Adjusted EPS of $1.05 and GAAP EPS of $0.77

  • First quarter earnings were below expectations as a result of soft sales in seasonal and weather-related categories
  • The Company opened its first 24 Canadian stores in the first quarter as part of its plan to open 124 stores in Canada by the end of the year
  • In the first quarter, Target returned $779 million to shareholders through dividends and share repurchase

Target Corporation (NYSE: TGT) today reported first quarter net earnings of $498 million, or $0.77 per share, which includes:

  • Losses related to the early retirement of debt of (41) cents per share;
  • EPS dilution related to the Canadian Segment of (24) cents, and;
  • Net accounting gains of 36 cents associated with the sale of Target’s entire consumer credit card receivables portfolio to TD Bank Group.

Adjusted earnings per share, a measure the Company believes is useful in providing period-to-period comparisons of the results of its U.S. operations, were $1.05 in first quarter 2013, down 5.0 percent from $1.11 in 2012. 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.

“Target’s first quarter earnings were below expectations as a result of softer-than-expected sales, particularly in apparel and other seasonal and weather-sensitive categories,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation. “While we are disappointed in our first quarter performance, we remain confident in our strategy, and we continue to invest in initiatives, including Canada, our digital channels and CityTarget, that will drive Target’s long-term growth.”

Fiscal 2013 Earnings Guidance

In second quarter 2013, the Company expects adjusted EPS of $1.09 to $1.19 and GAAP EPS of $0.90 to $1.00. The difference between the adjusted and GAAP EPS ranges reflects expected dilution of approximately (16) cents related to Canadian operations, and (3) cents related to the expected reduction in the beneficial interest asset recorded on the sale of our credit card portfolio.

For full-year 2013, the Company now expects adjusted EPS of $4.70 to $4.90, compared with prior guidance of $4.85 to $5.05. GAAP EPS is expected to be $4.12 to $4.32, approximately 58 cents lower than adjusted EPS due to:

  • Losses related to the early retirement of debt of (42) cents per share;
  • Expected EPS dilution related to the Canadian Segment of approximately (45) cents, and;
  • Net accounting gains of approximately 29 cents associated with the sale of Target’s entire consumer credit card receivables portfolio to TD Bank Group.

U.S. Segment Results

In first quarter 2013, sales increased 0.5 percent to $16.6 billion from $16.5 billion last year, reflecting a 0.6 percent decline in comparable-store sales combined with the contribution from new stores. Segment earnings before interest expense and income taxes (EBIT) were $1,239 million in the first quarter of 2013, a decrease of 7.5 percent from $1,340 million in 2012.

As a reminder, following the sale of the U.S. credit card portfolio in March 2013, Target’s historical U.S. Retail Segment and U.S. Credit Card Segment results were combined to form a new U.S. Segment. Selling, General and Administrative (SG&A) expenses in the new U.S. Segment include income from the profit-sharing arrangement with TD Bank Group, net of servicing expenses. In prior periods, credit card revenues, net of credit card expenses, from the historical U.S. Credit Card Segment have been classified within U.S. Segment SG&A expenses.(1)

In addition, beginning with fiscal 2013, Target made changes to certain vendor agreements regarding payments received in support of marketing programs. As a result, these payments are being recorded as a reduction to U.S. Segment cost of sales rather than a reduction to SG&A expenses, creating equivalent year-over-year increases in both gross margin and SG&A expense rates. This change has no effect on U.S. Segment EBITDA and EBIT margin rates.

First quarter EBITDA margin rate was 10.4 percent, compared with 11.2 percent in the revised U.S. Segment and 10.3 percent in the historical U.S. Retail Segment in first quarter 2012. First quarter EBIT margin rate was 7.5 percent, compared with 8.1 percent in the revised U.S. Segment and 7.3 percent in the historical U.S. Retail Segment in first quarter 2012.

