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Exhibit 99
| FOR IMMEDIATE RELEASE | Contact: | Susan Kahn (investor) (612) 761-6735 | ||
Cathy Wright (financial media) (612) 761-6627 |
TARGET CORPORATION SECOND QUARTER
EARNINGS PER SHARE $0.38
MINNEAPOLIS, August 15, 2002 – Target Corporation today reported earnings per share for the second quarter ended August 3, 2002 of 38 cents, compared with 30 cents in the second quarter ended August 4, 2001. All earnings per share figures refer to diluted earnings per share. Second quarter net earnings increased 26.8 percent to $344 million, compared with $271 million in 2001.
"We are extremely pleased with our second quarter results, particularly our continued momentum at Target Stores," said Bob Ulrich, chairman and chief executive officer of Target Corporation. "This performance reinforces our confidence in our ability to deliver strong profitable growth in 2002 and generate considerable value for our shareholders over the long-term."
Total revenues in the second quarter increased 12.6 percent to $10.068 billion from $8.941 billion in 2001, driven by a 16.2 percent revenue increase at Target Stores. Comparable-store sales for the second quarter 2002 increased 3.0 percent. (Total revenues include retail sales and net credit revenues. Comparable-store sales are sales from stores open longer than one year.)
In the second quarter, gross margin rate increased from the prior year, primarily due to strong improvement at both Target Stores and Mervyn's. (Gross margin rate represents gross margin as a percentage of sales.) Expense rate, excluding credit card operations, was unfavorable to prior year, as growth in expense was only partially offset by the benefit of overall growth at Target, our lowest expense rate division. (Expense rate represents selling, general and administrative expenses as a percentage of sales. It includes buying and occupancy, advertising, start-up and other expense, and excludes depreciation and expenses associated with credit card operations.)
For the quarter, pre-tax segment profit increased 31.4 percent to $785 million, compared with $598 million in the second quarter 2001. Pre-tax profit at Target Stores increased $186 million, or 35.5 percent. Pre-tax profit at Mervyn's declined $1 million and pre-tax profit at Marshall Field's improved by $2 million. (Pre-tax segment profit is earnings before LIFO, securitization effects, interest, other expense and unusual items.)
Contribution from the company's credit card operations increased to $129 million in the second quarter from $103 million a year ago. At quarter-end, gross receivables serviced were $4.636 billion, compared with $2.687 billion at the end of second quarter 2001, due to the continued growth in usage of the Target Visa. The provision for bad debt expense exceeded write-offs by $35 million in the quarter, while delinquency trends improved from the same period a year ago, primarily due to the growth of higher quality Target Visa receivables. Results of credit card operations are included in the pre-tax segment profit for each of the company's three business segments.
Other Factors
Net interest expense and interest equivalent for the quarter increased $32 million compared with second quarter 2001, of which $16 million is related to the repurchase of debt. The increase in net interest expense is due to substantially higher average funded balances, partially offset by the benefit of a lower average portfolio interest rate.
The company's annual effective income tax rate is 38.2 percent, compared with 38.0 percent last year.
–More–
Miscellaneous
Separately, the corporation announced today that CEO Bob Ulrich and CFO Doug Scovanner plan to sign and file the certifications required by the SEC, following their review with the company's audit committee and Board of Directors. This filing is due in conjunction with the corporation's second quarter Form 10-Q filing, on or before September 17, 2002.
Target Corporation will webcast its second quarter earnings conference call at 9:30am CDT today. Investors and the media are invited to listen to the call through the company's website at www.target.com (click on "company/Target Corporation/investor information/webcasts"). A telephone replay of the call will be available beginning at approximately 11:30am CDT today through the end of business on August 16, 2002. The replay number is (888) 445-8681.
Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)C to the company's 2001 Form 10-K.
Target Corporation operates large-store general merchandise formats, including discount stores, moderate-priced promotional and traditional department stores, as well as a direct mail and on-line business called target.direct. The company currently operates 1,435 stores in 47 states. This includes 1,107 Target stores, 264 Mervyn's stores and 64 Marshall Field's stores.
Target Corporation news releases are available at www.target.com or www.prnewswire.com.
