AGENDA: GroupY's Emerge brand-building conference returns on Jan. 6.
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MOSS ADAMS: Plan now for tax season.
Details on Industry Insight.
MINNEAPOLIS--(BUSINESS WIRE)--Target Corporation (NYSE:TGT - News) today reported net earnings of $671 million for the quarter ended May 1, 2010, compared with $522 million in the quarter ended May 2, 2009. Earnings per share in the first quarter increased 30 percent to 90 cents from 69 cents in the same period a year ago. This was the highest EPS from continuing operations in Target’s history, excluding holiday-driven fourth quarter results. All earnings per share figures refer to diluted earnings per share.
“We’re very pleased with our first quarter financial results, which were the result of disciplined execution by our teams in a stronger-than-expected economic environment,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation. “Our retail segment delivered results well above our expectations, as sales of higher margin discretionary items were particularly strong, especially in apparel. Profitability in our credit card segment was also well above expectations, as declining risk levels led to a sharp reduction in bad debt expense compared with a year ago. Going forward, we will continue our relentless focus on delighting our guests by delivering the right fashion, great quality at low prices, and a superior guest experience in our stores and online.”
Retail Segment Results
Sales increased 5.5 percent in the first quarter to $15.2 billion in 2010 from $14.4 billion in 2009, due to a 2.8 percent increase in comparable-store sales and the contribution from new stores. Retail segment earnings before interest expense and income taxes (EBIT) were $1,108 million in the first quarter of 2010, an increase of 15.2 percent from $962 million in 2009.
First quarter gross margin rate was 31.3 percent, up from 30.8 percent in 2009, due to gross margin rate improvements within categories. The impact of sales mix on gross margin rate was essentially neutral, as sales increased at a similar pace in both higher-margin and lower-margin categories.
First quarter selling, general and administrative (SG&A) expense rate was 20.6 percent, down from 20.9 percent in 2009. This improvement was driven by continued strong productivity improvements in our stores, combined with disciplined expense control throughout the company.
Credit Card Segment Results
First quarter segment profit increased 188 percent to $111 million from $39 million a year ago, as bad debt expense declined 33 percent from $296 million in first quarter 2009 to $197 million this year.
First quarter average receivables decreased 13.2 percent to $7.5 billion in 2010 from $8.7 billion in 2009. Average receivables directly funded by Target declined 26 percent in the first quarter to $2.4 billion from $3.2 billion in 2009.
Annualized segment pre-tax return on invested capital was 18.8 percent in the first quarter 2010, compared with 4.8 percent a year ago.
Interest Expense and Taxes
Net interest expense for the quarter decreased $15 million from first quarter 2009, driven by lower average debt balances partially offset by a higher average portfolio interest rate.
The company’s effective income tax rate for the first quarter was 36.4 percent in 2010, down from 36.7 percent in 2009.
In the first quarter, under the share repurchase program originally announced in November 2007 and resumed in January 2010, the company repurchased 7.5 million shares of its common stock at an average price of $52.27, for a total investment of $394 million.
Program-to-date through the end of the first quarter, the company has acquired 111 million shares of its common stock at an average price per share of $51.42, reflecting a total investment of $5.7 billion.
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 “events + presentations” and then “archives + webcasts”). A telephone replay of the call will be available beginning at approximately 11:30am CDT today through the end of business on May 21, 2010. The replay number is (800) 642-1687 (passcode: 49641294).
Target Corporation's retail segment includes large general merchandise and food discount stores and Target.com, a fully integrated on-line business. In addition, the company operates a credit card segment that offers branded proprietary credit card products. The company currently operates 1,740 Target stores in 49 states.
Target Corporation news releases are available at www.target.com.