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Target Corp. gets lift from Mervyn's

MINNEAPOLIS -Lifted by a predictably strong performance in its core Target Stores and an unexpectedly strong earnings gain at Mervyn's, Target Corp. pushed fourth-quarter profits before one-time items up by 5.9 percent, to $552 million from $522 million last year.

Net income rose at a somewhat faster pace, by 11.8 percent, to $552 million from $494 million, but only because last year's earnings were depressed by a $28 million after-tax charge stemming from the early retirement of debt.

Propping up the bottom line, and offsetting deep declines in its department store business, operating profits in the Target Stores division rose by 11.2 percent, to $1.1 billion from $961 million last year. Even more surprisingly, operating profits at Mervyn's shot up by 36.9 percent, to $141 million from $103 million last year. But knocked about in a weak retail environment, the Marshall Field's department store division reported that fourth-quarter operating profits dropped off by 27.0 percent, to $112 million from $153 million last year.

Putting some downward pressure on the bottom line, average gross margin contracted by 40 basis points, to 29.1 percent from 29.5 percent the prior year.

Sales at the nation's fourth-largest retailer picked up by 12.8 percent, with virtually all of the gain generated by the Target chain, climbing to $12.2 billion from $10.8 billion a year ago. Same-store sales increased by 1.8 percent, with all of the strength coming from the Target chain, where same-store sales moved up by 2.7 percent. Mervyn's recorded a same-store decline of 0.3 percent, and Marshall Field's reported a drop of 3.4 percent.

For all of last year, Target earnings before the one-time item rose by 6.7 percent, to $1.3 billion from $1.2 billion. Sales climbed higher by 9.5 percent, to $36.4 billion from $33.2 billion. Same-store sales moved up by 2.4 percent.

Breaking results out by segment, Target Stores' operating profits rose by 11.4 percent; Mervyn's moved up by 16.3 percent; and Marshall Field's declined by 24.7 percent.

Same-store sales at Target advanced by 3.4 percent; Mervyn's ticked up by 0.3 percent; and Marshall Field's fell back by 4.0 percent.

Target Stores


Qtr. 2/3 (x000) 2001 2000 %CHG

Salesa

$12,182,000

$10,804,000

12.8

Oper. income (EBIT)

1,016,000

952,000

6.7

Net income

552,000

494,000b

11.8

Per share (diluted)

0.61

0.53

14.3

Average gross margin

29.1%

29.5%

-

SG & A expenses

19.9%

19.8%

-

12 months

2001

2000

%CHG

Sales-a

36,362,000

33,212,000

9.5

Oper. income (EBIT)

2,478,000

2,329,000

6.4

Net income

1,264,000

1,144,000b

10.5

Per share (diluted)

1.38

1.23

13.1

Average gross margin

30.4%

30.7%

-

SG & A expenses

22.5%

22.6%

-


a - Net retail sales excluding credit revenues. Credit sales in the quarter rose by 13.1 percent, to $142 million form $126 million last year. For all of last year, credit sales rose by 10.4 percent, to $541 million from $490 million. Average gross margin and SG & A expenses are calculated as a percentage of net retail sales.

b -Year-ago fourth-quarter results include a $28 million charge stemming from the early retirement of debt. 12-month results for 2000 include a $41 million charge for debt retirement.

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