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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 2023
OR
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 1-6049
TARGET CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of incorporation or
organization)
1000 Nicollet Mall, Minneapolis, Minnesota
(Address of principal executive offices)
41-0215170
(I.R.S. Employer Identification No.)
55403
(Zip Code)
612-304-6073
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common stock, par value $0.0833 per share |
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TGT |
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New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes ☒
No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
Total shares of common stock, par value $0.0833, outstanding
at
May 19, 2023,
were 461,559,612.
TARGET CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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Consolidated Statements of Operations |
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Three Months Ended |
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(millions, except per share data) (unaudited) |
April 29, 2023 |
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April 30, 2022 |
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Sales |
$ |
24,948 |
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$ |
24,830 |
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Other revenue |
374 |
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340 |
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Total revenue |
25,322 |
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25,170 |
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Cost of sales |
18,386 |
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18,461 |
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Selling, general and administrative expenses |
5,025 |
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4,762 |
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Depreciation and amortization (exclusive of depreciation included
in cost of sales) |
583 |
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601 |
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Operating income |
1,328 |
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1,346 |
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Net interest expense |
147 |
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112 |
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Net other income |
(23) |
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(15) |
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Earnings before income taxes |
1,204 |
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1,249 |
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Provision for income taxes |
254 |
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240 |
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Net earnings |
$ |
950 |
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$ |
1,009 |
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Basic earnings per share |
$ |
2.06 |
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$ |
2.17 |
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Diluted earnings per share |
$ |
2.05 |
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$ |
2.16 |
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Weighted average common shares outstanding |
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Basic |
460.9 |
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464.0 |
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Diluted |
462.9 |
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467.8 |
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Antidilutive shares |
1.2 |
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— |
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TARGET CORPORATION |
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Q1 2023 Form 10-Q |
1
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Consolidated Statements of Comprehensive Income |
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Three Months Ended |
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(millions) (unaudited) |
April 29, 2023 |
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April 30, 2022 |
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Net earnings |
$ |
950 |
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$ |
1,009 |
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Other comprehensive income, net of tax |
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Pension benefit liabilities |
2 |
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11 |
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Cash flow hedges and currency translation adjustment |
(5) |
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190 |
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Other comprehensive income |
(3) |
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201 |
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Comprehensive income |
$ |
947 |
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$ |
1,210 |
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TARGET CORPORATION |
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Q1 2023 Form 10-Q |
2
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Consolidated Statements of Financial Position |
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(millions, except footnotes) (unaudited) |
April 29,
2023 |
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January 28,
2023 |
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April 30,
2022 |
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Assets |
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Cash and cash equivalents |
$ |
1,321 |
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$ |
2,229 |
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$ |
1,112 |
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Inventory |
12,616 |
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13,499 |
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15,083 |
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Other current assets |
1,836 |
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2,118 |
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1,758 |
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Total current assets |
15,773 |
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17,846 |
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17,953 |
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Property and equipment |
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Land |
6,493 |
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6,231 |
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6,164 |
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Buildings and improvements |
35,198 |
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34,746 |
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33,300 |
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Fixtures and equipment |
7,473 |
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7,439 |
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6,459 |
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Computer hardware and software |
3,067 |
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3,039 |
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2,588 |
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Construction-in-progress |
2,822 |
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2,688 |
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1,444 |
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Accumulated depreciation |
(22,657) |
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(22,631) |
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(21,285) |
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Property and equipment, net |
32,396 |
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31,512 |
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28,670 |
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Operating lease assets |
2,640 |
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2,657 |
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2,571 |
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Other noncurrent assets |
1,341 |
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1,320 |
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1,648 |
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Total assets |
$ |
52,150 |
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$ |
53,335 |
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$ |
50,842 |
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Liabilities and shareholders’ investment |
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Accounts payable |
$ |
11,935 |
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$ |
13,487 |
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$ |
14,053 |
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Accrued and other current liabilities |
5,732 |
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5,883 |
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5,582 |
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Current portion of long-term debt and other borrowings |
200 |
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130 |
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1,089 |
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Total current liabilities |
17,867 |
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19,500 |
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20,724 |
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Long-term debt and other borrowings |
16,010 |
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16,009 |
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13,379 |
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Noncurrent operating lease liabilities |
2,621 |
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2,638 |
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2,581 |
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Deferred income taxes |
2,289 |
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2,196 |
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1,752 |
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Other noncurrent liabilities |
1,758 |
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1,760 |
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1,632 |
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Total noncurrent liabilities |
22,678 |
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22,603 |
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19,344 |
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Shareholders’ investment |
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Common stock |
38 |
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38 |
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39 |
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Additional paid-in capital |
6,541 |
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6,608 |
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5,592 |
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Retained earnings |
5,448 |
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5,005 |
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5,495 |
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Accumulated other comprehensive loss |
(422) |
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(419) |
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(352) |
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Total shareholders’ investment |
11,605 |
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11,232 |
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10,774 |
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Total liabilities and shareholders’ investment |
$ |
52,150 |
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$ |
53,335 |
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$ |
50,842 |
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Common Stock
Authorized 6,000,000,000 shares, $0.0833 par value; 461,552,843,
460,346,947, and 463,683,711 shares issued and outstanding as of
April 29, 2023, January 28, 2023, and April 30,
2022, respectively.
Preferred Stock
Authorized 5,000,000 shares, $0.01 par value; no shares were issued
or outstanding during any period presented.
