Comparable sales and EPS near the high end of
expectations
- Third quarter comparable traffic grew
1.4 percent. Comparable sales increased 0.9 percent.
- Third quarter GAAP EPS from continuing
operations of $0.87 and Adjusted EPS1 of $0.91 were near the
upper-end of the guidance range of $0.75 to $0.95.
- Comparable digital channel sales
increased 24 percent, on top of 26 percent growth in third quarter
2016.
- In the third quarter, Target devoted
$847 million to capital investment, paid dividends of $339 million,
and returned $171 million through share repurchases.
- For additional media materials, please
visit:
https://corporate.target.com/article/2017/11/q3-2017-earnings
Target Corporation (NYSE: TGT) today reported a third quarter
2017 comparable sales increase of 0.9 percent and GAAP earnings per
share (EPS) from continuing operations of $0.87, a decrease of 17.7
percent from third quarter 2016. Third quarter adjusted earnings
per share from continuing operations (Adjusted EPS) were $0.91, a
decrease of 13.1 percent from third quarter 2016. The attached
tables provide a reconciliation of non-GAAP to GAAP measures. All
earnings per share figures refer to diluted EPS.
1 Adjusted EPS, a non-GAAP financial
measure, excludes the impact of certain discretely managed items.
See the “Miscellaneous” section of this release, as well as the
tables of this release, for additional information about the items
that have been excluded from Adjusted EPS.
“We’re very pleased with Target’s third quarter performance,
including traffic and sales growth that demonstrate we’re building
on the progress we saw in the first half of the year,” said Brian
Cornell, chairman and chief executive officer of Target
Corporation. “The investments we’re making in our business will
help Target drive long-term success and ensure we’re well
positioned to deliver for guests in the all-important holiday
season. Our assortment now includes thousands of new items from the
eight exclusive brands we’ve launched throughout 2017, including
Hearth and Hand with Magnolia, our new home goods partnership with
Chip and Joanna Gaines. Guests this holiday season will experience
elevated in-store service reflecting our investments in wages,
training and additional hours for our team, and they’ll find more
value than ever before through a combination of being priced right
daily and offering impressive deals. While we expect the
fourth-quarter environment to be highly competitive, we are very
confident in our holiday season plans.”
Fourth Quarter and Fiscal 2017 GuidanceTarget expects
fourth quarter 2017 comparable sales growth of flat to two percent.
That performance would translate into full-year 2017 comparable
sales growth of flat to one percent.
For fourth quarter 2017, the Company expects GAAP EPS from
continuing operations and Adjusted EPS of $1.05 to $1.25. For
full-year 2017, the Company now expects GAAP EPS from continuing
operations of $4.38 to $4.58 and Adjusted EPS of $4.40 to $4.60,
compared with prior guidance of $4.35 to $4.55 for GAAP EPS from
continuing operations and $4.34 to $4.54 for Adjusted EPS. The 2
cent difference between expected full-year GAAP EPS from continuing
operations and Adjusted EPS is driven by the expected net impact of
debt-retirement costs and tax benefits.
Fourth quarter and full-year 2017 GAAP EPS from continuing
operations may include the impact of additional discrete items
which will be excluded in calculating Adjusted EPS. The Company is
not currently aware of any such discrete items.
The Company announced today that it plans to issue a
post-holiday financial update on Tuesday, January 9, 2018.
Segment ResultsThird quarter 2017 sales increased 1.4
percent to $16.7 billion from $16.4 billion last year, reflecting a
0.9 percent comparable sales increase combined with the benefit
from sales in non-mature stores. Comparable digital channel sales
grew 24 percent and contributed 0.8 percentage points to comparable
sales growth. Segment earnings before interest expense and income
taxes (EBIT), which is Target’s measure of segment profit, were
$869 million in third quarter 2017, a decrease of 17.8 percent from
$1,057 million in third quarter 2016.
