Target Corporation

Last modified by Asif Farooqui on 2023/11/20 16:43

Contents

Summary
Recent Developments
Financial Highlights
Company Overview
References

Summary

Target Corporation is a major American retail corporation that operates a chain of discount department stores and hypermarkets.
It operates a chain of over 1,900 stores across the United States.
Its stores typically sell general merchandise—including clothing, household goods, electronics, toys, and more—as well as groceries.

Target Corporation (NYSE: TGT) is a major American retail corporation that operates a chain of discount department stores and hypermarkets. It is headquartered in Minneapolis. Target is known for its upscale, trend-forward merchandise at affordable prices. Its stores typically sell general merchandise—including clothing, household goods, electronics, toys, and more—as well as groceries.

Recent Developments

Target Unveils 2023 Strategic Investments to Fuel Growth and a Differentiated Guest Experience¹

Feb 28, 2023; Target Corporation announced its plans for 2023 at the retailer's annual Financial Community Meeting in New York, emphasizing its focus on offering a differentiated guest shopping experience that will continue to position the company for long-term growth.

The company plans to invest $4 billion to $5 billion this year to expand its guest-centric services, operations network of stores and supply chain facilities, digital experiences and other capabilities. The retailer also shared more about its plans to advance its enterprise efficiency efforts, aimed at optimizing its operations after years of rapid growth.

Opening more new stores and updating existing locations

Target plans to open about 20 new stores in a variety of sizes as it seeks to reach new guests. Many of the new stores will include new design elements that reflect the local community, experiences that highlight new brands, assortment and services, and sustainable features. Target is also making investments in about 175 of its existing stores, ranging from full remodels to the addition of Ulta Beauty at Target or Apple at Target shop-in-shop experiences, or expanded capacity for same-day fulfillment services. These new and updated stores are one way Target brings new partnerships and the latest innovations in fulfillment services to guests while also investing in operational enhancements for its team.

Expanding sortation center network

The company plans to expand its sortation center network from nine to more than 15 locations by the end of 2026, which will expand its next-day delivery capabilities to guests across major U.S. markets. These specialized supply chain facilities allow Target to deliver digital orders faster, more efficiently and at a lower cost, with up to 40% of orders delivered by its last-mile delivery capability arriving next day.

Financial Highlights

Third Quarter Results²

Nov 15, 2023; The Company reported third quarter GAAP and Adjusted earnings per share (EPS) of $2.10, up 36.3 percent from $1.54 in 2022. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

Total revenue of $25.4 billion was 4.2 percent lower than last year, reflecting a total sales decline of 4.3 percent and a 0.6 percent decrease in other revenue. Third quarter operating income of $1.3 billion was 28.9 percent higher than last year, driven by a higher gross margin rate.

Third quarter operating income margin rate was 5.2 percent in 2023, compared with 3.9 percent in 2022. Third quarter gross margin rate was 27.4 percent, compared with 24.7 percent in 2022, reflecting lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs, and favorable category mix. These benefits were partially offset by higher inventory shrink. Third quarter SG&A expense rate was 20.9 percent in 2023, compared with 19.7 percent in 2022, reflecting the de-leveraging impact of lower sales combined with higher costs, including continued investments in pay and benefits and inflationary pressures throughout its business, partially offset by disciplined cost management.

The Company's third quarter 2023 net interest expense was $107 million, compared with $125 million last year, reflecting an increase in interest income, partially offset by higher debt levels and the impact of higher floating interest rates on interest rate swaps. Third quarter 2023 effective income tax rate was 21.3 percent, in line with the prior year rate of 21.6 percent.

The Company paid dividends of $507 million in the third quarter, compared with $497 million last year, reflecting a 1.9 percent increase in the dividend per share.

Company Overview

Target Corporation is a major American retail corporation that operates a chain of discount department stores and hypermarkets. It is headquartered in Minneapolis. Target is known for its upscale, trend-forward merchandise at affordable prices. Its stores typically sell general merchandise—including clothing, household goods, electronics, toys, and more—as well as groceries.

Merchandise

The majority of its stores offer a wide assortment of general merchandise and food. Nearly all of its stores larger than 170,000 square feet offer a variety of general merchandise and a full line of food items comparable to traditional supermarkets. The company's digital channels include a wide merchandise and food assortment, including many items found in its stores, along with a complementary assortment sold by Target and third parties. The company manage its business across the five core merchandise categories shown below. Within categories, gross margins vary depending on the type of merchandise.³

Brand

A significant portion of its sales is from national brand merchandise. Approximately one-third of its sales come from its owned and exclusive brands.