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TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
3
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Consolidated Statements of Cash Flows |
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Three Months Ended |
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(millions) (unaudited) |
April 29, 2023 |
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April 30, 2022 |
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Operating activities |
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Net earnings |
$ |
950 |
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$ |
1,009 |
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Adjustments to reconcile net earnings to cash provided by operating
activities: |
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Depreciation and amortization |
667 |
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679 |
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Share-based compensation expense |
43 |
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83 |
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Deferred income taxes |
95 |
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115 |
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Noncash losses
/
(gains) and other, net
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(11) |
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52 |
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Changes in operating accounts: |
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Inventory |
883 |
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(1,181) |
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Other assets |
34 |
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(86) |
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Accounts payable |
(1,463) |
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(1,560) |
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Accrued and other liabilities |
67 |
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(505) |
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Cash provided by (required for) operating activities |
1,265 |
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(1,394) |
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Investing activities |
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Expenditures for property and equipment |
(1,605) |
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(952) |
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Proceeds from disposal of property and equipment |
2 |
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2 |
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Other investments |
1 |
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2 |
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Cash required for investing activities |
(1,602) |
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(948) |
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Financing activities |
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Change in commercial paper, net |
90 |
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945 |
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Reductions of long-term debt |
(46) |
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(48) |
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Dividends paid |
(497) |
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|
(424) |
|
|
|
Repurchase of stock |
— |
|
|
(10) |
|
|
|
Accelerated share repurchase pending final settlement |
— |
|
|
(2,750) |
|
|
|
Shares withheld for taxes on share-based compensation |
(118) |
|
|
(171) |
|
|
|
Stock option exercises |
— |
|
|
1 |
|
|
|
Cash required for financing activities |
(571) |
|
|
(2,457) |
|
|
|
Net decrease in cash and cash equivalents |
(908) |
|
|
(4,799) |
|
|
|
Cash and cash equivalents at beginning of period |
2,229 |
|
|
5,911 |
|
|
|
Cash and cash equivalents at end of period |
$ |
1,321 |
|
|
$ |
1,112 |
|
|
|
Supplemental information |
|
|
|
|
|
Leased assets obtained in exchange for new finance lease
liabilities |
$ |
15 |
|
|
$ |
62 |
|
|
|
Leased assets obtained in exchange for new operating lease
liabilities |
54 |
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Shareholders’ Investment |
|
|
Common |
|
Stock |
|
Additional |
|
|
|
Accumulated Other |
|
|
|
|
Stock |
|
Par |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
|
|
(millions) (unaudited) |
Shares |
|
Value |
|
Capital |
|
Earnings |
|
(Loss)
/
Income
|
|
Total |
|
January 29, 2022 |
471.3 |
|
|
$ |
39 |
|
|
$ |
6,421 |
|
|
$ |
6,920 |
|
|
$ |
(553) |
|
|
$ |
12,827 |
|
|
Net earnings |
— |
|
|
— |
|
|
— |
|
|
1,009 |
|
|
— |
|
|
1,009 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
201 |
|
|
201 |
|
|
Dividends declared |
— |
|
|
— |
|
|
— |
|
|
(426) |
|
|
— |
|
|
(426) |
|
|
Repurchase of stock |
(0.1) |
|
|
— |
|
|
— |
|
|
(10) |
|
|
— |
|
|
(10) |
|
|
Accelerated share repurchase pending final settlement |
(8.9) |
|
|
(1) |
|
|
(751) |
|
|
(1,998) |
|
|
— |
|
|
(2,750) |
|
|
Stock options and awards |
1.4 |
|
|
1 |
|
|
(78) |
|
|
— |
|
|
— |
|
|
(77) |
|
|
April 30, 2022 |
463.7 |
|
|
$ |
39 |
|
|
$ |
5,592 |
|
|
$ |
5,495 |
|
|
$ |
(352) |
|
|
$ |
10,774 |
|
|
Net earnings |
— |
|
|
— |
|
|
— |
|
|
183 |
|
|
— |
|
|
183 |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17) |
|
|
(17) |
|
|
Dividends declared |
— |
|
|
— |
|
|
— |
|
|
(502) |
|
|
— |
|
|
(502) |
|
|
Repurchase of stock |
(3.6) |
|
|
(1) |
|
|
870 |
|
|
(755) |
|
|
— |
|
|
114 |
|
|
Stock options and awards |
0.1 |
|
|
— |
|
|
40 |
|
|
— |
|
|
— |
|
|
40 |
|
|
July 30, 2022 |
460.2 |
|
|
$ |
38 |
|
|
$ |
6,502 |
|
|
$ |
4,421 |
|
|
$ |
(369) |
|
|
$ |
10,592 |
|
|
Net earnings |
— |
|
|
— |
|
|
— |
|
|
712 |
|
|
— |
|
|
712 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
161 |
|
|
161 |
|
|
Dividends declared |
— |
|
|
— |
|
|
— |
|
|
(502) |
|
|
— |
|
|
(502) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards |
0.1 |
|
|
— |
|
|
56 |
|
|
— |
|
|
— |
|
|
56 |
|
|
October 29, 2022 |
460.3 |
|
|
$ |
38 |
|
|
$ |
6,558 |
|
|
$ |
4,631 |
|
|
$ |
(208) |
|
|
$ |
11,019 |
|
|
Net earnings |
— |
|
|
— |
|
|
— |
|
|
876 |
|
|
— |
|
|
876 |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(211) |
|
|
(211) |
|
|
Dividends declared |
— |
|
|
— |
|
|
— |
|
|
(502) |
|
|
— |
|
|
(502) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards |
— |
|
|
— |
|
|
50 |
|
|
— |
|
|
— |
|
|
50 |
|
|
January 28, 2023 |
460.3 |
|
|
$ |
38 |
|
|
$ |
6,608 |
|
|
$ |
5,005 |
|
|
$ |
(419) |
|
|
$ |
11,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Shareholders’ Investment |
|
|
Common |
|
Stock |
|
Additional |
|
|
|
Accumulated Other |
|
|
|
|
Stock |
|
Par |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
|
|
(millions) (unaudited) |
Shares |
|
Value |
|
Capital |
|
Earnings |
|
(Loss)
/
Income
|
|
Total |
|
January 28, 2023 |
460.3 |
|
|
$ |
38 |
|
|
$ |
6,608 |
|
|
$ |
5,005 |
|
|
$ |
(419) |
|
|
$ |
11,232 |
|
|
Net earnings |
— |
|
|
— |
|
|
— |
|
|
950 |
|
|
— |
|
|
950 |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3) |
|
|
(3) |
|
|
Dividends declared |
— |
|
|
— |
|
|
— |
|
|
(507) |
|
|
— |
|
|
(507) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards |
1.3 |
|
|
— |
|
|
(67) |
|
|
— |
|
|
— |
|
|
(67) |
|
|
April 29, 2023 |
461.6 |
|
|
$ |
38 |
|
|
$ |
6,541 |
|
|
$ |
5,448 |
|
|
$ |
(422) |
|
|
$ |
11,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We declared $1.08 and $0.90 dividends per share for the three
months ended April 29, 2023, and April 30, 2022, and
$4.14 per share for the fiscal year ended January 28,
2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
6
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS |
|
|
INDEX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
7
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS |
|
|
NOTES |
|
Notes to Consolidated Financial Statements (unaudited)
1. Accounting Policies
These unaudited condensed consolidated financial statements are
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission applicable to interim financial
statements. While these statements reflect all normal recurring
adjustments that are, in the opinion of management, necessary for
fair presentation of the results of the interim period, they do not
include all of the information and footnotes required by United
States generally accepted accounting principles (U.S. GAAP) for
complete financial statements. These condensed consolidated
financial statements should be read in conjunction with the
financial statement disclosures in our most recent
Form 10-K.