Third quarter EBIT margin rate was 5.2 percent, compared with
6.4 percent in 2016. Third quarter gross margin rate2 was 29.7
percent, compared with 29.8 percent in 2016, reflecting pressure
from digital fulfillment costs and the Company’s pricing and
promotion efforts, partially offset by cost savings. Third quarter
SG&A expense rate was 21.1 percent in 2017, compared with 20.3
percent in 2016, driven by higher compensation costs, reflecting a
year-over-year increase in team member incentives combined with the
impact of investments in store team member hours and wage rates.
This was partially offset by the benefit from the timing of some
expenses and our ongoing cost-savings efforts.
Interest Expense and Taxes from Continuing OperationsThe
Company’s third quarter 2017 net interest expense was $254 million,
compared with $142 million last year. The increase was driven by a
$123 million charge related to the early retirement of debt in
third quarter 2017, partially offset by the benefit of lower
average debt balances.
Third quarter 2017 effective income tax rate from continuing
operations was 22.3 percent compared with 33.8 percent last year.
The decrease was primarily due to the net tax effect of the
Company’s global sourcing operations, the resolution of other
income tax matters and the effect of lower pretax earnings.
2 Beginning in the second quarter of 2017,
we reclassified supply chain-related depreciation expense into cost
of sales and out of depreciation and amortization on our
Consolidated Statements of Operations. Prior year amounts have been
reclassified to reflect this change. Updated financials for the
thirteen quarters prior to this change have been posted on our
Investor Relations website at investors.target.com.
Capital Returned to ShareholdersIn third quarter 2017,
the Company returned $510 million to shareholders, which consisted
of:
- Dividends of $339 million, compared
with $345 million in third quarter 2016.
- Share repurchases totaling $171
million, including an accelerated share repurchase (ASR) agreement
that retired 2.8 million shares of common stock at an average price
of $57.78, for a total investment of $161 million. Final settlement
of the ASR occurred in November, and 0.3 million of the 2.8 million
shares repurchased through the ASR were delivered in November.
As of the end of third quarter 2017, including the $161 million
repurchased under the ASR, the Company had approximately $4 billion
of remaining capacity under its current $5 billion share repurchase
program.
For the trailing twelve months through third quarter 2017,
after-tax return on invested capital (ROIC) was 13.7 percent,
compared with 16.3 percent for the twelve months through third
quarter 2016. Excluding the net gain on the sale of the pharmacy
and clinic businesses, ROIC for the trailing twelve months through
third quarter 2016 was 14.3 percent. The year-over-year decline in
third quarter 2017 primarily reflected the impact of lower profits,
partially offset by the benefit of lower working capital. See the
“Reconciliation of Non-GAAP Financial Measures” section of this
release for additional information about the Company’s ROIC
calculation.
Conference Call DetailsTarget will webcast its third
quarter earnings conference call at 7:00 a.m. CST today. Investors
and the media are invited to listen to the call at
investors.target.com (hover over “company” then click on “events
& presentations” in the “investors” column). A telephone replay
of the call will be available beginning at approximately 10:30 a.m.
CST today through the end of business on November 17, 2017. The
replay number is 866-393-0868.
MiscellaneousStatements in this release regarding fourth
quarter and full-year 2017 earnings per share and comparable sales
guidance are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements
are subject to risks and uncertainties which could cause the
Company’s actual results to differ materially. The most important
risks and uncertainties are described in Item 1A of the Company’s
Form 10-K for the fiscal year ended Jan. 28, 2017. Forward-looking
statements speak only as of the date they are made, and the Company
does not undertake any obligation to update any forward-looking
statement.
