Exhibit 99
FOR IMMEDIATE RELEASE |
| Contacts: Susan Kahn (investor) | |
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| (612) 761-6735 |
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| Cathy Wright (financial media) | |
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| (612) 761-6627 or (847) 615-1538 | |
TARGET CORPORATION FIRST QUARTER
EARNINGS PER SHARE FROM CONTINUING OPERATIONS $0.55
MINNEAPOLIS, May 12, 2005 — Target Corporation today reported earnings from continuing operations for the first quarter ended April 30, 2005 of $494 million, or 55 cents per share, compared with $392 million, or 43 cents per share in the first quarter ended May 1, 2004. All earnings per share figures refer to diluted earnings per share.
“We are pleased with our first quarter results,” said Bob Ulrich, chairman and chief executive officer of Target Corporation. “Our performance reflects our discipline in executing our strategy and our success in delighting our guests with the right combination of innovation, design and value. We are optimistic about our ability to sustain our competitive advantage and remain confident that we will continue to enjoy profitable market share growth throughout 2005 and beyond.”
Total revenues in the first quarter increased 12.7 percent to $11.477 billion from $10.180 billion in 2004, driven by a 6.2 percent increase in comparable store sales combined with the contribution from new store expansion and our credit card operations. (Total revenues include retail sales and net credit revenues. Comparable-store sales are sales from stores open longer than one year.)
For the quarter, earnings before interest and income taxes (EBIT) increased 17.4 percent to $907 million, compared with $773 million in the first quarter 2004. The contribution from the company’s credit card operations to EBIT was $142 million, an increase of $31 million, or 27.9 percent.
In the first quarter, the company’s gross margin rate improved from the prior year, reflecting favorable markup and shortage performance, while the company’s expense rate was unfavorable to prior year.(Gross margin rate represents sales less cost of sales expressed as a percentage of sales. Expense rate represents selling, general and administrative expenses expressed as a percentage of sales.)
Net interest expense for the quarter decreased $32 million compared with first quarter 2004 reflecting the benefit of lower average funded balances resulting from the application of proceeds from the Mervyn’s and Marshall Field’s sale transactions, partially offset by a higher average portfolio interest rate.
—more —
TARGET CORPORATION
Page 2
Other Factors
The company’s effective income tax rate for continuing operations for the first quarter was 37.9 percent in 2005 compared with 37.8 percent in 2004.
In June 2004, the company announced a $3 billion share repurchase program. Under this program, the company repurchased $453 million of its common stock during the first quarter of 2005, acquiring 9.2 million shares at an average price of $49.37 per share. Program to-date, the company has acquired 37.7 million shares of its common stock at an average price per share of $45.89, reflecting a total investment of approximately $1.73 billion. The company continues to expect that this share repurchase program will be completed within two to three years of its inception.
Miscellaneous
Target Corporation will webcast its first 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 (scroll down to the bottom of the Home page and click on “Investors”, then click on “webcasts”). A telephone replay of the call will be available beginning at approximately 11:30am CDT today through the end of business on May 13, 2005. The replay number is (402) 998-1599.
Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)C to the company’s 2004 Form 10-K.
Target Corporation’s continuing operations include large, general merchandise discount stores, as well as an on-line business called Target.com. At quarter-end, the company operated 1,330 Target stores in 47 states.
Target Corporation news releases are available at www.target.com or www.prnewswire.com.
