.0 %


$           3.06


$           2.48


23.4 %

 

TARGET CORPORATION 


Consolidated Statements of Financial Position 

(millions, except footnotes) (unaudited)


October 29, 2022


January 29, 2022


October 30, 2021

Assets







Cash and cash equivalents


$                954


$             5,911


$             5,753

Inventory


17,117


13,902


14,958

Other current assets


2,322


1,760


1,865

Total current assets


20,393


21,573


22,576

Property and equipment







Land


6,214


6,164


6,146

Buildings and improvements


34,279


32,985


32,478

Fixtures and equipment


7,184


6,407


6,144

Computer hardware and software


2,899


2,505


2,447

Construction-in-progress


2,358


1,257


1,302

Accumulated depreciation


(22,013)


(21,137)


(20,602)

Property and equipment, net


30,921


28,181


27,915

Operating lease assets


2,596


2,556


2,539

Other noncurrent assets


1,705


1,501


1,381

Total assets


$          55,615


$          53,811


$          54,411

Liabilities and shareholders' investment







Accounts payable


$          15,438


$          15,478


$          16,250

Accrued and other current liabilities


6,138


6,098


5,925

Current portion of long-term debt and other borrowings


2,207


171


1,176

Total current liabilities


23,783


21,747


23,351

Long-term debt and other borrowings


14,237


13,549


11,586

Noncurrent operating lease liabilities


2,590


2,493


2,494

Deferred income taxes


2,240


1,566


1,246

Other noncurrent liabilities


1,746


1,629


1,931

Total noncurrent liabilities


20,813


19,237


17,257

Shareholders' investment







Common stock


38


39


40

Additional paid-in capital


6,558


6,421


6,381

Retained earnings


4,631


6,920


8,069

Accumulated other comprehensive loss


(208)


(553)


(687)

Total shareholders' investment


11,019


12,827


13,803

Total liabilities and shareholders' investment


$          55,615


$          53,811


$          54,411


Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 460,297,654, 471,274,073 and 480,905,493 shares issued
and outstanding as of October 29, 2022, January 29, 2022, and October 30, 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



Nine Months Ended

(millions) (unaudited)


October 29,
2022


October 30,
2021

Operating activities





Net earnings


$           1,904


$           5,402

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





Depreciation and amortization


2,004


1,952

Share-based compensation expense


177


187

Deferred income taxes


548


233

Gain on Dermstore sale



(335)

Noncash losses / (gains) and other, net


141


18

Changes in operating accounts:





Inventory


(3,215)


(4,305)

Other assets


(205)


(117)

Accounts payable


(224)


3,284

Accrued and other liabilities


(578)


(722)

Cash (required for) provided by operating activities


552


5,597

Investing activities





Expenditures for property and equipment


(4,323)


(2,483)

Proceeds from disposal of property and equipment


4


23

Proceeds from Dermstore sale



356

Other investments


16


14

Cash required for investing activities


(4,303)


(2,090)

Financing activities





Change in commercial paper, net


2,104


Additions to long-term debt


991


Reductions of long-term debt


(139)


(112)

Dividends paid


(1,339)


(1,116)

Repurchase of stock


(2,825)


(5,042)

Stock option exercises


2


5

Cash required for financing activities


(1,206)


(6,265)

Net decrease in cash and cash equivalents


(4,957)


(2,758)

Cash and cash equivalents at beginning of period


5,911


8,511

Cash and cash equivalents at end of period


$              954


$           5,753

 

 

TARGET CORPORATION 


Operating Results 

Rate Analysis






Three Months Ended


Nine Months Ended

(unaudited)






October 29,
2022


October 30,
2021


October 29,
2022


October 30,
2021

Gross margin rate






24.7 %


28.0 %


23.9 %


29.5 %

SG&A expense rate






19.7


18.9


19.3


19.0

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






2.3


2.2


2.3


2.3

Operating income margin rate






3.9


7.8


3.5


9.1

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 $184 million and $550 million of profit-sharing income
under our credit card program agreement for the three and nine months ended October 29, 2022, respectively, and $184 million
and $527 million for the three and nine months ended October 30, 2021, respectively.


