Analysis of Results of Operations
Segment Results
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Three Months Ended
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Nine Months Ended
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(dollars in millions)
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October 28,
2017
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October 29,
2016
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Change
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October 28,
2017
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October 29,
2016
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Change
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Sales
|
$
|
16,667
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|
$
|
16,441
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|
1.4
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%
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|
$
|
49,113
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|
$
|
48,805
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|
0.6
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%
|
Cost of sales
(a)
|
11,712
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|
11,536
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|
1.5
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34,330
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33,957
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1.1
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|
Gross margin
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4,955
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|
4,905
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1.0
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14,783
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14,848
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|
(0.4
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)
|
SG&A expenses
(b)
|
3,512
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|
3,343
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5.1
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10,027
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9,741
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|
2.9
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|
Depreciation and amortization (exclusive of depreciation included in cost of sales)
(a)
|
574
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|
505
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13.7
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1,596
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|
1,486
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7.4
|
|
EBIT
|
$
|
869
|
|
|
$
|
1,057
|
|
|
(17.8
|
)%
|
|
$
|
3,160
|
|
|
$
|
3,621
|
|
|
(12.7
|
)%
|
Note: See Note 14 of our Financial Statements for a reconciliation of our segment results to earnings before income taxes.
(a)
Refer to Note 3 of the Financial Statements for information about a reclassification of supply chain-related depreciation expense to cost of sales.
(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.
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Rate Analysis
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Three Months Ended
|
Nine Months Ended
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|
October 28,
2017
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October 29,
2016
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|
October 28,
2017
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|
October 29,
2016
|
|
Gross margin rate
(a)
|
29.7
|
%
|
|
29.8
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%
|
30.1
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%
|
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30.4
|
%
|
SG&A expense rate
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21.1
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20.3
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20.4
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20.0
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Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate
(a)
|
3.4
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3.1
|
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3.2
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3.0
|
|
EBIT margin rate
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5.2
|
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6.4
|
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6.4
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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.
Sales
Sales include all merchandise sales, net of expected returns, and gift card breakage. Digital channel sales include all sales initiated through mobile applications and our conventional websites. Digital channel sales may be fulfilled through our distribution centers, our vendors, or our stores.
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Sales by Channel
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Three Months Ended
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Nine Months Ended
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|
October 28,
2017
|
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|
October 29,
2016
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|
October 28,
2017
|
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|
October 29,
2016
|
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Stores
|
95.7
|
%
|
|
96.5
|
%
|
|
95.7
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%
|
|
96.5
|
%
|
Digital
|
4.3
|
|
|
3.5
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4.3
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|
3.5
|
|
Total
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100
|
%
|
|
100
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%
|
|
100
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%
|
|
100
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%
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Sales by Product Category
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Three Months Ended
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Nine Months Ended
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|
October 28,
2017
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October 29,
2016
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October 28,
2017
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October 29,
2016
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Household essentials
(a)
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25
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%
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25
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%
|
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25
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%
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25
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%
|
Apparel and accessories
|
21
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|
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21
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|
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21
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|
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21
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|
Food and beverage
(a)
|
20
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|
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21
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21
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21
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|
Home furnishings and décor
|
20
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|
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19
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|
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18
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19
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Hardlines
|
14
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|
|
14
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|
15
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|
14
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|
Total
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100
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%
|
|
100
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%
|
|
100
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%
|
|
100
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%
|
(a)
For all periods presented, pet supplies, which represented approximately 2 percent of total sales, has been reclassified from food and beverage to household essentials.
Comparable sales is a measure that highlights the performance of our stores and digital channels by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months, digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies.
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Comparable Sales
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Three Months Ended
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Nine Months Ended
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October 28,
2017
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October 29,
2016
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October 28,
2017
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October 29,
2016
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Comparable sales change
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0.9
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%
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(0.2
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)%
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0.3
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%
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—
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%
|
Drivers of change in comparable sales
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Number of transactions
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1.4
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(1.2
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)
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0.9
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(1.0
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)
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Average transaction amount
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(0.5
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)
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|
1.0
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(0.6
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)
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|
1.0
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Note: Amounts may not foot due to rounding.
