Target Corp sales grow on back of new store additions
25 Feb '09
5 min read
The credit card segment incurred a $135 million pre-tax loss in the quarter, compared with a $189 million profit in fourth quarter 2007. This loss was the result of a $245 million addition to the allowance for doubtful accounts in the quarter. Segment pre-tax return on invested capital was negative 15.0 percent in the fourth quarter 2008, compared with 13.4 percent in 2007.
Average receivables for fiscal 2008 increased 19.5 percent to $8.7 billion from $7.3 billion in 2007, as the company annualized the impact of strong receivables growth that occurred in the third quarter of 2007. Average receivables directly funded by Target in 2008 declined 14.2 percent to $4.2 billion from $4.9 billion in 2007.
Full year 2008 segment profit declined 80.5 percent to $155 million from $797 million in 2007. The company added $440 million to the allowance for doubtful accounts in 2008. Full year pre-tax return on the capital invested by Target in this segment was 3.7 percent in 2008, down from 16.3 percent in 2007.
Interest Expense and Taxes: Net interest expense for the quarter increased $34 million from fourth quarter 2007, and full-year interest expense increased $219 million over 2007. Increases in interest expense for both the quarter and the year reflect higher average debt balances supporting capital investment, share repurchase and the receivables portfolio, partially offset by lower average net interest rates. Over the past four quarters, the company has invested $3.5 billion in capital expenditures, repurchased shares valued at $3.4 billion and grown its gross accounts receivable by $0.5 billion.
The company's annualized effective income tax rate for the fourth quarter was 35.4 percent in 2008, down from 38.3 percent in 2007, due to effective settlement of tax uncertainties during the quarter. For the full year, the effective income tax rate was 37.4 percent, down from 38.4 percent in 2007.
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