Owned Brands
A New Day	Goodfellow & Co	Room Essentials
All in Motion	Hearth & Hand with Magnolia	Shade & Shore
Art Class	Heyday	Smartly
Auden	Hyde & EEK! Boutique	Smith & Hawken
Ava & Viv	JoyLab	Sonia Kashuk
Boots & Barkley	Kindfull	Spritz
Brightroom	Knox Rose	Stars Above
Bullseye's Playground	Kona Sol	Sun Squad
Casaluna	Made By Design	Threshold
Cat & Jack	Market Pantry	Universal Thread
Cloud Island	Mondo Llama	up & up
Colsie	More Than Magic	Wild Fable
Embark	Opalhouse	Wondershop
Everspring	Open Story	Xhilaration
Favorite Day	Original Use
Future Collective	Pillowfort
Good & Gather	Project 62

Exclusive Adult Beverage Brands
California Roots	Jingle & Mingle	SunPop
Casa Cantina	Photograph	The Collection
Headliner	Rosé Bae	Wine Cube

The company also sell merchandise through periodic exclusive design and creative partnerships, and shop-in-shop experiences, with partners such as Apple, Disney, Levi's, and Ulta Beauty, and generate revenue from in-store amenities such as Starbucks, Target Café, and Target Optical. CVS Pharmacy, Inc. (CVS) operates pharmacies and clinics in its stores under a perpetual operating agreement from which the company generate annual occupancy income.

Stores

Stores as of January 28, 2023	Stores	Retail Square Feet (in thousands)	Stores as of January 28, 2023	Stores	Retail Square Feet (in thousands)
Alabama	22	3,132	Montana	7	777
Alaska	3	504	Nebraska	14	2,005
Arizona	46	6,081	Nevada	18	2,262
Arkansas	9	1,165	New Hampshire	10	1,236
California	314	37,304	New Jersey	49	6,189
Colorado	45	6,361	New Mexico	10	1,185
Connecticut	21	2,732	New York	100	10,820
Delaware	4	551	North Carolina	52	6,653
District of Columbia	5	342	North Dakota	4	554
Florida	127	17,225	Ohio	65	7,863
Georgia	51	6,826	Oklahoma	15	2,167
Hawaii	8	1,234	Oregon	22	2,353
Idaho	7	725	Pennsylvania	78	9,260
Illinois	100	12,171	Rhode Island	4	517
Indiana	32	4,186	South Carolina	20	2,389
Iowa	21	2,859	South Dakota	5	580
Kansas	17	2,385	Tennessee	30	3,815
Kentucky	14	1,575	Texas	154	21,176
Louisiana	16	2,195	Utah	15	1,981
Maine	6	741	Vermont	1	60
Maryland	41	5,070	Virginia	61	7,789
Massachusetts	50	5,546	Washington	40	4,424
Michigan	54	6,300	West Virginia	6	755
Minnesota	73	10,332	Wisconsin	38	4,614
Mississippi	6	743	Wyoming	3	257
Missouri	35	4,618
			Total	1,948	244,584

Stores and Supply Chain Facilities as of January 28, 2023	Stores	Supply Chain Facilities
Owned	1,530	37
Leased	261	18
Owned buildings on leased land	157	—
Total	1,948	55

Company History

The future Target Corporation was founded by George Draper Dayton. In 1902.⁴

Year	Milestone
1960	Daytons plan discount store chain.
1962	Creation of Iconic Name and Logo.
1962	The Birth of Target - The first four Target stores opened in Minnesota.
1967	Dayton Corporation Goes Public After a decade of significant growth, Dayton's transformed itself from a regional department store company to a national retailer. The company's Initial Public Offering (IPO) was Oct. 18, 1967, with 450,000 common stocks at $34/share.
1969	Target's First Distribution Center - Target opened its first distribution center in Fridley, Minnesota — the first of dozens to come.
1969	Merger: Dayton-Hudson Corporation The Dayton Corporation joined forces with the J.L. Hudson Company of Detroit to create the Dayton Hudson Corporation. The merger established the corporation as one of the 15 largest non-food retailers in the nation.
1972	Target HQ Moved to IDS Building The new IDS Building in downtown Minneapolis was designed by renowned architect Philip Johnson and remains the tallest building in Minnesota.
1983	First Stores Network Intranet The new system linked all of Target's locations together in a communications network through the use of computers.
1984	Target's First Owned Brand Target carried store-branded "private label" products starting in the early 1960s, but in 1984 introduced its first official owned brand, Honors — a casual, color-coordinated line of clothing for men, women and children.
1986	First Email System at Target Message Switch, Target's first email system, rolled out company-wide. It was replaced by T-Mail in 1991.
1990	Acquisition: Marshall Field's Target's parent company, Dayton Hudson Corp., purchased legendary Chicago-based department store Marshall Field's, making Dayton Hudson the largest department store chain in the Midwest.
1998	Opening of Target Plaza Headquarters Building Target added to the Minneapolis skyline with the opening of the Target Plaza North building.
2001	Target Plaza Headquarters Lights Display Target lights up the Minneapolis skyline
2005	Introducing: ClearRx Target created innovative pharmacy concept ClearRx
2008	Expansion: Alaska Target opened its first stores outside the continental U.S. in Anchorage and Wasilla, Alaska, with store design and merchandise catering specifically to the Alaskan market.
2015	CVS Acquired Target Pharmacy Business Branded as CVS Pharmacy, CVS Health began operating Target pharmacies across 47 states through a store-within-a-store format.
2017	Acquisition: Transportation Technology Company Grand Junction The acquisition accelerated Target's work to improve delivery speed and boost its ability to offer new services like same-day delivery.
2017	Acquisition: Shipt Target announced its acquisition of Shipt, with plans to bring same-day delivery service to stores across the country.
2022	Introducing: Drive Up with Starbucks In response to guest requests, Target debuted the ability to add a Starbucks Café order to be delivered with a Drive Up order at select stores.