In addition to the GAAP results provided in this release, the
Company provides Adjusted EPS, consolidated earnings from
continuing operations before interest expense and income taxes
(EBIT), and earnings from continuing operations before interest,
taxes, depreciation and amortization (EBITDA) for the three and
nine-month periods ended October 28, 2017 and October 29, 2016,
respectively. The Company also provides ROIC for the twelve-month
periods ended October 28, 2017 and October 29, 2016, which is a
ratio based on GAAP information, with the exception of adjustments
made to capitalize operating leases. Operating leases are
capitalized as part of the ROIC calculation to control for
differences in capital structure between the Company and its
competitors. Adjusted EPS, capitalized operating lease obligations
and operating lease interest are not in accordance with, or an
alternative for, generally accepted accounting principles in the
United States (GAAP). Management believes Adjusted EPS is useful in
providing period-to-period comparisons of the results of the
Company’s ongoing retail operations. Management believes
consolidated EBIT and EBITDA are useful in providing meaningful
information about our operational efficiency compared to our
competitors by excluding the impact of differences in tax
jurisdictions and structures, debt levels and, for EBITDA, capital
investment. Management believes ROIC is useful in assessing the
effectiveness of its capital allocation over time. The most
comparable GAAP measure for adjusted diluted EPS is diluted EPS
from continuing operations. The most comparable GAAP measure for
consolidated EBIT and EBITDA is net earnings from continuing
operations. The most comparable GAAP measure for capitalized
operating lease obligations and operating lease interest is total
rent expense. These non-GAAP numbers should not be considered in
isolation or as a substitution for analysis of the Company’s
results as reported under GAAP. Other companies may calculate
Adjusted EPS, consolidated EBIT, EBITDA and ROIC differently than
the Company does, limiting the usefulness of the measure for
comparisons with other companies.
About TargetMinneapolis-based Target Corporation (NYSE:
TGT) serves guests at 1,834 stores and at Target.com. Since 1946,
Target has given 5 percent of its profit to communities, which
today equals millions of dollars a week. For more information,
visit Target.com/Pressroom. For a behind-the-scenes look at Target,
visit Target.com/abullseyeview or follow @TargetNews on
Twitter.
TARGET CORPORATION
Consolidated Statements of
Operations
Three Months Ended Nine Months Ended
(millions, except per share
data) October 28, October 29, October 28, October
29,
(unaudited) 2017 2016 Change
2017 2016 Change Sales $ 16,667 $ 16,441 1.4 % $
49,113 $ 48,805 0.6 % Cost of sales (a) 11,712
11,536 1.5 34,330 33,957
1.1 Gross margin 4,955 4,905 1.0 14,783 14,848
(0.4 ) Selling, general and administrative expenses 3,512 3,339 5.2
10,027 9,741 2.9 Depreciation and amortization (exclusive of
depreciation included in cost of sales) (a) 574
505 13.7 1,596
1,486 7.4 Earnings from continuing operations
before interest expense and income taxes 869 1,061 (18.1 ) 3,160
3,621 (12.7 ) Net interest expense 254 142
79.1 532 864
(38.4 ) Earnings from continuing operations before income
taxes 615 919 (33.1 ) 2,628 2,757 (4.7 ) Provision for income taxes
137 311 (55.8 ) 802
910 (11.9 )
Net earnings from
continuing operations 478 608 (21.5 ) 1,826 1,847 (1.1 )
Discontinued operations, net of tax 2 —
7 73
Net
earnings $ 480 $ 608 (21.0
)% $ 1,833 $ 1,920 (4.5 )%
Basic earnings per share Continuing operations $ 0.88 $ 1.07
(17.8 )% $ 3.33 $ 3.16 5.2 % Discontinued operations —
— 0.01 0.12
Net earnings per share $ 0.88
$ 1.07 (17.3 )% $ 3.34 $
3.29 1.6 %
Diluted earnings per share
Continuing operations $ 0.87 $ 1.06 (17.7 )% $ 3.31 $ 3.14 5.4 %
Discontinued operations — —
0.01 0.12 Net
earnings per share $ 0.88 $ 1.06
(17.1 )% $ 3.32 $ 3.26 1.8 %
Weighted average common shares outstanding Basic 544.5 570.1 (4.5
)% 548.7 583.5 (6.0 )% Dilutive impact of share-based awards
3.4 4.7 0 3.1 5.0
Diluted 547.9 574.8
(4.7 )% 551.8 588.5
(6.2 )% Antidilutive shares 4.5 0.2
4.1 0.1
Dividends declared per share $ 0.62 $
0.60 3.3 % $ 1.84 $ 1.76
4.5 %
Note: Per share amounts may not foot due to rounding.(a) Refer
to the Segment Results section for information about a
reclassification of supply chain-related depreciation expense to
cost of sales.
