[ad_1]
Target Corp. said Tuesday it will continue to hold off on share repurchases until cash generation increases to a pace that is consistent with the retailer’s goal of maintaining a strong credit rating.
The discount retailer
TGT,
hasn’t repurchased any shares since the second quarter of 2022. There is is currently $9.7 billion remaining in the $15 billion share-buyback program that was approved in August 2021. The remaining authorization represents about 12.3% of Target’s current market capitalization of $78.77 billion.
In the retailer’s conference call with analysts, which followed the release of fiscal fourth-quarter results, Chief Financial Officer Michael Fiddelke said that in 2022, Target’s business was “a net user of cash for the first time in many years,” due to factors including “unexpectedly low profitability,” higher-than-expected capital expenditures and a “rapid slowdown” in inventory turns.
He said he expects each of those factors to become more favorable in 2023, but in the near-term, there is still no plan to repurchase shares.
“Over time, as our cash flow recovers and debt metrics improve, we expect share repurchases will play a meaningful role within our broader long-term capital [requirements],” Fiddelke said, according to a transcript provided by FactSet. “But as always, those repurchases will only occur after we [have] fully invested in our business and supported our team, after we’ve supported our dividend goals, and within limits of our middle A ratings.”
Credit-rating agency S&P Global Ratings currently rates Target’s long-term debt at A.
Target said on the earnings call that it wasn’t “guiding” for free cash flow in 2023, but it expects “material improvements” in cash generation as profitability improves and working capital recovers.
Target’s stock rallied 2.6% in midday trading. Before the opening bell, the company reported fiscal fourth-quarter profit that beat expectations by a wide margin and revenue and same-store sales that, surprisingly, increased, but it also provided a “cautious” profit outlook that was below Wall Street forecasts.
The stock has advanced 3.5% over the past three months but has lost 14.3% over the past year, while the S&P 500
SPX,
has tacked on 0.5% the past three months and declined 8.9% over the past year.
[ad_2]
Source link
