Exhibit 99
FOR IMMEDIATE RELEASE | | Contact: | | Susan Kahn |
| | | | (612) 761-6735 |
TARGET CORPORATION FIRST QUARTER
EARNINGS PER SHARE $0.75
MINNEAPOLIS, May 23, 2007 — Target Corporation today reported net earnings for the first quarter ended May 5, 2007 of $651 million, or 75 cents per share, compared with $554 million, or 63 cents per share in the first quarter ended April 29, 2006, representing a 19.6 percent increase in earnings per share. All earnings per share figures refer to diluted earnings per share.
“We are pleased with the strength of our first quarter results in both our core retail and credit card operations,” said Bob Ulrich, chairman and chief executive officer of Target Corporation. “Our overall performance reinforces our confidence in our ability to continue to generate profitable market share growth for the full year 2007 and many years to come.”
Total revenues in the first quarter increased 9.2 percent to $14.041 billion from $12.863 billion in 2006, reflecting a 4.3 percent increase in comparable-store sales combined with the contribution from new store expansion and from our credit card operations. (Total revenues include retail sales and net credit card revenues. Comparable-store sales are sales from stores open longer than one year.)
Earnings before interest and income taxes (EBIT) in the first quarter of 2007 increased 18.0 percent, to $1.200 billion, compared with $1.017 billion in the first quarter a year ago. Key contributors to this EBIT growth included improvement in both gross margin and expense rate performance, combined with strong profit growth in our credit card operations. (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 increased $5 million compared with first quarter 2006 primarily due to higher average debt balances, including the debt to fund the growth in our accounts receivable.
The contribution from the company’s credit card operations to first quarter earnings before taxes (EBT), net of the allocated interest expense to fund our average accounts receivable, was $143 million, an increase of $25 million, or 20.6 percent, from the same period in 2006. This favorability is primarily attributable to growth in net interest income.
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TARGET CORPORATION
Other Factors
The company’s effective income tax rate for the first quarter was 38.8 percent in 2007 compared with 37.5 percent in 2006. For the full year, the effective income tax rate is still expected to increase modestly from last year’s 38.0 percent rate.
Under a $5 billion share repurchase program that began in 2004, the company repurchased $549 million of its common stock during the first quarter of 2007, acquiring 9.2 million shares at an average price of $59.79 per share. Program-to-date, the company has acquired 80.2 million shares of its common stock at an average price per share of $49.84, reflecting a total investment of approximately $4.0 billion. The company expects to continue to execute this program primarily in open market transactions, subject to market conditions, and expects to complete the total program by year-end 2008, or sooner.
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/investors (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 24, 2007. The replay number is (800) 642-1687 (passcode: 7389070).
Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)A to the company’s 2006 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 1,500 Target stores in 47 states.
Target Corporation news releases are available at www.target.com.
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(Tables Follow)
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Consolidated Statements of Cash Flows
| | Thirteen Weeks Ended | |
| | May 5, | | April 29, | |
(millions) (unaudited) | | 2007 | | 2006 | |
Operating Activities | | | | | |
Net earnings | | $ | 651 | | $ | 554 | |
Reconciliation of net earnings to operating cash flows | | | | | |
Depreciation and amortization | | 392 | | 334 | |
Share-based compensation expense | | 18 | | 20 | |
Deferred income taxes | | (27 | ) | (62 | ) |
Bad debt provision | | 86 | | 88 | |
Loss on disposal of property and equipment, net | | 14 | | 15 | |
Other non-cash items affecting earnings | | 19 | | 4 | |
Changes in operating accounts providing / (requiring) cash: | | | | | |
Accounts receivable originated at Target | | 48 | | 99 | |
Inventory | | (133 | ) | (192 | ) |
Other current assets | | 110 | | 88 | |
Other non-current assets | | (4 | ) | 11 | |
Accounts payable | | (698 | ) | (561 | ) |
Accrued and other current liabilities | | (258 | ) | (61 | ) |
Income taxes payable | | 226 | | 190 | |