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(Tables Follow)
CONSOLIDATED RESULTS OF OPERATIONS
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| Three Months Ended |
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(Millions, except per share data) |
| April 30, |
| May 1, |
| % |
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Sales |
| $ | 11,171 |
| $ | 9,909 |
| 12.7 | % |
Net credit revenues |
| 306 |
| 271 |
| 12.7 |
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Total revenues |
| 11,477 |
| 10,180 |
| 12.7 |
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Cost of sales |
| 7,556 |
| 6,769 |
| 11.6 |
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Selling, general and administrative expense |
| 2,495 |
| 2,172 |
| 14.8 |
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Credit expense |
| 179 |
| 174 |
| 2.6 |
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Depreciation and amortization |
| 340 |
| 292 |
| 16.4 |
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Earnings from continuing operations before interest |
| 907 |
| 773 |
| 17.4 |
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Net interest expense |
| 111 |
| 143 |
| (22.8 | ) | ||
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Earnings from continuing operations before income taxes |
| 796 |
| 630 |
| 26.6 |
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Provision for income taxes |
| 302 |
| 238 |
| 26.9 |
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Earnings from continuing operations |
| 494 |
| 392 |
| 26.4 |
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Earnings from discontinued operations, net of $25 tax |
| — |
| 40 |
| — |
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Net earnings |
| $ | 494 |
| $ | 432 |
| 14.6 | % |
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Basic earnings per share: |
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Continuing operations |
| $ | 0.56 |
| $ | 0.43 |
| 30.0 |
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Discontinued operations |
| — |
| 0.04 |
| — |
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Basic earnings per share |
| $ | 0.56 |
| $ | 0.47 |
| 17.9 | % |
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Diluted earnings per share: |
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Continuing operations |
| $ | 0.55 |
| $ | 0.43 |
| 30.3 |
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Discontinued operations |
| — |
| 0.04 |
| — |
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Diluted earnings per share |
| $ | 0.55 |
| $ | 0.47 |
| 18.2 | % |
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Weighted average common shares outstanding: |
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Basic |
| 887.0 |
| 912.6 |
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Diluted |
| 893.5 |
| 921.4 |
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SUBJECT TO RECLASSIFICATION
(Millions) |
| April 30, |
| May 1, |
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ASSETS |
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Cash and cash equivalents |
| $ | 1,152 |
| $ | 614 |
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Accounts receivable, net |
| 4,857 |
| 4,340 |
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Inventory |
| 5,407 |
| 4,473 |
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Other current assets |
| 1,039 |
| 889 |
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Current assets of discontinued operations |
| — |
| 2,083 |
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Total current assets |
| 12,455 |
| 12,399 |
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Property and equipment, net |
| 17,328 |
| 15,507 |
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Other non-current assets |
| 1,512 |
| 1,331 |
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Non-current assets of discontinued operations |
| — |
| 1,910 |
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Total assets |
| $ | 31,295 |
| $ | 31,147 |
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LIABILITIES AND SHAREHOLDERS’ INVESTMENT |
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Accounts payable |
| $ | 5,110 |
| $ | 4,355 |
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Current portion of long-term debt and notes payable |
| 4 |
| 1,359 |
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Other current liabilities |
| 2,059 |
| 1,610 |
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Current liabilities of discontinued operations |
| — |
| 907 |
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Total current liabilities |
| 7,173 |
| 8,231 |
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Long-term debt |
| 9,005 |
| 9,529 |
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Deferred income taxes |
| 973 |
| 632 |
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Other non-current liabilities |
| 1,097 |
| 964 |
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Non-current liabilities of discontinued operations |
| — |
| 257 |
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Shareholders’ investment |
| 13,047 |
| 11,534 |
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Total liabilities and shareholders’ investment |
| $ | 31,295 |
| $ | 31,147 |
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Common shares outstanding |
| 883.3 |
| 913.4 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS
SUBJECT TO RECLASSIFICATION |
| Three Months Ended |
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(Millions) |
| April 30, |
| May 1, |
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OPERATING ACTIVITIES |
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Net earnings |
| $ | 494 |
| $ | 432 |
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Earnings from and gain on disposal of discontinued operations, net of tax |
| — |
| 40 |
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Earnings from continuing operations |
| 494 |
| 392 |
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Reconciliation to cash flow: |
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Depreciation and amortization |
| 340 |
| 292 |
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Bad debt provision |
| 106 |
| 111 |
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Loss on disposal of fixed assets, net |
| 6 |
