MINNEAPOLIS, Nov. 15, 2023 /PRNewswire/ --

  • The Company's third quarter operating income margin rate of 5.2 percent was 1.3 percentage points higher than last year, driven by a higher gross margin rate.
  • Third quarter GAAP and Adjusted EPS1 of $2.10 was 36 percent higher than a year ago and above the high end of the Company's guidance range, reflecting disciplined inventory and expense management.
  • Through the first three quarters of this year, Target has generated more than $5.3 billion of operating cash flow, compared with approximately $550 million in 2022.
  • Third quarter comparable sales declined 4.9 percent, in line with expectations.
    • Declines in discretionary categories were partially offset by continued growth in frequency categories, most notably in Beauty.
    • Same-day services grew more than 8 percent, led by more than 12 percent growth in Drive-Up.
  • Inventory at the end of Q3 was 14 percent lower than last year, reflecting a 19 percent reduction in discretionary category inventory.
  • To deliver newness and value for guests this holiday season, Target will offer more than 10,000 new items for the holidays, with thousands of must-have gifts under $25, and thousands of exclusive-to-Target items across many categories.

For additional media materials, please visit:
https://corporate.target.com/news-features/article/2023/11/q3-2023-earnings 

Target Corporation (NYSE: TGT) today announced its third quarter 2023 financial results, which reflected stronger-than-expected profit performance on sales consistent with expectations.

The Company reported third quarter GAAP and Adjusted earnings per share1 (EPS) of $2.10, up 36.3 percent from $1.54 in 2022. 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.

Brian Cornell, chair and chief executive of Target Corporation, said "In the third quarter, our team continued to successfully navigate our business through a very challenging external environment. While third quarter sales were consistent with our expectations, earnings per share came in far ahead of our forecast. This profit performance benefited from our team's commitment to efficiency and disciplined inventory management, and I'd like to thank them for their tireless efforts. Looking ahead, we're continuing to make investments throughout our business -- in our assortment, our team and the services we offer -- to provide the newness, affordability and convenience our guests want during the holiday season and beyond."

Guidance

For the fourth quarter, the Company expects comparable sales in a wide range around a mid-single digit decline, and GAAP and Adjusted EPS of $1.90 to $2.60.

Operating Results

Comparable sales declined 4.9 percent in the third quarter, reflecting a comparable store sales decline of 4.6 percent and a comparable digital sales decline of 6.0 percent. Total revenue of $25.4 billion was 4.2 percent lower than last year, reflecting a total sales decline of 4.3 percent and a 0.6 percent decrease in other revenue. Third quarter operating income of $1.3 billion was 28.9 percent higher than last year, driven by a higher gross margin rate.

Third quarter operating income margin rate was 5.2 percent in 2023, compared with 3.9 percent in 2022. Third quarter gross margin rate was 27.4 percent, compared with 24.7 percent in 2022, reflecting lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs, and favorable category mix. These benefits were partially offset by higher inventory shrink. Third quarter SG&A expense rate was 20.9 percent in 2023, compared with 19.7 percent in 2022, reflecting the de-leveraging impact of lower sales combined with higher costs, including continued investments in pay and benefits and inflationary pressures throughout our business, partially offset by disciplined cost management.

Interest Expense and Taxes

The Company's third quarter 2023 net interest expense was $107 million, compared with $125 million last year, reflecting an increase in interest income, partially offset by higher debt levels and the impact of higher floating interest rates on interest rate swaps.

Third quarter 2023 effective income tax rate was 21.3 percent, in line with the prior year rate of 21.6 percent.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $507 million in the third quarter, compared with $497 million last year, reflecting a 1.9 percent increase in the dividend per share.

The Company did not repurchase any stock in the third quarter.  As of the end of the 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 2023, after-tax return on invested capital (ROIC) was 13.9 percent, compared with 14.6 percent for the trailing twelve months through third quarter 2022. The decrease in ROIC reflects faster growth in average invested capital compared with after-tax returns. 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 Corporate.Target.com/Investors (click on "Q3 2023 Target Corporation Earnings Conference Call" under "Events & Presentations"). A replay of the webcast will be provided when available. The replay number is 1-800-391-9851.

Miscellaneous

Statements in this release regarding the Company's future financial performance, including its fiscal 2023 fourth quarter guidance, 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 results 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 28, 2023. 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. Additional company information can be found by visiting the corporate website (corporate.target.com) and press center.

