Exhibit 99
FOR IMMEDIATE RELEASE
TARGET CORPORATION FIRST QUARTER EARNINGS PER SHARE $0.69
MINNEAPOLIS, May 20, 2009 — Target Corporation (NYSE:TGT) today reported net earnings of $522 million for the first quarter ended May 2, 2009, compared with $602 million in the first quarter ended May 3, 2008. Earnings per share in the first quarter decreased 6.8 percent to $0.69 from $0.74 in the same period a year ago. All earnings per share figures refer to diluted earnings per share.
“Our first quarter earnings per share reflect disciplined execution of our strategy in a difficult environment,” said Gregg Steinhafel, chairman, president and chief executive officer. “In our retail segment, we continue to experience strong positive comparable store sales results in our traffic-driving food and commodity categories, and the profitability of our first quarter sales was higher than expected due to outstanding gross margin and expense rate performance. Credit card segment results for the first quarter were stable, profitable and consistent with our expectations. Very importantly, we believe this improved stability and predictability in key aspects of both our retail and credit card segments reflects the resilience of our strategy and underscores our ability to generate substantial value for our shareholders over time.”
Retail Segment Results
Sales increased 0.4 percent in the first quarter to $14.4 billion in 2009 from $14.3 billion in 2008, due to the contribution from new store expansion partially offset by a 3.7 percent decline in comparable-store sales. Retail segment earnings before interest expense and income taxes (EBIT) were $962 million in the first quarter of 2009, a 0.3 percent increase from $959 million in 2008.
First quarter gross margin rate was unchanged from prior year, due to favorable markup and markdown performance offset by the unfavorable mix impact of faster sales growth in non-discretionary lower margin rate categories. First quarter selling, general and administrative (SG&A) expense rate improved compared with the first quarter of 2008, benefiting from well-controlled dollar growth in a continued soft sales environment and timing of recognition of certain expenses.
Credit Card Segment Results
Average credit card receivables in the quarter increased $249 million, or 3.0 percent, from the first quarter of 2008, and quarter-end receivables increased $37 million, or 0.4 percent, from the same period a year ago.
Credit card segment profit in the quarter declined to $39 million from $181 million last year as a result of a decline in the spread to LIBOR earned on the overall portfolio, and as a result of other factors, including a 49 percent reduction in Target’s investment in this segment’s average receivables.
As expected, net write-offs in the quarter were $301 million. The allowance for doubtful accounts was $1,005 million at quarter-end, reflecting a $5 million reduction during the period.
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TARGET CORPORATION
Page 2
Interest Expense and Income Taxes
Net interest expense for the quarter increased $1 million from first quarter 2008 to $202 million, reflecting higher average debt balances offset by a lower average portfolio interest rate.
The company’s effective income tax rate for the first quarter was 36.7 percent in 2009, down from 37.1 percent in 2008, primarily due to a higher proportion of earnings that are not subject to tax and a decrease in the amount of reserves recorded for tax uncertainties. For the full year, the company now expects an effective income tax rate in the range of 37.0 to 38.0 percent.
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 22, 2008. The replay number is (800) 642-1687 (passcode: 73957856).
The statements on expected tax rate and shareholder value creation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the company’s actual 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 31, 2009.
Target Corporation’s retail segment includes large, general merchandise and food discount stores, and a fully integrated on-line business called Target.com. In addition, the company operates a credit card segment that offers branded proprietary and Visa credit card products. At quarter-end, the company operated 1,698 Target stores in 49 states.
Target Corporation news releases are available at www.target.com.
