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Target sales gains spike 3Q profits

Susan Andrews, Don Hogsett -- Home Textiles Today, November 26, 2001

MINNEAPOLIS — Target Corp. boosted its third-quarter net profit by 4.6 percent, reaching $226 million, according to its most recent quarterly financial figures. The increase came primarily because the retail company was able to push up sales by 8.6 percent, and total revenues by 9 percent.

The net income figures do not include a pretax charge of $67 million, related to restoring what the company called "securitized accounts receivable" to its balance sheet. Including this charge, Target's third-quarter net was $185 million, down 14 percent from last year's third-quarter net of $215 million (reflecting a $1 million charge for debt extinguishment).

The sales growth, which brought Target's third-quarter sales to $9.2 billion, offset the effects of declining gross margin and increasing SG&A expenses. The company's third-quarter operating income was nearly flat compared with last year, at $701 million.

Target's SG&A rose by nearly 13 percent, totaling nearly $2.3 billion in dollars. As a percentage of total revenues, SG&A increased 80 basis points from the third quarter of last year to this year, to 24.4 percent. Expenses went up due to items relating to the one-time charge, plus increased expenses related to higher revenues from the company's credit area. Gross-margin dollars increased 9.5 percent, but only picked up 20 basis points as a percentage of sales, to 31.9 percent.

Looking at Target's divisions, pretax segment profit at the Target store unit rose nearly 15 percent in the third quarter. At Mervyn's, pretax profit fell 21.6 percent, and at Field's it declined 31.7 percent.

Said Bob Ulrich, chairman and ceo, "We believe our strategies position us well to delivery reasonable growth in earnings per share in the fourth quarter."

Target Inc.

QTR 11/03 (x000) 2001 2000 % CHG
a: Earnings for the third quarter of 2001 include pretax charge of $67 million, or 5 cents a share, related to the impact of restoring securitized accounts receivable to the company's financial statements. Earnings for the third quarter of 2000 include a $1 million pretax charge for debt extinguishment.
Sales $9,171,000 $8,444,000 8.6
Oper. income (EBIT) 701,000 698,000 0.4
Net incomea 185,000 215,000 -14.0
Per share (diluted) 0.20 0.24 -16.7
Average gross margin 31.9% 31.7%
SG&A expenses 24.4% 23.6%
Nine months
Sales 26,174,000 24,180,000 8.2
Oper. income (EBIT) 2,280,000 2,155,000 5.8
Net income 710,000 712,000 -0.3
Per share (diluted) 0.78 0.78 0.0
Average gross margin 32.1% 32.2%
SG&A expenses 23.5% 23.5%

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