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Published: 2023-11-15 06:55:10 ET
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EX-99 2 a2023q3ex-99.htm EX-99 Document

Exhibit 99
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FOR IMMEDIATE RELEASE
Contacts:John Hulbert, Investors, (612) 761-6627
 
Jennifer Kron, Media, (612) 696-3400

Target Corporation Reports Third Quarter Earnings

•The Company's third quarter operating income margin rate of 5.2 percent was 1.3 percentage points higher than last year, driven by a higher gross margin rate.
•Third quarter GAAP and Adjusted EPS1 of $2.10 was 36 percent higher than a year ago and above the high end of the Company's guidance range, reflecting disciplined inventory and expense management.
•Through the first three quarters of this year, Target has generated more than $5.3 billion of operating cash flow, compared with approximately $550 million in 2022.
•Third quarter comparable sales declined 4.9 percent, in line with expectations.
◦Declines in discretionary categories were partially offset by continued growth in frequency categories, most notably in Beauty.
◦Same-day services grew more than 8 percent, led by more than 12 percent growth in Drive-Up.
•Inventory at the end of Q3 was 14 percent lower than last year, reflecting a 19 percent reduction in discretionary category inventory.
•To deliver newness and value for guests this holiday season, Target will offer more than 10,000 new items for the holidays, with thousands of must-have gifts under $25, and thousands of exclusive-to-Target items across many categories.

For additional media materials, please visit:
https://corporate.target.com/news-features/article/2023/11/q3-2023-earnings

MINNEAPOLIS (November 15, 2023) – Target Corporation (NYSE: TGT) today announced its third quarter 2023 financial results, which reflected stronger-than-expected profit performance on sales consistent with expectations.
The Company reported third quarter GAAP and Adjusted earnings per share1 (EPS) of $2.10, up 36.3 percent from $1.54 in 2022. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

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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.
Target Corporation Reports Third Quarter Earnings — Page 2 of 12
Brian Cornell, chair and chief executive of Target Corporation, said “In the third quarter, our team continued to successfully navigate our business through a very challenging external environment. While third quarter sales were consistent with our expectations, earnings per share came in far ahead of our forecast. This profit performance benefited from our team’s commitment to efficiency and disciplined inventory management, and I’d like to thank them for their tireless efforts. Looking ahead, we’re continuing to make investments throughout our business -- in our assortment, our team and the services we offer -- to provide the newness, affordability and convenience our guests want during the holiday season and beyond.”

Guidance
For the fourth quarter, the Company expects comparable sales in a wide range around a mid-single digit decline, and GAAP and Adjusted EPS of $1.90 to $2.60.

Operating Results
Comparable sales declined 4.9 percent in the third quarter, reflecting a comparable store sales decline of 4.6 percent and a comparable digital sales decline of 6.0 percent. Total revenue of $25.4 billion was 4.2 percent lower than last year, reflecting a total sales decline of 4.3 percent and a 0.6 percent decrease in other revenue. Third quarter operating income of $1.3 billion was 28.9 percent higher than last year, driven by a higher gross margin rate.
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Target Corporation Reports Third Quarter Earnings — Page 3 of 12

Third quarter operating income margin rate was 5.2 percent in 2023, compared with 3.9 percent in 2022. Third quarter gross margin rate was 27.4 percent, compared with 24.7 percent in 2022, reflecting lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs, and favorable category mix. These benefits were partially offset by higher inventory shrink. Third quarter SG&A expense rate was 20.9 percent in 2023, compared with 19.7 percent in 2022, reflecting the de-leveraging impact of lower sales combined with higher costs, including continued investments in pay and benefits and inflationary pressures throughout our business, partially offset by disciplined cost management.

Interest Expense and Taxes
The Company’s third quarter 2023 net interest expense was $107 million, compared with $125 million last year, reflecting an increase in interest income, partially offset by higher debt levels and the impact of higher floating interest rates on interest rate swaps.

Third quarter 2023 effective income tax rate was 21.3 percent, in line with the prior year rate of 21.6 percent.