We use the same accounting policies in preparing quarterly and
annual financial statements.
We operate as a single segment that is designed to enable guests to
purchase products seamlessly in stores or through our digital
channels. Nearly all of our revenues are generated in the U.S. The
vast majority of our long-lived assets are located within the
U.S.
Due to the seasonal nature of our business, quarterly revenues,
expenses, earnings, and cash flows are not necessarily indicative
of the results that may be expected for the full year.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
8
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS |
|
|
NOTES |
|
2. Revenue
Merchandise sales represent the vast majority of our revenues. We
also earn revenues from a variety of other sources, most notably
credit card profit-sharing income from our arrangement with TD Bank
Group (TD).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
Three Months Ended |
|
|
|
(millions) |
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Apparel & accessories
(a)
|
$ |
3,967 |
|
|
$ |
4,239 |
|
|
|
|
|
|
Beauty & household essentials
(b)
|
7,682 |
|
|
7,053 |
|
|
|
|
|
|
Food & beverage
(c)
|
5,997 |
|
|
5,505 |
|
|
|
|
|
|
Hardlines
(d)
|
3,391 |
|
|
3,713 |
|
|
|
|
|
|
Home furnishings & décor
(e)
|
3,855 |
|
|
4,271 |
|
|
|
|
|
|
Other |
56 |
|
|
49 |
|
|
|
|
|
|
Sales |
24,948 |
|
|
24,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card profit sharing |
174 |
|
|
185 |
|
|
|
|
|
|
Other |
200 |
|
|
155 |
|
|
|
|
|
|
Other revenue |
374 |
|
|
340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
25,322 |
|
|
$ |
25,170 |
|
|
|
|
|
(a)Includes
apparel for women, men, boys, girls, toddlers, infants and
newborns, as well as jewelry, accessories, and shoes.
(b)Includes
beauty and personal care, baby gear, cleaning, paper products, and
pet supplies.
(c)Includes
dry grocery, dairy, frozen food, beverages, candy, snacks, deli,
bakery, meat, produce, and food service in our stores.
(d)Includes
electronics (including video game hardware and software), toys,
entertainment, sporting goods, and luggage.
(e)Includes
furniture, lighting, storage, kitchenware, small appliances, home
décor, bed and bath, home improvement, school/office supplies,
greeting cards and party supplies, and other seasonal
merchandise.
Merchandise sales —
We record almost all retail store revenues at the point of sale.
Digitally originated sales may include shipping revenue and are
recorded upon delivery to the guest or upon guest pickup at the
store. Sales are recognized net of expected returns, which we
estimate using historical return patterns and our expectation of
future returns. As of April 29, 2023, January 28, 2023,
and April 30, 2022, the accrual for estimated returns was $206
million, $174 million, and $204 million, respectively.
Revenue from Target gift card sales is recognized upon gift card
redemption, which is typically within one year of
issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gift Card Liability Activity |
January 28,
2023 |
|
Gift Cards Issued During Current Period But Not Redeemed
(b)
|
|
Revenue Recognized From Beginning Liability |
|
April 29,
2023 |
|
(millions) |
|
|
|
|
Gift card liability
(a)
|
$ |
1,240 |
|
|
$ |
268 |
|
|
$ |
(481) |
|
|
$ |
1,027 |
|
(a)Included
in Accrued and Other Current Liabilities.
(b)Net
of estimated breakage.
Other Revenue
Credit card profit sharing
— We receive payments under a credit card program agreement with
TD. Under the agreement, we receive a percentage of the profits
generated by the Target Credit Card and Target MasterCard
receivables in exchange for performing account servicing and
primary marketing functions. TD underwrites, funds, and owns Target
Credit Card and Target MasterCard receivables, controls risk
management policies, and oversees regulatory
compliance.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
9
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS |
|
|
NOTES |
|
Other
— Includes advertising revenue, Shipt membership and service
revenues, commissions earned on third-party sales through
Target.com, rental income, and other miscellaneous
revenues.
3. Fair Value Measurements
Fair value measurements are reported in one of three levels
reflecting the significant inputs used to determine fair
value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments Measured On a
Recurring Basis |
|
Fair Value |
|
(millions) |
Classification |
Measurement Level |
April 29, 2023 |
|
January 28, 2023 |
|
April 30, 2022 |
|
Assets |
|
|
|
|
|
|
|
|
Short-term investments |
Cash and Cash Equivalents |
Level 1 |
$ |
408 |
|
|
$ |
1,343 |
|
|
$ |
182 |
|
|
Prepaid forward contracts |
Other Current Assets |
Level 1 |
25 |
|
|
27 |
|
|
37 |
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
Other Current Assets |
Level 2 |
— |
|
|
— |
|
|
41 |
|
|
Interest rate swaps |
Other Noncurrent Assets |
Level 2 |
7 |
|
|
7 |
|
|
292 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
Other Noncurrent Liabilities |
Level 2 |
72 |
|
|
81 |
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Financial Instruments Not Measured at Fair Value
(a)
(millions)
|
April 29, 2023 |
|
January 28, 2023 |
|
April 30, 2022 |
Carrying
Amount |
Fair
Value |
|
Carrying
Amount |
Fair
Value |
|
Carrying
Amount |
Fair
Value |
|
Long-term debt, including current portion
(b)
|
$ |
14,144 |
|
$ |
13,672 |
|
|
$ |
14,141 |
|
$ |
13,688 |
|
|
$ |
11,549 |
|
$ |
11,466 |
|
(a)The
carrying amounts of certain other current assets, commercial paper,
accounts payable, and certain accrued and other current liabilities
approximate fair value due to their short-term nature.
(b)The
fair value of debt is generally measured using a discounted cash
flow analysis based on current market interest rates for the same
or similar types of financial instruments and would be classified
as Level 2. These amounts exclude commercial paper, fair value
hedge adjustments, and lease liabilities.
4. Supplier Finance Programs
We have arrangements with several financial institutions to act as
our paying agents to certain vendors. The arrangements also permit
the financial institutions to provide vendors with an option, at
our vendors' sole discretion, to sell their receivables from Target
to the financial institutions. A vendor’s election to receive early
payment at a discounted amount from the financial institutions does
not change the amount that we must remit to the financial
institutions or our payment date, which is up to 120 days from the
invoice date.