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Contribution to Comparable Sales Change
|
Three Months Ended
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Nine Months Ended
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|
October 28,
2017
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October 29,
2016
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October 28,
2017
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October 29,
2016
|
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Stores channel comparable sales change
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—
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%
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|
(1.0
|
)%
|
|
(0.6
|
)%
|
|
(0.7
|
)%
|
Digital channel contribution to comparable sales change
|
0.8
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|
|
0.7
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|
|
0.9
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0.6
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|
Total comparable sales change
|
0.9
|
%
|
|
(0.2
|
)%
|
|
0.3
|
%
|
|
—
|
%
|
Note: Amounts may not foot due to rounding.
The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.
We monitor the percentage of sales that are paid for using REDcards (REDcard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on REDcards are also incremental sales for Target. Guests receive a 5 percent discount on virtually all purchases when they use a REDcard at Target.
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REDcard Penetration
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 28,
2017
|
|
|
October 29,
2016
|
|
|
October 28,
2017
|
|
|
October 29,
2016
|
|
Target Debit Card
|
12.9
|
%
|
|
12.9
|
%
|
|
13.1
|
%
|
|
12.9
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%
|
Target Credit Cards
|
11.4
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|
|
11.4
|
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|
11.3
|
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|
11.0
|
|
Total REDcard Penetration
|
24.2
|
%
|
|
24.3
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%
|
|
24.4
|
%
|
|
23.9
|
%
|
Note: Amounts may not foot due to rounding.
Gross Margin Rate
For the
three and nine
months ended
October 28, 2017
, our gross margin rate was
29.7
percent and
30.1
percent, respectively, compared with
29.8
percent and
30.4
percent in the comparable periods last year. For the three and nine months ended October 28, 2017, the decrease was primarily due to increased digital fulfillment costs. The rate was also affected by other items, including benefits from cost savings initiatives, partially offset by the net impacts of our efforts to improve pricing and promotions.
Selling, General, and Administrative Expense Rate
For the
three and nine
months ended
October 28, 2017
, our SG&A expense rate was
21.1
percent and
20.4
percent, respectively, compared to
20.3
percent and
20.0
percent in the comparable periods last year. The increase was primarily due to higher compensation due to both bonus expense and store wages, partially offset by cost savings driven by efficiency in our technology operations and, for the third quarter, timing of marketing campaigns.
Depreciation and Amortization Expense Rate
For the
three and nine
months ended
October 28, 2017
, our depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate was
3.4
percent and
3.2
percent, respectively, compared to
3.1
percent and
3.0
percent in the comparable periods last year. These increases were primarily due to higher accelerated depreciation for planned store remodels.
Store Data
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Change in Number of Stores
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 28,
2017
|
|
|
October 29,
2016
|
|
|
October 28,
2017
|
|
|
October 29,
2016
|
|
Beginning store count
|
1,816
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|
|
1,797
|
|
|
1,802
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|
|
1,792
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|
Opened
|
12
|
|
|
5
|
|
|
26
|
|
|
11
|
|
Closed
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(3
|
)
|
Ending store count
|
1,828
|
|
|
1,800
|
|
|
1,828
|
|
|
1,800
|
|
|
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|
Number of Stores and
Retail Square Feet
|
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.
Other Performance Factors
Net Interest Expense
Net interest expense from continuing operations was
$254 million
and
$532 million
for the
three and nine
months ended
October 28, 2017
, respectively, compared to
$142 million
and
$864 million
for the comparable periods last year. Net interest expense for the three and nine months ended October 28, 2017 included a net loss on early retirement of debt of $123 million. Net interest expense for the nine months ended
October 29, 2016
included a loss on early retirement of debt of
$422 million
.
Provision for Income Taxes
Our effective income tax rate from continuing operations for the
three and nine
months ended
October 28, 2017
was
22.3
percent and
30.5
percent, respectively, compared with
33.8
percent and
33.0
percent for the comparable periods last year. For the three and nine months ended October 28, 2017, the decrease was primarily due to prior-period discrete tax benefits related to our global sourcing operations. The rate decrease for both the three and nine months ended October 28, 2017, was also due to a benefit from our global sourcing operations related to our 2017 taxes, the rate impact of lower pretax earnings, and the resolution of other tax matters. For the nine months ended October 28, 2017, these items were partially offset by the recognition of excess tax benefits related to share-based payments for the nine months ended October 29, 2016.