###
(Tables Follow)
Contacts: John Hulbert (Investors) | Eric Hausman (Financial Media) |
(612) 761-6627 | (612) 761-2054 |
TARGET CORPORATION
Consolidated Statements of Operations
|
| Three Months Ended |
|
|
| ||||
|
| May 2, |
| May 3, |
|
|
| ||
(millions, except per share data) |
| 2009 |
| 2008 |
| Change |
| ||
|
| (unaudited) |
| (unaudited) |
|
|
| ||
Sales |
| $ | 14,361 |
| $ | 14,302 |
| 0.4 | % |
Credit card revenues |
| 472 |
| 500 |
| (5.7 | ) | ||
Total revenues |
| 14,833 |
| 14,802 |
| 0.2 |
| ||
Cost of sales |
| 9,936 |
| 9,898 |
| 0.4 |
| ||
Selling, general and administrative expenses |
| 3,015 |
| 3,037 |
| (0.7 | ) | ||
Credit card expenses |
| 384 |
| 274 |
| 40.2 |
| ||
Depreciation and amortization |
| 472 |
| 435 |
| 8.4 |
| ||
Earnings before interest expense and income taxes |
| 1,026 |
| 1,158 |
| (11.4 | ) | ||
Net interest expense |
|
|
|
|
|
|
| ||
Nonrecourse debt collateralized by credit card receivables |
| 26 |
| 18 |
| 42.1 |
| ||
Other interest expense |
| 177 |
| 191 |
| (7.2 | ) | ||
Interest income |
| (1 | ) | (8 | ) | (84.4 | ) | ||
Net interest expense |
| 202 |
| 201 |
| 0.6 |
| ||
Earnings before income taxes |
| 824 |
| 957 |
| (13.9 | ) | ||
Provision for income taxes |
| 302 |
| 355 |
| (14.8 | ) | ||
Net earnings |
| $ | 522 |
| $ | 602 |
| (13.4 | ) % |
Basic earnings per share |
| $ | 0.69 |
| $ | 0.75 |
| (7.2 | ) % |
Diluted earnings per share |
| $ | 0.69 |
| $ | 0.74 |
| (6.8 | ) % |
Weighted average common shares outstanding |
|
|
|
|
|
|
| ||
Basic |
| 752.2 |
| 805.5 |
|
|
| ||
Diluted |
| 753.0 |
| 809.6 |
|
|
| ||
Subject to reclassification
TARGET CORPORATION
Consolidated Statements of Financial Position
|
| May 2, |
| Jan. 31, |
| May 3, |
| |||
(millions) |
| 2009 |
| 2009 |
| 2008 |
| |||
Assets |
| (unaudited) |
|
|
| (unaudited) |
| |||
Cash and cash equivalents, including marketable securities of $849, $302 and $3 |
| $ | 1,371 |
| $ | 864 |
| $ | 620 |
|
Credit card receivables, net of allowance of $1,005, $1,010 and $590 |
| 7,452 |
| 8,084 |
| 7,830 |
| |||
Inventory |
| 6,993 |
| 6,705 |
| 6,836 |
| |||
Other current assets |
| 1,735 |
| 1,835 |
| 1,473 |
| |||
Total current assets |
| 17,551 |
| 17,488 |
| 16,759 |
| |||
Property and equipment |
|
|
|
|
|
|
| |||
Land |
| 5,775 |
| 5,767 |
| 5,618 |
| |||
Buildings and improvements |
| 20,994 |
| 20,430 |
| 18,817 |
| |||
Fixtures and equipment |
| 4,295 |
| 4,270 |
| 3,959 |
| |||
Computer hardware and software |
| 2,504 |
| 2,586 |
| 2,337 |
| |||
Construction-in-progress |
| 1,427 |
| 1,763 |
| 2,012 |
| |||
Accumulated depreciation |
| (9,195 | ) | (9,060 | ) | (8,077 | ) | |||
Property and equipment, net |
| 25,800 |
| 25,756 |
| 24,666 |
| |||
Other noncurrent assets |
| 861 |
| 862 |
| 1,405 |
| |||
Total assets |
| $ | 44,212 |
| $ | 44,106 |
| $ | 42,830 |
|
Liabilities and shareholders’ investment |
|
|
|
|
|
|
| |||
Accounts payable |
| $ | 6,004 |
| $ | 6,337 |
| $ | 5,959 |
|
Accrued and other current liabilities |
| 2,990 |
| 2,913 |
| 3,137 |
| |||
Unsecured debt and other borrowings |
| 1,255 |
| 1,262 |
| 1,863 |
| |||
Total current liabilities |
| 10,249 |
| 10,512 |
| 10,959 |
| |||
Unsecured debt and other borrowings |
| 12,012 |
| 12,000 |
| 13,230 |
| |||
Nonrecourse debt collateralized by credit card receivables |
| 5,502 |
| 5,490 |
| 1,900 |
| |||
Deferred income taxes |
| 487 |
| 455 |
| 493 |
| |||
Other noncurrent liabilities |
| 1,843 |
| 1,937 |
