Target Corporation Reports First Quarter Earnings
Target Corporation reported impressive first quarter 2021 results, with comparable sales growing 22.9%, driven by 18.0% store sales and 50% digital sales increases. Total revenue rose to $24.2 billion, up 23.4%, while operating income surged 407% to $2.4 billion. GAAP EPS reached $4.17, up 643.2% from last year. The company gained over $1 billion in market share and expects strong comparable sales growth for the remainder of the year, though operating margins may not match last year's unprecedented levels.
- Comparable sales grew 22.9% in Q1 2021.
- Digital comparable sales increased by 50%.
- Total revenue reached $24.2 billion, a 23.4% increase.
- Operating income rose 407% to $2.4 billion.
- GAAP EPS of $4.17 was up 643.2% from previous year.
- Market share increased by over $1 billion.
- Return on invested capital rose to 30.7%.
- Operating margin rate for Q2 2021 expected below last year's 10.0%.
- Effective income tax rate increased to 19.6%.
MINNEAPOLIS, May 19, 2021 /PRNewswire/ --
- First quarter comparable sales grew 22.9 percent, on top of 10.8 percent growth last year.
- Store comparable sales increased 18.0 percent, on top of 0.9 percent growth last year. Digital comparable sales grew 50 percent, on top of 141 percent growth a year ago.
- Same-day services (Order Pickup, Drive Up and Shipt) grew more than 90 percent, led by growth in Drive Up of 123 percent.
- More than 95 percent of Target's first quarter sales were fulfilled by its stores.
- The Company gained more than
$1 billion in market share in the first quarter, on top of a$1 billion share gain in first quarter 2020. - First quarter GAAP EPS of
$4.17 was 643.2 percent higher than last year. First quarter Adjusted EPS1 of$3.69 was 525.0 percent higher than last year. - For additional media materials, please visit: https://corporate.target.com/article/2021/05/q1-2021-earnings
Target Corporation (NYSE: TGT) today announced its first quarter 2021 financial results, which reflected robust growth in both sales and profitability. The Company reported first quarter GAAP earnings per share (EPS) of
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. |
"Our performance in the first quarter was outstanding on every measure, and showcased the power of putting our stores at the center of our strategy. Store comp sales grew 18.0 percent in the quarter, even as they also fulfilled more than three quarters of Target's digital sales - including more than 90-percent growth of our same-day services. Importantly, market-share gains of more than
"Given the trust we've built with our guests quarter after quarter and our commitment to adjusting along with them to the ongoing shifts in the macro environment, we're confident in continued comp growth in the second quarter and through the remainder of the year, as well as a healthy full-year operating margin rate."
Fiscal 2021 Guidance
For the second quarter of 2021, the Company expects mid-to-high single digit growth in comparable sales. The Company expects its second-quarter operating margin rate will be well above the second quarter 2019 rate of 7.2 percent, but likely not as high as last year's unprecedented 10.0 percent.
The Company expects positive single-digit comparable sales growth in the last two quarters of the year, and expects its full-year operating margin rate will be well above the 2020 rate of 7.0 percent, with the potential to reach 8 percent or somewhat higher.
Operating Results
Comparable sales grew 22.9 percent in the first quarter, reflecting comparable store sales growth of 18.0 percent and comparable digital sales growth of 50 percent. Total revenue of
First quarter operating income margin rate was 9.8 percent in 2021 compared with 2.4 percent in 2020. First quarter gross margin rate was 30.0 percent, compared with 25.1 percent in 2020. This year's gross margin rate reflected the benefit of favorable category mix and merchandising actions, primarily from low markdown rates, while last year's gross margin rate reflected elevated inventory costs and impairment charges. First quarter SG&A expense rate was 18.6 percent in 2021, compared with 20.7 percent in 2020, reflecting the benefit of leverage from strong sales growth, partially offset by the net impact of other factors, primarily investments in team member pay, benefits, and safety.
Interest Expense and Taxes
The Company's first quarter 2021 net interest expense was
First quarter 2021 effective income tax rate was 19.6 percent, compared with 13.9 percent last year. The rate increase was driven by significantly higher earnings, diluting the benefit of fixed and discrete tax items.
Capital Deployment and Return on Invested Capital
The Company paid dividends of
The Company resumed share repurchases in first quarter 2021, consistent with its long-standing capital deployment policies and within the limits of its strong, middle-A credit ratings. Share repurchases of
As of the end of the first quarter, the Company had approximately
For the trailing twelve months through first quarter 2021, after-tax return on invested capital (ROIC) was 30.7 percent, compared with 13.4 percent for the trailing twelve months through first quarter 2020. The increase in ROIC was driven primarily by increased profitability. The tables in this release provide additional information about the Company's ROIC calculation.
