Tucked into all the good news released by Target Corp. when it announced yet another strong quarter last week was not much more than a line about the company renewing its share repurchase program.
The new authorization is for $15 billion worth of stock, and that's a lot even for a company as big as Target. It was puzzling to see, particularly for a company that seems to have a bigger growth opportunity ahead of it than it did a couple of years ago.
Besides, price always matters in business. Target's share price is off its all-time highs reached this summer, but it's still about double its peak before the COVID-19 pandemic.
Buying back shares ranks up there with overpaying the CEO as a corporate practice that aggravates people. But for some companies, it's better than just sitting on the cash and waiting for other opportunities to crop up.
Even the nonagenarians in charge of Berkshire Hathaway, who happily criticize any number of shortsighted business practices, support buying back stock — if the price is right.
Most corporations don't think "buy low and sell high" when it comes to dealing in their own shares. They are allocating capital, not day trading.
Target again this year said its top priorities for its capital were investing in the business, supporting the cash dividend and then buying back shares. That all sounds sensible until you realize that there aren't really any other reasonable uses for the company's cash, although the order here seems to be what matters a lot.
Buying back stock is not a new idea for Target, either. The company bought more than $2 billion worth of stock in 2018 and about $1.6 billion worth in 2019. Last year was odd because like a lot of companies Target suspended share repurchases for a while.