###
(Tables Follow)
CONSOLIDATED RESULTS OF OPERATIONS
| | Three Months Ended | Six Months Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Millions, except per share data) (Unaudited) | August 3, 2002 | August 4, 2001 | % Change | August 3, 2002 | August 4, 2001 | % Change | |||||||||||||
| Sales | $ | 9,791 | $ | 8,795 | 11.3 | % | $ | 19,127 | $ | 16,981 | 12.6 | % | |||||||
| Net credit revenues | 277 | 146 | 88.8 | 535 | 294 | 81.5 | |||||||||||||
Total revenues | 10,068 | 8,941 | 12.6 | 19,662 | 17,275 | 13.8 | |||||||||||||
Cost of sales | 6,640 | 6,082 | 9.2 | 12,962 | 11,685 | 10.9 | |||||||||||||
| Selling, general and administrative expense | 2,249 | 1,974 | 13.9 | 4,376 | 3,861 | 13.3 | |||||||||||||
| Credit expense | 171 | 78 | 118.9 | 336 | 150 | 124.3 | |||||||||||||
| Depreciation and amortization | 295 | 259 | 13.8 | 584 | 515 | 13.5 | |||||||||||||
| Interest expense | 154 | 109 | 40.9 | 289 | 216 | 33.5 | |||||||||||||
Earnings before income taxes | 559 | 439 | 27.4 | 1,115 | 848 | 31.5 | |||||||||||||
Provision for income taxes | 215 | 168 | 28.4 | 426 | 323 | 32.0 | |||||||||||||
Net earnings | $ | 344 | $ | 271 | 26.8 | % | $ | 689 | $ | 525 | 31.2 | % | |||||||
Basic earnings per share | $ | 0.38 | $ | 0.30 | 25.8 | % | $ | 0.76 | $ | 0.58 | 30.1 | % | |||||||
Diluted earnings per share | $ | 0.38 | $ | 0.30 | 26.2 | % | $ | 0.75 | $ | 0.58 | 30.4 | % | |||||||
Weighted average common shares outstanding: | |||||||||||||||||||
| Basic | 907.9 | 901.0 | 907.2 | 900.0 | |||||||||||||||
| Diluted | 913.0 | 908.9 | 913.9 | 908.7 | |||||||||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| (Millions) (Unaudited) | August 3, 2002 | August 4, 2001 | |||||
|---|---|---|---|---|---|---|---|
| ASSETS | |||||||
| Cash and cash equivalents | $ | 1,755 | $ | 798 | |||
| Accounts receivable (net of $332 allowance) | 4,304 | — | |||||
| Receivable-backed securities | — | 1,721 | |||||
| Inventory | 4,549 | 4,408 | |||||
| Other | 1,112 | 893 | |||||
| Total current assets | 11,720 | 7,820 | |||||
Property and equipment, net | 14,370 | 12,508 | |||||
| Other | 1,169 | 917 | |||||
| Total assets | $ | 27,259 | $ | 21,245 | |||
LIABILITIES AND SHAREHOLDERS' INVESTMENT | |||||||
| Accounts payable | $ | 4,187 | $ | 3,735 | |||
| Current portion of long-term debt and notes payable | 1,583 | 580 | |||||
| Other | 2,031 | 1,886 | |||||
| Total current liabilities | 7,801 | 6,201 | |||||
Long-term debt | 9,735 | 6,999 | |||||
| Other | 1,206 | 1,047 | |||||
| Shareholders' investment | 8,517 | 6,998 | |||||
| Total liabilities and shareholders' investment | $ | 27,259 | $ | 21,245 | |||
Common shares outstanding | 908.4 | 901.7 | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Six Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Millions) (Unaudited) | August 3, 2002 | August 4, 2001 | |||||||
| OPERATING ACTIVITIES | |||||||||
| Net earnings | $ | 689 | $ | 525 | |||||
| Reconciliation to cash flow: | |||||||||
| Depreciation and amortization | 584 | 515 | |||||||
| Bad debt provision | 192 | — | |||||||
| Other non-cash items affecting earnings | 106 | 56 | |||||||
| Changes in operating accounts providing / (requiring) cash: | |||||||||
| Accounts receivable | (665 | ) | — | ||||||
| Inventory | (100 | ) | (160 | ) | |||||
| Other current assets | (197 | ) | (142 | ) | |||||
| Other assets | (121 | ) | (67 | ) | |||||
| Accounts payable | 27 | 159 | |||||||
| Accrued liabilities | 13 | (97 | ) | ||||||
| Income taxes payable | 20 | 94 | |||||||
| Other | 19 | — | |||||||
| Cash flow provided by operations | 567 | 883 | |||||||
INVESTING ACTIVITIES | |||||||||
| Expenditures for property and equipment | (1,479 | ) | (1,586 | ) | |||||
| Decrease in receivable-backed securities | — | 220 | |||||||
| Proceeds from disposals of property and equipment | 11 | 10 | |||||||
| Cash flow required by investing activities | (1,468 | ) | (1,356 | ) | |||||
Net financing requirements | (901 | ) | (473 | ) | |||||
FINANCING ACTIVITIES | |||||||||
| Decrease in notes payable, net | — | (247 | ) | ||||||
| Additions to long-term debt | 2,500 | 1,750 | |||||||
| Reductions of long-term debt | (245 | ) | (476 | ) | |||||
| Dividends paid | (109 | ) | (99 | ) | |||||
| Repurchase of stock | — | (14 | ) | ||||||
| Other | 11 | 1 | |||||||
| Cash flow provided by financing activities | 2,157 | 915 | |||||||
Net increase in cash and cash equivalents | 1,256 | 442 | |||||||
Cash and cash equivalents at beginning of year | 499 | 356 | |||||||
| Cash and cash equivalents at end of period | $ | 1,755 | $ | 798 | |||||
Target Corporation
(Millions, except as indicated)
(Unaudited)
REVENUES and COMPARABLE-STORE SALES
Comparable-store sales are sales from stores open longer than one year.
