Target Financial Analysis 1
Target Financial Analysis
Chanelle Christie
Baheejah Lumumba
Lucius Miller
Anthony Becerra
Jessica Jordan
Siena Heights University
LDR 640 Financial Systems Management
Eric Glohr
May 23, 2014
Target Financial Analysis 2
TABLE OF CONTENTS
Company Background .........................................................................................................3
Overview of the Annual Report ...........................................................................................5
The Business Environment ..................................................................................................5
The Auditors ........................................................................................................................7
SEC Form 10-K Report .......................................................................................................8
Industry Background ..........................................................................................................11
Operating Activities ...........................................................................................................12
Analysis of Operating Activities ........................................................................................16
Investing Activities ............................................................................................................17
Analysis of Investing Activities .........................................................................................19
Debt Financing ...................................................................................................................21
Equity Financing ................................................................................................................28
Analysis of Financing Activities........................................................................................33
Comparison to Industry Benchmarks.................................................................................36
Appendix:
Statement of Cash Flows ...................................................................................................37
Income Statement...............................................................................................................42
Balance Sheet .....................................................................................................................47
Target Financial Analysis 3
Introduction
TargetCorporation is a retail industry that had developed its first site in Roseville
Minnesota in 1962 before founding in other Target corporations around the United States. Target
is listed as number three in retail compared to other competitors such as Wal-Mart and Kroger
and Costco who are Targets main competitors. Target has expanded over time now having stores
in Canada among the rest of the stores in the United States. “Target the preferred shopping
destination for our guests by delivering outstanding value"(Target 2013). Target has expanded in
retail over the years now having corporations in Canada and also serving our communities for
years with retail integrity, an innovation for improving the TargetCorporation based on the needs
of the people.
Company Background
Target was founded by its original owner George Draper Dayton in 1902 the store opened
under the name of Dayton dry goods which began incorporated that same year 1902, in
Roseville, MN today the company has an internet website for their customers to shop and
address their concerns their address is www.Target.com and their corporate address is 1000
Nicolle mall Minneapolis, MN 55403.
Target
presently used Ernst & Young LLP to conduct their internal control over their financial reporting
which has been issued by the committee of sponsoring organizations of tread way commission (
The COSO criteria ) Their responsibility include the assessment and effectiveness of the internal
control over financial reporting which accompanies the report of management on internal control
over the financial reporting. They conduct audits which are in accordance with the standards of
the public company accounting oversight board of the United States of America also they have
Target Financial Analysis 4
audit, within the standards of the public company accounting oversight board of the United
States of America.
For the last three years this firm has provided Target with consolidated statements on
their financial position. Target has grown tremendously since their beginning, today they are
considered a discounted retail giant their service expands across all lines of service such as their
grocery, pharmacy, in store retail, and online catalogs service. Target SIC code is 5531, Target
presently has 1,763 stores nationwide and 124 located in Canada with their average size ranges
14,189 sq. feet.
Formerly, the company named Dayton Hudson now operates their division of Marshall
Fields, Mervyn’s and the Target stores they also have 40 distribution centers, 3 of which are in
located in Canada. Target is famously known for their Bulls eye symbol which is a registered
trade mark they officially became Target in 1962 after the company went through several name
changes advertising the bulls eye in a red and white color their aim was to hit the center of the
bulls eye logo because the store would do the same in terms of their goods and services within
the community. The ticker symbol for this company is TGT (common stock) the listed shares are
shown on the NASDAQ and the market watch also the NYSE. Target’s board of directors list is
one of the most impressive of its kind Gregg Steinhafel, chairman, chief executive officer and
president has a total annual compensation of 1,500,000 USD. Under his membership there are 66
affiliated members Douglas M. Baker from Ecolab Inc. Kenneth L Salazar US, Department of
the interior, William C. Rhodes, from Auto Zone Inc. All are board members who comprised
from a diverse business background. Target’s ranks # 20 of the top 50 companies for diversity
and # 29 most admired company. Target owns several subsidiaries which includes 1. Target.com
2 Target Brands, 3 Target commercial interiors, 4.
Target Financial Analysis 5
Overview of the Annual Report
Year over year, Target Corp. has seen net income shrink from $3.0B USD to $2.0B USD
despite relatively flat revenues. A key factor has been an increase in the percentage of sales
devoted to SGA costs from 20.67% to 21.08%.
Target’s net change in cash flows in the quarter ending of October 2013 was $ 78 million
because it was not enough cash being generated to fund its operations. The cash flow from
operating activities in the quarter ending October 31, 2013 Target generated $ 4.75 Billion in
cash from its core business operations. Cash from the investing activities in the quarter ending
October 31, 2013 Target generated $ 311 million in cash from investing activity because the
company was selling off more assets then it was in the beginning. Cash flow from financing
activities from the quarter ending October 31, 2013, Target used $ 5.15 billion in cash for
financing activities which indicates that Target is using its cash flow from operations to pay
dividends or, to pay off extended financing.
The Business Environment
Target uses the direct method on their statements. Target represents commitment to the
community by their brand promise to “Expect more and pay less”. In 2012 Target develop new
ways to connect with their customers by accelerating their investments in the digital channels. In
doing so, Target launch free WI-FI in all of their stores so that customers will have access to all
of the services such as their QR code program and the Target apps, customers now can download
coupons onto their I phones and have better chances to keep track of upcoming sales.
Target Financial Analysis 6
Target has also extended their price match services because they want their customers to
have a great value they recently announced that they are committed to hiring 100,000 veterans by
the year 2020. Target Products are vast; merchandize range from home and décor sells at 18% to
apparel and accessories 19% food and pet supplies at 20% just to name a few of the various
items sold. Target exclusive brands products differentiate them from other retailers.
Target’s MD&A reports states that their managers believe their U.S. operations increased
14.3 percent to $ 4.41 in 2011 from $ 3.56 in the prior year after launching their 5% RED card
reward loyalty program charges were $ 258 million in 2011 increase to their operations and
market expenses were within the U.S. credit card segment. Report of management on the
consolidated financial statements, has been prepared in accordance with the accounting
principles which are accepted in the United States which includes judgments and estimates by
their management, it’s their responsibility to fulfill a comprehensive system of internal control to
assure that the assets are safeguarded and transactions are executed. In addition, Target
consolidated financial statements have been audited by Ernst & Young LLP. An independent
registered public accounting firm. Target has several executive officers just to name a few are
Tina M. Schiel serves as executive vice president, stores and Laysha L. Ward president of
community relations and Target foundation.
Target currently has and claim against them for copied designs for maternity pants made
by Destination Maternity and U.S. District judge Anita B Brody of the eastern district of
Pennsylvania granted Target a motion to stay in federal court because Target plans to show the
pants are invalid.
According to the article Destination Maternity says that Target and their brand of clothes
for pregnant women infringed on two of its patents for maternity pants, Target intends to file for
Target Financial Analysis 7
inter parties review, based on prior Japanese art which will show that the patents are invalid.
Target was hit with a law suit because hackers had breached their systems and comprised
40 million of their customers credit and debit cards information in the report states where Target
failure to implement correct security measures case is currently pending, However, a secret
service official testified that the data breach was “highly technical” prompting Mr. Steinhafel to
reply that any retailer would not be able to with stand that type of technology. Currently under
Steinhafel direction Target is pushing for new chip technology on their cards and replace the old
magnetic strips as used today their goal date to have this done is by 2015. With all the fallout
behind the breach Target decided to replace Steinhafel with CFO John Mulligan who will serve
as interim CEO. Target currently will focus on things that previously defined them which are
fashion and innovation trends. Target is currently looking to develop a strategic and competitive
vision because of the magnitude of the breach by building more presence in urban markets and
offer more fresh groceries with natural and holistic options.
Target is committed to corporate responsibility: Especially after last year’s credit breach
which took place during the Thanksgiving, and Christmas shopping season today Target
encourages their team members to conduct themselves and business practices with integrity and
honesty, there are 22 corporate policies and each employee is expected to know and comply.
