Thursday, February 28, 2013

TGT Q4 Earnings

Target Corp. (TGT) announced earnings Wednesday and stated that its fiscal fourth-quarter sales rose 6.8% to $22.37 billion while credit-card revenue was up 1.8% to $356 million. Gross profit fell 2% to $961 million from $981 million the previous year. Per-share profit increased to $1.47 from $1.45 a year earlier after a 2.8% decrease in shares outstanding. Analysts, on average, expected earnings of $1.48 per share. Adjusted earnings per share, excluding items such as costs related to Canada, rose to $1.65 from $1.49 a year ago. Same-store sales were up 0.4% and missed analysts' average target of 0.8%.  
Full-year 2012 sales increased 5.1 percent to $72.0 billion from $68.5 billion in 2011 with credit card revenue decreasing 4.1% to about $1.4 billion. Gross profit for 2012 increased 2.4% when compared to 2011. Per-share profit increased to $4.52 from $4.28 in 2011, a 5.6% increase.
Full-year gross margin rate decreased to 29.7% in 2012, compared to the 30.1% rate in 2011. Fiscal fourth-quarter SG&A expenses increased 9.1% from the previous year and Cost of Sales increased 7.1%, both of which could explain why profits fell despite the increase in sales. Target had a more promotional holiday season than expected and was hurt by rising gas prices and a payroll tax increase.
Target has stated that it is going to have a transition year and plans to open 124 new stores in Canada, more openings than it has ever had in a single year. These Canada plans cut earnings by 48 cents per share in 2012 and should trim earnings by about 45 cents in 2013. Target expects sales to rise only about 2% this year.
CEO Gregg Steinhafel cited painfully slow growth in the US economy as to why Target’s growth declined. In first quarter 2013, TGT expects adjusted EPS anywhere between $1.10 and $1.20. Yearly, the company expects adjusted EPS of $4.85 to $5.05. Shares fell about 1% to $63.46 after shares dropped as low as 3.7% during yesterday’s session.
I am bullish on TGT going forward as the company continues to provide affordable products while economic growth remains slow. The aggressive expansion into Canada represents a key driver in the long-term growth of the company.

-JonMichael Shekian

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