| | Three Months Ended | Six Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | % Change | | | % Change | |||||||||||||||
| | August 3, 2002 | August 4, 2001 | Revenues | Comp. Sales | August 3, 2002 | August 4, 2001 | Revenues | Comp. Sales | |||||||||||||
| Target | $ | 8,499 | $ | 7,311 | 16.2 | % | 4.4 | % | $ | 16,528 | $ | 14,082 | 17.4 | % | 5.6 | % | |||||
| Mervyn's | 886 | 931 | (4.9 | ) | (5.1 | ) | 1,749 | 1,802 | (3.0 | ) | (3.3 | ) | |||||||||
| Marshall Field's | 589 | 598 | (1.4 | ) | (2.5 | ) | 1,214 | 1,227 | (1.1 | ) | (2.3 | ) | |||||||||
| Other | 94 | 101 | (7.8 | ) | na | 171 | 164 | 4.5 | na | ||||||||||||
| TOTAL | $ | 10,068 | $ | 8,941 | 12.6 | % | 3.0 | % | $ | 19,662 | $ | 17,275 | 13.8 | % | 4.1 | % | |||||
NUMBER OF STORES, RETAIL SQUARE FEET and INVENTORY
Retail square feet in thousands; reflects total square feet less office, warehouse and vacant space.
| | Number of Stores | Retail Square Feet | Inventory | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | August 3, 2002 | August 4, 2001 | August 3, 2002 | August 4, 2001 | % Change | August 3, 2002 | August 4, 2001 | % Change | |||||||||||
| Target | 1,107 | * | 1,019 | * | 133,811 | 119,822 | 11.7 | % | $ | 3,509 | $ | 3,193 | 9.9 | % | |||||
| Mervyn's | 264 | 265 | 21,425 | 21,480 | (0.3 | ) | 526 | 587 | (10.3 | ) | |||||||||
| Marshall Field's | 64 | 64 | 14,638 | 14,638 | 0.0 | 343 | 393 | (12.7 | ) | ||||||||||
| Other | — | — | — | — | 171 | 235 | (27.6 | ) | |||||||||||
| TOTAL | 1,435 | 1,348 | 169,874 | 155,940 | 8.9 | % | $ | 4,549 | $ | 4,408 | 3.2 | % | |||||||
* Includes 82 SuperTargets in 2002 and 51 SuperTargets in 2001.
PRE-TAX SEGMENT PROFIT AND EARNINGS RECONCILIATION
Pre-tax segment profit is earnings before LIFO, securitization effects, interest, other expense and unusual items.
| | Three Months Ended | Six Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | August 3, 2002 | August 4, 2001 | % Change | August 3, 2002 | August 4, 2001 | % Change | ||||||||||||
| Target | $ | 708 | $ | 522 | 35.5 | % | $ | 1,386 | $ | 1,024 | 35.3 | % | ||||||
| Mervyn's | 59 | 60 | (1.2 | ) | 111 | 108 | 3.0 | |||||||||||
| Marshall Field's | 18 | 16 | 18.0 | 50 | 39 | 28.8 | ||||||||||||
| Total pre-tax segment profit | 785 | 598 | 31.4 | 1,547 | 1,171 | 32.1 | ||||||||||||
| Securitization adjustment (interest equivalent) | — | (13 | ) | — | (25 | ) | ||||||||||||
| Interest expense | (154 | ) | (109 | ) | (289 | ) | (216 | ) | ||||||||||
| Other | (72 | ) | (37 | ) | (143 | ) | (82 | ) | ||||||||||
| Earnings before income taxes | $ | 559 | $ | 439 | 27.4 | % | $ | 1,115 | $ | 848 | 31.5 | % | ||||||
EBITDA
EBITDA is pre-tax segment profit before depreciation and amortization.
