When comparing 2017 to 2008, how can Target Corporation’s EPS rise, yet its net

Question

When comparing 2017 to 2008, how can Target Corporation’s EPS rise, yet its net earnings decrease?

Target Corporation (http://investors.target.com/phoenix.zhtml?c=65828&p=irol-IRHome) has been repurchasing its common stock over the past several years. Target’s fiscal year ends on the Saturday nearest to January 31.

Use the information from Target’s 2017 and 2008 fiscal years (a ten-year gap) in this table to answer the questions that follow.

Target Corporation

Comparing 2017 EPS to 2008 EPS

For Fiscal year ended

Jan. 28, 2017

Feb. 02, 2008

Net earnings per share (“EPS”)

$4.74

$3.37

$2,737

$2,849

               577.6

                     845.4

$3.24

Questions

Judging solely based on earnings per share (EPS), has Target’s performance improved since 2008?

Now judging solely on net earnings, has Target’s performance improved since 2008?

How can you explain the difference between the two answers above?

Approximately how many common shares has Target repurchased over the ten-year period illustrated in the table?

Target Corporation

Comparing 2017 EPS to 2008 EPS

For Fiscal year ended

Jan. 28, 2017

Feb. 02, 2008

Net earnings per share (“EPS”)

$4.74

$3.37

Net earnings (“Net income”) (in millions)

$2,737

$2,849

Weighted-average common shares outstanding (in millions)

               577.6

                     845.4

Approximate hypothetical 2017 EPS using 2008 weighted-average common shares ($2,737 ÷ 845.4 = $3.24)

$3.24

Explanation / Answer

1. Judging soleley on the basis of EPS than performance has not improved because though prima facie it looks like EPS in 2017 is $4.74 where as in 2008 it was just $ 3.37, but the fact that question Target have repurchased shares and Weighted-average common shares outstanding (in millions) have came down to $ 577.6 millions suggests that EPS have not improved over the time

2. No, infact net earnings have decreased by 112 millions.

3. EPS represents the earnings per share, it has direct relation with share capital issued. More the EPS, more the profitable is the company. Whereas Net income is the basis by which EPS is calculated. It is not necessary that if higher the net income than EPS would also be higher. In case more shares are issued than EPS would correspondingly be lower.

4. Target approximately would have purchased 854.4 - 577.6 = 276.80 shares.

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