 

TARGET CORPORATION

Consolidated Statements of Operations



Three Months Ended




Nine Months Ended



(millions, except per share data) (unaudited)


October 28,
2023


October 29,
2022


Change


October 28,
2023


October 29,
2022


Change

Sales


$       25,004


$       26,122


(4.3) %


$       74,336


$       76,605


(3.0) %

Other revenue


394


396


(0.6)


1,157


1,120


3.3

Total revenue


25,398


26,518


(4.2)


75,493


77,725


(2.9)

Cost of sales


18,149


19,680


(7.8)


54,333


58,283


(6.8)

Selling, general and administrative expenses


5,316


5,219


1.8


15,525


14,983


3.6

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


616


597


3.2


1,793


1,770


1.3

Operating income


1,317


1,022


28.9


3,842


2,689


42.9

Net interest expense


107


125


(14.1)


395


349


13.4

Net other income


(25)


(12)


115.0


(64)


(35)


87.8

Earnings before income taxes


1,235


909


35.9


3,511


2,375


47.9

Provision for income taxes


264


197


34.2


755


471


60.6

Net earnings


$            971


$            712


36.3 %


$         2,756


$         1,904


44.7 %

Basic earnings per share


$           2.10


$           1.55


35.9 %


$           5.97


$           4.11


45.4 %

Diluted earnings per share


$           2.10


$           1.54


36.3 %


$           5.96


$           4.09


45.6 %

Weighted average common shares outstanding













Basic


461.6


460.3


0.3 %


461.4


462.6


(0.3) %

Diluted


462.6


462.5


0.0 %


462.7


465.3


(0.6) %

Antidilutive shares


3.0


1.3




2.6


1.1



Dividends declared per share


$           1.10


$           1.08


1.9 %


$           3.28


$           3.06


7.2 %

 

TARGET CORPORATION

Consolidated Statements of Financial Position

(millions, except footnotes) (unaudited)


October 28, 2023


January 28, 2023


October 29, 2022

Assets







Cash and cash equivalents


$             1,910


$             2,229


$                954

Inventory


14,731


13,499


17,117

Other current assets


1,958


2,118


2,322

Total current assets


18,599


17,846


20,393

Property and equipment







Land


6,520


6,231


6,214

Buildings and improvements


36,627


34,746


34,279

Fixtures and equipment


8,490


7,439


7,184

Computer hardware and software


3,312


3,039


2,899

Construction-in-progress


2,000


2,688


2,358

Accumulated depreciation


(23,781)


(22,631)


(22,013)

Property and equipment, net


33,168


31,512


30,921

Operating lease assets


3,086


2,657


2,596

Other noncurrent assets


1,376


1,320


1,705

Total assets


$          56,229


$          53,335


$          55,615

Liabilities and shareholders' investment







Accounts payable


$          14,291


$          13,487


$          15,438

Accrued and other current liabilities


6,099


5,883


6,138

Current portion of long-term debt and other borrowings


1,112


130


2,207

Total current liabilities


21,502


19,500


23,783

Long-term debt and other borrowings


14,883


16,009


14,237

Noncurrent operating lease liabilities


3,031


2,638


2,590

Deferred income taxes


2,447


2,196


2,240

Other noncurrent liabilities


1,852


1,760


1,746

Total noncurrent liabilities


22,213


22,603


20,813

Shareholders' investment







Common stock


38


38


38

Additional paid-in capital


6,681


6,608


6,558

Retained earnings


6,225


5,005


4,631

Accumulated other comprehensive loss


(430)


(419)


(208)

Total shareholders' investment


12,514


11,232


11,019

Total liabilities and shareholders' investment


$          56,229


$          53,335


$          55,615

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 461,651,176, 460,346,947, and 460,297,654 shares issued and outstanding as of October 28, 2023, January 28, 2023, and October 29, 2022, 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 28,
2023


October 29,
2022

Operating activities





Net earnings


$           2,756


$           1,904

Adjustments to reconcile net earnings to cash provided by operating activities:





Depreciation and amortization


2,072


2,004

Share-based compensation expense


176


177

Deferred income taxes


252


548

Noncash losses / (gains) and other, net


101


141

Changes in operating accounts:





Inventory


(1,232)


(3,215)

Other assets


(208)


(205)

Accounts payable


887


(224)

Accrued and other liabilities


528


(578)

Cash provided by operating activities


5,332


552

Investing activities





Expenditures for property and equipment


(3,952)


(4,323)

Proceeds from disposal of property and equipment


24


4

Other investments


18


16

Cash required for investing activities


(3,910)


(4,303)

Financing activities





Change in commercial paper, net



2,104

Additions to long-term debt



991

Reductions of long-term debt


(114)


(139)

Dividends paid


(1,503)


(1,339)

Repurchase of stock



(2,646)

Shares withheld for taxes on share-based compensation


(124)


(179)

Stock option exercises



2

Cash required for financing activities


(1,741)


(1,206)

Net decrease in cash and cash equivalents


(319)


(4,957)

Cash and cash equivalents at beginning of period


2,229


5,911

Cash and cash equivalents at end of period


$           1,910


$               954

 

TARGET CORPORATION

Operating Results

Rate Analysis


Three Months Ended


Nine Months Ended

(unaudited)


October 28,
2023


October 29,
2022


October 28,
2023


October 29,
2022

Gross margin rate


27.4 %


24.7 %


26.9 %


23.9 %

SG&A expense rate


20.9


19.7


20.6


19.3

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


2.4


2.3


2.4


2.3

Operating income margin rate


5.2


3.9


5.1


3.5


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 $165 million and $508 million of profit-sharing income under our credit card program agreement for the three and nine months ended October 28, 2023, respectively, and $184 million and $550 million for the three and nine months ended October 29, 2022, respectively.

