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Form 8-K TARGET CORP For: Aug 17

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August 17, 2022 8:23 AM EDT
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 17, 2022

Target Corporation
(Exact name of registrant as specified in its charter)
Minnesota 1-6049 41-0215170
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)
1000 Nicollet Mall,Minneapolis,Minnesota55403
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (612)304-6073

Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0833 per shareTGTNew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 



Item 2.02             Results of Operations and Financial Condition.
 
On August 17, 2022, Target Corporation issued a News Release containing its financial results for the three months ended July 30, 2022. The News Release is attached hereto as Exhibit 99.

Item 9.01             Financial Statements and Exhibits.
 
(d)                                 Exhibits.
99
104Cover Page Interactive Data File (formatted as inline XBRL).



2

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 TARGET CORPORATION
  
Date: August 17, 2022By:/s/ Michael J. Fiddelke
 Michael J. Fiddelke
 Executive Vice President and Chief Financial Officer

3
Exhibit (99)

releasebullseyeq419a.gif

FOR IMMEDIATE RELEASE
Contacts:John Hulbert, Investors, (612) 761-6627
 
Joe Poulos, Media, (612) 761-0042
 Target Media Hotline, (612) 696-3400

Target Corporation Reports Second Quarter Earnings

•Comparable sales grew 2.6 percent, on top of 8.9 percent growth last year.
◦Comparable sales growth reflected 2.7 percent traffic growth.
◦Growth reflected continued strength in Food & Beverage, Beauty and Household Essentials.
◦The Company gained unit share in all five of its core merchandising categories in the second quarter.
◦Store comparable sales increased 1.3 percent, on top of 8.7 percent growth last year.
◦Digital comparable sales grew 9.0 percent, following growth of 9.9 percent last year.
◦Same-day services (Order Pickup, Drive Up and Shipt) grew nearly 11 percent this year, led by Drive Up, which grew in the mid-teens on top of more than 80 percent last year.
◦More than 95 percent of Target’s second quarter sales were fulfilled by its stores.
•Operating margin rate of 1.2 percent reflected gross margin pressure from actions to reduce excess inventory as well as higher freight and transportation costs.
•As a result of the Company’s inventory actions in the second quarter, the Company reduced its inventory exposure in discretionary categories while investing in rapidly-growing frequency categories. Additionally, Fall season receipts in discretionary categories were reduced by more than $1.5 billion.

For additional media materials, please visit:
https://corporate.target.com/article/2022/08/q2-2022-earnings

MINNEAPOLIS (August 17, 2022) – Target Corporation (NYSE: TGT) today announced its second quarter 2022 financial results, which reflected continued sales and traffic growth on top of unprecedented increases over the last two years, and profit pressure driven primarily by the Company's inventory reduction efforts.
– more –
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 Second Quarter Earnings — Page 2 of 11
The Company reported second quarter GAAP earnings per share (EPS) of $0.39, down 89.2 percent from $3.65 in 2021. Second quarter Adjusted EPS1 of $0.39 decreased 89.2 percent compared with $3.64 in 2021. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
“I’m really pleased with the underlying performance of our business, which continues to grow traffic and sales while delivering broad-based unit-share gains in a very challenging environment,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “I want to thank our team for their tireless work to deliver on the inventory rightsizing goals we announced in June. While these inventory actions put significant pressure on our near-term profitability, we’re confident this was the right long-term decision in support of our guests, our team and our business. Looking ahead, the team is energized and ready to serve our guests in the back half of the year, with a safe, clean, uncluttered shopping experience, compelling value across every category, and a fresh assortment to serve our guests’ wants and needs.”

Fiscal 2022 Guidance
While the Company is planning cautiously for the remainder of the year, current trends support the company’s prior guidance for full-year revenue growth in the low- to mid-single digit range, and an operating margin rate in a range around 6% in the back half of the year.

