Target Corporation Reports Fourth Quarter and Full-Year 2021 Earnings

Target Corporation Reports Fourth Quarter and Full-Year 2021 Earnings

PR Newswire


MINNEAPOLIS, March 1, 2022 /PRNewswire/ --

Q4 2021 Highlights     

  • Comparable sales grew 8.9 percent, on top of 20.5 percent in Q4 2020.
  • Comparable traffic grew 8.1 percent on top of 6.5 percent in Q4 2020.
  • More than 95 percent of Target's fourth quarter sales were fulfilled by its stores.
  • EPS established an all-time high with GAAP EPS of $3.21 and Adjusted EPS1 of $3.19, despite significant investments in team, price, and inventory availability.

Full-Year 2021 Highlights

  • Target delivered $106 billion in total revenue, having grown nearly $28 billion, or more than 35 percent over the past two years.
  • Comparable sales grew 12.7 percent, on top of 19.3 percent in 2020.
  • Comparable traffic grew 12.3 percent, on top of 3.7 percent in 2020.
  • Total sales have grown more than $27 billion since 2019, reflecting more than $14 billion of additional store sales and digital sales growth of nearly $13 billion.
  • All five core merchandise categories delivered double-digit comparable sales growth in 2021, on top of unprecedented growth in 2020.
  • Operating income margin rate of 8.4 percent expanded nearly 150 basis points from 2020.
  • GAAP EPS from continuing operations of $14.10 was 63.1 percent higher than last year, while Adjusted EPS of $13.56 grew 44.0 percent compared with 2020. Both GAAP and Adjusted EPS have more than doubled since 2019.

For additional media materials, please visit:
https://corporate.target.com/article/2022/03/q4-fy2021

1

Adjusted 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.

Target Corporation (NYSE: TGT) today announced its fourth-quarter and full-year 2021 results.  The Company reported fourth-quarter GAAP earnings per share (EPS) from continuing operations of $3.21, compared with $2.73 in 2020, and $14.10 for full-year 2021, compared with $8.64 in 2020.  Adjusted EPS was $3.19 for the fourth quarter, compared with $2.67 in 2020, and $13.56 for the full-year, compared with $9.42 in 2020. Full-year GAAP EPS included a $335 million pretax gain on the sale of Dermstore, which was excluded from Adjusted EPS.  The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

"Our strong fourth-quarter performance capped off a year of record growth in 2021, reinforcing the durability of our business model and our confidence in long-term profitable growth," said Brian Cornell, chairman and CEO of Target.  "As we look ahead, we'll keep investing and delivering on all that has earned the loyalty and trust of our guests; that starts with our outstanding team and includes continued differentiation through affordability, assortment, ease and convenience."

Fiscal 2022 Guidance and Quarterly Commentary

For fiscal year 2022, the Company expects low- to mid-single digit revenue growth, an operating margin rate of 8 percent or higher, low-single digit growth in operating margin dollars, and high-single digit growth in Adjusted Earnings per Share.

The Company expects quarterly, year-over-year profit performance will be variable during the year, and generally improve as the year progresses. The company expects its first quarter 2022 operating margin rate will be favorable in relation to historical performance, but well below its first quarter 2021 rate of 9.8 percent.

Long-Term Financial Algorithm

Target has also updated its long-term financial algorithm, which will define the Company's expectations for annual performance in fiscal years 2023 and beyond. The algorithm specifies annual benchmarks for the following metrics:

  • Mid-single digit growth in Total Revenue;
  • Mid-single digit growth in Operating Income;
  • High-single digit growth in Adjusted EPS;
  • CAPEX of $4 to $5 billion; and
  • After-tax Return on Invested Capital in the high-20% to 30% range.

Operating Results

The Company's total comparable sales grew 8.9 percent in the fourth quarter, reflecting comparable stores sales growth of 8.9 percent and digital sales growth of 9.2 percent. Total revenue of $31.0 billion grew 9.4 percent compared with last year, driven by sales growth of 9.4 percent and an 11.1 percent increase in other revenue. Operating income was $2.1 billion in fourth quarter 2021, up 14.1 percent from $1.8 billion in 2020.

Fourth quarter operating income margin rate was 6.8 percent in 2021 compared with 6.5 percent in 2020. Fourth quarter gross margin rate was 25.7 percent, compared with 26.8 percent in 2020, reflecting pressure from increased supply chain costs due to increased compensation and headcount in the Company's distribution centers as well as higher freight and merchandising costs. Fourth quarter SG&A expense rate was 17.9 percent in 2021, compared with 19.2 percent in 2020, reflecting the benefit of leverage resulting from strong revenue growth.

Full-year sales increased 13.2 percent to $104.6 billion from $92.4 billion last year, reflecting a 12.7 percent increase in comparable sales combined with sales from non-mature stores. Full-year revenue of $106.0 billion grew 13.3 percent compared with 2020, reflecting sales growth of 13.2 percent and a 20.2 percent increase in other revenue.