Capital Deployment and Return on Invested Capital
The Company paid dividends of $507 million in the third quarter, compared with $497 million last year, reflecting a 1.9 percent increase in the dividend per share.
The Company did not repurchase any stock in the third quarter. As of the end of the quarter, the Company had approximately $9.7 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.
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Target Corporation Reports Third Quarter Earnings — Page 4 of 12
For the trailing twelve months through third quarter 2023, after-tax return on invested capital (ROIC) was 13.9 percent, compared with 14.6 percent for the trailing twelve months through third quarter 2022. The decrease in ROIC reflects faster growth in average invested capital compared with after-tax returns. The tables in this release provide additional information about the Company’s ROIC calculation.

Webcast Details
Target will webcast its third quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Corporate.Target.com/Investors (click on "Q3 2023 Target Corporation Earnings Conference Call" under "Events & Presentations"). A replay of the webcast will be provided when available. The replay number is 1-800-391-9851.

Miscellaneous
Statements in this release regarding the Company’s future financial performance, including its fiscal 2023 fourth quarter 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 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 28, 2023. 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 the corporate website (corporate.target.com) and press center.

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Target Corporation Reports Third Quarter Earnings — Page 5 of 12
TARGET CORPORATION
 
Consolidated Statements of Operations
 Three Months Ended Nine Months Ended 
(millions, except per share data) (unaudited)October 28, 2023October 29, 2022ChangeOctober 28, 2023October 29, 2022Change
Sales $25,004 $26,122 (4.3)%$74,336 $76,605 (3.0)%
Other revenue394 396 (0.6)1,157 1,120 3.3 
Total revenue25,398 26,518 (4.2)75,493 77,725 (2.9)
Cost of sales18,149 19,680 (7.8)54,333 58,283 (6.8)
Selling, general and administrative expenses
5,316 5,219 1.8 15,525 14,983 3.6 
Depreciation and amortization (exclusive of depreciation included in cost of sales)
616 597 3.2 1,793 1,770 1.3 
Operating income
1,317 1,022 28.9 3,842 2,689 42.9 
Net interest expense107 125 (14.1)395 349 13.4 
Net other income(25)(12)115.0 (64)(35)87.8 
Earnings before income taxes
1,235 909 35.9 3,511 2,375 47.9 
Provision for income taxes264 197 34.2 755 471 60.6 
Net earnings $971 $712 36.3 %$2,756 $1,904 44.7 %
Basic earnings per share
$2.10 $1.55 35.9 %$5.97 $4.11 45.4 %
Diluted earnings per share
$2.10 $1.54 36.3 %$5.96 $4.09 45.6 %
Weighted average common shares outstanding
  
Basic461.6 460.3 0.3 %461.4 462.6 (0.3)%
Diluted462.6 462.5 0.0 %462.7 465.3 (0.6)%
Antidilutive shares3.0 1.3 2.6 1.1 
Dividends declared per share$1.10 $1.08 1.9 %$3.28 $3.06 7.2 %


Target Corporation Reports Third Quarter Earnings — Page 6 of 12
TARGET CORPORATION
 
Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited)October 28, 2023January 28, 2023October 29, 2022
Assets
Cash and cash equivalents$1,910 $2,229 $954 
Inventory14,731 13,499 17,117 
Other current assets1,958 2,118 2,322 
Total current assets18,599 17,846 20,393 
Property and equipment
Land6,520 6,231 6,214 
Buildings and improvements36,627 34,746 34,279 
Fixtures and equipment8,490 7,439 7,184 
Computer hardware and software3,312 3,039 2,899 
Construction-in-progress2,000 2,688 2,358 
Accumulated depreciation(23,781)(22,631)(22,013)
Property and equipment, net33,168 31,512 30,921 
Operating lease assets3,086 2,657 2,596 
Other noncurrent assets1,376 1,320 1,705 
Total assets$56,229 $53,335 $55,615 
Liabilities and shareholders’ investment
Accounts payable$14,291 $13,487 $15,438 
Accrued and other current liabilities6,099 5,883 6,138 
Current portion of long-term debt and other borrowings1,112 130 2,207 
Total current liabilities21,502 19,500 23,783 
Long-term debt and other borrowings14,883 16,009 14,237 
Noncurrent operating lease liabilities3,031 2,638 2,590 
Deferred income taxes2,447 2,196 2,240 
Other noncurrent liabilities1,852 1,760 1,746 
Total noncurrent liabilities22,213 22,603 20,813 
Shareholders’ investment
Common stock38 38 38 
Additional paid-in capital6,681 6,608 6,558 
Retained earnings6,225 5,005 4,631 
Accumulated other comprehensive loss(430)(419)(208)
Total shareholders’ investment12,514 11,232 11,019 
Total liabilities and shareholders’ investment$56,229 $53,335 $55,615 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 461,651,176, 460,346,947, and 460,297,654 shares issued and outstanding as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively.
 
Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

Target Corporation Reports Third Quarter Earnings — Page 7 of 12
TARGET CORPORATION
 
Consolidated Statements of Cash Flows
 Nine Months Ended
(millions) (unaudited)October 28, 2023October 29, 2022
Operating activities  
Net earnings $2,756 $1,904 
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization2,072 2,004 
Share-based compensation expense176 177 
Deferred income taxes252 548 
Noncash losses / (gains) and other, net 101 141 
Changes in operating accounts:  
Inventory(1,232)(3,215)
Other assets(208)(205)
Accounts payable887 (224)
Accrued and other liabilities528 (578)
Cash provided by operating activities5,332 552 
Investing activities  
Expenditures for property and equipment(3,952)(4,323)
Proceeds from disposal of property and equipment24 4 
Other investments18 16 
Cash required for investing activities(3,910)(4,303)
Financing activities  
Change in commercial paper, net— 2,104 
Additions to long-term debt— 991 
Reductions of long-term debt(114)(139)
Dividends paid(1,503)(1,339)
Repurchase of stock— (2,646)
Shares withheld for taxes on share-based compensation(124)(179)
Stock option exercises— 2 
Cash required for financing activities(1,741)(1,206)
Net decrease in cash and cash equivalents(319)(4,957)
Cash and cash equivalents at beginning of period2,229 5,911 
Cash and cash equivalents at end of period$1,910 $954 


Target Corporation Reports Third Quarter Earnings — Page 8 of 12
TARGET CORPORATION
 
Operating Results

Rate AnalysisThree Months EndedNine Months Ended
(unaudited)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Gross margin rate27.4 %24.7 %26.9 %23.9 %
SG&A expense rate20.9 19.7 20.6 19.3 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)
2.4 2.3 2.4 2.3 
Operating income margin rate5.2 3.9 5.1 3.5 
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 $165 million and $508 million of profit-sharing income under our credit card program agreement for the three and nine months ended October 28, 2023, respectively, and $184 million and $550 million for the three and nine months ended October 29, 2022, respectively.

Comparable SalesThree Months EndedNine Months Ended
(unaudited)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Comparable sales change(4.9)%2.7 %(3.5)%2.9 %
Drivers of change in comparable sales
Number of transactions (traffic)(4.1)1.4 (2.7)2.6 
Average transaction amount(0.8)1.3 (0.8)0.2 

Comparable Sales by ChannelThree Months EndedNine Months Ended
(unaudited)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Stores originated comparable sales change(4.6)%3.2 %(2.8)%2.6 %
Digitally originated comparable sales change(6.0)0.3 (6.7)4.1 
 
Sales by ChannelThree Months EndedNine Months Ended
(unaudited)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Stores originated83.2 %82.9 %82.9 %82.3 %
Digitally originated16.8 17.1 17.1 17.7 
Total100 %100 %100 %100 %

Sales by Fulfillment ChannelThree Months EndedNine Months Ended
(unaudited)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Stores 97.7 %96.8 %97.5 %96.7 %
Other2.3 3.2 2.5 3.3 
Total100 %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 PenetrationThree Months EndedNine Months Ended
(unaudited)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Total RedCard Penetration18.3 %19.6 %18.6 %20.0 %

Target Corporation Reports Third Quarter Earnings — Page 9 of 12
 
Number of Stores and Retail Square FeetNumber of Stores
Retail Square Feet (a)
(unaudited)October 28,
2023		January 28,
2023		October 29,
2022		October 28,
2023		January 28,
2023		October 29,
2022
170,000 or more sq. ft.273 274 274 48,824 48,985 48,985 
50,000 to 169,999 sq. ft.1,542 1,527 1,522 192,877 191,241 190,739 
49,999 or less sq. ft.141 147 145 4,207 4,358 4,305 
Total1,956 1,948 1,941 245,908 244,584 244,029 
(a)In thousands; reflects total square feet less office, supply chain facilities, and vacant space.