Operating Results
Comparable sales grew 2.6 percent in the second quarter, reflecting comparable store sales growth of 1.3 percent and comparable digital sales growth of 9.0 percent. Total revenue of $26.0 billion grew 3.5 percent compared with last year, reflecting total sales growth of 3.3 percent and a 14.8 percent increase in other revenue. Operating income was $321 million in second quarter 2022, down 87.0 percent from $2.5 billion in 2021, reflecting a decline in the Company's gross margin rate.
– more –
Target Corporation Reports Second Quarter Earnings — Page 3 of 11
Second quarter operating income margin rate was 1.2 percent in 2022, compared with 9.8 percent in 2021. Second quarter gross margin rate was 21.5 percent, compared with 30.4 percent in 2021. This year's gross margin rate reflected higher markdown rates, driven primarily by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as higher merchandise, inventory shrink, and freight costs. Additionally, gross margin rate was pressured by increased compensation and headcount in our distribution centers, the costs of managing excess inventory, and higher per-unit last-mile shipping costs. Second quarter SG&A expense rate was 19.2 percent in 2022, compared with 19.3 percent in 2021, reflecting the impact of lower incentive compensation, partially offset by cost increases across our business, including investments in hourly team member wages.

Interest Expense and Taxes
The Company’s second quarter 2022 net interest expense was $112 million, compared with $104 million last year, reflecting higher commercial paper and average long-term debt levels.
Second quarter 2022 effective income tax rate was 15.8 percent, compared with the prior year rate of 23.4 percent, reflecting the impact of tax benefits on lower pre-tax earnings compared with last year.

Capital Deployment and Return on Invested Capital
The Company paid dividends of $417 million in the second quarter, compared with $336 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count.
Final settlement of an Accelerated Share Repurchase (ASR) arrangement, which the Company initiated during the first quarter of 2022 occurred in early June. As a result, the Company recorded the repurchase of $2.6 billion worth of its shares through the ASR, reflecting the retirement of 12.5 million shares of common stock at an average price of $211.58. As of the end of the second 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.
For the trailing twelve months through second quarter 2022, after-tax return on invested capital (ROIC) was 18.4 percent, compared with 31.7 percent for the trailing twelve months through second quarter 2021. The decrease in ROIC was driven primarily by lower profitability in second quarter 2022. The tables in this release provide additional information about the Company’s ROIC calculation.
– more –
Target Corporation Reports Second Quarter Earnings — Page 4 of 11
Webcast Details
Target will webcast its second quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Investors.Target.com (click on link under "Upcoming Events"). A replay of the webcast will be provided when available. The replay number is 1-866-430-8795.

Miscellaneous
Statements in this release regarding second half and full year revenue growth and operating margin rates 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 January 29, 2022. 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. For the latest store count or more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.

# # #

Target Corporation Reports Second Quarter Earnings — Page 5 of 11

TARGET CORPORATION
 
Consolidated Statements of Operations
 Three Months Ended Six Months Ended 
(millions, except per share data) (unaudited)July 30, 2022July 31, 2021ChangeJuly 30, 2022July 31, 2021Change
Sales $25,653 $24,826 3.3 %$50,483 $48,705 3.7 %
Other revenue384 334 14.8 724 652 10.9 
Total revenue26,037 25,160 3.5 51,207 49,357 3.7 
Cost of sales20,142 17,280 16.6 38,603 33,996 13.6 
Selling, general and administrative expenses
5,002 4,849 3.1 9,764 9,358 4.3 
Depreciation and amortization (exclusive of depreciation included in cost of sales)
572 564 1.5 1,173 1,162 0.9 
Operating income
321 2,467 (87.0)1,667 4,841 (65.6)
Net interest expense112 104 8.0 224 212 5.8 
Net other (income) / expense(8)(7)5.2 (23)(350)(93.5)
Earnings before income taxes
217 2,370 (90.8)1,466 4,979 (70.6)
Provision for income taxes34 553 (93.8)274 1,065 (74.3)
Net earnings $183 $1,817 (89.9)%$1,192 $3,914 (69.6)%
Basic earnings per share
$0.40 $3.68 (89.2)%$2.57 $7.89 (67.4)%
Diluted earnings per share
$0.39 $3.65 (89.2)%$2.55 $7.82 (67.4)%
Weighted average common shares outstanding
  
Basic461.5 493.1 (6.4)%463.8 495.8 (6.5)%
Diluted463.6 497.5 (6.8)%466.8 500.4 (6.7)%
Antidilutive shares1.3 — 1.0 — 
Dividends declared per share$1.08 $0.90 20.0 %$1.98 $1.58 25.3 %