Subject to reclassification
TARGET CORPORATION
Consolidated Statements of Financial
Position
October 28, January 28, October 29,
(millions) (unaudited)
2017 2017 2016
Assets Cash and cash
equivalents $ 2,725 $ 2,512 $ 1,231 Inventory 10,586 8,309 10,057
Assets of discontinued operations 6 69 62 Other current assets
1,392 1,100 1,492 Total
current assets 14,709 11,990 12,842 Property and equipment Land
6,087 6,106 6,106 Buildings and improvements 28,310 27,611 27,518
Fixtures and equipment 5,548 5,503 5,467 Computer hardware and
software 2,658 2,651 2,538 Construction-in-progress 389 200 219
Accumulated depreciation (17,880 ) (17,413 )
(16,946 ) Property and equipment, net 25,112 24,658 24,902
Noncurrent assets of discontinued operations 9 12 17 Other
noncurrent assets 878 771 842
Total assets $ 40,708 $ 37,431
$ 38,603
Liabilities and shareholders’
investment Accounts payable $ 9,986 $ 7,252 $ 8,250 Accrued and
other current liabilities 4,036 3,737 3,662 Current portion of
long-term debt and other borrowings 1,354
1,718 729 Total current liabilities 15,376
12,707 12,641 Long-term debt and other borrowings 11,277 11,031
12,097 Deferred income taxes 944 861 920 Liabilities of
discontinued operations 11 19 19 Other noncurrent liabilities
1,963 1,860 1,857 Total
noncurrent liabilities 14,195 13,771 14,893 Shareholders’
investment Common stock 45 46 47 Additional paid-in capital 5,762
5,661 5,598 Retained earnings 5,940 5,884 6,031 Accumulated other
comprehensive loss (610 ) (638 ) (607 ) Total
shareholders’ investment 11,137 10,953
11,069
Total liabilities and shareholders’
investment $ 40,708 $ 37,431
$ 38,603
Common Stock Authorized 6,000,000,000 shares, $.0833 par
value; 543,913,318, 556,156,228 and 563,676,785 shares issued and
outstanding at October 28, 2017, January 28, 2017 and
October 29, 2016, respectively.
Preferred Stock Authorized 5,000,000 shares, $.01 par
value; no shares were issued or outstanding during any period
presented.
Subject to reclassification
TARGET CORPORATION
Consolidated Statements of Cash
Flows
Nine Months Ended October 28, October 29,
(millions) (unaudited) 2017 2016
Operating
activities Net earnings $ 1,833 $ 1,920 Earnings from
discontinued operations, net of tax 7 73
Net earnings from continuing operations 1,826 1,847
Adjustments to reconcile net earnings to cash provided by
operations Depreciation and amortization 1,784 1,686 Share-based
compensation expense 81 85 Deferred income taxes 37 83 Loss on debt
extinguishment 123 422 Noncash losses / (gains) and other, net 189
(5 ) Changes in operating accounts Inventory (2,277 ) (1,455 )
Other assets (89 ) (14 ) Accounts payable 2,738 832 Accrued and
other liabilities 2 (711 ) Cash provided by
operating activities—continuing operations 4,414 2,770 Cash
provided by operating activities—discontinued operations 75
111 Cash provided by operations 4,489
2,881
Investing activities Expenditures
for property and equipment (2,049 ) (1,184 ) Proceeds from disposal
of property and equipment 27 23 Other investments (62 )
23 Cash required for investing activities
(2,084 ) (1,138 )
Financing activities Change in
commercial paper, net — 89 Additions to long-term debt 739 1,977
Reductions of long-term debt (1,087 ) (2,625 ) Dividends paid
(1,001 ) (1,011 ) Repurchase of stock (757 ) (3,034 ) Prepayment of
accelerated share repurchase (111 ) (120 ) Stock option exercises
25 166 Cash required for financing
activities (2,192 ) (4,558 ) Net increase /
(decrease) in cash and cash equivalents 213 (2,815 ) Cash and cash
equivalents at beginning of period 2,512 4,046
Cash and cash equivalents at end of period $
2,725 $ 1,231
Subject to reclassification
TARGET CORPORATION
Segment Results
Three
Months Ended Nine Months Ended October 28, October 29,
October 28, October 29,
(millions) (unaudited)
2017 2016 Change 2017 2016
Change Sales $ 16,667 $ 16,441 1.4 % $ 49,113 $ 48,805 0.6 % Cost
of sales (a) 11,712 11,536 1.5
34,330 33,957 1.1 Gross margin 4,955 4,905 1.0
14,783 14,848 (0.4 ) SG&A expenses (b) 3,512 3,343 5.1 10,027
9,741 2.9 Depreciation and amortization (exclusive of depreciation
included in cost of sales) (a) 574 505 13.7
1,596 1,486 7.4 EBIT $
869 $ 1,057 (17.8 )% $ 3,160 $ 3,621
(12.7 )%
(a) Beginning in the second quarter of 2017, we
reclassified supply chain-related depreciation expense to cost of
sales whereas it was previously included in depreciation and
amortization on our Consolidated Statements of Operations. We
reclassified prior year amounts to reflect this change.