| 1,891 |
| |||
Total noncurrent liabilities |
| 19,844 |
| 19,882 |
| 17,514 |
| |||
Shareholders’ investment |
|
|
|
|
|
|
| |||
Common stock |
| 63 |
| 63 |
| 66 |
| |||
Additional paid-in capital |
| 2,788 |
| 2,762 |
| 2,678 |
| |||
Retained earnings |
| 11,821 |
| 11,443 |
| 11,789 |
| |||
Accumulated other comprehensive loss |
| (553 | ) | (556 | ) | (176 | ) | |||
Total shareholders’ investment |
| 14,119 |
| 13,712 |
| 14,357 |
| |||
Total liabilities and shareholders’ investment |
| $ | 44,212 |
| $ | 44,106 |
| $ | 42,830 |
|
Common shares outstanding |
| 752.0 |
| 752.7 |
| 788.6 |
| |||
Subject to reclassification
TARGET CORPORATION
Consolidated Statements of Cash Flows
|
| Three Months Ended | |||||
|
| May 2, |
| May 3, |
| ||
(millions) |
| 2009 |
| 2008 |
| ||
Operating activities |
| (unaudited) |
| (unaudited) |
| ||
Net earnings |
| $ | 522 |
| $ | 602 |
|
Reconciliation to cash flow |
|
|
|
|
| ||
Depreciation and amortization |
| 472 |
| 435 |
| ||
Share-based compensation expense |
| 24 |
| 16 |
| ||
Deferred income taxes |
| 69 |
| 20 |
| ||
Bad debt provision |
| 296 |
| 181 |
| ||
Loss on disposal of property and equipment, net |
| 18 |
| 7 |
| ||
Other non-cash items affecting earnings |
| 10 |
| 23 |
| ||
Changes in operating accounts providing / (requiring) cash: |
|
|
|
|
| ||
Accounts receivable originated at Target |
| 160 |
| 21 |
| ||
Inventory |
| (288 | ) | (56 | ) | ||
Other current assets |
| 27 |
| 79 |
| ||
Other noncurrent assets |
| — |
| 8 |
| ||
Accounts payable |
| (333 | ) | (762 | ) | ||
Accrued and other current liabilities |
| 113 |
| 12 |
| ||
Other noncurrent liabilities |
| (91 | ) | (6 | ) | ||
Other |
| — |
| 160 |
| ||
Cash flow provided by operations |
| 999 |
| 740 |
| ||
Investing activities |
|
|
|
|
| ||
Expenditures for property and equipment |
| (540 | ) | (950 | ) | ||
Proceeds from disposal of property and equipment |
| 6 |
| 2 |
| ||
Change in accounts receivable originated at third parties |
| 175 |
| 23 |
| ||
Other investments |
| (13 | ) | (41 | ) | ||
Cash flow required for investing activities |
| (372 | ) | (966 | ) | ||
Financing activities |
|
|
|
|
| ||
Change in commercial paper, net |
| — |
| 902 |
| ||
Reductions of short-term notes payable |
| — |
| (500 | ) | ||
Reductions of long-term debt |
| (1 | ) | (501 | ) | ||
Dividends paid |
| (121 | ) | (115 | ) | ||
Repurchase of stock |
| — |
| (1,403 | ) | ||
Stock option exercises and related tax benefit |
| 2 |
| 13 |
| ||
Cash flow provided by/(required for) financing activities |
| (120 | ) | (1,604 | ) | ||
Net increase/(decrease) in cash and cash equivalents |
| 507 |
| (1,830 | ) | ||
Cash and cash equivalents at beginning of period |
| 864 |
| 2,450 |
| ||
Cash and cash equivalents at end of period |
| $ | 1,371 |
| $ | 620 |
|
Subject to reclassification
TARGET CORPORATION
Retail Segment
Retail Segment Results |
| Three Months Ended |
|
|
| ||||
|
| May 2, |
| May 3, |
|
|
| ||
(millions) (unaudited) |
| 2009 |
| 2008 |
| Change |
| ||
Sales |
| $ | 14,361 |
| $ | 14,302 |
| 0.4 | % |
Cost of sales |
| 9,936 |
| 9,898 |
| 0.4 |
| ||
Gross margin |
| 4,425 |
| 4,404 |
| 0.5 |
| ||
SG&A expenses (a) |
| 2,995 |
| 3,014 |
| (0.6 | ) | ||
EBITDA |
| 1,430 |
| 1,390 |
| 2.8 |
| ||
Depreciation and amortization |
| 468 |
| 431 |
| 8.6 |
| ||
EBIT |
| $ | 962 |
| $ | 959 |
| 0.3 | % |
EBITDA is earnings before interest expense, income taxes, depreciation and amortization.