| 7 |
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Other non-cash items affecting earnings |
| 60 |
| 21 |
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Changes in operating accounts providing/(requiring) cash: |
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Accounts receivable originated at Target |
| 90 |
| 82 |
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Inventory |
| (23 | ) | 58 |
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Other current assets |
| 151 |
| 124 |
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Other non-current assets |
| (2 | ) | 10 |
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Accounts payable |
| (669 | ) | (601 | ) | ||
Accrued liabilities |
| (59 | ) | (97 | ) | ||
Income taxes payable |
| 163 |
| 33 |
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Other |
| (6 | ) | — |
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Cash Flow Provided by Operations |
| 651 |
| 432 |
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INVESTING ACTIVITIES |
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Expenditures for property and equipment |
| (768 | ) | (632 | ) | ||
Proceeds from the disposal of fixed assets |
| 4 |
| 1 |
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Change in accounts receivable originated at third parties |
| 16 |
| 89 |
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Cash Flow Required by Investing Activities |
| (748 | ) | (542 | ) | ||
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FINANCING ACTIVITIES |
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Reductions of long term debt |
| (511 | ) | (108 | ) | ||
Dividends paid |
| (71 | ) | (64 | ) | ||
Repurchase of stock |
| (450 | ) | (15 | ) | ||
Stock option exercises |
| 36 |
| 48 |
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Cash Flow Required for Financing Activities |
| (996 | ) | (139 | ) | ||
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Net Cash Provided by Discontinued Operations |
| — |
| 155 |
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Net Decrease in Cash and Cash Equivalents |
| (1,093 | ) | (94 | ) | ||
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Cash and Cash Equivalents at Beginning of Period |
| 2,245 |
| 708 |
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Cash and Cash Equivalents at End of Period |
| $ | 1,152 |
| $ | 614 |
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Target Corporation
(Millions)
(Unaudited)
NUMBER OF STORES, RETAIL SQUARE FEET and COMPARABLE STORE SALES
Retail square feet in thousands; reflects total square feet less office, warehouse and vacant space.
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| Number of Stores |
| Retail Square Feet |
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| April 30, |
| May 1, |
| April 30, |
| May 1, |
| % Change |
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Target General Merchandise Stores |
| 1,189 |
| 1,130 |
| 143,288 |
| 134,626 |
| 6.4 |
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SuperTarget Stores |
| 141 |
| 119 |
| 24,936 |
| 21,100 |
| 18.2 |
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Total |
| 1,330 |
| 1,249 |
| 168,224 |
| 155,726 |
| 8.0 | % |
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| Three Months Ended |
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| April 30, |
| May 1, |
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Continuing Operations Comparable Store Sales |
| 6.2 | % | 7.3 | % |
CREDIT CARD CONTRIBUTION OF CONTINUING OPERATIONS
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| Three Months Ended |
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| April 30, |
| May 1, |
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Revenues |
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Finance charges, late fees and other revenues |
| $ | 279 |
| $ | 251 |
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Merchant fees |
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Intracompany |
| 15 |
| 14 |
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Third-party |
| 27 |
| 20 |
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Total revenues |
| 321 |
| 285 |
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Expenses |
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Bad debt provision |
| 106 |
| 111 |
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Operations and marketing |
| 73 |
| 63 |
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Total expenses |
| 179 |
| 174 |
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Pre-tax credit card contribution |
| $ | 142 |
| $ | 111 |
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As a percent of average receivables (annualized) |
| 10.7 | % | 9.2 | % | ||
ALLOWANCE FOR DOUBTFUL ACCOUNTS
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| Three Months Ended |
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| April 30, |
| May 1, |
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Allowance at beginning of period |
| $ | 387 |
| $ | 352 |
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Bad debt provision |
| 106 |
| 111 |
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Net write-offs |
| (99 | ) | (114 | ) | ||
Allowance at end of period |
| $ | 394 |
| $ | 349 |
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As a percent of period-end receivables |
| 7.5 | % | 7.4 | % | ||
SUPPLEMENTAL DATA
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| April 30, |
| May 1, |
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Period-end receivables |
| $ | 5,251 |
| $ | 4,689 |
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Total past due as a percent of period-end receivables * |
| 3.0 | % | 3.9 | % | ||
* Accounts with three or more payments past due.
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| Three Months Ended |
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| April 30, |
| May 1, |
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Total revenues as a percent of average receivables (annualized): |
| 24.1 | % | 23.7 | % | ||
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Net write-offs as a percent of average receivables (annualized): |
| 7.4 | % | 9.5 | % | ||
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Average receivables |
| $ | 5,322 |
| $ | 4,798 |
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