This reclassification increased cost of sales by $60
million and $189 million for the three and nine months ended
October 28, 2017, respectively, and $65 million and $200 million
for the three and nine months ended October 29, 2016, respectively,
with equal and offsetting decreases to depreciation and
amortization. This reclassification had no impact on sales, EBIT,
net earnings or earnings per share.(b) SG&A expenses
include $170 million and $512 million net profit-sharing income
under our credit card program agreement for the three and nine
months ended October 28, 2017, respectively, and $168 million
and $489 million for the three and nine months ended
October 29, 2016, respectively.
Three Months Ended
Nine Months Ended
Rate Analysis October 28, October
29, October 28, October 29,
(unaudited) 2017
2016 2017 2016 Gross margin rate (a) 29.7 %
29.8 % 30.1 % 30.4 % SG&A expense rate 21.1 20.3 20.4 20.0
Depreciation and amortization (exclusive of depreciation included
in cost of sales) expense rate (a) 3.4 3.1 3.2 3.0 EBIT margin rate
5.2 6.4 6.4 7.4
Note: Rate analysis metrics are computed by dividing the
applicable amount by sales.(a) Reclassifying supply chain-related
depreciation expense to cost of sales reduced the gross margin and
depreciation and amortization rates by 0.4 percentage points for
all periods presented.
Three Months Ended
Nine Months Ended
Sales by Channel October 28,
October 29, October 28, October 29,
(unaudited)
2017 2016 2017 2016 Stores 95.7 % 96.5
% 95.7 % 96.5 % Digital 4.3 3.5
4.3 3.5 Total 100 % 100 %
100 % 100 % Three
Months Ended Nine Months Ended
Comparable Sales
October 28, October 29, October 28, October 29,
(unaudited) 2017 2016 2017 2016
Comparable sales change 0.9 % (0.2 )% 0.3 % — % Drivers of change
in comparable sales Number of transactions 1.4 (1.2 ) 0.9 (1.0 )
Average transaction amount (0.5 ) 1.0
(0.6 ) 1.0
Note: Amounts may not foot due to rounding.
Contribution to Comparable
Sales Change
(unaudited)
Three Months Ended Nine Months Ended
October 28,2017
October 29,2016 October 28,2017 October
29,2016 Stores channel comparable sales change — % (1.0 )%
(0.6 )% (0.7 )% Digital channel contribution to comparable
sales change 0.8 0.7 0.9
0.6 Total comparable sales change 0.9 %
(0.2 )% 0.3 % — %
Note: Amounts may not foot due to rounding.
Three Months Ended
Nine Months Ended
REDcard
Penetration(unaudited)
October 28,2017 October 29,2016 October
28,2017 October 29,2016 Target Debit Card 12.9 % 12.9
% 13.1 % 12.9 % Target Credit Cards 11.4
11.4 11.3 11.0 Total
REDcard Penetration 24.2 % 24.3 % 24.4 %
23.9 %
Note: Amounts may not foot due to rounding.
