MINNEAPOLIS, May 18, 2022  /PRNewswire/ --

  • Comparable sales grew 3.3 percent, on top of 22.9 percent growth last year.
    • Comparable sales growth reflected traffic growth of 3.9 percent.
    • Store comparable sales increased 3.4 percent, on top of 18.0 percent growth last year.
    • Digital comparable sales grew 3.2 percent, following growth of 50.2 percent last year.
    • Same-day services (Order Pickup, Drive Up and Shipt) grew 8 percent this year, led by Drive Up, which grew in the mid-teens on top of more than 120 percent last year.
    • More than 95 percent of Target's first quarter sales were fulfilled by its stores.
  • Sales growth was led by frequently-purchased categories, including Food & Beverage, Beauty, and Household Essentials.
  • Operating margin rate of 5.3 percent was well below expectations, driven primarily by gross margin pressure reflecting actions to reduce excess inventory as well as higher freight and transportation costs.

For additional media materials, please visit:
https://corporate.target.com/article/2022/05/q1-2022-earnings

Target Corporation (NYSE: TGT) today announced its first quarter 2022 financial results, which reflected continued topline growth on top of unprecedented increases over the last two years. The Company reported first quarter GAAP earnings per share (EPS) of $2.16, down 48.2 percent from $4.17 in 2021. First quarter Adjusted EPS1 of $2.19 decreased 40.7 percent compared with $3.69 in 2021. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS. 

"Our first-quarter results mark Target's 20th-consecutive quarter of sales growth, with comp sales growing more than 3 percent on top of a 23 percent increase one year ago," said Brian Cornell, chairman and chief executive officer of Target Corporation.  "Guests continue to depend on Target for our broad and affordable product assortment, as reflected in Q1 guest traffic growth of nearly 4 percent. Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time. Despite these near-term challenges, our team remains passionately dedicated to our guests and serving their needs, giving us continued confidence in our long-term financial algorithm, which anticipates mid-single digit revenue growth, and an operating margin rate of 8 percent or higher over time."

Fiscal 2022 Guidance

For second quarter 2022, the Company expects its operating income margin rate will be in a wide range centered around first quarter's operating margin rate of 5.3 percent.

For full-year 2022, the Company continues to expect low- to mid- single digit revenue growth. The Company now expects its full-year operating income margin rate will be in a range centered around 6 percent.

Operating Results

Comparable sales grew 3.3 percent in the first quarter, reflecting comparable store sales growth of 3.4 percent and comparable digital sales growth of 3.2 percent. Total revenue of $25.2 billion grew 4.0 percent compared with last year, reflecting total sales growth of 4.0 percent and a 6.7 percent increase in other revenue. Operating income was $1.3 billion in first quarter 2022, down 43.3 percent from $2.4 billion in 2021, driven primarily by a decline in the Company's gross margin rate.

First quarter operating income margin rate was 5.3 percent in 2022, compared with 9.8 percent in 2021. First quarter gross margin rate was 25.7 percent, compared with 30.0 percent in 2021. This year's gross margin rate reflected higher markdown rates, driven largely by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as costs related to freight, supply chain disruptions, and increased compensation and headcount in our distribution centers. First quarter SG&A expense rate was 18.9 percent in 2022, compared with 18.6 percent in 2021, reflecting the net impact of cost increases across our business, including investments in hourly team member wages, partially offset by lower incentive compensation expense.

Interest Expense and Taxes

The Company's first quarter 2022 net interest expense was $112 million, in line with $108 million last year.

First quarter 2022 effective income tax rate was 19.2 percent, in line with the prior year rate of 19.6 percent.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $424 million in the first quarter, compared with $340 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count.

During the first quarter of 2022, the Company entered into an Accelerated Share Repurchase (ASR) arrangement for up to $2.75 billion of common stock, with final settlement outstanding as of the end of the first quarter.

Additionally, the Company repurchased $10.0 million worth of its shares in first quarter 2022, retiring 0.1 million shares of common stock at an average price of $208.60.  As of the end of the first quarter, excluding the outstanding ASR of $2.75 billion, the Company had approximately $12.3 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in August 2021.

For the trailing twelve months through first quarter 2022, after-tax return on invested capital (ROIC) was 25.3 percent, compared with 30.7 percent for the trailing twelve months through first quarter 2021. The decrease in ROIC was driven primarily by lower profitability in first quarter 2022. The tables in this release provide additional information about the Company's ROIC calculation.

