Target Corporation released 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% 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% in the first quarter to $15.2 billion in 2010 from $14.4 billion in 2009, due to a 2.8% 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% from $962 million in 2009.
First quarter gross margin rate was 31.3%, up from 30.8% 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%, down from 20.9% 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% to $111 million from $39 million a year ago, as bad debt expense declined 33% from $296 million in first quarter 2009 to $197 million this year.
First quarter average receivables decreased 13.2% to $7.5 billion in 2010 from $8.7 billion in 2009. Average receivables directly funded by Target declined 26% 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% in the first quarter 2010, compared with 4.8% a year ago.
TARGET CORPORATION
Consolidated Statements of Operations
| Three Months Ended | ||||||||||||
| May 1, | May 2, | |||||||||||
| (millions, except per share data) | 2010 | 2009 | Change | |||||||||
| (unaudited) | (unaudited) | |||||||||||
| Sales | $ | 15,158 | $ | 14,361 | 5.5 | % | ||||||
| Credit card revenues | 435 | 472 | (7.9 | ) | ||||||||
| Total revenues | 15,593 | 14,833 | 5.1 | |||||||||
| Cost of sales | 10,412 | 9,936 | 4.8 | |||||||||
| Selling, general and administrative expenses | 3,143 | 3,015 | 4.2 | |||||||||
| Credit card expenses | 280 | 384 | (27.0 | ) | ||||||||
| Depreciation and amortization | 516 | 472 | 9.3 | |||||||||
| Earnings before interest expense and income taxes | 1,242 | 1,026 | 21.0 | |||||||||
| Net interest expense | ||||||||||||
| Nonrecourse debt collateralized | ||||||||||||
| by credit card receivables | 23 | 26 | (12.6 | ) | ||||||||
| Other interest expense | 165 | 177 | (7.0 | ) | ||||||||
| Interest income | (1 | ) | (1 | ) | (54.2 | ) | ||||||
| Net interest expense | 187 | 202 | (7.4 | ) | ||||||||
| Earnings before income taxes | 1,055 | 824 | 28.0 | |||||||||
| Provision for income taxes | 384 | 302 | 26.9 | |||||||||
| Net earnings | $ | 671 | $ | 522 | 28.6 | % | ||||||
| Basic earnings per share | $ | 0.91 | $ | 0.69 | 30.7 | % | ||||||
| Diluted earnings per share | $ | 0.90 | $ | 0.69 | 29.8 | % | ||||||
| Weighted average common shares outstanding | ||||||||||||
| Basic | 739.9 | 752.2 | ||||||||||
| Diluted | 745.7 | 753.0 | ||||||||||