Store Numbers Right on Target
By Don Hogsett -- Home Textiles Today, 11/14/2005
Minneapolis — Driven by robust same-store sales, wider margins and a rapidly growing credit business, third quarter profits from continuing operations at Target Corp. jumped 34.5 percent, to $435 million from $324 million last year.
Net income declined 18 percent, to $435 million from $531 million, but the year-over-year comparison is skewed by one-time items related to the sale of Mervyn's, which inflated last year's profit by $207 million.
Sales during the third quarter climbed 11.7 percent, to $11.9 billion from $10.6 billion, and the crucial gauge of same-store sales improved 5.9 percent. Credit card sales raced ahead 18.1 percent, to $343 million from $290 million. Total revenues, including merchandise and credit sales, rose 11.9 percent, to $12.2 billion from $10.9 billion.
In another big lift to the bottom line, margins widened substantially, more than offsetting rising costs. Helped largely by a higher markup, average gross margin was strengthened 120 basis points, or 1.2 percentage points, to 32.3 percent from 31.1 percent during the same period a year ago. A lower markdown rate and a reduction in inventory shrinkage also helped to boost margins.
Hurt largely by the effects of three hurricanes, operating costs climbed 40 basis points, or four-tenths of a percentage point, to 23.5 percent from 23.1 percent.
Going forward, CEO Bob Ulrich said, “We will continue to grow market share profitably in this year's fourth quarter and well beyond.”
| Qtr. 10/29 (x000) | 2005 | 2004 | % change |
| Sales | $11,863,000 | $10,619,000 | 11.7 |
| Oper. income (EBIT) | 831,000 | 633,000 | 31.2 |
| Net income | 435,000 | 531,000a | -18.0 |
| Per share (diluted) | 0.49 | 0.59 | -16.3 |
| Average gross margin | 32.3% | 31.1% | – |
| SG&A expenses | 23.5% | 23.1% | – |
| Nine months | |||
| Sales | 34,701,000 | 30,805,000 | 12.6 |
| Oper. income (EBIT) | 2,717.000 | 2,192,000 | 24.0 |
| Net income | 1,469,000 | 2,373,000b | -38.1 |
| Per share (diluted) | 1.65 | 2.59 | -36.4 |
| Average gross margin | 32.5% | 31.5% | – |
| SG&A expenses | 22.9% | 22.4% | – |
| a. Net income in the year-ago third quarter included
$4 million in earnings from the subsequently sold Mervyn's unit, and a $203
million gain on the sale of Mervyn's. Excluding the one-time items relating
to Mervyn's, earnings from continuing operations this year improved by 34.5
percent, to $435 million from $324 million. b. Earnings in the prior-year nine months included $75 million in earnings from the discontinued Mervyn's operation, and a $1.2 billion gain on the sale of Mervyn's. Excluding the one-time items, nine-month profits this year rose by 36.7 percent, to $1.5 billion from $1.1 billion. |
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