Target Corporation reported first quarter 2016 comparable sales growth of 1.2 percent, and adjusted earnings per share from continuing operations of $1.29, up 16.5 percent from $1.10 in 2015.
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First quarter GAAP earnings per share (EPS) from continuing operations were $1.02, compared with $1.01 in first quarter 2015.
First quarter 2016 GAAP EPS from continuing operations reflects $261 million of pre-tax early debt retirement losses, costs related to the sale of the pharmacy and clinic businesses to CVS Health and the resolution of income tax matters.
First quarter 2016 sales decreased 5.4 percent to $16.2 billion from $17.1 billion last year, as a 1.2 percent increase in comparable sales was more than offset by the impact of the sale of the pharmacy and clinic businesses. Comparable digital channel sales grew 23 percent and contributed 0.6 percentage points to comparable sales growth. Segment earnings before interest expense and income taxes (EBIT) were $1,323 million in first quarter 2016, an increase of 4.9 percent from $1,261 million in 2015.
First quarter EBITDA and EBIT margin rates were 11.5 percent and 8.2 percent, respectively, compared with 10.5 percent and 7.4 percent, respectively, in 2015. First quarter gross margin rate was 30.9 percent, compared with 30.4 percent in 2015, reflecting the benefit of the sale of Target’s pharmacy and clinic businesses, combined with the benefit of Target’s cost savings initiatives, partially offset by investments in promotions.
First quarter SG&A expense rate was 19.4 percent in 2016, compared with 19.9 percent in 2015, reflecting the benefit of the sale of Target’s pharmacy and clinic businesses along with continued expense discipline across the organization.
The Company’s first quarter 2016 net interest expense was $415 million, compared with $155 million last year, driven by a $261 million charge related to the early retirement of debt. First quarter 2016 effective income tax rate from continuing operations was 31.6 percent, compared with 34.8 percent last year.
The decrease was primarily due to the adoption of new accounting standards for employee share-based payments, which reduced the effective tax rate by approximately 1.9 percentage points, and losses related to the early retirement of debt.
In first quarter 2016, Target repurchased 11.4 million shares of common stock at an average price of $78.37, for a total investment of $893 million. The Company also paid dividends of $336 million. In total, Target returned $1,229 million to shareholders in first quarter 2016, representing more than 200 percent of net income from continuing operations.
Since the beginning of the current $10 billion share repurchase program, Target repurchased 106.0 million common shares at an average price of $70.51, for a total investment of approximately $7.5 billion.
For the trailing twelve months through first quarter 2016, after-tax return on invested capital (ROIC) was 16.0 percent, compared with 12.5 percent for the twelve months through first quarter 2015.
Excluding the net gain on the sale of the pharmacy and clinic businesses, ROIC for the trailing twelve months through first quarter 2016 was 14.0 percent, reflecting higher profits on a stable base of invested capital. See the “Reconciliation of Non-GAAP Financial Measures†section of this release for additional information about Target’s ROIC calculation.
First quarter net earnings from discontinued operations were $18 million, compared with after-tax losses of ($16) million last year. First quarter 2016 net earnings from discontinued operations primarily reflect foreign currency gains on Target’s net assets. ■