Share repurchases resume

Target plans to spend approximately $5 billion over the next two or three years to buy its own stock, the company announced last week. Resumption of share repurchase activity was viewed favorably by the market as yet another sign that Target is on the right track, or at least is generating ample cash flow to fund the buyback after curtailing new store expansion.

The Target board authorized a $10 billion share repurchase program in November 2007 and spent nearly half of that amount by November 2008, when it decided to temporarily suspend repurchase activity amid deteriorating economic conditions and poor sales.

“Better results in both our retail and credit card segments, together with disciplined management of our capital expenditures and significant reductions in credit card receivables, have contributed to much stronger-than-expected cash flow generation,” said Gregg Steinhafel, Target chairman, president and chief executive officer. “We believe employing this internally-generated cash for share repurchase activity is an effective tool to maintain appropriate balance in our capital structure and will create value for our shareholders over time.”

One noteworthy aspect of the announcement was the fact that the company specified a time frame in which shares would be bought. The purchases are contingent on such factors as the strength of business operations, economic conditions, adequate liquidity and conditions in the debt and equity markets.