Target Corporation Reports Second Quarter Earnings — Page 6 of 11

TARGET CORPORATION
 
Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited)July 30, 2022January 29, 2022July 31, 2021
Assets
Cash and cash equivalents$1,117 $5,911 $7,368 
Inventory15,320 13,902 11,259 
Other current assets2,016 1,760 1,604 
Total current assets18,453 21,573 20,231 
Property and equipment
Land6,161 6,164 6,148 
Buildings and improvements33,694 32,985 32,133 
Fixtures and equipment6,744 6,407 5,892 
Computer hardware and software2,684 2,505 2,260 
Construction-in-progress2,245 1,257 944 
Accumulated depreciation(21,708)(21,137)(20,133)
Property and equipment, net29,820 28,181 27,244 
Operating lease assets2,542 2,556 2,503 
Other noncurrent assets1,655 1,501 1,407 
Total assets$52,470 $53,811 $51,385 
Liabilities and shareholders’ investment
Accounts payable$14,891 $15,478 $12,632 
Accrued and other current liabilities5,905 6,098 5,600 
Current portion of long-term debt and other borrowings1,649 171 1,190 
Total current liabilities22,445 21,747 19,422 
Long-term debt and other borrowings13,453 13,549 11,589 
Noncurrent operating lease liabilities2,543 2,493 2,462 
Deferred income taxes1,862 1,566 1,146 
Other noncurrent liabilities1,575 1,629 1,906 
Total noncurrent liabilities19,433 19,237 17,103 
Shareholders’ investment
Common stock38 39 41 
Additional paid-in capital6,502 6,421 6,332 
Retained earnings4,421 6,920 9,200 
Accumulated other comprehensive loss(369)(553)(713)
Total shareholders’ investment10,592 12,827 14,860 
Total liabilities and shareholders’ investment$52,470 $53,811 $51,385 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 460,236,393, 471,274,073 and 489,651,196 shares issued and outstanding as of July 30, 2022, January 29, 2022, and July 31, 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 Reports Second Quarter Earnings — Page 7 of 11

TARGET CORPORATION
 
Consolidated Statements of Cash Flows
 Six Months Ended
(millions) (unaudited)July 30, 2022July 31, 2021
Operating activities  
Net earnings $1,192 $3,914 
Adjustments to reconcile net earnings to cash (required for) provided by operating activities:
Depreciation and amortization1,329 1,300 
Share-based compensation expense122 138 
Deferred income taxes227 143 
Gain on Dermstore sale— (335)
Noncash losses / (gains) and other, net 108 7 
Changes in operating accounts:  
Inventory(1,418)(606)
Other assets(179)3 
Accounts payable(784)(311)
Accrued and other liabilities(644)(831)
Cash (required for) provided by operating activities(47)3,422 
Investing activities  
Expenditures for property and equipment(2,523)(1,338)
Proceeds from disposal of property and equipment4 15 
Proceeds from Dermstore sale — 356 
Other investments1 (5)
Cash required for investing activities(2,518)(972)
Financing activities  
Change in commercial paper, net1,545 — 
Reductions of long-term debt(113)(72)
Dividends paid(842)(676)
Repurchase of stock(2,821)(2,850)
Stock option exercises2 5 
Cash required for financing activities(2,229)(3,593)
Net decrease in cash and cash equivalents(4,794)(1,143)
Cash and cash equivalents at beginning of period5,911 8,511 
Cash and cash equivalents at end of period$1,117 $7,368 


Target Corporation Reports Second Quarter Earnings — Page 8 of 11

TARGET CORPORATION
 
Operating Results

Rate AnalysisThree Months EndedSix Months Ended
(unaudited)July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Gross margin rate21.5 %30.4 %23.5 %30.2 %
SG&A expense rate19.2 19.3 19.1 19.0 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)
2.2 2.2 2.3 2.4 
Operating income margin rate1.2 9.8 3.3 9.8 
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 $181 million and $366 million of profit-sharing income under our credit card program agreement for the three and six months ended July 30, 2022, respectively, and $172 million and $343 million for the three and six months ended July 31, 2021, respectively.

Comparable SalesThree Months EndedSix Months Ended
(unaudited)July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Comparable sales change2.6 %8.9 %3.0 %15.3 %
Drivers of change in comparable sales
Number of transactions (traffic)2.7 12.7 3.3 14.8 
Average transaction amount0.0 (3.4)(0.3)0.5 

Comparable Sales by ChannelThree Months EndedSix Months Ended
(unaudited)July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Stores originated comparable sales change1.3 %8.7 %2.3 %13.0 %
Digitally originated comparable sales change9.0 9.9 6.1 27.3 
 