We do not pay any fees or pledge any security to these financial
institutions under these arrangements. The arrangements can be
terminated by either party with notice ranging up to 120
days.
Our outstanding vendor obligations eligible for early payment under
these arrangements totaled $3.3 billion, $3.4 billion,
and $4.4 billion as of April 29, 2023, January 28,
2023, and April 30, 2022, respectively, and are included
within Accounts Payable on our Consolidated Statements of Financial
Position. Our outstanding vendor obligations do not represent
actual receivables sold by our vendors to the financial
institutions, which may be lower.
5. Commercial Paper and Long-Term Debt
We obtain short-term financing from time to time
under our commercial paper program. For the three months ended
April 29, 2023 and April 30, 2022, the maximum amounts
outstanding were $90 million and $1.1 billion,
respectively, and the average daily amounts outstanding were
$2 million and $291 million, respectively, at a weighted
average annual interest rate of 4.8 percent and 0.4 percent,
respectively. As of April 29, 2023 and April 30, 2022,
$90 million and $945 million, respectively, were
outstanding and are classified within Current Portion of Long-Term
Debt and Other Borrowings on our Consolidated Statements of
Financial Position.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
10
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS |
|
|
NOTES |
|
6. Derivative Financial Instruments
Our derivative instruments consist of interest rate swaps used to
mitigate interest rate risk. As a result, we have counterparty
credit exposure to large global financial institutions, which we
monitor on an ongoing basis.
Note
3
to the Consolidated Financial Statements provides the fair value
and classification of these instruments.
We were party to interest rate swaps with notional amounts totaling
$2.45 billion as of April 29, 2023 and January 28,
2023, and $1.50 billion as of April 30, 2022. We pay a
floating rate and receive a fixed rate under each of these
agreements. All of the agreements are designated as fair value
hedges, and all were considered to be perfectly effective under the
shortcut method during the three months ended April 29, 2023
and April 30, 2022.
During the first quarter of 2023, we amended certain of our
interest rate swaps, with notional amounts totaling
$1.25 billion, to replace the London Interbank Offered Rate
(LIBOR) with the daily Secured Overnight Financing Rate (SOFR) as
part of our planned reference rate reform activities. These
amendments did not result in any change to our application of hedge
accounting or any impact to our consolidated financial
statements.
We were party to forward-starting interest rate swaps with notional
amounts totaling $2.15 billion as of April 30, 2022.
During 2022, we terminated all remaining forward-starting interest
rate swap agreements. The resulting gains upon termination were
recorded in Accumulated Other Comprehensive Loss and will be
recognized as a reduction to Net Interest Expense over the
respective term of the debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Hedges on Debt
(millions)
|
|
April 29, 2023 |
|
January 28, 2023 |
|
April 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and other borrowings |
|
|
|
|
|
|
|
Carrying amount of hedged debt |
|
$ |
2,376 |
|
|
$ |
2,366 |
|
|
$ |
1,468 |
|
|
Cumulative hedging adjustments, included in carrying
amount |
|
(65) |
|
|
(74) |
|
|
(27) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Hedges on Net Interest Expense |
Three Months Ended |
|
|
|
(millions) |
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on fair value hedges recognized in Net Interest
Expense |
|
|
|
|
|
|
|
|
Interest rate swap designated as fair value hedges |
$ |
9 |
|
|
$ |
(104) |
|
|
|
|
|
|
Hedged debt |
(9) |
|
|
104 |
|
|
|
|
|
|
Gain on cash flow hedges recognized in Net Interest
Expense |
6 |
|
|
— |
|
|
|
|
|
|
Total |
$ |
6 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
11
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS |
|
|
NOTES |
|
7. Share Repurchase
We periodically repurchase shares of our common stock under a
board-authorized repurchase program through a combination of open
market transactions, accelerated share repurchase (ASR)
arrangements, and other privately negotiated transactions with
financial institutions. We did not repurchase any of our shares
during the three months ended April 29, 2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Repurchase Activity |
Three Months Ended |
|
|
|
(millions, except per share data) |
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Number of shares purchased |
— |
|
|
0.1 |
|
|
|
|
|
|
Average price paid per share |
$ |
— |
|
|
$ |
208.60 |
|
|
|
|
|
|
Total investment |
$ |
— |
|
|
$ |
10 |
|
|
|
|
|
Note: This table excludes activity related to the ASR arrangement
described below because final settlement had not occurred as of
April 30, 2022.
During the first quarter of 2022, we entered into an ASR
arrangement to repurchase up to $2.75 billion of our common
stock. Under the agreement, we paid $2.75 billion and received
an initial delivery of 8.9 million shares, which were retired,
resulting in a $2.0 billion reduction to Retained Earnings. As
of April 30, 2022, $751 million was included in the
Consolidated Statement of Financial Position as a reduction to
Additional Paid-in Capital. Final settlement occurred during the
second quarter of 2022. In total, under the ASR arrangement, we
repurchased 12.5 million shares for a total cash investment of
$2.6 billion.
8. Pension Benefits
We provide pension plan benefits to eligible team
members.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Pension Benefits Expense |
|
Three Months Ended |
|
|
|
(millions) |
Classification |
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Service cost benefits earned |
SG&A |
$ |
20 |
|
|
$ |
23 |
|
|
|
|
|
|
Interest cost on projected benefit obligation |
Net Other Income |
41 |
|
|
29 |
|
|
|
|
|
|
Expected return on assets |
Net Other Income |
(67) |
|
|
(59) |
|
|
|
|
|
|
Amortization of losses |
Net Other Income |
— |
|
|
15 |
|
|
|
|
|
|
Prior service cost |
Net Other Income |
3 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(3) |
|
|
$ |
8 |
|
|
|
|
|
9. Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Accumulated Other Comprehensive Income (Loss) |
Cash Flow Hedges |
|
Currency Translation Adjustment |
|
Pension |
|
Total |
|
(millions) |
|
|
|
|
January 28, 2023 |
$ |
300 |
|
|
$ |
(23) |
|
|
$ |
(696) |
|
|
$ |
(419) |
|
|
Other comprehensive income (loss) before reclassifications, net of
tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Amounts reclassified from AOCI, net of tax |
(5) |
|
|
— |
|
|
2 |
|
|
(3) |
|
|
April 29, 2023 |
$ |
295 |
|
|
$ |
(23) |
|
|
$ |
(694) |
|
|
$ |
(422) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
12
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
FINANCIAL SUMMARY |
|
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Financial Summary
First quarter 2023 included the following notable
items:
•GAAP
and Adjusted diluted earnings per share were $2.05.
