Fitch Ratings Affirms Target's Sr Unsec Notes at 'A'; Outlook Stable.Business Editors CHICAGO--(BUSINESS WIRE)--June 10, 2004 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed its ratings of Target Corporation (TGT TGT Target TGT Ticket Granting Ticket (Windows 2000 Kerberos security) TGT Target Corp (stock symbol) TGT Turbine Gas Temperature TGT TDRSS Ground Terminal TGT Tank Gunnery Trainer TGT Target Tracker ) following the company's announcement that it will be selling its Marshall Field's Marshall Field's was an iconic Chicago, Illinois, department store that grew to become a major chain before being acquired by Cincinnati-based Federated Department Stores on August 30, 2005. business unit to The May Department Stores The May Department Stores Company was a department store chain founded in 1877 by David May in Leadville, Colorado. Its headquarters moved to St. Louis, Missouri in 1905, and the company went public in 1911. Company for approximately $3.2 billion. TGT also announced that it plans to repurchase $3 billion of its stock over the next 2-3 years. Fitch rates TGT's senior unsecured notes and credit facility 'A', and its commercial paper 'F1'. Approximately $9 billion of debt is affected by the affirmation. The Rating Outlook is Stable. The affirmation reflects the elimination of an underperforming division that, though it remained cash flow positive, had nonetheless become a modest drag on Verb 1. drag on - last unnecessarily long drag out last, endure - persist for a specified period of time; "The bad weather lasted for three days" 2. TGT's earnings growth. The sale will enable TGT's management to focus its attention more closely on its successful Target Stores Division. The affirmation further reflects the expectation that TGT will deploy the proceeds from this transaction, and any additional proceeds from the expected sale of the Mervyn's Division, into a balanced combination of debt reduction and share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . The sale of Marshall Field's notwithstanding, the ratings reflect the solid performance of the Target Stores Division and TGT's steady financial profile. The Target Stores Division generated comparable store sales growth of 7.0% in the four months ended May 2004, and 4.4% in the fiscal year ended 1/31/04. In addition, the division expanded its pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern segment margin to 8.6% in the first quarter of 2004 from 8.3% a year earlier. After rapidly expanding in 2001-2002, TGT's credit business grew at a more moderate pace in 2003, and portfolio quality measures have begun to stabilize. Financial leverage has trended lower as receivables growth has moderated, with adjusted debt/EBITDAR improving to 2.4 times (x) in the twelve months ended 5/1/04 from 2.7x in 2002. Fitch expects that share repurchase activity will be managed at a level that will permit further reduction in leverage over the near term. |
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