Webcast Details

Target will webcast its first 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 second quarter and full year comparable sales 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.

(1)

Adjusted 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



(millions, except per share data) (unaudited)


April 30, 2022


May 1, 2021


Change

Sales


$       24,830


$       23,879


4.0%

Other revenue


340


318


6.7

Total revenue


25,170


24,197


4.0

Cost of sales


18,461


16,716


10.4

Selling, general and administrative expenses


4,762


4,509


5.6

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


601


598


0.3

Operating income


1,346


2,374


(43.3)

Net interest expense


112


108


3.8

Net other (income) / expense


(15)


(343)


(95.7)

Earnings before income taxes


1,249


2,609


(52.1)

Provision for income taxes


240


512


(53.1)

Net earnings


$         1,009


$         2,097


(51.9)%

Basic earnings per share


$           2.17


$           4.20


(48.3)%

Diluted earnings per share


$           2.16


$           4.17


(48.2)%

Weighted average common shares outstanding







     Basic


464.0


498.6


(6.9)%

     Diluted


467.8


503.4


(7.1)%

Antidilutive shares





Dividends declared per share


$           0.90


$           0.68


32.4%

 

TARGET CORPORATION

 

Consolidated Statements of Financial Position


(millions, except footnotes) (unaudited)


April 30, 2022


January 29, 2022


May 1, 2021

Assets







Cash and cash equivalents


$             1,112


$             5,911


$             7,816

Inventory


15,083


13,902


10,539

Other current assets


1,758


1,760


1,576

     Total current assets


17,953


21,573


19,931

Property and equipment







     Land


6,164


6,164


6,146

     Buildings and improvements


33,300


32,985


31,710

     Fixtures and equipment


6,459


6,407


5,496

     Computer hardware and software


2,588


2,505


2,256

     Construction-in-progress


1,444


1,257


973

     Accumulated depreciation


(21,285)


(21,137)


(19,777)

     Property and equipment, net


28,670


28,181


26,804

Operating lease assets


2,571


2,556


2,362

Other noncurrent assets


1,648


1,501


1,374

Total assets


$          50,842


$          53,811


$          50,471

Liabilities and shareholders' investment







Accounts payable


$          14,053


$          15,478


$          11,637

Accrued and other current liabilities


5,582


6,098


5,788

Current portion of long-term debt and other borrowings


1,089


171


1,173

     Total current liabilities


20,724


21,747


18,598

Long-term debt and other borrowings


13,379


13,549


11,509

Noncurrent operating lease liabilities


2,581


2,493


2,337

Deferred income taxes


1,752


1,566


1,169

Other noncurrent liabilities


1,632


1,629


1,899

     Total noncurrent liabilities


19,344


19,237


16,914

Shareholders' investment







     Common stock


39


39


41

     Additional paid-in capital


5,592


6,421


6,271

     Retained earnings


5,495


6,920


9,372

     Accumulated other comprehensive loss


(352)


(553)


(725)

     Total shareholders' investment


10,774


12,827


14,959

Total liabilities and shareholders' investment


$          50,842


$          53,811


$          50,471



Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 463,683,711, 471,274,073 and 496,093,160 shares issued and outstanding as of April 30, 2022, January 29, 2022, and May 1, 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



Three Months Ended

(millions) (unaudited)


April 30, 2022


May 1, 2021

Operating activities





Net earnings


$           1,009


$           2,097

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





     Depreciation and amortization


679


667

     Share-based compensation expense


83


79

     Deferred income taxes


115


170

     Gain on Dermstore sale



(335)

     Noncash losses / (gains) and other, net


52


(30)

     Changes in operating accounts:





          Inventory


(1,181)


114

          Other assets


(86)


(5)

          Accounts payable


(1,560)


(1,205)

          Accrued and other liabilities


(505)


(413)

Cash (required for) provided by operating activities


(1,394)


1,139

Investing activities





     Expenditures for property and equipment


(952)


(540)

     Proceeds from disposal of property and equipment


2


12

     Proceeds from Dermstore sale



356

     Other investments


2


7

Cash required for investing activities


(948)


(165)

Financing activities





     Change in commercial paper, net


945


     Reductions of long-term debt


(48)


(21)

     Dividends paid


(424)