•Total
revenue was $25.3 billion, an increase of 0.6 percent, reflecting
total sales growth of 0.5 percent and a 10.2 percent increase in
other revenue.
•Comparable
sales were flat, reflecting a 0.9 percent increase in traffic and a
(0.9) percent decrease in average transaction amount.
◦Comparable
stores originated sales grew 0.7 percent.
◦Comparable
digitally originated sales declined (3.4) percent.
•Operating
income of $1.3 billion was (1.4) percent lower than the comparable
prior-year period. See
Business
Environment
below for additional information.
Cash flow provided by operating activities was $1.3 billion for the
three months ended April 29, 2023, compared with $(1.4)
billion cash flow required for operating activities for the three
months ended April 30, 2022. The drivers of the operating cash
flow increase are described on
page
20.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share |
Three Months Ended |
|
|
|
|
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
Change |
|
|
|
|
|
|
|
GAAP diluted earnings per share |
$ |
2.05 |
|
|
$ |
2.16 |
|
|
(4.8) |
% |
|
|
|
|
|
|
|
Adjustments |
— |
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share |
$ |
2.05 |
|
|
$ |
2.19 |
|
|
(6.2) |
% |
|
|
|
|
|
|
Note: Adjusted diluted earnings per share (Adjusted EPS), a
non-GAAP metric, excludes the impact of certain items. Management
believes that Adjusted EPS is useful in providing period-to-period
comparisons of the results of our operations. A reconciliation of
non-GAAP financial measures to GAAP measures is
provided
on
page 18.
We report after-tax return on invested capital (ROIC) because we
believe ROIC provides a meaningful measure of our capital
allocation effectiveness over time. For the trailing twelve months
ended April 29, 2023, after-tax ROIC
was
11.4 percent,
compared with 25.3 percent for the trailing twelve months ended
April 30, 2022. The calculation of ROIC is
provided on
page
19.
Business Environment
During the first quarter of 2023, sales growth in our Frequency
categories (Beauty & Household Essentials and Food &
Beverage) was offset by decreases in our Discretionary categories
(Apparel & Accessories, Hardlines, and Home Furnishings &
Decor). Inventory as of April 29, 2023 decreased compared with
January 28, 2023 and April 30, 2022. This decrease was driven by
actions we took during 2022 and strategies we employed to align
inventories with sales trends, as well as improvements in the
supply chain that reduced in-transit inventory. These improvements
have resulted in a reduction in costs related to managing elevated
inventory levels and reduced our working capital investment. In
addition, we experienced a significant decrease in freight costs
due to a decline in freight rates compared to 2022.
We continue to experience higher inventory shrink, as a percentage
of sales, relative to historical levels — including significantly
higher shrink rates at certain stores. We believe that this trend
is pervasive across the retail industry. Increased shrink has had,
and if current trends persist will continue to have, an adverse
impact on our results of operations, including potential impairment
of our long-lived assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
13
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
ANALYSIS OF RESULTS OF OPERATIONS |
|
Analysis of Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Income |
Three Months Ended |
|
|
|
|
|
|
|
(dollars in millions) |
April 29, 2023 |
|
April 30, 2022 |
|
Change |
|
|
|
|
|
|
|
Sales |
$ |
24,948 |
|
|
$ |
24,830 |
|
|
0.5 |
% |
|
|
|
|
|
|
|
Other revenue |
374 |
|
|
340 |
|
|
10.2 |
|
|
|
|
|
|
|
|
Total revenue |
25,322 |
|
|
25,170 |
|
|
0.6 |
|
|
|
|
|
|
|
|
Cost of sales |
18,386 |
|
|
18,461 |
|
|
(0.4) |
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
5,025 |
|
|
4,762 |
|
|
5.5 |
|
|
|
|
|
|
|
|
Depreciation and amortization (exclusive of depreciation included
in cost of sales) |
583 |
|
|
601 |
|
|
(3.0) |
|
|
|
|
|
|
|
|
Operating income |
$ |
1,328 |
|
|
$ |
1,346 |
|
|
(1.4) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Analysis |
Three Months Ended |
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Gross margin rate |
26.3 |
% |
|
25.7 |
% |
|
|
|
|
|
SG&A expense rate |
19.8 |
|
|
18.9 |
|
|
|
|
|
|
Depreciation and amortization expense rate (exclusive of
depreciation included in cost of sales) |
2.3 |
|
|
2.4 |
|
|
|
|
|
|
Operating income margin rate |
5.2 |
|
|
5.3 |
|
|
|
|
|
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.
Sales
Sales include all merchandise sales, net of expected returns, and
our estimate of gift card breakage. We use comparable sales to
evaluate the performance of our stores and digital channel sales by
measuring the change in sales for a period over the comparable
prior-year period of equivalent length. Comparable sales include
all sales, except sales from stores open less than 13 months,
digital acquisitions we have owned less than 13 months, stores that
have been closed, and digital acquisitions that we no longer
operate. Comparable sales measures vary across the retail industry.
As a result, our comparable sales calculation is not necessarily
comparable to similarly titled measures reported by other
companies. Digitally originated sales include all sales initiated
through mobile applications and our websites. Our stores fulfill
the majority of digitally originated sales, including shipment from
stores to guests, store Order Pickup or Drive Up, and delivery via
Shipt. Digitally originated sales may also be fulfilled through our
distribution centers, our vendors, or other third
parties.