 

Comparable Sales


Three Months Ended


Nine Months Ended

(unaudited)


October 28,
2023


October 29,
2022


October 28,
2023


October 29,
2022

Comparable sales change


(4.9) %


2.7 %


(3.5) %


2.9 %

Drivers of change in comparable sales









Number of transactions (traffic)


(4.1)


1.4


(2.7)


2.6

Average transaction amount


(0.8)


1.3


(0.8)


0.2


Comparable Sales by Channel


Three Months Ended


Nine Months Ended

(unaudited)


October 28,
2023


October 29,
2022


October 28,
2023


October 29,
2022

Stores originated comparable sales change


(4.6) %


3.2 %


(2.8) %


2.6 %

Digitally originated comparable sales change


(6.0)


0.3


(6.7)


4.1



Sales by Channel


Three Months Ended


Nine Months Ended

(unaudited)


October 28,
2023


October 29,
2022


October 28,
2023


October 29,
2022

Stores originated


83.2 %


82.9 %


82.9 %


82.3 %

Digitally originated


16.8


17.1


17.1


17.7

Total


100 %


100 %


100 %


100 %


Sales by Fulfillment Channel


Three Months Ended


Nine Months Ended

(unaudited)


October 28,
2023


October 29,
2022


October 28,
2023


October 29,
2022

Stores


97.7 %


96.8 %


97.5 %


96.7 %

Other


2.3


3.2


2.5


3.3

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 28,
2023


October 29,
2022


October 28,
2023


October 29,
2022

Total RedCard Penetration


18.3 %


19.6 %


18.6 %


20.0 %

 

Number of Stores and Retail Square Feet


Number of Stores


Retail Square Feet (a)

(unaudited)


October 28,
2023


January 28,
2023


October 29,
2022


October 28,
2023


January 28,
2023


October 29,
2022

170,000 or more sq. ft.


273


274


274


48,824


48,985


48,985

50,000 to 169,999 sq. ft.


1,542


1,527


1,522


192,877


191,241


190,739

49,999 or less sq. ft.


141


147


145


4,207


4,358


4,305

Total


1,956


1,948


1,941


245,908


244,584


244,029

(a)      In thousands; reflects total square feet less office, supply chain facilities, 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 28, 2023


October 29, 2022



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP and adjusted diluted earnings per share






$     2.10






$     1.54


36.3 %






Reconciliation of Non-GAAP

Adjusted EPS


Nine Months Ended




October 28, 2023


October 29, 2022



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP diluted earnings per share






$     5.96






$     4.09


45.6 %

Adjustments















Other (a)


$        —


$         —


$        —


$        20


$         15


$     0.03



Adjusted diluted earnings per share






$     5.96






$     4.12


44.4 %

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

 

Reconciliation of Non-GAAP

Adjusted EPS Guidance

Guidance

Q4 2023

(unaudited)

Per Share

GAAP diluted earnings per share guidance

$1.90 - $2.60

Estimated adjustments


Other (a)

$                   —

Adjusted diluted earnings per share guidance

$1.90 - $2.60

(a)         

Fourth quarter and full-year 2023 GAAP EPS may include the impact of certain discrete items, which will be excluded in calculating Adjusted EPS. In the past, these items have included losses on the early retirement of debt and certain other items that are discretely managed. The Company is not currently aware of any such discrete items.

 

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 28,
2023


October 29,
2022


Change


October 28,
2023


October 29,
2022


Change

Net earnings


$            971


$            712


36.3 %


$         2,756


$         1,904


44.7 %

 + Provision for income taxes


264


197


34.2


755


471


60.6

 + Net interest expense


107


125


(14.1)


395


349


13.4

EBIT


$         1,342


$         1,034


29.8 %


$         3,906


$         2,724


43.5 %

 + Total depreciation and amortization (a)


722


674


7.1


2,072


2,004


3.4

EBITDA


$         2,064


$         1,708


20.9 %


$         5,978


$         4,728


26.5 %

(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


October 28,
2023


October 29,
2022



Operating income


$         5,001


$           4,784



 + Net other income


79


61



EBIT


5,080


4,845



 + Operating lease interest (a)


106


89



  - Income taxes (b)


1,050


1,059



Net operating profit after taxes


$         4,136


$           3,875



 

Denominator


October 28,
2023


October 29,
2022


October 30,
2021

Current portion of long-term debt and other borrowings


$         1,112


$           2,207


$         1,176

 + Noncurrent portion of long-term debt


14,883


14,237


11,586

 + Shareholders' investment


12,514


11,019


13,803

 + Operating lease liabilities (c)


3,351


2,879


2,737

  - Cash and cash equivalents


1,910


954


5,753

Invested capital


$       29,950


$         29,388


$       23,549

Average invested capital (d)


$       29,670


$         26,469










After-tax return on invested capital


13.9 %


14.6 %





(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 20.3 percent and 21.5 percent for the trailing twelve months ended October 28, 2023, and October 29, 2022, respectively. For the twelve months ended October 28, 2023, and October 29, 2022, includes tax effect of $1.0 billion related to EBIT, and $22 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, 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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