Sales by ChannelThree Months EndedSix Months Ended
(unaudited)July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Stores originated82.1 %83.0 %81.9 %82.3 %
Digitally originated17.9 17.0 18.1 17.7 
Total100 %100 %100 %100 %

Sales by Fulfillment ChannelThree Months EndedSix Months Ended
(unaudited)July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Stores 96.6 %96.6 %96.6 %96.4 %
Other3.4 3.4 3.4 3.6 
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 EndedSix Months Ended
(unaudited)July 30, 2022July 31, 2021July 30, 2022July 31, 2021
Target Debit Card11.2 %11.6 %11.4 %11.9 %
Target Credit Cards8.9 8.7 8.8 8.6 
Total RedCard Penetration20.1 %20.3 %20.2 %20.4 %
Note: Amounts may not foot due to rounding.

Target Corporation Reports Second Quarter Earnings — Page 9 of 11

 
Number of Stores and Retail Square FeetNumber of Stores
Retail Square Feet (a)
(unaudited)July 30,
2022		January 29,
2022		July 31,
2021		July 30,
2022		January 29,
2022		July 31,
2021
170,000 or more sq. ft.273 274 273 48,798 49,071 48,798 
50,000 to 169,999 sq. ft.1,521 1,516 1,510 190,734 190,205 189,624 
49,999 or less sq. ft.143 136 126 4,256 4,008 3,709 
Total1,937 1,926 1,909 243,788 243,284 242,131 
(a)In thousands; reflects total square feet less office, distribution center, and vacant space.


Target Corporation Reports Second Quarter Earnings — Page 10 of 11

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
July 30, 2022July 31, 2021
(millions, except per share data) (unaudited)PretaxNet of TaxPer SharePretaxNet of TaxPer ShareChange
GAAP diluted earnings per share
$0.39 $3.65 (89.2)%
Adjustments
Other (a)
$— $— $— $(5)$(4)$(0.01)
Adjusted diluted earnings per share
$0.39 $3.64 (89.2)%

Reconciliation of Non-GAAP
Adjusted EPS		Six Months Ended
July 30, 2022July 31, 2021
(millions, except per share data) (unaudited)PretaxNet of TaxPer SharePretaxNet of TaxPer ShareChange
GAAP diluted earnings per share
$2.55 $7.82 (67.4)%
Adjustments
Gain on Dermstore sale$— $— $— $(335)$(269)$(0.54)
Other (a)
20 15 0.03 36 27 0.05 
Adjusted diluted earnings per share
$2.59 $7.34 (64.8)%
Note: Amounts may not foot due to rounding.
(a)Other items unrelated to current period operations, none of which were individually significant.

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 Six Months Ended 
(dollars in millions) (unaudited)July 30, 2022July 31, 2021ChangeJuly 30, 2022July 31, 2021Change
Net earnings $183 $1,817 (89.9)%$1,192 $3,914 (69.6)%
 + Provision for income taxes34 553 (93.8)274 1,065 (74.3)
 + Net interest expense112 104 8.0 224 212 5.8 
EBIT
$329 $2,474 (86.7)%$1,690 $5,191 (67.4)%
 + Total depreciation and amortization (a)
650 633 2.8 1,329 1,300 2.3 
EBITDA
$979 $3,107 (68.5)%$3,019 $6,491 (53.5)%
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

Target Corporation Reports Second Quarter Earnings — Page 11 of 11

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
July 30, 2022July 31, 2021
Operating income
$5,773 $8,611 
 + Net other income / (expense)
54 346 
EBIT
5,827 8,957 
 + Operating lease interest (a)
88 84 
  - Income taxes (b)
1,282 1,918 
Net operating profit after taxes$4,633 $7,123 

Denominator
July 30, 2022July 31, 2021August 1, 2020
Current portion of long-term debt and other borrowings$1,649 $1,190 $109 
 + Noncurrent portion of long-term debt13,453 11,589 14,188 
 + Shareholders' investment10,592 14,860 12,578 
 + Operating lease liabilities (c)
2,823 2,695 2,448 
  - Cash and cash equivalents
1,117 7,368 7,284 
Invested capital$27,400 $22,966 $22,039 
Average invested capital (d)
$25,183 $22,502 
After-tax return on invested capital
18.4 %31.7 %
(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 21.7 percent and 21.2 percent for the trailing twelve months ended July 30, 2022, and July 31, 2021, respectively. For the twelve months ended July 30, 2022, and July 31, 2021, includes tax effect of $1.3 billion and $1.9 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, 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.


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