The Auditors
Auditors are essential for any company that is large or small or looking for ways of
improvement within their organization. Target corporation uses an accounting firm known as
“Ernest and Young, LLC"(Target Brands 2013). Therefore, Ernest and Young, LLC was helps
with the auditing of Targets financial statements. The Ernest and young accounting firm works in
the accordance of the United States standard of public accounting oversight board
Target Financial Analysis 8
(TargetBrands, 2013). The auditing firm for this Target has been involved with the statements
and cash flow operations since 2012. The accounting firm audit opinion was signed in the city of
Minneapolis, MN. Ernest Young accounting company is a large company that is placed as
number 10 in Americas most private companies. (Forbes 2013) "Ernest and Young has 175,000
employees and was founded in 1903 as the headquarters is in New York, NY"(Forbes 2013). The
use of the accounting firm uses multiple measures including consolidated statements of
operation, cash flow statements, and statements of shareholder investments, etc.( Target brands,
2013). However, an example of a financial statement that the firm of Ernest Young would
analyze can be seen in the table below.
SEC Form 10-K Report
The form 10-K report offers a wealth of information for the analysis of both potential and
current investors. The information included in a 10-K report ranges from general business
background information to detailed financial information that reports the company’s financial
standing at the end of the fiscal year. In reviewing the most recent 10-K report for Target, for
the fiscal year ending February 2, 2013, there are several parts that are very important, however
for the purpose of this report, three major parts stood out as being most informative and helpful
to potential investors.
Although Target is a well-known national retail chain, as with any investment, it is
important to understand what you are investing in. Target’s 10-K report offers a Business
section under Part I, Item 1. Included in this section of the 10-K report are items such as general
business model and function, financial highlights, as well as merchandise sales broken down by
category, amongst several other items. Specifically, the General Business section of Item 1
Target Financial Analysis 9
describes the corporation’s business segments as well as practices. It identifies three reportable
business segments, U.S. Retail, U.S. Credit Card and Canadian, and includes the different
products and services offered by both U.S. segments of the corporation. In addition this section
also offers consumers insight into their business strategy, their approach to customer service, and
their dedication to properly managing their current business while focusing on future growth.
This is valuable information to an investor and should not be overlooked. Investors want to be
an owner of a company that produces returns, and the business model provides an overview of
how the company intends to maximize profits. (Hudspeth, 2012)
The Analysis of Financial Condition section also provides some very useful information
in regards to the liquidity and capital resources for the corporation. In addition to the financial
results reported in the 10-K form, this section gives a detailed explanation of the financial
transactions that greatly affected the items being reported on the company’s financial statements.
It is information that might not be readily available or discernable to investors.
A share repurchase transaction totaling $10 billion dollars was completed in 2012, and a
new effort to repurchase shares worth $5 billion dollars began in 2012. (Target.com)This would
be useful information as a share repurchase can mean a number of different things. In general a
share buyback is a positive thing for current investors and can signify to potential investors a
share-holder friendly management team that is seeking to increase the percentage of equity each
shareholder represents in the corporation. (Kennon) When a company reduces the amount of
shares issued to the public, it increases the value of each of the remaining publicly traded shares.
While this generally may be a good practice from investors standpoint, if a company pays too
much for its own stock it can be harmful for the organization. (Kennon) Companies in this
situation should evaluate other more beneficial options for both the company and investors.
Target Financial Analysis 10
After getting background information on the organization it would be vital for an investor
to read and attempt to make sense of the financial information that is reported on the company’s
financial statement. While background information is important to the overall decision to invest,
the company’s actual performance is what drives most investors to buy, or not to buy stocks.
Reading the statements provided in the 10-K report is one of the best ways for investors to
understand what is happening within the organization financially, and can help investors stave
off a potential loss of earnings if there are any red flags in their reporting. (Krantz, 2012)
Different financial statements within the 10-K form focus on different financial areas of
the organization. For instance the operating results of an organization can be found on the
Income Statement, which provides investors the ability to judge a company’s past performance,
while also assessing their future cash flows. (Way) Investors can then hone in on the
information they are interested in and make a reasonable decision after reviewing that
information.
The 10-K report to the Securities and Exchange Commission is required by law, and is an
annual report geared toward regulators prepared and presented annually. This document varies
greatly from the standard annual report for many organizations, however due to a law called
Regulation Fair Disclosure (Reg-FD), many organizations have opted to either include in or
replace their annual report with the 10-K report. (Terzo) For Target, the major difference is in the
way the information is presented. While the annual report has much of the same general
business information that is important in the 10-K report noted previously, the information is
reported in a user friendly way accompanied by graphics to enhance the effect of the information
being presented. Because the annual report is geared toward current investors, it is important for
this to be made as comprehendible as possible.
Target Financial Analysis 11
Another way in which the 10-K report and the company’s annual report differ is in the
presentation of the financial information. The 10-K report is very straight forward and detailed
in the amount of information provided. In contrast, the financial information found in the
primary annual report gives a comprehensible financial outlook. While the 10-K report is
available as part of the annual report, it is not the focus of the information that is going out to
current shareholders.
Industry Background
Target’s industry background is in is in retail. Targets Corporation had started as a small
company and then expanded around the United States and Canada. Target had started in 1902
and has expanded "and now operates in over 100 locations in the Canadian Subsidiary."
(Wikipedia 2014) However, retail stores have always been sustainable in society. Target
however, is ranked as number three on the top 100 retail stores. The Target administrators of the
cooperation have always looked for ways to satisfy its customers through organizational skills,
trend, and affordability. Also "Target continually reinvents its stores, including layout,
presentation and merchandise assortment, to create an engaging shopping experience"(Target
2013). Target is also known for having a general Target store and super Target store that
includes a supermarket. Target Corporation has been in competition with rivals Wal-Mart who is
listed as number one in company retail and Kroger. "Target and its larger grocery-carrying
incarnation, super Target, have carved out a niche by offering more upscale, trend-driven
merchandise than rivals Wal-Mart and Kmart. Target also issues its proprietary Target credit
card, good only at Target (Hoover's 2014). Target has expanded by the needs of the customers
causing Target to be one of the top retails stores without having to expand or have as many
supercenters like Wal-Mart. Therefore, Target is very know and has ranking in many areas.
Target Financial Analysis 12
Some of the areas that Target is ranked in are: #36 in FORTUNE 500 (May 2013) S&P 500
(March 31, 2014) #184 in FT Global 500 (July 2013) #36 in FORTUNE 1000 (May 2013)
(Hoover's 2014). Therefore, the major trends and development that is happening in this industry
is expanding the retail stores for accessibility for the customers; also allowing the current fashion
trends to be able to be marketed for customers of all ages. "Since 1946, the corporation has given
5 percent of its income to communities through grants and a variety of programs like Take
Charge of Education".
Operating Activities
Target’s operating activities are the daily processes that generate income. These
processes demonstrate the company’s core business values and provide the majority of the
company’s cash flow and will determine if the company is profitable or not.
2013
2012
Sales Revenue
73,301.0
69,865.0
Cost of goods sold
53.18B
50.44B
Operating expenses
5,371,000
5,322,000
Income Taxes
1,610,000
1,527,000
Net Income
2,999,000
2,929,000
Earnings per share
4.52
4.28
Target’s sales revenue increased from 2012 to 2013; however that doesn’t mean that the
company is absolutely doing better. Target stores generally record revenue at the point of sale,
online and mobile applications including shipping revenue sales are recorded upon delivery to
Target Financial Analysis 13
the guest. Total revenues do not include sales tax because of the pass through nature of collecting
and remitting sales tax, the company allows returns up to 90 days after purchase. Revenues of
Target are recognized net of expected returns that are estimated using historical return patterns as
a percentage of sales. Gift card sales are only recognized at the time of the redemption on the
card. Discounts associated with loyalty programs such as Target’s REDcard are included as a
reduction in sales. The REDcard allows Target customers to receive a 5% discount and free
shipping when shopping at Target.com. Targets sales also increased due to the amount of new
store sales and in addition to a higher comparable-store sales.
Target’s cost of goods sold refers to the inventory costs of goods it has sold during a
period. The increase to Target’s cost of goods sold means that Target has a higher expense in
cost including: labor, supplies, shipping costs, cost of packaging, freight, also cost of the factory
where goods are manufactured. From 2012 to 2013 price inflation and other market changes
caused prices to change, this cost is seen for Target as its cost of goods sold increased by 2.74
billion dollars.