Full-year operating income was $8.9 billion in 2021, an increase of 36.8 percent from $6.5 billion last year. Full-year gross margin rate was 28.3 percent, in line with 28.4 percent in 2020, reflecting pressure from increased supply chain, merchandise, and freight costs largely offset by favorable category mix and lower markdowns.  Full-year SG&A expense rate was 18.6 percent in 2021, compared with 19.9 percent in 2020, reflecting significant leverage on fixed costs that offset investments in team member pay and benefits.

Interest Expense and Taxes

The Company's fourth quarter 2021 net interest expense was $104 million, in line with $106 million last year.

Full-year 2021 net interest expense was $421 million, compared with $977 million in 2020, which included a $512 million loss on early debt retirement.

Fourth quarter 2021 effective income tax rate was 23.4 percent, compared with 20.2 percent last year. The Company's full-year 2021 effective income tax rate from continuing operations was 22.0 percent compared with 21.2 percent in 2020.  This increase was driven by significantly higher earnings, which diluted the benefit of fixed and discrete tax items.

Capital Deployment and Return on Invested Capital

The Company paid dividends of $432 million in the fourth quarter, compared with $341 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count.

The Company repurchased $2.3 billion worth of its shares in fourth quarter 2021, retiring 9.7 million shares of common stock at an average price of $237.00.  As of the end of the fourth quarter, 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 fourth quarter 2021, after-tax return on invested capital (ROIC) was 33.1 percent, compared with 23.5 percent for the twelve months through fourth quarter 2020. This increase was driven primarily by increased profitability. The tables in this release provide additional information about the Company's ROIC calculation.

Webcast Details

Target will webcast its financial community meeting, including a Q&A session, beginning at 8:00 a.m. CST today. Investors and the media are invited to listen to the meeting at Investors.Target.com (click on "2022 Financial Community Meeting, including Fourth Quarter and Full-Year 2021 Earnings" under "upcoming events"). A replay of the webcast will be provided when available.

Miscellaneous

Statements in this release regarding the Company's future financial performance 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 Jan. 30, 2021. 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. Additional company information can be found by visiting its corporate website and press center and by following @TargetNews.

For more on the Target Foundation, click here.

 

TARGET CORPORATION


Consolidated Statements of Operations




Three Months Ended




Twelve Months Ended



(millions, except per share data) (unaudited)


January 29,
2022


January 30,
2021


Change


January 29,
2022


January 30,
2021


Change

Sales


$     30,616


$     27,997


9.4%


$   104,611


$     92,400


13.2%

Other revenue


380


342


11.1


1,394


1,161


20.2

Total revenue


30,996


28,339


9.4


106,005


93,561


13.3

Cost of sales


22,761


20,485


11.1


74,963


66,177


13.3

Selling, general and administrative expenses


5,535


5,448


1.6


19,752


18,615


6.1

Depreciation and amortization (exclusive of
depreciation included in cost of sales)


605


570


6.0


2,344


2,230


5.1

Operating income


2,095


1,836


14.1


8,946


6,539


36.8

Net interest expense


104


106


(2.5)


421


977


(56.9)

Net other (income) / expense


(26)



NM(a)


(382)


16


NM(a)

Earnings before income taxes


2,017


1,730


16.6


8,907


5,546


60.6

Provision for income taxes


473


350


35.1


1,961


1,178


66.5

Net earnings


$       1,544


$       1,380


11.9%


$       6,946


$       4,368


59.0%

Basic earnings per share


$         3.24


$         2.76


17.7%


$       14.23


$         8.72


63.2%

Diluted earnings per share


$         3.21


$         2.73


17.8%


$       14.10


$         8.64


63.1%

Weighted average common shares outstanding













Basic


476.1


500.8


(4.9)%


488.1


500.6


(2.5)%

Diluted


480.6


506.0


(5.0)%


492.7


505.4


(2.5)%

Antidilutive shares









Dividends declared per share


$         0.90


$         0.68


32.4%


$         3.38


$         2.70


25.2%



(a)

Not meaningful.