EBIT is earnings before interest expense and income taxes.
(a) New account and loyalty rewards redeemed by our guests reduce reported sales. Our Retail Segment charges these discounts to our Credit Card Segment, and the reimbursements of $20 million for the three months ended May 2, 2009 and $24 million for the three months ended May 3, 2008 are recorded as a reduction to SG&A expenses within the Retail Segment.
Retail Segment Rate Analysis |
| Three Months Ended |
|
|
| ||
|
| May 2, |
| May 3, |
|
|
|
(unaudited) |
| 2009 |
| 2008 |
|
|
|
Gross margin rate |
| 30.8% |
| 30.8% |
|
|
|
SG&A expense rate |
| 20.9% |
| 21.1% |
|
|
|
EBITDA margin rate |
| 10.0% |
| 9.7% |
|
|
|
Depreciation and amortization expense rate |
| 3.3% |
| 3.0% |
|
|
|
EBIT margin rate |
| 6.7% |
| 6.7% |
|
|
|
Retail Segment rate analysis metrics are computed by dividing the applicable amount by sales. |
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable-Store Sales |
| Three Months Ended |
|
|
| ||
|
| May 2, |
| May 3, |
|
|
|
(unaudited) |
| 2009 |
| 2008 |
|
|
|
Comparable-store sales |
| (3.7)% |
| (0.7)% |
|
|
|
Drivers of changes in comparable-store sales: |
|
|
|
|
|
|
|
Number of transactions |
| (1.3)% |
| (1.8)% |
|
|
|
Average transaction amount |
| (2.4)% |
| 1.1 % |
|
|
|
Units per transaction |
| (3.2)% |
| (0.8)% |
|
|
|
Selling price per unit |
| 0.8% |
| 1.9 % |
|
|
|
The comparable-store sales increases or decreases above are calculated by comparing sales in fiscal year periods with comparable prior year periods of equivalent length. |
|
|
| ||||
|
|
|
|
|
|
|
|
Number of Stores and Retail Square Feet |
| Number of Stores |
| Retail Square Feet (a) |
| ||||||||
|
| May 2, |
| Jan. 31, |
| May 3, |
| May 2, |
| Jan. 31, |
| May 3, |
|
(unaudited) |
| 2009 |
| 2008 |
| 2008 |
| 2009 |
| 2008 |
| 2008 |
|
Target general merchandise stores |
| 1,453 |
| 1,443 |
| 1,395 |
| 182,087 |
| 180,321 |
| 173,015 |
|
SuperTarget stores |
| 245 |
| 239 |
| 218 |
| 43,385 |
| 42,267 |
| 38,514 |
|
Total |
| 1,698 |
| 1,682 |
| 1,613 |
| 225,472 |
| 222,588 |
| 211,529 |
|
(a) In thousands; reflects total square feet, less office, distribution center and vacant space.
Subject to reclassification
TARGET CORPORATION
Credit Card Segment
Credit Card Segment Results |
| Three Months Ended |
| Three Months Ended |
| ||||||
|
| May 2, 2009 |
| May 3, 2008 |
| ||||||
|
| Amount |
| Annualized |
| Amount |
| Annualized |
| ||
(millions) (unaudited) |
| (in millions | ) | Rate(d) |
| (in millions | ) | Rate(d) |
| ||
Finance charge revenue |
| $ | 355 |
| 16.3 | % | $ | 354 |
| 16.8 | % |
Late fees and other revenue |
| 87 |
| 4.0 |
| 108 |
| 5.1 |
| ||
Third party merchant fees |
| 30 |
| 1.4 |
| 38 |
| 1.8 |
| ||
Total revenues |
| 472 |
| 21.7 |
| 500 |
| 23.7 |
| ||
Bad debt expense |
| 296 |
| 13.6 |
| 181 |
| 8.5 |
| ||
Operations and marketing expenses (a) |
| 107 |
| 4.9 |
| 116 |
| 5.5 |
| ||
Depreciation and amortization |
| 4 |
| 0.2 |
| 4 |
| 0.2 |
| ||
Total expenses |
| 407 |
| 18.7 |
| 301 |
| 14.3 |
| ||
EBIT |
| 65 |
| 3.0 |
| 199 |
| 9.4 |
| ||
Interest expense on nonrecourse debt collateralized by credit card receivables |
| 26 |
|
|
| 18 |
|
|
| ||
Segment profit |
| $ | 39 |
|
|
| $ | 181 |
|
|
|
Average receivables funded by Target (b) |
| $ | 3,200 |
|
|
| $ | 6,267 |
|
|
|
Segment pretax ROIC (c) |
| 4.8% |
|
|
| 11.5% |
|
|
| ||
(a) New account and loyalty rewards redeemed by our guests reduce reported sales. Our Retail Segment charges the cost of these discounts to our Credit Card Segment, and the reimbursements of $20 million for the three months ended May 2, 2009 and $24 million for the three months ended May 3, 2008 are recorded as an increase to Operations and marketing expenses within the Credit Card Segment.