Target’s operating expenses increased from 2012 to 2013 by 510,000 million dollars.
Perhaps the breach of security from the year end 2013 made an impact on this by requiring
unexpected expense for the heightened security. There are several factors that can be investigated
regarding the higher operating expense for Target like employee wages, which differs throughout
the United States, and research and developments funds.
Income taxes increased 83,000 million dollars for Target over the 2012-13 year. The
income taxes shown on the income statement are an estimation of what Target thinks the expense
is, not the actual paid income tax.
Target Financial Analysis 14
The net income increased despite the increases to expenses, net income increased by 70,
000 million from 2012 to 2013. Target’s net income is the bottom line earnings for the company,
by taking all expenses away from revenue. According to BusinessWeek, a key factor to Target’s
net income increase is in the percentage of sales devoted to SGA (Selling, General &
Administrative Expense) cost from 20.67% to 21.08%. Moreover, the SGA breaks down into
sales of specific items such as credit, warranty and advertising expenses. Additionally, this
expense covers the salaries of non-sales personnel, rent, heat, and lights. Earnings per share
indicate a slight increase of .24, due to the net income increase. As stated by Corporate Target,
beginning with the first quarter of 2013, income from the profit-sharing arrangement, net of
account servicing expenses, will be recognized as an offset to selling, general and administrative
(SG&A) expenses, and we will no longer report a U.S. Credit Card Segment.
Year End Balance Sheet
Allowance for bad debts as a percentage of ending accounts receivable
(gross)
Balance in accounts receivable (net)
2013
0
2012
(430M)
5.84B
5.93B
Balance in inventory (ies)
7.9B
7.92B
Balance in income taxes payable
272M
257M
Balance in deferred income taxes
1.11B
1.19B
The Allowance for bad debts of ending accounts receivable for Target is not recorded for
2013, however 2012 shows that -430 million went into this account. Basically what that number
is showing is that the amount of accounts receivable that went bad and was not paid. Increases to
the bad debt expensive generally come from periodic loan-loss provisions and tends to smooth
Target Financial Analysis 15
bank earnings. The balance in accounts receivables decreased slighting from 2012 to 2013,
which could be indicating a sell off of bad debt or less debt owed to Target.
The balance in inventory decrease suggests Target is holding onto its inventory longer
than previously recorded metrics. This measure is calculated by using the inventory turnover
ratio; the inventory turnover is what shows how quickly a company can convert its inventory into
cash and profits. Because Target is facing a decrease in inventory turnover it could lead to
increased storage, insurance, and maintenance costs. The inventory ratio is calculated by taking
the cost of goods sold divided by the average inventory.
Target’s balance of income taxes payable increased by 15 million dollars from 2012 to
2013. This accounts to the funds in an account in the current liabilities section on the balance
sheet that must be paid to the Government within one year. The balance in deferred income taxes
show that Target found income but the taxes on it has not been realized yet.
Target Financial Analysis 16
Analysis of operating activities
2013
2012
Gross Profit Margin
29.73%
30.10%
Operating Profit Margin
7.46%
7.77%
Net Profit Margin
4.17%
4.28%
----
11.55%
Inventory Turnover
6.40%
6.04%
Asset Turnover
1.49%
1.47%
Rate of Return on Total Stockholders Equity
18.63%
12.09%
Receivables Turnover
Gross profit margins represent the difference between net sales and the cost of sales, the
better the GPM the greater chance for positive bottom line. Target is showing a decrease in the
gross profit margin from 2012-2013. This decrease has the potential to impact the Redcard
loyalty program; however Target did change merchandise vendors in 2013 so there could be an
increase moving forward to the gross profit margin.
Operating profit margin also declined showing less revenue after paying for variable
costs. A decrease in the profit margin can identify a difficulty in paying for fixed costs and
interest on debt. If the profit margin shows an increase it will show that Target is earning more
per dollar of sales. The net profit margin also declined, sharing the common impact of the
earning per dollar for the company. Receivables turnover ratio is equal to revenue divided by
receivables; Target only shows data for 2012. The receivable ratio is in the group of efficiency
ratios, if the receivable ratio is high it shows that the company’s profits are higher.
Target Financial Analysis 17
Inventory turnover shows a decline from 2012-2013 by .36%, this suggests that perhaps
Target found efficient ways of selling inventory in lessor time. In other words, Target is selling
its merchandise without it having to sit on the shelf for a long time.
Asset turnover ratio shows how well a company is generating revenues per dollar of
assets. The increase for Target shows efficiency in deployment of assets for the company. Finally
the rate of return on total stockholders’ equity shows 6.54% increase from 2012-2013.
The return on equity (ROE) from 2012-2014 went up and down from 12.09% to 18.59%,
although Target increased the return on equity from 2012 to 2013 by 6.54% it went back down to
12.14% in 2014.
Investing Activities
Target has made a commitment to continued improvement of its facilities as well as
construction on new stores in its United States segment. The non-current account balances listed
below, and retrieved from the Consolidated Statement of Financial Position for 2012 indicate the
largest percentage changes were found in the Construction in Progress, Accumulated
Depreciation and Buildings and Improvement, accounts respectively. The increases in
Construction in Progress and Buildings and Improvement can be attributed to the organization’s
commitment to expansion and growth, which was noted in the company’s 10-K form. The
increase in accumulated depreciation is most likely due to continued depreciation charges of
non-current assets (Hawawini & Viallet, 2011).
Target Financial Analysis 18
Non-Current Assets (Amounts in Millions)
Non-Current Asset
Year End Balance
Year End Balance
Percentage
Account
2012
2011
Change
Land
Buildings and
6,206
6,122
1.37
28,653
5,362
6.76
5,362
5,141
4.29
2,567
2,488
4.01
1,176
963
22.11
Improvement
Fixtures and
Equipment
Computer and
Software
Construction-inProgress
Target’s proportion of non-current assets to total assets for the last two years indicates
that the company prefers to invest the majority of their assets into long term capital expenditures
such as property and equipment. The proportion or percentage of non-current assets total assets
for 2012 and 2011 were 63% and 62% respectively. In comparison to its current assets, the noncurrent assets are much higher. This could also be due to the increase in store improvements and
new construction projects, as previously noted that the company has committed itself to ensure
continued growth and profitability.
Through the footnotes to the financial statements, the company has identified the use of a
straight-line depreciation method when accounting for non-current assets. The straight-line
Target Financial Analysis 19
depreciation method is the most basic form of accounting for non-current assets, resulting in
depreciation charges being equal each year (Hawawini & Viallet, 2011). Utilizing a straight-line
method of depreciation is advantageous to Target, because it allows for guaranteed deductions
for a set amount of time (Sherman). This means that if Target has given a piece of equipment a
five-year life expectancy, it can then depreciate that equipment over five years, guaranteeing that
tax deduction for that set amount of time.
In reviewing Target’s financial statements, it appears that the company utilizes both
Capitalization and Expense as a form of accounting for their costs. Items such as Cost of Goods
Sold are expensed, while those larger expenses such as Building and Equipment are capitalized.
Capitalization is the practice of accounting for expenses on the company’s balance sheet rather
than the income statement, and it allows for an organization to account for these costs during the
useful life of the equipment, however it will also have an effect on the cash flow from
operations, meaning that it will result in a higher reported cash flow, and greater taxes being paid
up front. (investopedia.com) Expensing an item results in the organization accounting for
purchases as they are incurred, however this will also have an effect on the company’s cash
flows from operations, resulting in reduced net earnings in comparison to capitalization.
Analysis of Investing Activities
The Return on Assets (ROA) and the Cash Return on Assets are valuable indicators of
how profitable a company is. The ROA is a ratio that gives investors a snapshot of profitable a
company is in relation to its total assets (investopedia.com). The Cash Return on Assets Ratio is
utilized to primarily to gauge a company’s performance in relation to competitors. The ROA for
Target Financial Analysis 20
Target for 2011 and 2012 was 6.2% for both periods. The Cash Return on Assets Ratio for the
same periods was 11.6% and 11.00% respectively.