Webcast Details
Target will webcast its first quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Investors.Target.com (click on link under "Upcoming Events"). A replay of the webcast will be provided when available. The replay number is 1-800-876-9512.
Miscellaneous
Statements in this release regarding second quarter and full year comparable sales growth and operating margin rates 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 actions 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 30, 2021. 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 more than 1,900 stores and at Target.com. Since 1946, Target has given
For more on the Target Foundation, click here.
TARGET CORPORATION | |||||||||||
Consolidated Statements of Operations | |||||||||||
Three Months Ended | |||||||||||
(millions, except per share data) (unaudited) | May 1, 2021 | May 2, 2020 | Change | ||||||||
Sales | $ | 23,879 | $ | 19,371 | 23.3 | % | |||||
Other revenue | 318 | 244 | 30.4 | ||||||||
Total revenue | 24,197 | 19,615 | 23.4 | ||||||||
Cost of sales | 16,716 | 14,510 | 15.2 | ||||||||
Selling, general and administrative expenses | 4,509 | 4,060 | 11.0 | ||||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) | 598 | 577 | 3.9 | ||||||||
Operating income | 2,374 | 468 | 407.0 | ||||||||
Net interest expense | 108 | 117 | (7.6) | ||||||||
Net other (income) / expense | (343) | 22 | (1,663.1) | ||||||||
Earnings before income taxes | 2,609 | 329 | 692.2 | ||||||||
Provision for income taxes | 512 | 45 | 1,017.1 | ||||||||
Net earnings | $ | 2,097 | $ | 284 | 639.8 | % | |||||
Basic earnings per share | $ | 4.20 | $ | 0.57 | 643.0 | % | |||||
Diluted earnings per share | $ | 4.17 | $ | 0.56 | 643.2 | % | |||||
Weighted average common shares outstanding | |||||||||||
Basic | 498.6 | 501.0 | (0.5) | % | |||||||
Diluted | 503.4 | 505.8 | (0.5) | % | |||||||
Antidilutive shares | — | 0.2 | |||||||||
Dividends declared per share | $ | 0.68 | $ | 0.66 | 3.0 | % | |||||
Note: Per share amounts may not foot due to rounding. |
TARGET CORPORATION | ||||||||||||
Consolidated Statements of Financial Position | ||||||||||||
(millions, except footnotes) (unaudited) | May 1, 2021 | January 30, 2021 | May 2, 2020 | |||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 7,816 | $ | 8,511 | $ | 4,566 | ||||||
Inventory | 10,539 | 10,653 | 8,584 | |||||||||
Other current assets | 1,576 | 1,592 | 1,465 | |||||||||
Total current assets | 19,931 | 20,756 | 14,615 | |||||||||
Property and equipment | ||||||||||||
Land | 6,146 | 6,141 | 6,034 | |||||||||
Buildings and improvements | 31,710 | 31,557 | 30,756 | |||||||||
Fixtures and equipment | 5,496 | 5,914 | 5,486 | |||||||||
Computer hardware and software | 2,256 | 2,765 | 2,597 | |||||||||
Construction-in-progress | 973 | 780 | 803 | |||||||||
Accumulated depreciation | (19,777) | (20,278) | (19,087) | |||||||||
Property and equipment, net | 26,804 | 26,879 | 26,589 | |||||||||
Operating lease assets | 2,362 | 2,227 | 2,235 | |||||||||
Other noncurrent assets | 1,374 | 1,386 | 1,367 | |||||||||
Total assets | $ | 50,471 | $ | 51,248 | $ | 44,806 | ||||||
Liabilities and shareholders' investment | ||||||||||||
Accounts payable | $ | 11,637 | $ | 12,859 | $ | 9,625 | ||||||
Accrued and other current liabilities | 5,788 | 6,122 | 4,619 | |||||||||
Current portion of long-term debt and other borrowings | 1,173 | 1,144 | 168 | |||||||||
Total current liabilities | 18,598 | 20,125 | 14,412 | |||||||||
Long-term debt and other borrowings | 11,509 | 11,536 | 14,073 | |||||||||
Noncurrent operating lease liabilities | 2,337 | 2,218 | 2,249 | |||||||||
Deferred income taxes | 1,169 | 990 | 1,122 | |||||||||
Other noncurrent liabilities | 1,899 | 1,939 | 1,781 | |||||||||
Total noncurrent liabilities | 16,914 | 16,683 | 19,225 | |||||||||