 

TARGET CORPORATION


Consolidated Statements of Financial Position


(millions, except footnotes) (unaudited)


January 29,
2022


January 30,
2021

Assets





Cash and cash equivalents


$           5,911


$           8,511

Inventory


13,902


10,653

Other current assets


1,760


1,592

Total current assets


21,573


20,756

Property and equipment





Land


6,164


6,141

Buildings and improvements


32,985


31,557

Fixtures and equipment


6,407


5,914

Computer hardware and software


2,505


2,765

Construction-in-progress


1,257


780

Accumulated depreciation


(21,137)


(20,278)

Property and equipment, net


28,181


26,879

Operating lease assets


2,556


2,227

Other noncurrent assets


1,501


1,386

Total assets


$         53,811


$         51,248

Liabilities and shareholders' investment





Accounts payable


$         15,478


$         12,859

Accrued and other current liabilities


6,098


6,122

Current portion of long-term debt and other borrowings


171


1,144

Total current liabilities


21,747


20,125

Long-term debt and other borrowings


13,549


11,536

Noncurrent operating lease liabilities


2,493


2,218

Deferred income taxes


1,566


990

Other noncurrent liabilities


1,629


1,939

Total noncurrent liabilities


19,237


16,683

Shareholders' investment





Common stock


39


42

Additional paid-in capital


6,421


6,329

Retained earnings


6,920


8,825

Accumulated other comprehensive loss


(553)


(756)

Total shareholders' investment


12,827


14,440

Total liabilities and shareholders' investment


$         53,811


$         51,248


Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 471,274,073 and 500,877,129 shares issued and outstanding as of January 29, 2022, and January 30, 2021, respectively.


Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

 

TARGET CORPORATION


Consolidated Statements of Cash Flows




Twelve Months Ended

(millions) (unaudited)


January 29,
2022


January 30,
2021

Operating activities





Net earnings


$              6,946


$              4,368

Adjustments to reconcile net earnings to cash provided by operations:





Depreciation and amortization


2,642


2,485

Share-based compensation expense


228


200

Deferred income taxes


522


(184)

Gain on Dermstore sale


(335)


Loss on debt extinguishment



512

Noncash losses / (gains) and other, net


67


86

Changes in operating accounts:





Inventory


(3,249)


(1,661)

Other assets


(78)


(137)

Accounts payable


2,628


2,925

Accrued and other liabilities


(746)


1,931

Cash provided by operating activities


8,625


10,525

Investing activities





Expenditures for property and equipment


(3,544)


(2,649)

Proceeds from disposal of property and equipment


27


42

Proceeds from Dermstore sale


356


Other investments


7


16

Cash required for investing activities


(3,154)


(2,591)

Financing activities





Additions to long-term debt


1,972


2,480

Reductions of long-term debt


(1,147)


(2,415)

Dividends paid


(1,548)


(1,343)

Repurchase of stock


(7,356)


(745)

Stock option exercises


8


23

Cash required for financing activities


(8,071)


(2,000)

Net (decrease) / increase in cash and cash equivalents


(2,600)


5,934

Cash and cash equivalents at beginning of period


8,511


2,577

Cash and cash equivalents at end of period


$              5,911


$              8,511

 

TARGET CORPORATION


Operating Results


Rate Analysis


Three Months Ended


Twelve Months Ended

(unaudited)


January 29,
2022


January 30,
2021


January 29,
2022


January 30,
2021

Gross margin rate


25.7%


26.8%


28.3%


28.4%

SG&A expense rate


17.9


19.2


18.6


19.9

Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate


2.0


2.0


2.2


2.4

Operating income margin rate


6.8


6.5


8.4


7.0


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. Other revenue includes $183 million and $710 million of profit-sharing income under our credit card program agreement for the three and twelve months ended January 29, 2022, respectively, and $178 million and $666 million for the three and twelve months ended January 30, 2021, respectively.

 


Comparable Sales


Three Months Ended


Twelve Months Ended

(unaudited)


January 29,
2022


January 30,
2021


January 29,
2022


January 30,
2021

Comparable sales change


8.9%


20.5%


12.7%


19.3%

Drivers of change in comparable sales:









Number of transactions


8.1


6.5


12.3


3.7

Average transaction amount


0.7


13.1


0.4


15.0

 

Comparable Sales by Channel


Three Months Ended


Twelve Months Ended

(unaudited)


January 29,
2022


January 30,
2021


January 29,
2022


January 30,
2021

Stores originated comparable sales change


8.9%


6.9%


11.0%


7.2%

Digitally originated comparable sales change


9.2


118.2


20.8


144.7


Note: Amounts may not foot due to rounding.

 

Sales by Channel


Three Months Ended


Twelve Months Ended

(unaudited)


January 29,
2022


January 30,
2021


January 29,
2022


January 30,
2021

Stores originated


78.2%


77.9%


81.1%


82.1%

Digitally originated


21.8


22.1


18.9


17.9

Total


100%


100%


100%


100%

 

Sales by Fulfillment Channel


Three Months Ended


Twelve Months Ended

(unaudited)


January 29,
2022


January 30,
2021


January 29,
2022


January 30,
2021

Stores


96.3%


95.3%


96.4%


96.0%

Other


3.7


4.7


3.6


4.0

Total


100%


100%


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.