Number of Stores and Retail Square
Feet(unaudited)
Number of Stores Retail Square Feet (a)
October 28,2017 January 28,2017 October 29,2016
October 28,2017 January 28,2017 October
29,2016 170,000 or more sq. ft. 276 276 278 49,326
49,328 49,685 50,000 to 169,999 sq. ft. 1,508 1,504
1,503 190,038 189,620 189,496 49,999 or less sq. ft. 44
22 19 1,268 554 464 Total
1,828 1,802 1,800 240,632 239,502
239,645
(a) In thousands, reflects total square feet less office,
distribution center, and vacant space.
Subject to reclassification
TARGET CORPORATION
Reconciliation of Non-GAAP Financial Measures
To provide additional transparency, we have disclosed non-GAAP
adjusted diluted earnings per share from continuing operations
(Adjusted EPS). This metric excludes certain items presented below.
We believe this information is useful in providing period-to-period
comparisons of the results of our continuing operations. This
measure is not in accordance with, or an alternative for, generally
accepted accounting principles in the United States (GAAP). The
most comparable GAAP measure is diluted earnings per share from
continuing operations. Adjusted EPS should not be considered in
isolation or as a substitution for analysis of our results as
reported under GAAP. Other companies may calculate Adjusted EPS
differently, limiting the usefulness of the measure for comparisons
with other companies.
Three Months Ended
October 28, 2017 October 29, 2016
Net of
Per Share Net of Per Share
(millions,
except per share data) (unaudited) Pretax
Tax
Amounts Pretax Tax Amounts
Change GAAP diluted earnings per share from continuing operations $
0.87 $ 1.06 (17.7 )% Adjustments Loss on early retirement of debt $
123 $ 75 $ 0.14 $ — $ — $ — Pharmacy Transaction-related costs (a)
— — — (4 ) (3 ) — Income tax matters (b) — (55 )
(0.10 ) — (5 ) (0.01 )
Adjusted diluted earnings per share from continuing
operations $ 0.91
$ 1.04 (13.1 )%
Nine Months Ended October 28, 2017
October 29, 2016 Net of Per Share Net of Per Share
(millions,
except per share data) (unaudited) Pretax Tax
Amounts Pretax Tax Amounts
Change GAAP diluted earnings per share from continuing operations $
3.31 $ 3.14 5.4 % Adjustments Loss on early retirement of debt $
123 $ 75 $ 0.14 $ 422 $ 257 $ 0.44 Pharmacy Transaction-related
costs (a) — — — — — — Income tax matters (b) — (56 )
(0.10 ) — (8 ) (0.01 )
Adjusted diluted earnings per share from continuing
operations $ 3.34
$ 3.56 (6.2 )%
Note: Amounts may not foot due to rounding.(a) Represents items
related to the December 2015 sale of our pharmacy and clinic
businesses to CVS (Pharmacy Transaction).(b) Represents income from
income tax matters not related to current period operations. For
the three and nine months ended October 28, 2017, primarily
represents prior-period discrete tax benefits related to our global
sourcing operations.
We have presented consolidated earnings from continuing
operations before interest expense and income taxes (EBIT) and
earnings before interest, taxes, depreciation and amortization
(EBITDA), non-GAAP financial measures, because we believe they
provide investors with meaningful information about our operational
efficiency compared to our competitors by excluding the impact of
differences in tax jurisdictions and structures, debt levels, and
for EBITDA, capital investment. These measures are not in
accordance with, or an alternative for, generally accepted
accounting principles in the United States (GAAP). The most
comparable GAAP measure is net earnings from continuing operations.
Consolidated EBIT and EBITDA should not be considered in isolation
or as a substitution for analysis of our results as reported under
GAAP. Other companies may calculate consolidated EBIT and EBITDA
differently, limiting the usefulness of the measure for comparisons
with other companies.
EBIT and EBITDA Three Months Ended Nine
Months Ended October 28, October 29, October 28,
October 29,
(millions) (unaudited) 2017
2016 Change 2017 2016 Change Net
earnings from continuing operations $ 478 $ 608 (21.5 )% $ 1,826 $
1,847 (1.1 )% + Provision for income taxes 137 311 (55.8 ) 802 910
(11.9 ) + Net interest expense 254 142 79.1
532 864 (38.4 ) EBIT 869 1,061 (18.1 )
3,160 3,621 (12.7 ) + Total depreciation and amortization (a)
633 570 11.1 1,784 1,686
5.8 EBITDA $ 1,502 $ 1,631 (7.9
)% $ 4,944 $ 5,307 (6.8 )%
(a) Represents total depreciation and amortization, including
amounts classified within depreciation and amortization and within
cost of sales on our Consolidated Statements of Operations.