Shareholders' investment | ||||||||||||
Common stock | 41 | 42 | 42 | |||||||||
Additional paid-in capital | 6,271 | 6,329 | 6,206 | |||||||||
Retained earnings | 9,372 | 8,825 | 5,775 | |||||||||
Accumulated other comprehensive loss | (725) | (756) | (854) | |||||||||
Total shareholders' investment | 14,959 | 14,440 | 11,169 | |||||||||
Total liabilities and shareholders' investment | $ | 50,471 | $ | 51,248 | $ | 44,806 | ||||||
Common Stock Authorized 6,000,000,000 shares,
Preferred Stock Authorized 5,000,000 shares,
TARGET CORPORATION | ||||||||
Consolidated Statements of Cash Flows | ||||||||
Three Months Ended | ||||||||
(millions) (unaudited) | May 1, 2021 | May 2, 2020 | ||||||
Operating activities | ||||||||
Net earnings | $ | 2,097 | $ | 284 | ||||
Adjustments to reconcile net earnings to cash provided by operating activities: | ||||||||
Depreciation and amortization | 667 | 641 | ||||||
Share-based compensation expense | 79 | 49 | ||||||
Deferred income taxes | 170 | (4) | ||||||
Gain on Dermstore sale | (335) | — | ||||||
Noncash losses / (gains) and other, net | (30) | 5 | ||||||
Changes in operating accounts: | ||||||||
Inventory | 114 | 408 | ||||||
Other assets | (5) | 11 | ||||||
Accounts payable | (1,205) | (280) | ||||||
Accrued and other liabilities | (413) | 170 | ||||||
Cash provided by operating activities | 1,139 | 1,284 | ||||||
Investing activities | ||||||||
Expenditures for property and equipment | (540) | (751) | ||||||
Proceeds from disposal of property and equipment | 12 | 6 | ||||||
Proceeds from Dermstore sale | 356 | — | ||||||
Other investments | 7 | 1 | ||||||
Cash required for investing activities | (165) | (744) | ||||||
Financing activities | ||||||||
Additions to long-term debt | — | 2,480 | ||||||
Reductions of long-term debt | (21) | (17) | ||||||
Dividends paid | (340) | (332) | ||||||
Repurchase of stock | (1,310) | (686) | ||||||
Stock option exercises | 2 | 4 | ||||||
Cash (required for) / provided by financing activities | (1,669) | 1,449 | ||||||
Net (decrease) / increase in cash and cash equivalents | (695) | 1,989 | ||||||
Cash and cash equivalents at beginning of period | 8,511 | 2,577 | ||||||
Cash and cash equivalents at end of period | $ | 7,816 | $ | 4,566 | ||||
TARGET CORPORATION | |||||
Operating Results | |||||
Rate Analysis | Three Months Ended | ||||
(unaudited) | May 1, 2021 | May 2, 2020 | |||
Gross margin rate | 30.0 | % | 25.1 | % | |
SG&A expense rate | 18.6 | 20.7 | |||
Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate | 2.5 | 2.9 | |||
Operating income margin rate | 9.8 | 2.4 | |||
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 | |||||
Comparable Sales | Three Months Ended | ||||
(unaudited) | May 1, 2021 | May 2, 2020 | |||
Comparable sales change | 22.9 | % | 10.8 | % | |
Drivers of change in comparable sales | |||||
Number of transactions | 17.1 | (1.5) | |||
Average transaction amount | 5.0 | 12.5 | |||
Comparable Sales by Channel | Three Months Ended | ||||
(unaudited) | May 1, 2021 | May 2, 2020 | |||
Stores originated comparable sales change | 18.0 | % | 0.9 | % | |
Digitally originated comparable sales change | 50.2 | 140.6 | |||
Sales by Channel | Three Months Ended | ||||
(unaudited) | May 1, 2021 | May 2, 2020 | |||
Stores originated | 81.7 | % | 84.7 | % | |
Digitally originated | 18.3 | 15.3 | |||
Total | 100 | % | 100 | % | |
Sales by Fulfillment Channel | Three Months Ended | ||||
(unaudited) | May 1, 2021 | May 2, 2020 | |||
Stores | 96.3 | % | 96.7 | % | |
Other | 3.7 | 3.3 | |||
Total | 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 | ||||
(unaudited) | May 1, 2021 | May 2, 2020 | |||
Target Debit Card | 12.1 | % | 12.7 | % | |
Target Credit Cards | 8.4 | 9.7 | |||
Total RedCard Penetration | 20.5 | % | 22.4 | % | |
