Target to resume $10 billion stock buyback

  • Article by: KAREN LUNDEGAARD , Star Tribune
  • Updated: January 14, 2010 - 8:10 PM

Target Corp. said Thursday it is resuming the $10 billion stock buyback program it had suspended more than a year ago as it tried to preserve cash and safeguard its short-term credit rating as the recession deepened.

Better results, both at the store level and in its credit card segment, have led to "much stronger-than-expected cash flow generation," Target Chief Executive Gregg Steinhafel said in a statement.

The company has more than half of the money originally set aside for the buybacks, which traditionally have been a way to boost share prices. The Minneapolis-based discount chain expects to complete the repurchases in two to three years.

Analyst Mark Miller of William Blair & Co. expects the share buybacks will boost earnings per share by 5 cents this year and 15 cents to 20 cents in 2011. He boosted his estimate for 2010 earnings by 5 cents a share, to $3.48.

Initially, Target's buyback program turned out to be ill-timed. When it suspended the program in November 2008, the company spent $4.8 billion on its shares, paying an average $51.70 a share. But as it was repurchasing the stock, the price continued to fall, dipping into the $30 range when Target suspended the program.

The buyback had been favored by activist investor William Ackman, one of Target's biggest shareholders. He had wanted the retailer to spend $15 billion repurchasing shares. Though at the time the parties appeared friendly, the relationship soured last year as Ackman tried to gain seats on the board in a heated proxy battle.

Separately Thursday, Target declared a quarterly divided of 17 cents per share.

The stock rose 76 cents Thursday to $50.10.

Karen Lundegaard • 612-673-4151

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