We have also disclosed after-tax return on invested capital from
continuing operations (ROIC), which is a ratio based on GAAP
information, with the exception of adjustments made to capitalize
operating leases. Operating leases are capitalized as part of the
ROIC calculation to control for differences in capital structure
between us and our competitors. We believe this metric provides a
meaningful measure of the effectiveness of our capital allocation
over time. Other companies may calculate ROIC differently, limiting
the usefulness of the measure for comparisons with other
companies.
After-Tax Return on Invested Capital
Numerator Trailing Twelve Months October 28,
October 29,
(dollars in millions) (unaudited)
2017 2016 Earnings from continuing operations before
interest expense and income taxes $ 4,508 $ 5,790 + Operating lease
interest (a)(b) 78 72 Adjusted earnings from
continuing operations before interest expense and income taxes
4,586 5,862 - Income taxes (c) 1,420 1,849
Net operating profit after taxes $
3,166 $ 4,013
Denominator
October 28, October 29, October 31,
(dollars in
millions) (unaudited) 2017 2016 2015
Current portion of long-term debt and other borrowings $ 1,354 $
729 $ 825 + Noncurrent portion of long-term debt 11,277 12,097
11,887 + Shareholders' equity 11,137 11,069 13,256 + Capitalized
operating lease obligations (b)(d) 1,298 1,192 1,503 - Cash and
cash equivalents 2,725 1,231 1,977 - Net assets of discontinued
operations 4 60 197 Invested
capital $ 22,337 $ 23,796 $
25,298
Average invested capital (e)
$
23,067 $ 24,547
After-tax return on invested capital (f)
13.7
% 16.3 %
(a) Represents the add-back to operating income to reflect the
hypothetical interest expense we would incur if the property under
our operating leases were owned or accounted for as capital leases,
using eight times our trailing twelve months rent expense and an
estimated interest rate of six percent.(b) See the following
Reconciliation of Capitalized Operating Leases table for the
adjustments to our GAAP total rent expense to obtain the
hypothetical capitalization of operating leases and related
operating lease interest.(c) Calculated using the effective tax
rate for continuing operations, which was 31.0 percent and 31.5
percent for the trailing twelve months ended October 28, 2017
and October 29, 2016, respectively. For the trailing twelve
months ended October 28, 2017 and October 29, 2016,
includes tax effect of $1,396 million and $1,826 million,
respectively, related to EBIT and $24 million and $23 million,
respectively, related to operating lease interest.(d) Calculated as
eight times our trailing twelve months rent expense.(e) Average
based on the invested capital at the end of the current period and
the invested capital at the end of the comparable prior period.(f)
Excluding the net gain on the Pharmacy Transaction, ROIC was 14.3
percent for the trailing twelve months ended October 29,
2016.
Capitalized operating lease obligations and operating lease
interest are not in accordance with, or an alternative for, GAAP.
The most comparable GAAP measure is total rent expense. Capitalized
operating lease obligations and operating lease interest should not
be considered in isolation or as a substitution for analysis of our
results as reported under GAAP.
Reconciliation of Capitalized Operating
Leases Trailing Twelve Months October 28, October
29, October 31,
(dollars in millions) (unaudited)
2017 2016 2015 Total rent expense $ 162 $ 149
$ 188 Capitalized operating lease obligations (total rent expense x
8) 1,298 1,192 1,503 Operating lease interest (capitalized
operating lease obligations x 6%) 78 72
n/a
Subject to reclassification
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171115005679/en/
Target CorporationJohn Hulbert, Investors, 612-761-6627orErin
Conroy, Media, 612-761-5928orTarget Media Hotline, 612-696-3400
Target (NYSE:TGT)
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Target (NYSE:TGT)
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From Sep 2023 to Sep 2024