Other non-current liabilities | | 18 | | — | |
Cash flow provided by operations | | 462 | | 527 | |
Investing Activities | | | | | |
Expenditures for property and equipment | | (1,183 | ) | (884 | ) |
Proceeds from disposal of property and equipment | | 4 | | 5 | |
Change in accounts receivable originated at third parties | | 53 | | 110 | |
Other investment | | (5 | ) | (10 | ) |
Cash flow required for investing activities | | (1,131 | ) | (779 | ) |
Financing Activities | | | | | |
Additions to long-term debt | | 1,900 | | — | |
Reductions of long-term debt | | (501 | ) | — | |
Dividends paid | | (103 | ) | (87 | ) |
Repurchase of stock | | (500 | ) | (350 | ) |
Stock option exercises and related tax benefit | | 36 | | 30 | |
Other | | (7 | ) | — | |
Cash flow provided by (required for) financing activities | | 825 | | (407 | ) |
Net increase / (decrease) in cash and cash equivalents | | 156 | | (659 | ) |
Cash and cash equivalents at beginning of period | | 813 | | 1,648 | |
Cash and cash equivalents at end of period | | $ | 969 | | $ | 989 | |
Subject to reclassification
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Number of Stores, Retail Square Feet and comparable-store sales
| | Number of Stores | | Retail Square Feet (a) | |
| | May 5, | | April 29, | | May 5, | | April 29, | | | |
(unaudited) | | 2007 | | 2006 | | 2007 | | 2006 | | Change | |
Target general merchandise stores | | 1,318 | | 1,259 | | 161,860 | | 152,996 | | 5.8 | % |
SuperTarget stores | | 182 | | 159 | | 32,129 | | 28,117 | | 14.3 | % |
Total | | 1,500 | | 1,418 | | 193,989 | | 181,113 | | 7.1 | % |
(a) In thousands; reflects total square feet, less office, distribution center and vacant space.
| | Thirteen Weeks Ended | |
| | May 5, | | April 29, | |
(unaudited) | | 2007 | | 2006 | |
Comparable-store sales (b) | | 4.3 | % | 5.1 | % |
(b) Comparable-store sales growth is calculated by comparing sales in current year periods to comparable, prior year periods of equivalent length.
Credit Card Contribution to EBT
Effective February 2007, the Company redefined Credit Card Contribution to Earnings Before Taxes (EBT). We have reclassified prior period amounts to conform to the current year disclosure. These reclassifications had no effect on our Consolidated Statements of Operations.
| | Thirteen Weeks Ended | |
| | May 5, | | April 29, | |
(millions) (unaudited) | | 2007 | | 2006 | |
Revenues | | | | | |
Finance charges | | $ | 296 | | $ | 259 | |
Interest expense (a) | | (77 | ) | (63 | ) |
Net interest income | | 219 | | 196 | |
Late fees and other revenues | | 88 | | 80 | |
Third-party merchant fees | | 34 | | 31 | |
New account and loyalty rewards discounts (b) | | (24 | ) | (25 | ) |
Non-interest income | | 98 | | 86 | |
Total credit card revenues | | 317 | | 282 | |
Expenses | | | | | |
Bad debt provision | | 86 | | 88 | |
Operations and marketing | | 84 | | 72 | |
Allocated depreciation charge (c) | | 4 | | 4 | |
Total expenses | | 174 | | 164 | |
Credit card contribution to EBT | | $ | 143 | | $ | 118 | |
As a percentage of average receivables (annualized) | | 8.7 | % | 8.0 | % |
Net interest margin (annualized) (d) | | 13.3 | % | 13.2 | % |
| | | | | |
Receivables | | | | | |
(millions) | | | | | |
Period-end receivables | | $ | 6,510 | | $ | 5,844 | |
Average receivables | | $ | 6,582 | | $ | 5,930 | |
Accounts with three or more payments past due as a percentage of period-end receivables | | 3.2 | % | 3.0 | % |
| | | | | |
Allowance for Doubtful Accounts | | | | | |
(millions) | | | | | |
Allowance at beginning of period | | $ | 517 | | $ | 451 | |
Bad debt provision | | 86 | | 88 | |
Net write-offs | | (99 | ) | (63 | ) |
Allowance at end of period | | $ | 504 | | $ | 476 | |
As a percentage of period-end receivables | | 7.7 | % | 8.1 | % |
Net write-offs as a percentage of average receivables (annualized) | | 6.0 | % | 4.3 | % |
(a) | Represents an allocation of consolidated interest expense based on estimated funding costs for average net accounts receivable and other financial services assets and is included in net interest expense in our Consolidated Statements of Operations. |
| |
(b) | Primarily consists of new account and loyalty rewards program discounts on our REDcard products, which are included as reductions of sales in our Consolidated Statements of Operations. |
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(c) | Included in depreciation and amortization in our Consolidated Statements of Operations. |
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(d) | Net interest income divided by average accounts receivable. |
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