Target's Q1 net income falls 51.9% to US$1.01B from US$2.10B; total revenue up 4% to US$25.17B from US$24.20B, with net sales up 4% to US$24.83B from US$23.88B, comp sales up 3.3% reflecting traffic growth of 3.9%, same-day services including Shipt up 8%

Sample article from our Consumer packaged goods (CPG)

MINNEAPOLIS , May 18, 2022 (press release) –

  • Comparable sales grew 3.3 percent, on top of 22.9 percent growth last year.
    • Comparable sales growth reflected traffic growth of 3.9 percent.
    • Store comparable sales increased 3.4 percent, on top of 18.0 percent growth last year.
    • Digital comparable sales grew 3.2 percent, following growth of 50.2 percent last year.
    • Same-day services (Order Pickup, Drive Up and Shipt) grew 8 percent this year, led by Drive Up, which grew in the mid-teens on top of more than 120 percent last year.
    • More than 95 percent of Target’s first quarter sales were fulfilled by its stores.
  • Sales growth was led by frequently-purchased categories, including Food & Beverage, Beauty, and Household Essentials.
  • Operating margin rate of 5.3 percent was well below expectations, driven primarily by gross margin pressure reflecting actions to reduce excess inventory as well as higher freight and transportation costs.

For additional media materials, please visit: https://corporate.target.com/article/2022/05/q1-2022-earnings

Target Corporation (NYSE: TGT) today announced its first quarter 2022 financial results, which reflected continued topline growth on top of unprecedented increases over the last two years. The Company reported first quarter GAAP earnings per share (EPS) of $2.16, down 48.2 percent from $4.17 in 2021. First quarter Adjusted EPS1 of $2.19 decreased 40.7 percent compared with $3.69 in 2021. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS. 

“Our first-quarter results mark Target’s 20th-consecutive quarter of sales growth, with comp sales growing more than 3 percent on top of a 23 percent increase one year ago," said Brian Cornell, chairman and chief executive officer of Target Corporation. "Guests continue to depend on Target for our broad and affordable product assortment, as reflected in Q1 guest traffic growth of nearly 4 percent. Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time. Despite these near-term challenges, our team remains passionately dedicated to our guests and serving their needs, giving us continued confidence in our long-term financial algorithm, which anticipates mid-single digit revenue growth, and an operating margin rate of 8 percent or higher over time.”

Fiscal 2022 Guidance
For second quarter 2022, the Company expects its operating income margin rate will be in a wide range centered around first quarter's operating margin rate of 5.3 percent.

For full-year 2022, the Company continues to expect low- to mid- single digit revenue growth.  The Company now expects its full-year operating income margin rate will be in a range centered around 6 percent.

Operating Results
Comparable sales grew 3.3 percent in the first quarter, reflecting comparable store sales growth of 3.4 percent and comparable digital sales growth of 3.2 percent. Total revenue of $25.2 billion grew 4.0 percent compared with last year, reflecting total sales growth of 4.0 percent and a 6.7 percent increase in other revenue. Operating income was $1.3 billion in first quarter 2022, down 43.3 percent from $2.4 billion in 2021, driven primarily by a decline in the Company's gross margin rate.

First quarter operating income margin rate was 5.3 percent in 2022, compared with 9.8 percent in 2021. First quarter gross margin rate was 25.7 percent, compared with 30.0 percent in 2021. This year's gross margin rate reflected higher markdown rates, driven largely by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as costs related to freight, supply chain disruptions, and increased compensation and headcount in our distribution centers. First quarter SG&A expense rate was 18.9 percent in 2022, compared with 18.6 percent in 2021, reflecting the net impact of cost increases across our business, including investments in hourly team member wages, partially offset by lower incentive compensation expense.

Interest Expense and Taxes
The Company’s first quarter 2022 net interest expense was $112 million, in line with $108 million last year.

First quarter 2022 effective income tax rate was 19.2 percent, in line with the prior year rate of 19.6 percent.

Capital Deployment and Return on Invested Capital
The Company paid dividends of $424 million in the first quarter, compared with $340 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count.

During the first quarter of 2022, the Company entered into an Accelerated Share Repurchase (ASR) arrangement for up to $2.75 billion of common stock, with final settlement outstanding as of the end of the first quarter.

Additionally, the Company repurchased $10.0 million worth of its shares in first quarter 2022, retiring 0.1 million shares of common stock at an average price of $208.60. As of the end of the first quarter, excluding the outstanding ASR of $2.75 billion, the Company had approximately $12.3 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.

For the trailing twelve months through first quarter 2022, after-tax return on invested capital (ROIC) was 25.3 percent, compared with 30.7 percent for the trailing twelve months through first quarter 2021. The decrease in ROIC was driven primarily by lower profitability in first quarter 2022. 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 1-800-391-9853.

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 29, 2022. 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 nearly 2,000 stores and at Target.com, with the purpose of helping all families discover the joy of everyday life. Since 1946, Target has given 5% of its profit to communities, which today equals millions of dollars a week. For the latest store count or more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.

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.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.

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