The ROA would seem to be a better indicator of a company’s financial performance, as
this calculation utilizes net income, which is a company’s profit after expenses have been paid.
The ROA figures indicate that the organization is doing a good job of utilizing its assets to
generate profit. Investors and professional like to see an ROA figure at 5% or more
(investopedia.com), and at 6.2% for both 2011 and 2012, the company seems to be on Target in
regards to profitability. It would be helpful in regards to Cash Return on Assets to have
information regarding competitors within the industry. This information could be found
similarly to that of Target’s on the company’s website. In addition to the figures reported in the
financial statements section, it would also be wise to review both the annual report and 10-K
report for any insight on the organization’s current asset management strategy as well as any
future outlooks for major projects.
As previously mentioned, Target is divided into three segments, U.S. Retail, U.S. Credit
Card, and Canadian. For the year end of 2011 and 2012, the following table represents the
segment profit/loss as described in the company’s footnotes to its financial statements.
US. Retail
U.S. Credit Card
Canadian
Total
2012
5,019
557
(369)
5,206
2011
4,765
606
(122)
5,250
The U.S. Retail segment of the company generates a large majority of the profits reported
in this section. The U.S. Retail segment made up 96% and 90% of the total profits for 2012 and
Target Financial Analysis 21
2011 respectively. In reviewing the additional segment information reported by Target, the U.S.
Retail segment also makes up the vast majority of the organization’s total assets as well. With a
figure in the millions of $37,404 for 2012 of the $48,163, reported on the Consolidated
Statement of Financial Position. In regards to capital expenditures, the U.S. Retail segment also
leads in this area. This tells us that Target’s main focus is on continuing the growth and
development of the U.S. market and has devoted a great deal of its capital to doing so.
The 10-K form allows investors the ability to assess future performance for various
reported segments of a company. For instance in the Target 10-K, the Management Discussion
and Analysis section gave insight into the profit losses reported for the Canadian segment of the
company. As previously noted for 2011 and 2012, the Canadian segment reported losses in
millions in the amounts of $122 and $369 respectively. The company entered the Canadian
market in 2013, so the losses reported for 2011 and 2012 were due mainly to start-up costs
related to this venture. Target is hopeful that the losses will be recouped as they begin to
establish themselves within the Canadian market.
Debt Financing
In this section, Targets debt financing will be cross referenced for the years 2014 and
2013 to get an understanding of the company’s debt financing and how it’s used by its
management. Reviewing Targets debt financing will show how the company is managing its
debts while staying profitable. According to investopedia.com, debt financing is defined as
“When a firm raises money for working capital or capital expenditures by selling bonds, bills, or
notes to individual and/or institutional investors. In return for lending the money, the individuals
or institutions become creditors and receive a promise that the principal and interest on the debt
will be repaid.” (investopedia.com)In this section, Targets debt financing is referenced in their
Target Financial Analysis 22
balance sheet under liabilities. Target’s liabilities consists of the following sub-sections: accounts
payable, short/current long term debt, long term debt, other liabilities, and deferred long term
liability charges. The fore mentioned sub-sections will be furthered defined for Target in the
coming sections of this report.
Accounts payable
As defined on Wikipedia.org, accounts payable is defined as “money owed by a business
to its suppliers shown as a liability on a company’s balance sheet” (Wikipedia.com). In 2014,
Target accounts payable as listed at $11,617,000,000 and in 2013 it was listed at
$11,037,000,000. Between the two years there has been an increase in the amount of
$580,000,000 in accounts payable suggesting the company is making significant changes to
improve its financial structure, inventories, and to improve the operational cycle in the company.
Short/Current long term debt
As defined by Hawawini, “short-term debt includes notes payable, bank overdrafts,
drawings on lines of credit, and short-term promissory notes. The portion of any long-term debt
due within a year is also a short-term obligation and is recorded in the balance sheet as a shortterm borrowing” (Hawawini, 2011, pp. 39). In 2014, Target short/current long term debt was
$1,160,000,000 and in 2013 it was $2,994,000,000. Between the two years there has been a
decrease of $1,834,000,000 which suggests that the company is concentrating on lowering its
short-term debt to improve its debt ratio and profitability.
Long-term debt
As defined on investopedia.com, “long-term debt is loans and financial obligations
lasting over one year” (investopedia.com). In 2014, Target long-term debt was $12,622,000,000
and in 2013 it was $14,654,000,000. There was a decrease of $2,032,000,000 between the two
Target Financial Analysis 23
years which suggest that the company is concentrating on lowering its long-term debt to improve
its debt ratio, increase profitability, and it shows that the company finances is in good standing.
Other liabilities
As defined on investopedia.com, “Other liabilities consist of obligations which are not
going to be paid off within a year, but are not included as a long-term liability. These liabilities
are part of the total liabilities and are deemed not important enough to be identified each amount
individually.” (investopedia.com) In 2014, Target other liabilities was $1,490,000,000 and in
2013 it was $1,609,000,000. There was a decrease of $119,000,000 which suggests that the
company has made enough capital to pay off some of its debts and to improve its debt ratio.
Deferred long-term liability charges
As defined on investopedia.com, “Deferred long-term liability charges are charges that
are most often made up of deferred-tax liabilities that are to be paid more than one year in the
future. Deferred long-term liabilities are also considered forward contract obligations like swap
contracts or derivative products” (investopedia.com). In 2014, Target deferred long-term liability
charges was $1,433,000,000 and in 2013 it was $1,311,000,000. There was an increase of
$122,000,000 during the two year period.
The total current liabilities add up to $12,777,000,000 for 2014 and $14,031,000,000 for
2013. The non-current liabilities add up to $15,545,000,000 for 2014 and $17,574,000,000 for
2013.The total liabilities from 2013 to 2014 have decreased by $3,283,000,000 which implies
that Targets profit margin has increase and the company is doing well.
According to edgar-online.com (through SEC filings), the table listed below shows the
interest-bearing liabilities for current and non-current liabilities for Target:
Target Financial Analysis 24
Fair Value
Measurements
Fair Value at February 1,
– Recurring
2014
Basis
(millions)
Level
Level 2
Level 3
1
Assets
Cash and cash
equivalents
Short-term
$ 3
$
—
$
—
investments
Other current
assets
Interest rate
—
1
—
swaps (a)
Prepaid
73
—
—
forward
contracts
Beneficial
—
—
71
(b)
interest asset
Other
noncurrent
assets
Interest rate
—
62
—
swaps (a)
Company-owned
—
305
—
life insurance
investments (c)
Beneficial
—
—
56
(b)
interest asset
Total
$ 76
$ 368
$ 127
Liabilities
Other current
liabilities
Interest rate
$ —
$
—
$
—
(a)
swaps
Other
noncurrent
liabilities
Fair Value at February 2, 2013
Level 1
$
130
Level 2
$
—
Level 3
$
—
—
4
—
73
—
—
—
—
—
—
85
—
—
269
—
—
—
—
$
203
$
358
$
—
$
—
$
2
$
—
Target Financial Analysis 25
Interest rate
swaps (a)
Total
(b)
(c)
$ —
$
39
$
—
$
—
$
54
$
—
$ —
$
39
$
—
$
—
$
56
$
—
There was one interest rate swap designated as an accounting hedge at February 01, 2014
and February 02, 2013. See Note 19 for additional information on interest rate swaps.
A rollforward of the Level 3 beneficial interest asset is included in Note 6.
Company-owned life insurance investments consist of equity index funds and fixed income
assets. Amounts are presented net of nonrecourse loans that are secured by some of these
policies. These loan amounts were $790 million at February 01, 2014 and $817 million at
February 02, 2013.
Lease commitments
Over the next five years Target does have lease commitments that it has obligations too.
