Target's fiscal Q3 earnings grew to US$555M from US$535M a year ago as sales grew 5.4% to US$16.1B; expenses related to investments in 2013 Canadian market entry reduced earnings per share by roughly US$0.05

MINNEAPOLIS , November 16, 2011 () – Target Corporation (NYSE: TGT) today reported net earnings of $555 million for the quarter ended October 29, 2011, compared with $535 million in the quarter ended October 30, 2010. Earnings per share in the third quarter increased 10.2 percent to $0.82 from $0.74 in the same period a year ago. As previously disclosed, third quarter 2010 earnings per share included the benefit of approximately 6 cents related to favorable state income tax settlements. Third quarter 2011 results included expenses related to Target’s investments in its 2013 Canadian market entry, which reduced earnings per share by approximately 5 cents. Excluding those two items, adjusted earnings per share increased 28 percent to $0.87 in third quarter 2011 from $0.68 in the same period a year ago. A reconciliation of non-GAAP financial measures to GAAP measures is provided in the tables attached to this press release. All earnings per share figures refer to diluted earnings per share.

“We’re very pleased with our third quarter financial results, which reflect strong performance in our U.S. Retail and U.S. Credit Card segments,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation. “We’re confident that we have the right strategy and team in place to drive continued strong performance this holiday season and well into the future, allowing us to continue rewarding our shareholders while investing millions of dollars each week to support the many local communities where our guests and team members live, work and shop.”

Fourth Quarter 2011 Earnings Guidance

The company currently expects fourth quarter 2011 diluted EPS of $1.43 to $1.53, on a GAAP basis. This estimate excludes any reduction in income tax expense from the resolution of income tax uncertainties, which the company expects to be approximately $50 million in the quarter. It also excludes the impact of a potential credit-card receivables sale transaction, and excludes the impact of any potential early extinguishment of non-recourse debt collateralized by credit card receivables.

U.S. Retail Segment Results

As the company first reported in its sales release on November 3, 2011, Target’s sales in third quarter 2011 increased 5.4 percent to $16.1 billion from $15.2 billion a year ago, due to a 4.3 percent increase in comparable-store sales and the contribution from new stores. Segment earnings before interest expense and income taxes (EBIT) were $931 million in the third quarter of 2011, an increase of 14.1 percent from $816 million in 2010.

Third quarter 2011 EBITDA and EBIT margin rates were 9.1 percent and 5.8 percent, respectively, compared with 8.8 percent and 5.4 percent in 2010. Third quarter gross margin rate declined to 30.5 percent in 2011 from 30.6 percent in 2010, reflecting the impact of the company’s integrated growth strategies partially offset by rate improvements within categories. The company’s third quarter selling, general and administrative (SG&A) expense rate improved to 21.4 percent in 2011, compared with 21.8 percent in 2010.

U.S. Credit Card Segment Results

Third quarter average receivables decreased 9.9 percent to $6.2 billion in 2011 from $6.9 billion in 2010. Average receivables directly funded by Target decreased 14 percent in the third quarter to $2.4 billion from $2.8 billion in 2010.

Third quarter bad debt expense was $40 million in 2011, down from $110 million in 2010, driven by improved trends in key measures of risk. Segment profit for the quarter increased 10 percent to $143 million in 2011, compared with $130 million in third quarter 2010. Annualized segment pre-tax return on invested capital was 23.6 percent in third quarter 2011, compared with 18.5 percent in 2010.

Canadian Segment Results

Third quarter 2011 EBIT was $(35) million due to start-up expenses and depreciation related to the company’s expected market entry in 2013.

Interest Expense and Taxes

Net interest expense for the quarter was $200 million, including $15 million of interest on capitalized leases related to Target’s Canadian market entry. Net interest expense was $194 million in third quarter 2010.

The company’s effective income tax rate was 35.3 percent in third quarter 2011, up from 30.8 percent in 2010. Target’s third quarter 2010 income tax rate reflected the favorable resolution of various state income tax matters which increased earnings per share by approximately 6 cents.

Share Repurchase

In third quarter 2011, the company repurchased approximately 4.5 million shares of its common stock at an average price of $50.45, for a total investment of $226 million. Year-to-date, the company has repurchased approximately 34.1 million shares of its common stock at an average price of $50.76, for a total investment of $1.7 billion.


Target Corporation will webcast its third quarter earnings conference call at 9:30 a.m. CST today. Investors and the media are invited to listen to the call through the company’s website at (click on “Events + Presentations” and then “Archives + Webcasts”). A telephone replay of the call will be available beginning at approximately 11:30 a.m. CST today through the end of business on November 18, 2011. The replay number is (800) 642-1687 (passcode: 20428017).

Statements in this release regarding expected earnings per share and gains realized from the resolution of income tax uncertainties are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the company's actual results 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, 2011.

In addition to the GAAP results provided in this release, the company provides non-GAAP adjusted diluted earnings per share (non-GAAP adjusted EPS) for the three and nine months ended October 29, 2011 and October 30, 2010. This measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The most comparable GAAP measure is diluted earnings per share. Management believes non-GAAP adjusted EPS is useful in providing period-to-period comparisons of the results of our U.S. operations. Non-GAAP adjusted EPS should not be considered in isolation or as a substitution for analysis of the company’s results as reported under GAAP. Other companies may calculate non-GAAP adjusted EPS differently than the company does, limiting the usefulness of the measure for comparative purposes.

About Target

Minneapolis-based Target Corporation (NYSE:TGT) serves guests at 1,767 stores across the United States and at The company plans to open its first stores in Canada in 2013. In addition, the company operates a credit card segment that offers branded proprietary credit card products. Since 1946, Target has given 5 percent of its income through community grants and programs; today, that giving equals more than $3 million a week. For more information about Target’s commitment to corporate responsibility, visit

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