 

RedCard Penetration


Three Months Ended


Twelve Months Ended

(unaudited)


January 29,
2022


January 30,
2021


January 29,
2022


January 30,
2021

Target Debit Card


11.5%


12.4%


11.7%


12.3%

Target Credit Cards


8.9


9.3


8.7


9.2

Total RedCard Penetration


20.4%


21.7%


20.5%


21.5%


Note: Amounts may not foot due to rounding.

 

Number of Stores and Retail Square Feet


Number of Stores


Retail Square Feet(a)

(unaudited)


January 29,
2022


January 30,
2021


January 29,
2022


January 30,
2021

170,000 or more sq. ft.


274


273


49,071


48,798

50,000 to 169,999 sq. ft.


1,516


1,509


190,205


189,508

49,999 or less sq. ft.


136


115


4,008


3,342

Total


1,926


1,897


243,284


241,648



(a) 

In thousands, reflects total square feet less office, distribution center, and vacant space.

 

TARGET CORPORATION

Reconciliation of Non-GAAP Financial 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 continuing operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (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.

Reconciliation of Non-GAAP

Adjusted EPS


Three Months Ended




January 29, 2022


January 30, 2021



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP diluted earnings per share






$      3.21






$      2.73


17.8%

Adjustments















Gain on investment (a)


$         —


$         —


$         —


$         —


$          (3)


$    (0.01)



Other (b)


(18)


(13)


(0.03)


(5)


(4)


(0.01)



Income tax matters (c)






(21)


(0.04)



Adjusted diluted earnings per share






$      3.19






$      2.67


19.2%


Note: Amounts may not foot due to rounding.

 

Reconciliation of Non-GAAP

Adjusted EPS


Twelve Months Ended




January 29, 2022


January 30, 2021



(millions, except per share data) (unaudited)


Pretax


Net of Tax


Per Share


Pretax


Net of Tax


Per Share


Change

GAAP diluted earnings per share






$    14.10






$      8.64


63.1%

Adjustments















Gain on Dermstore Sale


$      (335)


$      (269)


$    (0.55)


$         —


$         —


$         —



Loss on debt extinguishment





512


379


0.75



Loss on investment (a)





19


14


0.03



Other (b)


9


7


0.01


28


20


0.04



Income tax matters (c)






(21)


(0.04)



Adjusted diluted earnings per share






$    13.56






$      9.42


44.0%


Note: Amounts may not foot due to rounding.

(a)

Represents a (gain) / loss on our investment in Casper Sleep Inc., which was not core to our continuing operations. We sold this investment during the fourth quarter of 2020.

(b) 

Other items unrelated to current period operations, none of which were individually significant.

(c) 

Represents benefits from the resolution of certain income tax matters unrelated to current period operations.


Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings from continuing operations 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 from continuing operations. 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




Twelve Months Ended



(dollars in millions) (unaudited)


January 29,
2022


January 30,
2021


Change


January 29,
2022


January 30,
2021


Change

Net earnings from continuing operations


$        1,544


$          1,380


11.9%


$        6,946


$          4,368


59.0%

 + Provision for income taxes


473


350


35.1


1,961


1,178


66.5

 + Net interest expense


104


106


(2.5)


421


977


(56.9)

EBIT


$        2,121


$          1,836


15.5%


$        9,328


$          6,523


43.0%

 + Total depreciation and amortization (a)


690


637


8.5


2,642


2,485


6.3

EBITDA


$        2,811


$          2,473


13.7%


$     11,970


$          9,008


32.9%



(a)

Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

 

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


January 29,
2022


January 30,
2021



Operating income


$         8,946


$           6,539



 + Net other income / (expense)


382


(16)



EBIT


9,328


6,523



 + Operating lease interest (a)


87


87



 - Income taxes (b)


2,073


1,404



Net operating profit after taxes


$         7,342


$           5,206



 

Denominator


January 29,
2022


January 30,
2021


February 1,
2020

Current portion of long-term debt and other borrowings


$            171


$           1,144


$            161

 + Noncurrent portion of long-term debt


13,549


11,536


11,338

 + Shareholders' investment


12,827


14,440


11,833

 + Operating lease liabilities (c)


2,747


2,429


2,475

 - Cash and cash equivalents


5,911


8,511


2,577

Invested capital


$       23,383


$         21,038


$       23,230

Average invested capital (d)


$       22,210


$         22,134



After-tax return on invested capital


33.1%


23.5%




(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 for continuing operations, which were 22.0 percent and 21.2 percent for the trailing twelve months ended January 29, 2022, and January 30, 2021, respectively. For the twelve months ended January 29, 2022, and January 30, 2021, includes tax effect of $2.1 billion and $1.4 billion, respectively, related to EBIT and $19 million and $18 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.

(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 Logo (PRNewsfoto/Target Corporation)

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/target-corporation-reports-fourth-quarter-and-full-year-2021-earnings-301492243.html

SOURCE Target Corporation

Copyright CNW Group 2022