Targetlease retail locations, warehouses, distribution centers, office space, land, equipment and
software. Over the next five years the table below shows the lease payments Target has agreed to
in contract, taken from edgar-online.com (through SEC filings):
Operating Leases (a)
Future
Minimum
Lease
Payments
(millions)
2014
2015
2016
2017
2018
After
2018
$
187
185
174
168
162
3,227
Capital Leases (b)
$
204
198
192
157
150
4,412
Rent Income
$
(6
(5
(4
(4
(3
(14
Total
)
)
)
)
)
)
$
385
378
362
321
309
7,625
Target Financial Analysis 26
Total
future
minimum
lease
payments
$
4,103
$
Less:
Interest (c)
Present
value of
future
minimum
capital
lease
payments
5,313
$
(36 )
$
9,380
(3,342)
$
1,971
Total contractual lease payments include $2,105 million related to options to extend lease
terms that are reasonably assured of being exercised and also includes $135 million of
legally binding minimum lease payments for stores that are expected to open in 2014 or
later.
Capital lease payments include $3,740 million related to options to extend lease terms that
are reasonably assured of being exercised and also includes $80 million of legally binding
minimum payments for stores opening in 2014 or later.
Calculated using the interest rate at inception for each lease.
Includes the current portion of $77 million.
Pension and Post-retirement benefit obligation
Target does have a Pension and Post-retirement benefit program that helps individuals to
save for retirement. Listed below is a table taken from edgar-online.com (through SEC filings)
that explains Target contributions from 2012 through 2023.
Contributions
Target Financial Analysis 27
Our obligations to plan participants can be met over time through a combination of
company contributions to these plans and earnings on plan assets. In 2013 we made no
contributions to our qualified defined benefit pension plans. In 2012, we made discretionary
contributions of $122 million . We are not required to make any contributions in 2014. However,
depending on investment performance and plan funded status, we may elect to make a
contribution. We expect to make contributions in the range of $5 million to $6 million to our
postretirement health care benefit plan in 2014.
Estimated Future Benefit Payments
Benefit payments by the plans, which reflect expected future service as appropriate, are
expected to be paid as follows:
Pension
Benefits
Estimated Future Benefit Payments
(millions)
2014
2015
2016
2017
2018
2019-2023
$
152
159
169
178
188
1,058
$
Postretirement
Health Care
Benefits
6
6
7
8
8
45
Overall, the debt financing activities for Target has been moving in a positive direction.
Target has paid on most of its liabilities over the past year except for deferred long-term liability
charges where the company’s value has increase from the prior year. With that said, Target was
still able to show positive figures from 2013 to 2014 with a decrease in total liabilities of
$3,283,000,000.
Target Financial Analysis 28
Contingent liabilities
During the fourth quarter of 2013 there was a data breach that jeopardized 40 million
credit and debit card accounts of guest who shopped at the U.S. stores. The investigation is still
being looked into and Target is working with law enforcement efforts to identify the responsible
parties. According to edgar-online.com (through SEC filings), “Target recorded $61 million of
pretax Data Breach-related expenses, and expected insurance proceeds of $44 million, for net
expenses of $17 million ($11 million after tax), or $0.02 per diluted share”(edgar-online.com).
According to a Statement issued in edgar-online.com, “Target expects to receive significant
investigation, legal and professional services expenses associated with the data breach and will
recognize the expenses as the services are received. Target also expects to gain additional
expenses associated with incremental fraud and reissuance costs on their Target
REDcards.”(Edgar-online.com)
Equity Financing
In this section, Targets equity financing will be cross compared for the years 2014 and
2013 to get an understanding of the company’s gains and how it managed to achieve its equity.
Reviewing Targets equity holdings will show how the company is managing its finances.
According to Hawawini, “Owners’ equity is the difference between a firm’s assets and its
liabilities.” (Hawawini, 2011, pp. 17) In this section, Targets stockholders’ equity is referenced
in their balance sheet. Target’s stockholders’ equity consists of the following sub-sections:
common stock, retained earnings, capital surplus, and other stockholder equity. The fore
mentioned sub-sections will be furthered defined for Target in the coming sections of this report.
Common Stock
Target Financial Analysis 29
According to investorwords.com, common stock is defined as “Securities representing
equity ownership in a corporation, providing voting rights, and entitling the holder to a share of
the company’s success through dividends and/or capital appreciation” (investorwords.com). In
2014, Targets common stock was $53,000,000 and in 2013 the common stock was $54,000,000.
From 2013 to 2014 there was a decrease in the dollar amount of 1 million for common stock.
According to Hawawini, “The dollar amount is the number of shares the firm has issued since its
creation multiplied by the par value of the shares.” (Hawawini, 2011, pp. 46) Cash dividends
paid to stockholders has increased from 0.36 to 0.43 from 2013 to 2014 respectively.
Retained Earnings
According to investorwords.com, retained earnings is defined as “Earnings not paid out
as dividends but instead reinvested in the core business or used to pay off debt.”
(investorwords.com) In 2014, Targets retained earnings was $12,599,000,000 and in 2013 the
retained earnings was $13,155,000,000. From 2013 to 2014 there was a decrease in the dollar
amount of $556,000,000 that the company can use in their reserve.
Capital Surplus
According to investopedia.com, capital surplus is defined as “Equity which cannot
otherwise be classified as capital stock or retained earnings. It's usually created from a stock
issued at a premium over par value.” (investopedia.com) In 2014, Targets capital surplus was
4,470,000,000 and in 2013 the capital surplus was 3.925,000,000. From 2013 to 2014 there was
an increase in capital surplus.
Other Stockholder Equity
Target Financial Analysis 30
Other stockholder equity, Sometimes known as AOCI (Accumulated other comprehensive
income), can consist of the following according to the definition on wikipedia.com:
1. Unrealized gains and losses on available for sale securities.
2. Gains and losses on derivatives held as cash flow hedges (only for effective portions).
3. Gains and losses resulting from translating the financial statements of foreign subsidiaries
(from foreign currency to the presentation currency).
4. Actuarial gains and losses on defined benefit plans recognized (Minimum pension
liability adjustments).
5. Changes in the revaluation surplus.
In 2014, Target’s other stockholder equity was $891,000,000 and in 2013 was $576,000,000.
There was an increase of $315,000,000 from 2013 to 2014.To sum up the stockholder equity
section of Target’s balance sheet, one can assume that the decrease in common stock from 2013
to 2014 means that the stocks available for sale may have decreased depending if the face value
or market value per share decreases too. Retained earnings have decreased as well that may be
due to decrease in profits for the year or dividends paid to stockholders. Capital surplus has
increased stating that Target has received more than the par value of its common stock. Other
stockholder equity has increased from 2013 to 2014 stating that Target had made gains on sales
of securities on outside investments. Totaling the stockholder equity from 2013 to 2014 has
made an increase for Target showing potential growth.
Dividend pay ratio and Dividend yield ratio
According to finance.yahoo.com, which derived its information from Morningstar, the
dividend payout ratio for 2014 is 51%. The forward annual dividend rate is 1.72 with the forward
annual dividend yield being 2.90%. The trailing annual dividend yield is 1.65 with the trailing
annual dividend yield being 2.70%. The provided information indicates that the increase in the
dividend payout ratio and dividend yield ratio is good standards that investors are looking for
Target Financial Analysis 31
when deciding to buy more stocks or sale their current stocks. Listed below is a graph from
dividendgrowthinvestor.com that shows the Targets dividend growth from 2004 to 2013.
According to dividendsgrowthinvestor.com, “The annual dividend payment has increased
by 18.60% per year over the past decade, which is higher than to the growth in EPS. An 18.60%
growth in distributions translates into the dividend payment doubling every four years. If we
look at historical data, going as far back as 1974 we see that Target has actually managed to
double its dividend every five and a half years on average” (Dividendsgrowthinvestor.com).
Target Financial Analysis 32
Also reported on dividendsgrowthinvestor.com, “the dividend payout ratio has increased from 13
% in 2004 to 29.20% in 2013. The expansion in the payout ratio has enabled dividend growth to
be faster than EPS growth over the past decade. A lower payout is always a plus, since it leaves
room for consistent dividend growth minimizing the impact of short-term fluctuations in
earnings” (Dividendsgrowthinvestor.com).
Equity financing activities
To briefly summarize Targets equity financing activities for the past year and beyond,
dividendgrowthinvestor.com has cited the following off its reports:






Future growth would likely be focused on expanding same-store sales and renovating
existing stores.