Number of Stores and Retail Square Feet | Number of Stores | Retail Square Feet (a) | |||||||||||||||
(unaudited) | May 1, 2021 | January 30, | May 2, 2020 | May 1, 2021 | January 30, | May 2, 2020 | |||||||||||
170,000 or more sq. ft. | 273 | 273 | 272 | 48,798 | 48,798 | 48,613 | |||||||||||
50,000 to 169,999 sq. ft. | 1,510 | 1,509 | 1,505 | 189,618 | 189,508 | 189,226 | |||||||||||
49,999 or less sq. ft. | 126 | 115 | 94 | 3,690 | 3,342 | 2,745 | |||||||||||
Total | 1,909 | 1,897 | 1,871 | 242,106 | 241,648 | 240,584 | |||||||||||
(a) | In thousands, reflects total square feet less office, distribution center, 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, generally accepted accounting principles in the United States (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 | Three Months Ended | |||||||||||||||||||||||||
Adjusted EPS | May 1, 2021 | May 2, 2020 | ||||||||||||||||||||||||
(millions, except per share data) (unaudited) | Pretax | Net of Tax | Per Share | Pretax | Net of Tax | Per Share | Change | |||||||||||||||||||
GAAP diluted earnings per share | $ | 4.17 | $ | 0.56 | 643.2 | % | ||||||||||||||||||||
Adjustments | ||||||||||||||||||||||||||
Gain on Dermstore sale | $ | (335) | $ | (269) | $ | (0.53) | $ | — | $ | — | $ | — | ||||||||||||||
Loss on investment (a) | — | — | — | 21 | 15 | 0.03 | ||||||||||||||||||||
Other (b) | 41 | 30 | 0.06 | — | — | — | ||||||||||||||||||||
Adjusted diluted earnings per share | $ | 3.69 | $ | 0.59 | 525.0 | % | ||||||||||||||||||||
Note: Amounts may not foot due to rounding. | |
(a) | Represented an unrealized loss on our investment in Casper Sleep Inc., which was not core to our operations. We sold this investment during the fourth quarter of 2020. |
(b) | Represents asset impairment charges resulting from the consolidation of our headquarters office space. |
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 | |||||||||
(dollars in millions) (unaudited) | May 1, 2021 | May 2, 2020 | Change | |||||||
Net earnings | $ | 2,097 | $ | 284 | 639.8 | % | ||||
+ Provision for income taxes | 512 | 45 | 1,017.1 | |||||||
+ Net interest expense | 108 | 117 | (7.6) | |||||||
EBIT | $ | 2,717 | $ | 446 | 508.7 | % | ||||
+ Total depreciation and amortization (a) | 667 | 641 | 4.1 | |||||||
EBITDA | $ | 3,384 | $ | 1,087 | 211.3 | % | ||||
(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) | ||||||||||||
Trailing Twelve Months | ||||||||||||
Numerator | May 1, 2021 | May 2, 2020 | ||||||||||
Operating income | $ | 8,444 | $ | 3,992 | ||||||||
+ Net other income / (expense) | 350 | (26) | ||||||||||
EBIT | 8,794 | 3,966 | ||||||||||
+ Operating lease interest (a) | 85 | 87 | ||||||||||
- Income taxes (b) | 1,864 | 855 | ||||||||||
Net operating profit after taxes | $ | 7,015 | $ | 3,198 | ||||||||
Denominator | May 1, 2021 | May 2, 2020 | May 4, 2019 | |||||||||
Current portion of long-term debt and other borrowings | $ | 1,173 | $ | 168 | $ | 1,056 | ||||||
+ Noncurrent portion of long-term debt | 11,509 | 14,073 | 11,357 | |||||||||
+ Shareholders' investment | 14,959 | 11,169 | 11,117 | |||||||||
+ Operating lease liabilities (c) | 2,563 | 2,448 | 2,231 | |||||||||
- Cash and cash equivalents | 7,816 | 4,566 | 1,173 | |||||||||
Invested capital | $ | 22,388 | $ | 23,292 | $ | 24,588 | ||||||
Average invested capital (d) | $ | 22,840 | $ | 23,940 | ||||||||
After-tax return on invested capital | 30.7 | % | 13.4 | % | ||||||||
(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 21.0 percent and 21.1 percent for the trailing twelve months ended May 1, 2021, and May 2, 2020, respectively. For the twelve months ended May 1, 2021, and May 2, 2020, includes tax effect of |
(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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SOURCE Target Corporation
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