| | Three Months Ended | Six Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | August 3, 2002 | August 4, 2001 | % Change | August 3, 2002 | August 4, 2001 | % Change | |||||||||||
| Target | $ | 931 | $ | 709 | 31.2 | % | $ | 1,830 | $ | 1,395 | 31.1 | % | |||||
| Mervyn's | 86 | 91 | (5.2 | ) | 167 | 171 | (1.9 | ) | |||||||||
| Marshall Field's | 49 | 50 | (0.3 | ) | 113 | 107 | 5.8 | ||||||||||
| Total segment EBITDA | $ | 1,066 | $ | 850 | 25.5 | % | $ | 2,110 | $ | 1,673 | 26.1 | % | |||||
| Segment depreciation and amortization | (281 | ) | (252 | ) | (563 | ) | (502 | ) | |||||||||
| Pre-tax segment profit | $ | 785 | $ | 598 | 31.4 | % | $ | 1,547 | $ | 1,171 | 32.1 | % | |||||
Three Months Ended | Six Months Ended | Twelve Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | August 3, 2002 | August 4, 2001 | August 3, 2002 | August 4, 2001 | August 3, 2002 | August 4, 2001 | |||||||
| Pre-tax Segment Profit as a % of Revenues: | |||||||||||||
| Target | 8.3 | % | 7.1 | % | 8.4 | % | 7.3 | % | 8.3 | % | 7.5 | % | |
| Mervyn's | 6.6 | % | 6.4 | % | 6.4 | % | 6.0 | % | 7.3 | % | 6.7 | % | |
| Marshall Field's | 3.1 | % | 2.6 | % | 4.1 | % | 3.1 | % | 5.2 | % | 5.7 | % | |
EBITDA as a % of Revenues: | |||||||||||||
| Target | 11.0 | % | 9.7 | % | 11.1 | % | 9.9 | % | 10.7 | % | 9.8 | % | |
| Mervyn's | 9.7 | % | 9.8 | % | 9.6 | % | 9.5 | % | 10.2 | % | 9.8 | % | |
| Marshall Field's | 8.4 | % | 8.3 | % | 9.3 | % | 8.7 | % | 9.9 | % | 10.4 | % | |
Target Corporation
(Millions)
(Unaudited)
CREDIT CARD CONTRIBUTION
| | Three Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | August 3, 2002 | August 4, 2001 | August 3, 2002 | August 4, 2001 | |||||||||
| Revenues | |||||||||||||
| Finance charges, late fees and other revenues | $ | 262 | $ | 175 | $ | 506 | $ | 350 | |||||
| Merchant fees | |||||||||||||
| Intracompany | 23 | 22 | 45 | 44 | |||||||||
| Third-party | 15 | 1 | 29 | 2 | |||||||||
| Total revenues | 300 | 198 | 580 | 396 | |||||||||
Expenses | |||||||||||||
| Bad debt | 103 | 45 | 192 | 81 | |||||||||
| Operations and marketing | 68 | 50 | 144 | 102 | |||||||||
| Total expenses | 171 | 95 | 336 | 183 | |||||||||
Pre-tax credit contribution | $ | 129 | $ | 103 | $ | 244 | $ | 213 | |||||
QUARTER-END RECEIVABLES SERVICED
| | August 3, 2002 | August 4, 2001 | |||||
|---|---|---|---|---|---|---|---|
| Target | |||||||
| Guest Card | $ | 865 | $ | 1,255 | |||
| Target Visa | 2,534 | 131 | |||||
| Mervyn's | 586 | 639 | |||||
| Marshall Field's | 651 | 662 | |||||
| Quarter-end receivables serviced | $ | 4,636 | $ | 2,687 | |||
Past due* | 5.6% | 6.8% | |||||
Average receivables serviced | $ | 4,301 | $ | 2,732 | |||
* Accounts with two or more payments past due as a percent of total outstanding receivables.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
| | Three Months Ended | Six Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | August 3, 2002 | August 4, 2001 | August 3, 2002 | August 4, 2001 | |||||||||
| Allowance at beginning of period | $ | 297 | $ | 207 | $ | 261 | $ | 211 | |||||
| Bad debt provision | 103 | 45 | 192 | 81 | |||||||||
| Net write-offs | (68 | ) | (39 | ) | (121 | ) | (79 | ) | |||||
| Allowance at end of period | $ | 332 | $ | 213 | $ | 332 | $ | 213 | |||||
As a percent of period-end receivables serviced | 7.2% | 7.9% | 7.2% | 7.9% | |||||||||
As a multiple of trailing 12 months net write-offs | 1.5 | 1.4 | 1.5 | 1.4 | |||||||||
TARGET CORPORATION SECOND QUARTER EARNINGS PER SHARE $0.38
CONSOLIDATED RESULTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
CONSOLIDATED STATEMENTS OF CASH FLOWS