Future growth could be realized by the increased penetration of the RED Card.
The company is Targeting middle-class and upper income consumers, which are more
interested in quality and diversity of product offerings, rather than simply looking at the
lowest prices.
It has in essence managed to differentiate itself from Wal-Mart (WMT).
The company also is on track to bring the number of stores in Canada, which could
increase long-term profits.
Target Stores has a goal of earning $8/share by 2017, which would be driven by 5% sales
growth in US, share repurchases, store openings in Canada, as well as square footage
growth.
Treasury stocks and stock options
Currently Target is not offering treasury stocks. Target is only selling shares of its stock
through a brokerage firm or through their direct investment program (Computershare
Shareowner Services) with the exception of the following taken from Edgar online through the
SEC filings:
“Through 2013, we granted nonqualified stock options to certain team members that generally vest
and become exercisable annually in equal amounts over a four -year period and expire 10 years
after the grant date. We previously granted options with a ten-year term to the non-employee
Target Financial Analysis 33
members of our Board of Directors that vest immediately, but are not exercisable until one year
after the grant date. We used a Black-Scholes valuation model to estimate the fair value of the
options at the grant date.” (Edgar-online.com)
Stock Option
Activity
Stock Options
Total Outstanding
Numbe
Exercis
Intrinsic
r of
e
Value (c)
Option
Price (b)
(a)
s
February 2,
34,458
$ 50.6
$ 366
2013
0
Granted
226
69.56
Expired/forfeite
(745 )
53.14
d
Exercised/issue (9,085 )
46.51
d
February 1,
24,854
$ 52.1
$ 136
2014
9
Exercisable
Exercis
Intrinsic
e
Value (c)
Price (b)
Numbe
r of
Option
s (a)
21,060
$
48.2
5
$
273
16,824
$
50.6
4
$
109
Analysis of Financing Activities
Financial leverage is calculated as liabilities over equity. Financial leverage is used to
make investments within the firm to improve operation. According to investopedia.com,
“financial leverage is the amount of debt used to finance a firm’s assets, a firm with significantly
more debt than equity is considered to be highly leveraged.” (investopedia.com) Based on the
table below taken from csimarket.com, Target is considered to have average leverage, even after
the wake of the data breach of late quarter 2013. Targets financial leverage for the fourth quarter
of 2013 is 1.74.
Target Financial Analysis 34
(Feb. 3. 2014)
IV. Quarter
(Nov. 2,
2013)
III. Quarter
-1.97 %
(Aug. 3,
2013)
II. Quarter
-1.2 %
(May 3,
2013)
I. Quarter
0.77 %
(Feb. 3.
2013)
IV. Quarter
4.14 %
Y / Y Total Liabilities
Change
Leverage Ratio MRQ
Overall Ranking
Seq. Equity Change
-10.39 %
-9.06 %
-10.46 %
-8.57 %
1.74
# 253
0.46 %
1.87
# 295
0.85 %
1.76
# 282
-3.03 %
1.68
# 281
-0.23 %
Seq. Total Liabilities
Change
-6.27 %
7.37 %
1.54 %
-12.31 %
Y / Y Equity Change
4.66
%
2.58
%
1.91
# 310
1.26
%
-4.88
%
Material changes in capital structure
During the period ending Feb 1, 2014 in the cash flow statement, Target ranked up the
following changes:
Period Ending
Net Income
Depreciation
Adjustments To Net Income
Changes In Accounts Receivables
Changes In Liabilities
Changes In Inventories
Changes In Other Operating Activities
Feb 1, 2014 Feb 2, 2013 Jan 28, 2012
1,971,000
2,999,000
2,929,000
2,223,000
33,000
157,000
566,000
(885,000)
2,455,000
2,142,000
150,000
(217,000)
457,000
15,000
(221,000)
2,131,000
637,000
(187,000)
353,000
(322,000)
(107,000)
Target Financial Analysis 35
Total Cash Flow From Operating Activities
6,520,000
5,325,000
5,434,000
Bonds payable
Target has bonds payable in the amount of $11.8 billion and according to
morningstar.com, there is a number of bonds with the maturity date ranging from 2014 to 2042.
Stock outstanding market price
Financial ratios






Targets Rate of return on total assets for 2014 is 4.33% and for 2013 is 6.30%.
o According to csimarket.com, “In (FY 2014) Target's ROA decreased compare to
previous year to 4.42 %, due to detoriation of net income -34.28 % to $1,971.00
million, from $2,999.00 million a year ago, as TGT's assets were $44,553.00
million” (csimarket.com).
Targets Rate of return on total stockholders’ equity for 2014 is 12.09% and for 2013 is
18.63%.
o According to csimarket.com, “In (FY 2014) ROE decreased compare to previous
year to 12.14 %, due to detoriation of net income” (csimarket.com).
Targets Dividend payout ratio for 2014 is 53.09% and for 2013 is 24.49%.
o According to csimarket.com, “Despite year on year detoriation of EPS, Target
increased dividend to $1.57 and raised dividend payout ratio to 51.14%”
(csimarket.com).
Targets Times interest earned for 2014 is 5.73% and for 2013 is 9.84%.
o According to csimarket.com, “Target's interest coverage ratio sequentially
decreased to 5.73 a new company low. Due to increase of interest expenses”
(csimarket.com).
Targets Current ratio for 2014 is 0.9058% and for 2013 is 1.168%.
o According to ycharts.com, “A current ratio of one means that book value of
current assets is exactly the same as book value of current liabilities. In general,
investors look for a company with a current ratio of 2:1, meaning current assets
twice as large as current liabilities. A current ratio less than one indicates the
company might have problems meeting short-term financial obligations. If the
ratio is too high, the company may not be efficiently using its current assets or
short term financing facilities” (ycharts.com).
Targets Quick ratio for 2014 is 0.08% and for 2013 is 0.08%.
o According to csimarket.com, ‘On the trailing twelve months basis Despite year
on year decrease in Target's average Current Liabilities to $12,777 million, Quick
Target Financial Analysis 36

Ratio TTM to 0.08 below company average Quick Ratio TTM.
Quick Ratio TTM is the average cumulative value over the last four quarters”
(csimarket.com).
Target Debt-to-Equity ratio for 2014 is 0.88% and for 2013 is 1.12%.
o According to csimarket.com, “On the trailing twelve months basis Due to
repayments of liabilities of -6.8%Target decreased Total Debt to Equity TTM in
the IV. Quarter to 0.88, below company's average Total Debt to Equity TTM.
Total Debt to Equity TTM is the average cumulative value over the last four
quarters.” (csimarket.com)
Comparison to Industry Benchmarks
After reviewing all the financial ratios to determine whether Target is an in fact a
growing corporation that should be listed in the top 10, it is evident that Target corporations
numbers are growing each year through performance based on the about financial and annual
statements, and ratios. Therefore, there are other super centers that are list higher in rank than
Target which is Wal-Mart as being one of Targets top competitors. Based on results from 2012
and 2013 there has been improvement as the researched ratios Targets Dividend payout ratio for
2014 is 53.09% and for 2013 is 24.49%.
According to csimarket.com, “Despite year on year detoriation of EPS, Target increased
dividend to $1.57 and raised dividend payout ratio to 51.14%” (csimarket.com). However, the
benchmarks that the company considers are the capacity of the industry and location. Therefore,
developing a supercenter like other competitors has kept Target Corporation in the running for
top 10 industry retail performers.
