Target Corporation Reports Second Quarter Earnings
Target Corporation (NYSE: TGT) today announced its second quarter 2024 financial results, which reflected a return to topline growth and strong profit performance.
The Company reported second quarter GAAP and Adjusted earnings per share1 (EPS) of $2.57, compared with $1.80 in 2023. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
1Adjusted EPS, a non-GAAP financial measure, excludes the impact of certain discretely managed items, when applicable. See the tables of this release for additional information.
“We made a commitment to get back to growth in the second quarter, and the team delivered, all while expanding operating margins and growing EPS by more than 40% compared to last year. Importantly, our growth was driven entirely by traffic in stores and our digital channels, with double-digit growth in our same-day delivery services,” said Brian Cornell, chair and chief executive officer of Target Corporation. “We also saw improving trends across our discretionary categories, most notably in apparel, and we’re seeing continued strength in beauty. Looking ahead, even as we maintain the measured outlook that has served us well, we are focused on building on this positive momentum by executing our strategy and providing the unique combination of newness and value that consumers can only find at Target.”
Guidance
For the third quarter, the Company expects a 0 to 2 percent increase in its comparable sales, and GAAP and Adjusted EPS of $2.10 to $2.40.
While the Company believes its full-year guidance range of a 0 to 2 percent increase in its comparable sales remains appropriate, it now believes the increase will more likely be in the lower half of that range. However, based on strong profit performance in the front half of the year, the Company now expects full-year GAAP and Adjusted EPS of $9.00 to $9.70, up from the prior range of $8.60 to $9.60.
Operating Results
Comparable sales increased 2.0 percent in the second quarter, reflecting a comparable store sales increase of 0.7 percent and a comparable digital sales increase of 8.7 percent. Total revenue of $25.5 billion in the second quarter was 2.7 percent higher than last year, reflecting a total sales increase of 2.6 percent and a 10.8 percent increase in other revenue. Second quarter operating income of $1.6 billion was 36.6 percent higher than last year, driven by sales growth and a higher gross margin rate.
Second quarter operating income margin rate was 6.4 percent in 2024, compared with 4.8 percent in 2023. Second quarter gross margin rate was 28.9 percent, compared with 27.0 percent in 2023, reflecting the net impact of merchandising activities, including cost improvements that more than offset higher promotional markdown rates, combined with favorable category mix and lower book to physical inventory adjustments as compared to the prior year, partially offset by higher digital fulfillment and supply chain costs. Second quarter SG&A expense rate was 21.2 percent in 2024, compared with 20.9 percent in 2023, reflecting the combined impact of higher costs, including continued investments in pay and benefits, partially offset by disciplined cost management.
Interest Expense and Taxes
The Company’s second quarter 2024 net interest expense was $110 million, compared with $141 million last year, primarily driven by an increase in interest income reflecting higher cash balances year-over-year.
Second quarter 2024 effective income tax rate was 22.9 percent, compared with the prior year rate of 22.2 percent, reflecting higher pretax earnings and lower discrete benefits as compared to the prior year.
Capital Deployment and Return on Invested Capital
The Company paid dividends of $509 million in the second quarter, compared with $499 million last year, reflecting a 1.9 percent increase in the dividend per share.
The Company repurchased $155 million of its shares in the second quarter, retiring 1.1 million shares of common stock at an average price of $145.94. As of the end of the quarter, the Company had approximately $9.5 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.
For the trailing twelve months through second quarter 2024, after-tax return on invested capital (ROIC) was 16.6 percent, compared with 13.7 percent for the trailing twelve months through second quarter 2023. The increase in ROIC reflects higher operating income, partially offset by higher average invested capital. The tables in this release provide additional information about the Company’s ROIC calculation.
Webcast Details
Target will webcast its second quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Corporate.Target.com/Investors (click on “Q2 2024 Target Corporation Earnings Conference Call” under “Events & Presentations”). A replay of the webcast will be provided when available. The replay number is 1-866-405-7299.
Miscellaneous
Statements in this release regarding the Company’s future financial performance, including its fiscal 2024 third quarter and full-year guidance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties which could cause the Company’s results to differ materially. The most important risks and uncertainties are described in Item 1A of the Company’s Form 10-K for the fiscal year ended February 3, 2024. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statement.