Sales growth—from both comparable sales and new stores—represents
an important driver of our long-term profitability. We expect that
comparable sales growth will drive the majority of our total sales
growth. We believe that our ability to successfully differentiate
our guests’ shopping experience through a careful combination of
merchandise assortment, price, convenience, guest experience, and
other factors will, over the long-term, drive both increasing
shopping frequency (number of transactions, or "traffic") and the
amount spent each visit (average transaction amount).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Sales |
Three Months Ended |
|
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Comparable sales change |
0.0 |
% |
|
3.3 |
% |
|
|
|
|
|
Drivers of change in comparable sales |
|
|
|
|
|
|
|
|
Number of transactions (traffic) |
0.9 |
|
|
3.9 |
|
|
|
|
|
|
Average transaction amount |
(0.9) |
|
|
(0.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
14
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
ANALYSIS OF RESULTS OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Sales by Channel |
Three Months Ended |
|
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Stores originated comparable sales change |
0.7 |
% |
|
3.4 |
% |
|
|
|
|
|
Digitally originated comparable sales change |
(3.4) |
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Channel |
Three Months Ended |
|
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Stores originated |
82.5 |
% |
|
81.8 |
% |
|
|
|
|
|
Digitally originated |
17.5 |
|
|
18.2 |
|
|
|
|
|
|
Total |
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Fulfillment Channel |
Three Months Ended |
|
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Stores |
97.2 |
% |
|
96.5 |
% |
|
|
|
|
|
Other |
2.8 |
|
|
3.5 |
|
|
|
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Product Category |
Three Months Ended |
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Apparel & accessories |
16 |
% |
|
17 |
% |
|
|
|
|
|
Beauty & household essentials |
31 |
|
|
29 |
|
|
|
|
|
|
Food & beverage |
24 |
|
|
22 |
|
|
|
|
|
|
Hardlines |
14 |
|
|
15 |
|
|
|
|
|
|
Home furnishings & décor |
15 |
|
|
17 |
|
|
|
|
|
|
Total |
100 |
% |
|
100 |
% |
|
|
|
|
Note
2
to the Financial Statements provides additional product category
sales information. The collective interaction of a broad array of
macroeconomic, competitive, and consumer behavioral factors, as
well as sales mix and the transfer of sales to new stores, makes
further analysis of sales metrics infeasible.
We monitor the percentage of purchases that are paid for using
RedCards (RedCard Penetration) because our internal analysis has
indicated that a meaningful portion of the incremental purchases on
RedCards are also incremental sales for Target. Guests receive a 5
percent discount on virtually all purchases when they use a RedCard
at Target. For the three months ended April 29, 2023 and
April 30, 2022, total RedCard Penetration was 19.0 percent and
20.3 percent, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
15
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
ANALYSIS OF RESULTS OF OPERATIONS |
|
Gross Margin Rate
For the three months ended April 29, 2023, our gross margin
rate was 26.3 percent compared with 25.7 percent in the comparable
prior-year period. The increase reflected the net impact
of
•merchandising
benefit, including
◦lower
freight costs;
◦retail
price increases; and
◦lower
clearance markdown rates compared with the prior-year, which
included the impact of inventory impairments and other
actions;
•lower
digital fulfillment costs due to a decrease in digital volume and a
beneficial mix of sales fulfilled through lower-cost same-day
fulfillment options; and
•higher
inventory shrink.
Selling, General, and Administrative Expense Rate
For the three months ended April 29, 2023, our SG&A
expense rate was 19.8 percent compared with 18.9 percent for the
comparable prior-year period. The increase reflected the net impact
of cost increases across our business, including investments in
team member pay and benefits.
Store Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Number of Stores |
Three Months Ended |
|
|
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
|
|
Beginning store count |
1,948 |
|
|
1,926 |
|
|
|
|
|
|
Opened |
6 |
|
|
7 |
|
|
|
|
|
|
Closed |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending store count |
1,954 |
|
|
1,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stores and |
Number of Stores |
|
Retail Square Feet
(a)
|
|
Retail Square Feet |
April 29, 2023 |
January 28, 2023 |
April 30, 2022 |
|
April 29, 2023 |
January 28, 2023 |
April 30, 2022 |
|
170,000 or more sq. ft. |
274 |
|
274 |
|
274 |
|
|
48,985 |
|
48,985 |
|
49,071 |
|
|
50,000 to 169,999 sq. ft. |
1,530 |
|
1,527 |
|
1,519 |
|
|
191,543 |
|
191,241 |
|
190,461 |
|
|
49,999 or less sq. ft. |
150 |
|
147 |
|
140 |
|
|
4,465 |
|
4,358 |
|
4,147 |
|
|
Total |
1,954 |
|
1,948 |
|
1,933 |
|
|
244,993 |
|
244,584 |
|
243,679 |
|
(a)In
thousands; reflects total square feet less office, supply chain
facilities, and vacant space.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
16
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
ANALYSIS OF RESULTS OF OPERATIONS |
|
Other Performance Factors
Net Interest Expense
Net
interest expense was $147 million for the three months ended
April 29, 2023 and $112 million for the three months ended
April 30, 2022. The increase in net interest expense was
primarily due to higher average debt levels in addition to higher
floating interest rates for the three months ended April 29,
2023 compared with the prior-year period.
Provision for Income Taxes
Our effective income tax rate for the three months ended
April 29, 2023 was 21.1 percent, compared with 19.2 percent in
the comparable prior-year period. The increase reflects higher
discrete tax benefits in the prior-year, primarily related to
share-based compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
17
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|
Reconciliation of Non-GAAP Financial Measures to GAAP
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, U.S. 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.
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Adjusted EPS |
|
Three Months Ended |
|
|
April 29, 2023 |
|
April 30, 2022 |
|
(millions, except per share data) |
|
Pretax |
|
Net of Tax |
|
Per Share |
|
Pretax |
|
Net of Tax |
|
Per Share |
|
GAAP diluted earnings per share |
|
|
|
|
|
$ |
2.05 |
|
|
|
|
|
|
$ |
2.16 |
|
|
Adjustments |
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
Other
(a)
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
20 |
|
|
$ |
15 |
|
|
$ |
0.03 |
|
|
Adjusted diluted earnings per share |
|
|
|
|
|
$ |
2.05 |
|
|
|
|
|
|
$ |
2.19 |
|
(a)Other
items unrelated to current period operations, none of which were
individually significant.
