Target Profits Slip on Canadian Expansion as Revenue and EPS Grow

Andrew Klips  |

Profits slipped in the fourth quarter for Target Corp. (TGT), but not as much as analyst had forecast, as the discount retailer’s gains were hamstringed by building its footprint in Canada.

For the fourth quarter, Target reported total revenue of $22.73 billion, up from $21.29 billion in the year prior quarter.  The Minneapolis, Minnesota-based company posted net earnings of $961 million, down 2 percent from $981 million in the year earlier period.  Earnings per share in the comparable quarters increased by 2 cents to $1.47 in the most recent quarter, thanks to a lower number of shares outstanding versus Q4 2011.  Adjusted earnings, which exclude the $148 million spent on expansion in Canada, were $1.65 per share, outpacing $1.49 last year.

During Q4 2012, Target repurchased about 10.4 million shares of its common stock for an aggregate amount of $645 million.

Wall Street was expecting earning of $1.47 per share on revenue of $22.69 billion.  Analysts typically don’t count one-time items, such as the expansion expense.

For the year, Target lost $369 million due to start-up expenses, depreciation and amortization related to its Canadian efforts, a market it expects to enter this year.

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“We’re pleased with Target’s fourth quarter performance, particularly in the face of a highly promotional retail environment and continued consumer uncertainty,” said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation.

For the full year 2012, Target reported revenue of $73.30 billion, 4.9 percent greater than $69.87 billion in 2011.  Adjusted earnings for the year were $4.76 per share, exceeding the top of the range the company guided at the beginning of last year.  GAAP earnings for 2012 were $4.52 per share, also topping corporate guidance as well as $2.28 per share earned in 2011.

Same-store-sales increased 2.7 percent across 2012, after rising 3.0 percent in 2011.

At the end of the year, Target owned a total of 1,778 stores, including its general stores, expanded food assortment stores, SuperTargets and CityTarget brands.

Looking forward, Target said it expects adjusted profit for 2013 in the range of $4.85 to $5.05 per share, which doesn’t including 45 cents per share related to its Canadian segment and a net benefit from selling its credit-card receivables to Toronto-Dominion Bank (TD).  For the first quarter, the compact see adjusted EPS of $1.10 to $1.20.  No revenue guidance was given.

The full year earnings guidance received mixed review by missing some analyst predictions, but exceeding others.  Shares dove by more than 3 percent at the opening bell, but have recovered to be down less than one percent at $63.50 halfway through the trading day.

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