Target Corporation reported net earnings of $555 million for the quarter ended October 29, 2011, compared with $535 million in the quarter ended October 30, 2010. Earnings per share in the third quarter increased 10.2 percent to $0.82 from $0.74 in the same period a year ago.
As previously disclosed, third quarter 2010 earnings per share included the benefit of approximately 6 cents related to favorable state income tax settlements. Third quarter 2011 results included expenses related to Target's investments in its 2013 Canadian market entry, which reduced earnings per share by approximately 5 cents.
Excluding those two items, adjusted earnings per share increased 28 percent to $0.87 in third quarter 2011 from $0.68 in the same period a year ago.
“We're very pleased with our third quarter financial results, which reflect strong performance in our U.S. Retail and U.S. Credit Card segments,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation. “We're confident that we have the right strategy and team in place to drive continued strong performance this holiday season and well into the future, allowing us to continue rewarding our shareholders while investing millions of dollars each week to support the many local communities where our guests and team members live, work and shop.”
Fourth Quarter 2011 Earnings Guidance The company currently expects fourth quarter 2011 diluted EPS of $1.43 to $1.53, on a GAAP basis. This estimate excludes any reduction in income tax expense from the resolution of income tax uncertainties, which the company expects to be approximately $50 million in the quarter.
It also excludes the impact of a potential credit-card receivables sale transaction, and excludes the impact of any potential early extinguishment of non-recourse debt collateralized by credit card receivables.
U.S. Retail Segment Results As the company first reported in its sales release on November 3, 2011, Target's sales in third quarter 2011 increased 5.4 percent to $16.1 billion from $15.2 billion a year ago, due to a 4.3 percent increase in comparable-store sales and the contribution from new stores. Segment earnings before interest expense and income taxes (EBIT) were $931 million in the third quarter of 2011, an increase of 14.1 percent from $816 million in 2010.
Third quarter 2011 EBITDA and EBIT margin rates were 9.1 percent and 5.8 percent, respectively, compared with 8.8 percent and 5.4 percent in 2010. Third quarter gross margin rate declined to 30.5 percent in 2011 from 30.6 percent in 2010, reflecting the impact of the company's integrated growth strategies partially offset by rate improvements within categories. The company's third quarter selling, general and administrative (SG&A) expense rate improved to 21.4 percent in 2011, compared with 21.8 percent in 2010.
U.S. Credit Card Segment Results Third quarter average receivables decreased 9.9 percent to $6.2 billion in 2011 from $6.9 billion in 2010. Average receivables directly funded by Target decreased 14 percent in the third quarter to $2.4 billion from $2.8 billion in 2010.
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