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) |
|
April 29, 2023 |
|
April 30, 2022 |
|
Change |
|
|
|
|
|
|
|
Net earnings |
|
$ |
950 |
|
|
$ |
1,009 |
|
|
(5.8) |
% |
|
|
|
|
|
|
|
+ Provision for income taxes |
|
254 |
|
|
240 |
|
|
6.0 |
|
|
|
|
|
|
|
|
+ Net interest expense |
|
147 |
|
|
112 |
|
|
31.2 |
|
|
|
|
|
|
|
|
EBIT |
|
$ |
1,351 |
|
|
$ |
1,361 |
|
|
(0.7) |
% |
|
|
|
|
|
|
|
+ Total depreciation and amortization
(a)
|
|
667 |
|
|
679 |
|
|
(1.8) |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
2,018 |
|
|
$ |
2,040 |
|
|
(1.1) |
% |
|
|
|
|
|
|
(a)Represents
total depreciation and amortization, including amounts classified
within Depreciation and Amortization and within Cost of
Sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
18
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|
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 |
|
April 29, 2023 |
|
April 30, 2022 |
|
|
|
Operating income |
|
$ |
3,830 |
|
|
$ |
7,918 |
|
|
|
|
+ Net other income |
|
57 |
|
|
55 |
|
|
|
|
EBIT |
|
3,887 |
|
|
7,973 |
|
|
|
|
+ Operating lease interest
(a)
|
|
96 |
|
|
87 |
|
|
|
|
- Income taxes
(b)
|
|
770 |
|
|
1,804 |
|
|
|
|
Net operating profit after taxes |
|
$ |
3,213 |
|
|
$ |
6,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
April 29, 2023 |
|
April 30, 2022 |
|
May 1, 2021 |
|
Current portion of long-term debt and other borrowings |
|
$ |
200 |
|
|
$ |
1,089 |
|
|
$ |
1,173 |
|
|
+ Noncurrent portion of long-term debt |
|
16,010 |
|
|
13,379 |
|
|
11,509 |
|
|
+ Shareholders' investment |
|
11,605 |
|
|
10,774 |
|
|
14,959 |
|
|
+ Operating lease liabilities
(c)
|
|
2,921 |
|
|
2,854 |
|
|
2,563 |
|
|
- Cash and cash equivalents |
|
1,321 |
|
|
1,112 |
|
|
7,816 |
|
|
Invested capital |
|
$ |
29,415 |
|
|
$ |
26,984 |
|
|
$ |
22,388 |
|
|
Average invested capital
(d)
|
|
$ |
28,199 |
|
|
$ |
24,686 |
|
|
|
|
|
|
|
|
|
|
|
|
After-tax return on invested capital |
|
11.4 |
% |
|
25.3 |
% |
|
|
(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
19.3 percent
and 22.4 percent for the trailing twelve months ended
April 29, 2023 and April 30, 2022, respectively. For the
trailing twelve months ended April 29, 2023 and April 30,
2022, includes tax effect of $0.8 billion and $1.8 billion,
respectively, related to EBIT and $18 million and $19 million,
respectively, related to operating lease interest.
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
19
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
ANALYSIS OF FINANCIAL CONDITION |
|
Analysis of Financial Condition
Liquidity and Capital Resources
Capital Allocation
We follow a disciplined and balanced approach to capital allocation
based on the following priorities, ranked in order of importance:
first, we fully invest in opportunities to profitably grow our
business, create sustainable long-term value, and maintain our
current operations and assets; second, we maintain a competitive
quarterly dividend and seek to grow it annually; and finally, we
return any excess cash to shareholders by repurchasing shares
within the limits of our credit rating goals.
Our cash and cash equivalents balance was $1.3 billion, $2.2
billion, and $1.1 billion as of April 29, 2023,
January 28, 2023, and April 30, 2022, respectively. Our
cash and cash equivalents balance included short-term investments
of $408 million, $1.3 billion, and $182 million as of
April 29, 2023, January 28, 2023, and April 30,
2022, respectively. Our investment policy is designed to preserve
principal and liquidity of our short-term investments. This policy
allows investments in large money market funds or in highly rated
direct short-term instruments that mature in 60 days or less. We
also place dollar limits on our investments in individual funds or
instruments.
Operating Cash Flows
Cash flows provided by operating activities were $1.3 billion for
the three months ended April 29, 2023, compared with $(1.4)
billion of cash flows required for operating activities for the
three months ended April 30, 2022. For the three months
ended April 29, 2023, operating cash flows increased as a
result of an improvement in working capital, including lower
inventory levels, compared with the three months ended
April 30, 2022.
Inventory
Inventory was $12.6 billion as of April 29, 2023, compared
with $13.5 billion and $15.1 billion at January 28, 2023 and
April 30, 2022, respectively. The decrease over the balance as
of April 30, 2022 primarily reflects actions taken to align
inventory levels with sales trends, as well as improvements in the
supply chain that reduced in-transit inventory.
Investing Cash Flows
Investing cash flows included capital investments of $1.6 billion
and $1.0 billion for the three months ended April 29, 2023 and
April 30, 2022, respectively. The increase primarily reflects
real estate acquisitions for new store and supply chain sites and
timing of remodel activity.
Dividends
We paid dividends totaling $497 million ($1.08 per share) for the
three months ended April 29, 2023, and $424 million ($0.90 per
share) for the three months ended April 30, 2022, a per share
increase of 20.0 percent. We declared dividends totaling $507
million ($1.08 per share) during the first quarter of 2023 and $426
million ($0.90 per share) during the first quarter of 2022, a per
share increase of 20.0 percent. We have paid dividends every
quarter since our 1967 initial public offering, and it is our
intent to continue to do so in the future.
Share Repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
20
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
|
ANALYSIS OF FINANCIAL CONDITION |
|
Financing
Our financing strategy is to ensure liquidity and access to capital
markets, to maintain a balanced spectrum of debt maturities, and to
manage our net exposure to floating interest rate volatility.
Within these parameters, we seek to minimize our borrowing costs.
Our ability to access the long-term debt and commercial paper
markets has provided us with ample sources of liquidity. Our
continued access to these markets depends on multiple factors,
including the condition of debt capital markets, our operating
performance, and maintaining strong credit ratings. As of
April 29, 2023, our credit ratings were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Ratings |
Moody’s |
Standard and Poor’s |
Fitch |
|
Long-term debt |
A2 |
A |
A |
|
Commercial paper |
P-1 |
A-1 |
F1 |
If our credit ratings were lowered, our ability to access the debt
markets, our cost of funds, and other terms for new debt issuances
could be adversely impacted. Each of the credit rating agencies
reviews its rating periodically, and there is no guarantee our
current credit ratings will remain the same as described
above.
We have the ability to obtain short-term financing from time to
time under our commercial paper program and credit facilities. Our
committed $1.0 billion 364-day and $3.0 billion unsecured revolving
credit facilities that will expire in October 2023 and October
2027, respectively, backstop our commercial paper program. No
balances were outstanding under either credit facility at any time
during 2023 or 2022. We had $90 million and $945 million
outstanding under our commercial paper program as of April 29,
2023 and April 30, 2022, respectively.