Comparable Sales






Three Months Ended


Nine Months Ended

(unaudited)






October 29,
2022


October 30,
2021


October 29,
2022


October 30,
2021

Comparable sales change






2.7 %


12.7 %


2.9 %


14.4 %

Drivers of change in comparable sales













Number of transactions (traffic)






1.4


12.9


2.6


14.0

Average transaction amount






1.3


(0.2)


0.2


0.3










Comparable Sales by Channel






Three Months Ended


Nine Months Ended

(unaudited)






October 29,
2022


October 30,
2021


October 29,
2022


October 30,
2021

Stores originated comparable sales change






3.2 %


9.7 %


2.6 %


11.9 %

Digitally originated comparable sales change






0.3


28.9


4.1


27.8










Sales by Channel






Three Months Ended


Nine Months Ended

(unaudited)






October 29,
2022


October 30,
2021


October 29,
2022


October 30,
2021

Stores originated






82.9 %


82.4 %


82.3 %


82.3 %

Digitally originated






17.1


17.6


17.7


17.7

Total






100 %


100 %


100 %


100 %










Sales by Fulfillment Channel






Three Months Ended


Nine Months Ended

(unaudited)






October 29,
2022


October 30,
2021


October 29,
2022


October 30,
2021

Stores






96.8 %


96.7 %


96.7 %


96.5 %

Other






3.2


3.3


3.3


3.5

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


Nine Months Ended

(unaudited)






October 29,
2022


October 30,
2021


October 29,
2022


October 30,
2021

Target Debit Card






10.8 %


11.7 %


11.2 %


11.8 %

Target Credit Cards






8.8


8.9


8.8


8.7

Total RedCard Penetration






19.6 %


20.7 %


20.0 %


20.5 %

Note: Amounts may not foot due to rounding.


Number of Stores and Retail Square Feet


Number of Stores


Retail Square Feet (a)

(unaudited)


October 29,

2022


January 29,

2022


October 30,

2021


October 29,

2022


January 29,

2022


October 30,

2021

170,000 or more sq. ft.


274


274


274


48,985


49,071


49,071

50,000 to 169,999 sq. ft.


1,522


1,516


1,515


190,739


190,205


190,116

49,999 or less sq. ft.


145


136


135


4,305


4,008


3,952

Total


1,941


1,926


1,924


244,029


243,284


243,139

(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




October 29, 2022


October 30, 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






$     1.54






$     3.04


(49.3) %

Adjustments















Other (a)


$        —


$         —


$        —


$         (9)


$          (7)


$   (0.01)



Adjusted diluted earnings per share






$     1.54






$     3.03


(49.1) %



Reconciliation of Non-GAAP

Adjusted EPS


Nine Months Ended




October 29, 2022


October 30, 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






$     4.09






$  10.87


(62.4) %

Adjustments















Gain on Dermstore sale


$        —


$         —


$        —


$    (335)


$     (269)


$   (0.54)



Other (a)


20


15


0.03


27


20


0.04



Adjusted diluted earnings per share






$     4.12






$  10.37


(60.2) %

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




Nine Months Ended



(dollars in millions) (unaudited)


October 29, 2022


October 30, 2021


Change


October 29, 2022


October 30, 2021


Change

Net earnings


$            712


$         1,488


(52.1) %


$         1,904


$         5,402


(64.7) %

 + Provision for income taxes


197


423


(53.6)


471


1,488


(68.4)

 + Net interest expense


125


105


17.5


349


317


9.8

EBIT


$         1,034


$         2,016


(48.7) %


$         2,724


$         7,207


(62.2) %

 + Total depreciation and amortization (a)


674


652


3.5


2,004


1,952


2.7

EBITDA


$         1,708


$         2,668


(36.0) %


$         4,728


$         9,159


(48.4) %

(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


October 29, 2022


October 30, 2021



Operating income


$         4,784


$           8,687



 + Net other income / (expense)


61


358



EBIT


4,845


9,045



 + Operating lease interest (a)


89


85



  - Income taxes (b)


1,059


1,947



Net operating profit after taxes


$         3,875


$           7,183




Denominator


October 29, 2022


October 30, 2021


October 31, 2020

Current portion of long-term debt and other borrowings


$         2,207


$           1,176


$            131

 + Noncurrent portion of long-term debt


14,237


11,586


12,490

 + Shareholders' investment


11,019


13,803


13,319

 + Operating lease liabilities (c)


2,879


2,737


2,400

  - Cash and cash equivalents


954


5,753


5,996

Invested capital


$       29,388


$         23,549


$       22,344

Average invested capital (d)


$       26,469


$         22,947




After-tax return on invested capital


14.6 %


31.3 %



(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 21.5 percent and 21.3 percent for the trailing twelve months ended
October 29, 2022, and October 30, 2021, respectively. For the twelve months ended October 29, 2022, and October 30,
2021, includes tax effect of $1.0 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.

 

 

Target Logo (PRNewsfoto/Target Corporation)

 

 

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SOURCE Target Corporation