(b) Amounts represent the portion of average credit card receivables funded by Target. These amounts exclude $5,496 million for the three months ended May 2, 2009 and $2,180 million for the three months ended May 3, 2008 of receivables funded by nonrecourse debt collateralized by credit card receivables.
(c) ROIC is return on invested capital, and this rate represents segment profit divided by average receivables funded by Target, expressed as an annualized rate.
(d) As an annualized percentage of average receivables.
Spread Analysis - Total Portfolio |
| Three Months Ended |
| Three Months Ended |
| ||||||
|
| May 2, 2009 |
| May 3, 2008 |
| ||||||
|
| Yield |
| Yield |
| ||||||
|
| Amount |
| Annualized |
| Amount |
| Annualized |
| ||
(unaudited) |
| (in millions) |
| Rate |
| (in millions) |
| Rate |
| ||
EBIT |
| $ | 65 |
| 3.0% | (b) | $ | 199 |
| 9.4% | (b) |
LIBOR (a) |
|
|
| 0.5% |
|
|
| 2.9% |
| ||
Spread to LIBOR (c) |
| $ | 54 |
| 2.5% | (b) | $ | 138 |
| 6.5% | (b) |
(a) Balance-weighted average one-month LIBOR
(b) As a percentage of average receivables
(c) Spread to LIBOR is a metric used to analyze the performance of our total credit card portfolio because the vast majority of our portfolio earns finance charge revenue at rates tied to the Prime Rate, and the interest rate on all nonrecourse debt securitized by credit card receivables is tied to LIBOR.
Receivables Rollforward Analysis |
| Three Months Ended |
|
|
|
|
| |||||
|
| May 2, |
| May 3, |
|
|
|
|
| |||
(millions) (unaudited) |
| 2009 |
| 2008 |
| Change |
|
|
| |||
Beginning receivables |
| $ | 9,094 |
| $ | 8,624 |
| 5.4 | % |
|
| |
Charges at Target |
| 804 |
| 946 |
| (15.1) |
|
|
| |||
Charges at third parties |
| 1,664 |
| 2,148 |
| (22.5) |
|
|
| |||
Payments |
| (3,261 | ) | (3,629) |
| (10.2) |
|
|
| |||
Other |
| 156 |
| 331 |
| (52.7) |
|
|
| |||
Period-end receivables |
| $ | 8,457 |
| $ | 8,420 |
| 0.4 | % |
|
| |
Average receivables |
| $ | 8,697 |
| $ | 8,447 |
| 3.0 | % |
|
| |
Accounts with three or more payments (60+ days) past due as a percentage of period-end receivables |
| 6.1% |
| 4.2% |
|
|
|
|
| |||
Accounts with four or more payments (90+ days) past due as a percentage of period-end receivables |
| 4.4% |
| 2.9% |
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Allowance for Doubtful Accounts |
| Three Months Ended |
|
|
|
|
| |||||
|
| May 2, |
| May 3, |
|
|
|
|
| |||
(millions) (unaudited) |
| 2009 |
| 2008 |
| Change |
|
|
| |||
Allowance at beginning of period |
| $ | 1,010 |
| $ | 570 |
| 77.1 | % |
|
| |
Bad debt provision |
| 296 |
| 181 |
| 64.1 |
|
|
| |||
Net write-offs(a) |
| (301 | ) | (161) |
| 87.9 |
|
|
| |||
Allowance at end of period |
| $ | 1,005 |
| $ | 590 |
| 70.2 | % |
|
| |
As a percentage of period-end receivables |
| 11.9% |
| 7.0% |
|
|
|
|
| |||
Net write-offs as a percentage of average receivables (annualized) |
| 13.9% |
| 7.6% |
|
|
|
|
| |||
(a) Net write-offs include the principal amount of losses (excluding accrued and unpaid finance charges) less current period principal recoveries.
Subject to reclassification