Note
5
to the Financial Statements provides additional
information.
Most of our long-term debt obligations contain covenants related to
secured debt levels. In addition to a secured debt level covenant,
our credit facilities also contain a debt leverage covenant. We
are, and expect to remain, in compliance with these covenants.
Additionally, as of April 29, 2023, no notes or debentures
contained provisions requiring acceleration of payment upon a
credit rating downgrade, except that certain outstanding notes
allow the note holders to put the notes to us if within a matter of
months of each other we experience both (i) a change in
control and (ii) our long-term credit ratings are either
reduced and the resulting rating is non-investment grade, or our
long-term credit ratings are placed on watch for possible reduction
and those ratings are subsequently reduced and the resulting rating
is non-investment grade.
We believe our sources of liquidity, namely operating cash flows,
credit facility capacity, and access to capital markets, will
continue to be adequate to meet our contractual obligations,
working capital and planned capital expenditures, finance
anticipated expansion and strategic initiatives, fund debt
maturities, pay dividends, and execute purchases under our share
repurchase program for the foreseeable future.
New Accounting Pronouncements
We do not expect any recently issued accounting pronouncements to
have a material effect on our financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
21
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL
INFORMATION |
|
|
FORWARD LOOKING STATEMENTS & CONTROLS AND
PROCEDURES |
|
Forward-Looking Statements
This report contains forward-looking statements, which are based on
our current assumptions and expectations. These statements are
typically accompanied by the words “expect,” “may,” “could,”
“believe,” “would,” “might,” “anticipates,” or similar words. The
principal forward-looking statements in this report include: our
financial performance, statements regarding the adequacy of and
costs associated with our sources of liquidity, the funding of debt
maturities, the execution of our share repurchase program, our
expected capital expenditures and new lease commitments, the
expected compliance with debt covenants, the expected impact of new
accounting pronouncements, our intentions regarding future
dividends, the expected return on plan assets, the expected outcome
of, and adequacy of our reserves for, claims, litigation, and the
resolution of tax matters, and changes in our assumptions and
expectations.
All such forward-looking statements are intended to enjoy the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995,
as amended. Although we believe there is a reasonable basis for the
forward-looking statements, our actual results could be materially
different. The most important factors which could cause our actual
results to differ from our forward-looking statements are set forth
in our description of risk factors included in
Part I, Item 1A, Risk Factors
of our
Form 10-K
for the fiscal year ended January 28, 2023, which should be
read in conjunction with the forward-looking statements in this
report. Forward-looking statements speak only as of the date they
are made, and we do not undertake any obligation to update any
forward-looking statement.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Item 4. Controls and Procedures
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there were no
changes which materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, we
conducted an evaluation, under supervision and with the
participation of management, including the chief executive officer
and chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to
Rules 13a-15 and 15d-15 of the Securities Exchange Act of
1934, as amended (Exchange Act). Based upon that evaluation, our
chief executive officer and chief financial officer concluded that
our disclosure controls and procedures are effective at a
reasonable assurance level. Disclosure controls and procedures are
defined by Rules 13a-15(e) and 15d-15(e) of the
Exchange Act as controls and other procedures that are designed to
ensure that information required to be disclosed by us in reports
filed with the SEC under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the
SEC’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in reports
filed under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal
financial officers, or persons performing similar functions, as
appropriate, to allow timely decisions regarding required
disclosure.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
22
|
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 29, 2023, Target Corporation and certain of its officers
were named as defendants in a purported federal securities law
class action filed in the United States District Court for the
District of Minnesota. The complaint alleges violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, as amended,
and Rule 10b-5 relating to certain prior disclosures of Target
about its business model, strategy, and inventory. The plaintiff
seeks to represent a class of shareholders who purchased or
otherwise acquired Target common stock between August 18, 2021 and
May 17, 2022. The plaintiff seeks damages and other relief,
including attorneys’ fees, based on allegations that the defendants
misled investors about Target’s business model, strategy, and
inventory and that such conduct affected the value of Target common
stock. Target intends to vigorously defend this
lawsuit.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
On August 11, 2021, our Board of Directors authorized a $15 billion
share repurchase program with no stated expiration. Under the
program, we have repurchased 23.8 million shares of common
stock at an average price of $223.52, for a total investment of
$5.3 billion. As of April 29, 2023, the dollar value of
shares that may yet be purchased under the program is $9.7 billion.
There were no Target common stock purchases made during the three
months ended April 29, 2023 by Target or any "affiliated
purchaser" of Target, as defined in Rule 10b-18(a)(3) under the
Exchange Act.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
23
|
Item 6. Exhibits
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
|
3.2 |
|
|
|
10.21.4 |
** + |
|
|
|
|
|
31.1 |
** |
|
|
31.2 |
** |
|
|
32.1 |
*** |
|
|
32.2 |
*** |
|
|
101.INS |
** |
Inline XBRL Instance Document |
|
101.SCH |
** |
Inline XBRL Taxonomy Extension Schema Document |
|
101.CAL |
** |
Inline XBRL Taxonomy Extension Calculation Linkbase
Document |
|
101.DEF |
** |
Inline XBRL Taxonomy Extension Definition Linkbase
Document |
|
101.LAB |
** |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE |
** |
Inline XBRL Taxonomy Extension Presentation Linkbase
Document |
|
104 |
** |
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101) |
|
|
|
|
|
|
|
** |
Filed herewith.
|
|
*** |
Furnished herewith.
|
|
+ |
Certain portions of this exhibit have been redacted pursuant to
Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to
furnish supplementally an unredacted copy of the exhibit to the
Securities and Exchange Commission upon its request.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
24
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
|
|
|
|
|
|
|
|
Dated: May 26, 2023 |
By: |
/s/ Michael J. Fiddelke |
|
|
Michael J. Fiddelke |
|
|
|
Executive Vice President and |
|
|
|
Chief Financial Officer |
|
|
|
(Duly Authorized Officer and |
|
|
|
Principal Financial Officer) |
|
|
|
|
|
|
|
|
|
|
/s/ Matthew A. Liegel |
|
|
|
Matthew A. Liegel |
|
|
|
Senior Vice President, Chief Accounting Officer |
|
|
|
and Controller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION |
|
Q1 2023 Form 10-Q |
25
|
Target (NYSE:TGT)
Historical Stock Chart
From Aug 2023 to Sep 2023
Target (NYSE:TGT)
Historical Stock Chart
From Sep 2022 to Sep 2023