(340)

     Repurchase of stock


(181)


(1,310)

     Accelerated share repurchase pending final settlement


(2,750)


     Stock option exercises


1


2

Cash required for financing activities


(2,457)


(1,669)

Net decrease in cash and cash equivalents


(4,799)


(695)

Cash and cash equivalents at beginning of period


5,911


8,511

Cash and cash equivalents at end of period


$           1,112


$           7,816

 

TARGET CORPORATION

 

Operating Results

Rate Analysis


Three Months Ended

(unaudited)


April 30, 2022


May 1, 2021

Gross margin rate


25.7%


30.0%

SG&A expense rate


18.9


18.6

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


2.4


2.5

Operating income margin rate


5.3


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 $185 million and $171 million of profit-sharing income under our credit card program agreement for the three months ended April 30, 2022 and May 1, 2021, respectively.

 

Comparable Sales


Three Months Ended

(unaudited)


April 30, 2022


May 1, 2021

Comparable sales change


3.3%


22.9%

Drivers of change in comparable sales





     Number of transactions (traffic)


3.9


17.1

     Average transaction amount


(0.6)


5.0

 

Comparable Sales by Channel

Three Months Ended

(unaudited)

April 30, 2022


May 1, 2021

Stores originated comparable sales change

3.4%


18.0%

Digitally originated comparable sales change

3.2


50.2

 

Sales by Channel


Three Months Ended

(unaudited)


April 30, 2022


May 1, 2021

Stores originated


81.8%


81.7%

Digitally originated


18.2


18.3

Total


100%


100%

 

Sales by Fulfillment Channel


Three Months Ended

(unaudited)


April 30, 2022


May 1, 2021

Stores


96.5%


96.3%

Other


3.5


3.7

Total


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

(unaudited)


April 30, 2022


May 1, 2021

Target Debit Card


11.6%


12.1%

Target Credit Cards


8.7


8.4

Total RedCard Penetration


20.3%


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)


April 30,
2022


January 29,
2022


May 1,
2021


April 30,
2022


January 29,
2022


May 1,
2021

170,000 or more sq. ft.


274


274


273


49,071


49,071


48,798

50,000 to 169,999 sq. ft.


1,519


1,516


1,510


190,461


190,205


189,618

49,999 or less sq. ft.


140


136


126


4,147


4,008


3,690

Total


1,933


1,926


1,909


243,679


243,284


242,106



(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




April 30, 2022


May 1, 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






$     2.16






$     4.17


(48.2)%

Adjustments















     Gain on Dermstore sale


$        —


$         —


$        —


$    (335)


$     (269)


$   (0.53)



     Other (a)


20


15


0.03


41


30


0.06



Adjusted diluted earnings per share






$     2.19






$     3.69


(40.7)%


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



(dollars in millions) (unaudited)


April 30, 2022


May 1, 2021


Change

Net earnings


$         1,009


$         2,097


(51.9)%

     + Provision for income taxes


240


512


(53.1)

     + Net interest expense


112


108


3.8

EBIT


$         1,361


$         2,717


(49.9)%

     + Total depreciation and amortization (a)


679


667


1.8

EBITDA


$         2,040


$         3,384


(39.7)%



(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


April 30, 2022


May 1, 2021



Operating income


$         7,918


$           8,444



     + Net other income / (expense)


55


350



EBIT


7,973


8,794



     + Operating lease interest (a)


87


85



     - Income taxes (b)


1,804


1,864



Net operating profit after taxes


$         6,256


$           7,015



 

Denominator


April 30, 2022


May 1, 2021


May 2, 2020

Current portion of long-term debt and other borrowings


$         1,089


$           1,173


$            168

     + Noncurrent portion of long-term debt


13,379


11,509


14,073

     + Shareholders' investment


10,774


14,959


11,169

     + Operating lease liabilities (c)


2,854


2,563


2,448

     - Cash and cash equivalents


1,112


7,816


4,566

Invested capital


$       26,984


$         22,388


$       23,292

Average invested capital (d)


$       24,686


$         22,840










After-tax return on invested capital


25.3%


30.7%





(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 22.4 percent and 21.0 percent for the trailing twelve months ended April 30, 2022, and May 1, 2021, respectively. For the twelve months ended April 30, 2022, and May 1, 2021, includes tax effect of $1.8 billion 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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