Target Financial Analysis 37
Appendix
Statement of Cash Flows
2012
2011
2010
Operating activities
Net earnings
$2,999 $2,929 $2,920
Reconciliation to cash flow
Depreciation and amortization
2,142 2,131 2,084
Share-based compensation expense
105
90
109
Deferred income taxes
(14)
371
445
Bad debt expense (a)
206
154
528
Gain on receivables held for sale
(161) -
Noncash (gains)/losses and other, net
14
22
(145)
Target Financial Analysis 38
2012
2011
2010
Changes in operating accounts:
Accounts receivable originated at Target
(217) (187) (78)
Inventory
15
Other current assets
(123) (150) (124)
Other noncurrent assets
(98)
43
(212)
Accounts payable
199
232
115
Accrued and other current liabilities
138
218
149
Other noncurrent liabilities
120
(97)
(103)
Cash flow provided by operations
5,325 5,434 5,271
(322) (417)
Investing activities
Expenditures for property and equipment
(3,277) (4,368) (2,129)
Proceeds from disposal of property and equipment
66
37
69
Change in accounts receivable originated at third parties
254
259
363
Other investments
102
(108) (47)
Cash flow required for investing activities
(2,855) (4,180) (1,744)
Financing activities
Change in commercial paper, net
970
—
—
Additions to short-term debt
—
1,500 —
Reductions of short-term debt
(1,500) —
Additions to long-term debt
1971
—
1,994 1,011
Target Financial Analysis 39
2012
2011
2010
Reductions of long-term debt
(1,529) (3,125) (2,259)
Dividends paid
(869) (750) (609)
Repurchase of stock
(1,875) (1,842) (2,452)
Stock option exercises and related tax benefit
360
89
294
Other
(16)
(6)
—
Cash flow required for financing activities
(2,488) (2,140) (4,015)
Effect of exchange rate changes on cash and cash equivalents
8
(32)
Net decrease in cash and cash equivalents
(10)
(918) (488)
Cash and cash equivalents at beginning of period
794
1,712 2,200
Cash and cash equivalents at end of period
$784
$794
$1,712
Interest paid, net of capitalized interest
$775
$816
$752
Income taxes paid
1,603 1,109 1,259
—
Supplemental information
Noncash financing activities
Property and equipment acquired through capital lease obligations 282
Consolidated financial summary*
Target Corporation
$73,301Revenues
Revenues
EBIT
2012 2011 2010 2009
$73,301 $69,865 $67,390 $65,357
$5,371 $5,322 $5,252 $4,673
1,388 176
Target Financial Analysis 40
Net Earnings
$2,999 $2,929 $2,920 $2,488
Net Earnings Per Share, Diluted $4.52 $4.28 $4.00 $3.30
Average Common Shares
Outstanding, Diluted
663.3 683.9 729.4 754.8
* all dollar amounts in millions, except per share amounts
Target Stores (Fiscal Year End)
1,778Number of U.S. Stores
2012 2011 2010 2009
Number of U.S. Stores* 1,778 1,763 1,750 1,740
Number of Employees 361,000 365,000 355,000 351,000
* Through 2012, all of Target's stores were located in the United States. Target began operating
stores in Canada in March, 2013.
Consolidated Statements of Cash Flows
(Millions)
2011
2010
2009
$2,929
$2,920
$2,488
2,131
2,084
2,023
90
109
103
Deferred income taxes
371
445
364
Bad debt expense
154
528
1,185
22
(145)
143
Operating activities
Net earnings
Reconciliation to cash flow
Depreciation and amortization
Share-based compensation expense
Non-cash (gains)/losses and other, net
Changes in operating accounts:
Target Financial Analysis 41
Accounts receivable originated at Target
(187)
(78)
(57)
Inventory
(322)
(417)
(474)
Other current assets
(150)
(124)
(129)
43
(212)
(114)
Accounts payable
232
115
174
Accrued and other current liabilities
218
149
257
Other noncurrent liabilities
(97)
(103)
(82)
5,434
5,271
5,881
Other noncurrent assets
Cash flow provided by operations
Investing activities
Expenditures for property and equipment
Proceeds from disposal of property and equipment
Change in accounts receivable originated at third parties
Other investments
Cash flow required for investing activities
(4,368) (2,129) (1,729)
37
69
33
259
363
(10)
(108)
(47)
3
(4,180) (1,744) (1,703)
Financing activities
Additions to short-term debt
1,500
—
—
Additions to long-term debt
1,994
1,011
—
Target Financial Analysis 42
(3,125) (2,259) (1,970)
Reductions of long-term debt
Dividends paid
(609)
(496)
(1,842) (2,452)
(423)
(750)
Repurchase of stock
Stock option exercises and related tax benefit
89
294
47
Other
(6)
—
—
(2,140) (4,015) (2,842)
Cash flow required for financing activities
(32)
—
—
Net increase (decrease) in cash and cash equivalents
(918)
(488)
1,336
Cash and cash equivalents at beginning of period
1,712
2,200
864
Cash and cash equivalents at end of period
$794
$1,712
$2,200
Effect of exchange rate changes on cash and cash equivalents
Cash paid for income taxes was $1,109 million, $1,259 million and $1,040 million during 2011,
2010 and 2009, respectively. Cash paid for interest (net of interest capitalized) was $816 million,
$752 million and $805 million during 2011, 2010 and 2009, respectively.
See accompanying Notes to Consolidated Financial Statements
Income Statement
2014
2013
2012
2011
Period End Date
02/01/2014
02/01/2013
01/31/2012
01/31/2011
Stmt Source
N/A
10-K
10-K
10-K
Stmt Source Date
01/31/2014
03/14/2014
03/20/2013
03/20/2013
Stmt Update Type
Original
Updated
Updated
Updated
Currency Code
USD
USD
USD
USD
Total Revenue
72,596.0
73,301.0
69,865.0
67,390.0
Target Financial Analysis 43
Cost of Revenue
Gross Profit
Selling,General and
Administrative
51,160.0
21,436.0
15,375.0
Depreciation,Amortization 2,223.0
and Depletion
50,568.0
22,733.0
48,306.0
21,559.0
46,585.0
20,805.0
14,914.0
14,106.0
13,469.0
2,142.0
2,131.0
2,084.0
467.0
0.0
0.0
Depreciation and
Amortization
Special Income/Charges
0.0
Operating Expenses
17,207.0
17,362.0
16,237.0
15,553.0
Operating Income
4,229.0
5,371.0
5,322.0
5,252.0
Net Interest Income
-1,126.0
Pretax Income
Provision for Income Tax
Net Income
3,103.0
1,132.0
1,971.0
-762.0
4,609.0
1,610.0
2,999.0
-866.0
4,456.0
1,527.0
2,929.0
-757.0
4,495.0
1,575.0
2,920.0
Dividend Per Share
1.58
1.32
1.10
0.84
Tax Rate
0.364808
0.349317
0.342684
0.350389
3.10
4.57
4.31
4.03
Basic EPS
Basic Weighted Average
Shares
Basic EPS from Continuing
Operations
Basic EPS,Continuing and
Discontinued
Target Financial Analysis 44
Diluted EPS
3.07
4.52
4.28
4.00
Balance Sheet
2014 Q4
2013 Q3
2013 Q2
2013 Q1
02/01/2014
10/31/2013
07/31/2013
04/30/2013
N/A
N/A
N/A
N/A
Stmt Source Date
01/31/2014
10/31/2013
07/31/2013
04/30/2013
Stmt Update Type
Original
Original
Original
Original
USD
USD
USD
USD
695.0
706.0
1,018.0
1,819.0
1,347.0
0.0
0.0
0.0
8,766.0
10,376.0
8,441.0
8,099.0
Prepaid Assets and Others
272.0
0.0
0.0
0.0
Deferred Current Assets
177.0
0.0
0.0
0.0
Period End Date
Stmt Source
Currency Code
Assets
Cash, Equiv and Short Term
Investments
Cash and Cash Equivalents
Short Term Investments
Receivables
Other Receivables
Taxes Receivable