Target Corporation Reports Third Quarter Earnings — Page 10 of 12
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 operations. This measure is not in accordance with, or an alternative to, 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
October 28, 2023October 29, 2022
(millions, except per share data) (unaudited)PretaxNet of TaxPer SharePretaxNet of TaxPer ShareChange
GAAP and adjusted diluted earnings per share
$2.10 $1.54 36.3 %
Reconciliation of Non-GAAP
Adjusted EPS		Nine Months Ended
October 28, 2023October 29, 2022
(millions, except per share data) (unaudited)PretaxNet of TaxPer SharePretaxNet of TaxPer ShareChange
GAAP diluted earnings per share
$5.96 $4.09 45.6 %
Adjustments
Other (a)
$— $— $— $20 $15 $0.03 
Adjusted diluted earnings per share
$5.96 $4.12 44.4 %
(a)Other items unrelated to current period operations, none of which were individually significant.

Reconciliation of Non-GAAP
Adjusted EPS Guidance		Guidance
Q4 2023
(unaudited)
Per Share
GAAP diluted earnings per share guidance
$1.90 - $2.60
Estimated adjustments
Other (a)
$— 
Adjusted diluted earnings per share guidance
$1.90 - $2.60
(a)Fourth quarter and full-year 2023 GAAP EPS may include the impact of certain discrete items, which will be excluded in calculating Adjusted EPS. In the past, these items have included losses on the early retirement of debt and certain other items that are discretely managed. The Company is not currently aware of any such discrete items.


Target Corporation Reports Third Quarter Earnings — Page 11 of 12
Earnings before interest expense and income taxes (EBIT) and earnings 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. 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 EBITDAThree Months Ended Nine Months Ended 
(dollars in millions) (unaudited)October 28, 2023October 29, 2022ChangeOctober 28, 2023October 29, 2022Change
Net earnings $971 $712 36.3 %$2,756 $1,904 44.7 %
 + Provision for income taxes264 197 34.2 755 471 60.6 
 + Net interest expense107 125 (14.1)395 349 13.4 
EBIT
$1,342 $1,034 29.8 %$3,906 $2,724 43.5 %
 + Total depreciation and amortization (a)
722 674 7.1 2,072 2,004 3.4 
EBITDA
$2,064 $1,708 20.9 %$5,978 $4,728 26.5 %
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

Target Corporation Reports Third Quarter Earnings — Page 12 of 12
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) (unaudited)
Trailing Twelve Months
Numerator
October 28, 2023October 29, 2022
Operating income
$5,001 $4,784 
 + Net other income
79 61 
EBIT
5,080 4,845 
 + Operating lease interest (a)
106 89 
  - Income taxes (b)
1,050 1,059 
Net operating profit after taxes$4,136 $3,875 

Denominator
October 28, 2023October 29, 2022October 30, 2021
Current portion of long-term debt and other borrowings$1,112 $2,207 $1,176 
 + Noncurrent portion of long-term debt14,883 14,237 11,586 
 + Shareholders' investment12,514 11,019 13,803 
 + Operating lease liabilities (c)
3,351 2,879 2,737 
  - Cash and cash equivalents
1,910 954 5,753 
Invested capital$29,950 $29,388 $23,549 
Average invested capital (d)
$29,670 $26,469 
After-tax return on invested capital
13.9 %14.6 %
(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, which were 20.3 percent and 21.5 percent for the trailing twelve months ended October 28, 2023, and October 29, 2022, respectively. For the twelve months ended October 28, 2023, and October 29, 2022, includes tax effect of $1.0 billion related to EBIT, and $22 million and $19 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, respectively.
(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.