Adjusted EPS of $1.29, up 16.5 percent from first quarter 2015

  • First quarter Adjusted EPS of $1.29 was above the company’s guidance of $1.15 to $1.25.
  • First quarter comparable sales increased 1.2 percent, driven by growth in both traffic and basket.
  • Comparable digital channel sales increased 23 percent, on top of 38 percent growth in first quarter 2015.
  • First quarter comparable sales in signature categories (Style, Baby, Kids and Wellness) grew more than three times as fast as the company average.
  • The first quarter marked Target’s sixth consecutive quarter of traffic growth, reflecting increases in both stores and digital channels.
  • Target returned $1.2 billion to shareholders in the first quarter through dividends and share repurchases.

Target Corporation (NYSE: TGT) today reported first quarter 2016 comparable sales growth of 1.2 percent, and adjusted earnings per share from continuing operations1 (Adjusted EPS) of $1.29, up 16.5 percent from $1.10 in 2015. First quarter GAAP earnings per share (EPS) from continuing operations were $1.02, compared with $1.01 in first quarter 2015. First quarter 2016 GAAP EPS from continuing operations reflects $261 million of pre-tax early debt retirement losses, costs related to the sale of the pharmacy and clinic businesses to CVS Health and the resolution of income tax matters. The attached tables provide a reconciliation of non-GAAP to GAAP measures for first quarter 2016. All earnings per share figures refer to diluted EPS.

“We are pleased with our first quarter financial results, which demonstrate the effectiveness of our strategy in an increasingly volatile consumer environment,” said Brian Cornell, chairman and CEO of Target. “First quarter comparable sales in Signature Categories grew more than three times the Company average, digital comparable sales grew 23 percent, and strong execution by our team delivered stronger-than-expected growth in Adjusted EPS. With an outstanding team, a resilient business model and a strong balance sheet, we plan to successfully implement our long-term strategy, even in the face of a challenging short-term consumer landscape.”

Fiscal 2016 Earnings Guidance

While the Company’s view of second quarter results has been tempered by the recent slowdown in consumer trends, Target currently believes full-year adjusted EPS within its prior guidance range is achievable.

In second quarter 2016, Target expects comparable sales of flat to down two percent, and Adjusted EPS of $1.00 to $1.20. Second quarter GAAP EPS from continuing operations will include approximately $0.17 of expense related to early debt retirement losses, and also may include the impact of certain additional discrete items which will be excluded in calculating Adjusted EPS. In the past, these items have included data breach expenses, restructuring costs and certain other items that are discretely managed. Beyond losses related to the early debt retirement, Target is not currently aware of any other material discrete items.

Segment Results

First quarter 2016 sales decreased 5.4 percent to $16.2 billion from $17.1 billion last year, as a 1.2 percent increase in comparable sales was more than offset by the impact of the sale of the pharmacy and clinic businesses. Comparable digital channel sales grew 23 percent and contributed 0.6 percentage points to comparable sales growth. Segment earnings before interest expense and income taxes (EBIT) were $1,323 million in first quarter 2016, an increase of 4.9 percent from $1,261 million in 2015.

First quarter EBITDA and EBIT margin rates were 11.5 percent and 8.2 percent, respectively, compared with 10.5 percent and 7.4 percent, respectively, in 2015. First quarter gross margin rate was 30.9 percent, compared with 30.4 percent in 2015, reflecting the benefit of the sale of the Company’s pharmacy and clinic businesses, combined with the benefit of the Company’s cost savings initiatives, partially offset by investments in promotions. First quarter SG&A expense rate was 19.4 percent in 2016, compared with 19.9 percent in 2015, reflecting the benefit of the sale of the Company’s pharmacy and clinic businesses along with continued expense discipline across the organization.

Interest Expense and Taxes from Continuing Operations

The Company’s first quarter 2016 net interest expense was $415 million, compared with $155 million last year, driven by a $261 million charge related to the early retirement of debt. First quarter 2016 effective income tax rate from continuing operations was 31.6 percent, compared with 34.8 percent last year. The decrease was primarily due to the adoption of new accounting standards for employee share-based payments, which reduced the effective tax rate by approximately 1.9 percentage points, and losses related to the early retirement of debt.

Capital Returned to Shareholders

In first quarter 2016, the Company repurchased 11.4 million shares of common stock at an average price of $78.37, for a total investment of $893 million. The Company also paid dividends of $336 million. In total, the Company returned $1,229 million to shareholders in first quarter 2016, representing more than 200 percent of net income from continuing operations.

Since the beginning of the current $10 billion share repurchase program, the Company repurchased 106.0 million common shares at an average price of $70.51, for a total investment of approximately $7.5 billion.

For the trailing twelve months through first quarter 2016, after-tax return on invested capital (ROIC) was 16.0 percent, compared with 12.5 percent for the twelve months through first quarter 2015. Excluding the net gain on the sale of the pharmacy and clinic businesses, ROIC for the trailing twelve months through first quarter 2016 was 14.0 percent, reflecting higher profits on a stable base of invested capital. See the “Reconciliation of Non-GAAP Financial Measures” section of this release for additional information about the Company’s ROIC calculation.

Discontinued Operations

First quarter net earnings from discontinued operations were $18 million, compared with after-tax losses of ($16) million last year. First quarter 2016 net earnings from discontinued operations primarily reflect foreign currency gains on the Company’s net assets.

Certain assets and liabilities of Target’s discontinued operations are based on estimates. The recorded assets include estimated receivables, and the remaining liabilities include accruals for estimated losses related to claims that may be asserted against Target Corporation, primarily under guarantees of certain leases. These estimates involve significant judgment and are based on currently available information, an assessment of the validity of certain claims and estimated payments by the Canada Subsidiaries. These estimates are subject to change, and the Company believes it is reasonably possible that adjustments to these amounts could be material to its results of operations in future periods. Any such adjustments would be recorded in discontinued operations.

Conference Call Details

Target 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 at (hover over “company” then click on “events & presentations” in the “investors” column). 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 20, 2016. The replay number is (855) 859-2056 (passcode: 56082202).


Statements in this release regarding second quarter and full-year 2016 earnings per share guidance 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 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 Jan. 30, 2016. 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.

In addition to the GAAP results provided in this release, the Company provides Adjusted EPS for the three-month periods ended Apr. 30, 2016, and May 2, 2015. The Company also provides ROIC for the twelve-month periods ended Apr. 30, 2016, and May 2, 2015, respectively, which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between the Company and its competitors. Adjusted EPS, capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Management believes Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s ongoing retail operations. Management believes ROIC is useful in assessing the effectiveness of its capital allocation over time. The most comparable GAAP measure for adjusted diluted EPS is diluted EPS from continuing operations. The most comparable GAAP measure for capitalized operating lease obligations and operating lease interest is total rent expense. Adjusted EPS, capitalized operating lease obligations and operating lease interest 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 and ROIC differently than the Company does, limiting the usefulness of the measure for comparisons with other companies.

Related: Review Target's Complete Q1 Financial Statements


About Target

Minneapolis-based Target Corporation (NYSE:TGT) serves guests at 1,793 stores and at Since 1946, Target has given 5 percent of its profit to communities, which today equals more than $4 million a week. For more information, visit For a behind-the-scenes look at Target, visit or follow @TargetNews on Twitter.

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