First quarter gross margin rate increased to 30.7 percent in 2013 from 30.2 percent in 2012, reflecting category rate improvements combined with a 0.2 percentage-point benefit from changes to the Company’s vendor agreements, partially offset by the impact of the Company’s integrated growth strategies. First quarter SG&A expense rate was 20.3 percent in 2013, compared with 2012 rates of 19.0 percent in the revised U.S. Segment and 19.9 percent in the historical U.S. Retail Segment. Compared with the U.S. Segment in first quarter 2012, the SG&A expense rate increase was primarily driven by a smaller benefit from credit card income (including the impact of profit-sharing with TD Bank) and an increase in technology investments. In addition, the change in Target’s vendor agreements increased first quarter 2013 SG&A rate by approximately 0.2 percentage points, offsetting the equivalent benefit to the gross margin rate.

1Quarterly and full-year historical information for the three most recently completed years reflecting the impact of the reclassification, and the results for our two segments, U.S. and Canadian, are attached as Exhibit (99) to our current report on Form 8-K filed April 16, 2013.

Canadian Segment Results

Target opened its first 24 Canadian stores in March 2013, which generated sales of $86 million in the first quarter with a gross margin rate of 38.4 percent. EBIT for the first quarter was $(205) million, as gross margin of $33 million was offset by $238 million in start-up expenses, operating expenses, depreciation and amortization related to the Company’s market entry. Canadian operations reduced Target’s GAAP earnings per share by 24 cents in first quarter 20132.

2This amount includes interest expense and tax expense that are not included in the segment measure of profit. A reconciliation of non-GAAP measures is included in the tables attached to this release.

Interest Expense and Taxes

Net interest expense increased to $629 million in first quarter 2013, compared with $184 million in first quarter 2012, due to a $445 million charge related to the early retirement of debt.

The Company’s effective income tax rate was 36.0 percent in the first quarter, compared with 36.7 percent in first quarter 2012.

Capital Returned to Shareholders

In first quarter 2013, the Company repurchased approximately 8.5 million shares of its common stock at an average price of $64.04 for a total investment of $547 million. The Company also paid dividends of $232 million during the quarter.

Accounting Considerations

Following the close of the sale of its entire U.S. consumer credit card receivables portfolio to TD Bank Group, Target recognized net pre-tax accounting gains of approximately $391 million. The gains reflect $166 million related to cash received in excess of the book value of the receivables, net of transaction costs, and $225 million related to the beneficial interest asset. The beneficial interest asset effectively represents a receivable for the present value of future profit-sharing Target expects to receive on the receivables sold. The Company estimates the asset will be reduced over a four-year period, with larger reductions in the early years. During the first quarter, the beneficial interest asset was reduced by $17 million. Inclusive of all of these impacts, the net impact of the transaction benefitted first quarter GAAP EPS by 36 cents.


Target Corporation will webcast its first quarter earnings conference call at 9:30 a.m. CDT today. Investors and the media are invited to listen to the call through the Company’s website at (click on “events & presentations”). A telephone replay of the call will be available beginning at approximately 11:30 a.m. CDT today through the end of business on May 24, 2013. The replay number is (855) 859-2056 (passcode: 78414341).

Statements in this release regarding second quarter and full year 2013 earnings guidance, including the expected impact related to the credit card receivables transaction on earnings performance, 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 February 2, 2013.

In addition to the GAAP results provided in this release, the Company provides adjusted diluted earnings per share for the three months ended May 4, 2013 and April 28, 2012, respectively. 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 adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s U.S. operations. 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 adjusted EPS differently than the Company does, limiting the usefulness of the measure for comparisons with other companies.

About Target

Minneapolis-based Target Corporation (NYSE: TGT) serves guests at 1,832 stores – 1,784 in the United States and 48 in Canada – and at Since 1946, Target has given 5 percent of its profit through community grants and programs; today, that giving equals more than $4 million a week. For more information about Target’s commitment to corporate responsibility, visit

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