Inventories
Target Financial Analysis 45
Deferred Taxes,Current Assets
177.0
0.0
0.0
0.0
Other Current Assets
316.0
2,071.0
1,944.0
1,939.0
Total Current Assets
11,573.0
13,153.0
11,403.0
11,857.0
Net Property,Plant,and
Equipment
31,378.0
31,726.0
31,405.0
31,074.0
357.0
0.0
0.0
0.0
305.0
0.0
0.0
0.0
62.0
0.0
0.0
0.0
Deferred Non-Current Assets
469.0
0.0
0.0
0.0
Other Non-Current Assets
409.0
1,494.0
1,354.0
1,303.0
Total Non-Current Assets
32,980.0
33,220.0
32,759.0
32,377.0
Total Assets
44,553.0
46,373.0
44,162.0
44,234.0
8,845.0
8,806.0
7,078.0
6,721.0
2,772.0
3,623.0
3,705.0
3,915.0
Gross Property,Plant,and
Equipment
Land and Improvements
Buildings and Improvements
Machinery,Furniture/Equipment
Construction in Progress
Accumulated Depreciation
Goodwill and Other Intangible
Assets
Goodwill
Other Intangible Assets
Investments and Advances
Derivative Assets,Non-Current
Liabilities and Shareholders'
Equity
Payables
Accounts Payable
Taxes Payable
Dividends Payable
Accrued Expenses,Current
Target Financial Analysis 46
Current Debt
1,160.0
2,122.0
1,833.0
523.0
Total Current Liabilities
12,777.0
14,551.0
12,616.0
11,159.0
LT Debt and Capital Lease
Obligation
12,622.0
12,665.0
12,655.0
13,691.0
1,924.0
1,466.0
1,331.0
1,295.0
Employee Benefits
539.0
0.0
0.0
0.0
Other Non-Current Liabilities
460.0
1,535.0
1,540.0
1,569.0
Total Non-Current Liabilities
and MI
15,545.0
15,666.0
15,526.0
16,555.0
Total Liabilities
28,322.0
30,217.0
28,142.0
27,714.0
53.0
53.0
53.0
53.0
12,599.0
12,353.0
12,285.0
12,873.0
4,470.0
4,403.0
4,335.0
4,159.0
-891.0
-653.0
-653.0
-565.0
Total Equity
16,231.0
16,156.0
16,020.0
16,520.0
Total Liabilities and Equity
44,553.0
46,373.0
44,162.0
44,234.0
632.93
631.76
630.92
641.25
Long Term Debt
Deferred Liabilities, Noncurrent
Deferred Taxes,Non-Current
Liabilities
Capital Stock
Common Stock
Retained Earnings
Additional Paid in Capital
Accum Gains/ Losses Not
Affecting RE
Minimum Pension Liabilities
Foreign Currency Translation
Adjustments
Ordinary Shares Outstanding
Target Financial Analysis 47
Cash Flow Statement
2014
2013
2012
2011
02/01/2014
02/01/2013
01/31/2012
01/31/2011
N/A
10-K
10-K
10-K
Stmt Source Date
01/31/2014
03/14/2014
03/20/2013
03/20/2013
Stmt Update Type
Original
Updated
Updated
Updated
USD
USD
USD
USD
1,971.0
2,999.0
2,929.0
2,920.0
54.0
-161.0
0.0
0.0
2,223.0
2,142.0
2,131.0
2,084.0
-254.0
-14.0
371.0
445.0
233.0
325.0
266.0
492.0
2,860.0
-217.0
-187.0
-78.0
Period End Date
Stmt Source
Currency Code
Net Income
Net Income from Continuing
Operations
Operating Gains/Losses
Depreciation,Amortization
and Depletion
Deferred Taxes
Other Non-Cash Items
Asset Impairment Charge
Stock-Based Compensation
Change in Receivables
Target Financial Analysis 48
Change in Inventories
-885.0
15.0
-322.0
-417.0
616.0
337.0
450.0
264.0
Change in Other Current
Assets
-267.0
-123.0
-150.0
-124.0
Change in Other Current
Liabilities
0.0
0.0
0.0
0.0
-31.0
22.0
-54.0
-315.0
6,520.0
5,325.0
5,434.0
5,271.0
-3,367.0
-3,211.0
-4,331.0
-2,060.0
-157.0
0.0
0.0
0.0
130.0
102.0
-108.0
-47.0
Other Investing Changes,Net
3,123.0
254.0
259.0
363.0
Cash Flow from Investing
Activities
-271.0
-2,855.0
-4,180.0
-1,744.0
Change in Pay/Accrued Exp
Change in Payables
Change In Account Payable
Change in Accrued Expenses
Change in Other Working
Capital
Cash Flow from Operating
Activities
Purchase/Sale of
Prop,Plant,Equip: Net
Purchase of Property,Plant
and Equipment
Sale of Property,Plant,and
Equipment
Purchase/Sale of
Business,Net
Purchase/Acquisition of
Business
Purchase/Sale of
Investments,Net
Sale of Investments
Sale of Long Term
Investments
Target Financial Analysis 49
Issuance/Payments of
Debt,Net
-4,353.0
-88.0
369.0
-1,248.0
-1,461.0
-1,875.0
-1,842.0
-2,452.0
-1,006.0
-869.0
-750.0
-609.0
456.0
360.0
89.0
294.0
0.0
-16.0
-6.0
0.0
-6,364.0
-2,488.0
-2,140.0
-4,015.0
Cash, Equivalents, Start of
Period
784.0
794.0
1,712.0
2,200.0
Cash, Equivalents, End of
Period
695.0
784.0
794.0
1,712.0
-89.0
-10.0
-918.0
-488.0
3,067.0
2,048.0
1,066.0
3,142.0
26.0
8.0
-32.0
0.0
Issuance/Payments of LT
Debt,Net
Payments to Settle Long Term
Debt
Proceeds or Issuance of Long
Term Debt
Issuance/Payments of ST
Debt,Net
Payments to Settle Short Term
Debt
Proceeds or Issuance of Short
Term Debt
Issuance/Payments of
Common Stock,Net
Payments for Common Stock
Cash Dividends Paid
Proceeds from Stock Option
Exercised
Other Financing Changes, Net
Cash Flow from Financing
Activities
Change in Cash
Free Cash Flow
Effect of Exchange Rate
Changes
Target Financial Analysis 50
References
Annual Financials. (2014, January 1). . Retrieved , from
http://www.marketwatch.com/investing/stock/tgt/financials/balance-sheet
Annual Data. (2014, January 1). . Retrieved , from http://www.stock-analysison.net/NYSE/Company/Target-Corp/Ratios/Short-term-Operating-Activity
2012 Annual Report. (2014, January 1). . Retrieved , from
https://corporate.target.com/_media/TargetCorp/annualreports/content/download/pdf/AnnualReport.pdf?ext=.pdf
Cost of Goods Sold. (2014, January 1). . Retrieved , from
http://www.gurufocus.com/term/COGS/TGT/Cost%2Bof%2BGoods%2BSold/Target%2BCorp
Dune, L., Matlack, C., & Riley, M. (2014, January 1). Missed Alarms and 40 Million
Stolen Credit Card Numbers: How Target Blew It. . Retrieved , from
http://www.businessweek.com/articles/2014-03-13/target-missed-alarms-in-epic-hack-of-creditcard-data
Ernest & Young. (2014, January 1). . Retrieved , from
http://www.forbes.com/companies/ernst-young/
Item 8. Financial Statements and Supplementary Data. (2014, January 1). . Retrieved ,
from https://corporate.target.com/annual-reports/2012/10-K/10-K-part-II/Item-8-FinancialStatements-and-Supplementary-Data
Target Financial Analysis 51
Income statement. (2014, January 1). . Retrieved , from
http://finance.yahoo.com/q/is?s=TGT+Income+Statement&annual
Long-Term Investment Activity Analysis. (2014, January 1). . Retrieved , from
http://www.stock-analysis-on.net/NYSE/Company/Target-Corp/Ratios/Long-term-InvestmentActivity
National Retail Federation. (2014, January 1). . Retrieved , from
http://www.stores.org/2013/Top-100-Retailers
Profitability Analysis. (2014, January 1). . Retrieved , from http://www.stock-analysison.net/NYSE/Company/Target-Corp/Ratios/Profitability
http://smallbusiness.chron.com/decreasing-inventory-turnover-mean-21667.html. (2014,
January 1). . Retrieved , from http://smallbusiness.chron.com/decreasing-inventory-turnovermean-21667.html
Target Corporation. (2014, January 1). . Retrieved April 1, 2014, from
http://www.marketwatch.com/investing/stock/tgt/financials
Target Corporation Competition. (2014, January 1). . Retrieved , from
http://www.hoovers.com/companyinformation/cs/competition.Target_Corporation.d874c3aa052df19e.html