Reconciliation of Non-GAAP Financial Measures to GAAP 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.
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|
|
|
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|
|
Three Months Ended
|
|
|
October 28, 2017
|
|
October 29, 2016
|
(millions, except per share data)
|
|
Pretax
|
|
|
Net of Tax
|
|
|
Per Share Amounts
|
|
|
Pretax
|
|
|
Net of Tax
|
|
|
Per Share Amounts
|
|
GAAP diluted earnings per share from continuing operations
|
|
|
|
|
|
$
|
0.87
|
|
|
|
|
|
|
$
|
1.06
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early retirement of debt
|
|
$
|
123
|
|
|
$
|
75
|
|
|
$
|
0.14
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Pharmacy Transaction-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(3
|
)
|
|
—
|
|
Income tax matters
(a)
|
|
—
|
|
|
(55
|
)
|
|
(0.10
|
)
|
|
—
|
|
|
(5
|
)
|
|
(0.01
|
)
|
Adjusted diluted earnings per share from continuing operations
|
|
|
|
|
|
$
|
0.91
|
|
|
|
|
|
|
$
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
October 28, 2017
|
|
October 29, 2016
|
(millions, except per share data)
|
|
Pretax
|
|
|
Net of Tax
|
|
|
Per Share Amounts
|
|
|
Pretax
|
|
|
Net of Tax
|
|
|
Per Share Amounts
|
|
GAAP diluted earnings per share from continuing operations
|
|
|
|
|
|
$
|
3.31
|
|
|
|
|
|
|
$
|
3.14
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early retirement of debt
|
|
$
|
123
|
|
|
$
|
75
|
|
|
$
|
0.14
|
|
|
$
|
422
|
|
|
$
|
257
|
|
|
$
|
0.44
|
|
Pharmacy Transaction-related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Income tax matters
(a)
|
|
—
|
|
|
(56
|
)
|
|
(0.10
|
)
|
|
—
|
|
|
(8
|
)
|
|
(0.01
|
)
|
Adjusted diluted earnings per share from continuing operations
|
|
|
|
|
|
$
|
3.34
|
|
|
|
|
|
|
$
|
3.56
|
|
Note: Amounts may not foot due to rounding.
(a)
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 that these measures provide 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
|
|
|
(millions) (unaudited)
|
|
October 28,
2017
|
|
October 29,
2016
|
|
Change
|
|
October 28,
2017
|
|
October 29,
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 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
|
|
|
(dollars in millions)
|
|
October 28,
2017
|
|
|
October 29,
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
(dollars in millions)
|
|
October 28,
2017
|
|
|
October 29,
2016
|
|
|
October 31,
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, generally accepted accounting principles in the United States. 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.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Capitalized Operating Leases
|
|
Trailing Twelve Months
|
(dollars in millions)
|
|
October 28,
2017
|
|
|
October 29,
2016
|
|
|
October 31,
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
|
|
Analysis of Financial Condition
Liquidity and Capital Resources
Our cash and cash equivalents balance was
$2,725 million
at
October 28, 2017
, compared with
$1,231 million
for the same period in
2016
. As of
October 28, 2017
,
$1,084 million
of cash and cash equivalents were held at entities located outside the United States and may be subject to taxation if repatriated. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place certain dollar limits on our investments in individual funds or instruments.
Capital Allocation
We follow a disciplined and balanced approach to capital allocation, based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to grow our business profitably, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.
Cash Flows
Operating cash flow provided by continuing operations was
$4,414 million
for the
nine
months ended
October 28, 2017
, compared with
$2,770 million
for the same period in
2016
. The operating cash flow increase is due to increased payables leverage primarily driven by changes in vendor payment terms during the nine months ended October 28, 2017, compared to the nine months ended October 29, 2016. The operating cash flow increase is also partially due to the payment of approximately $500 million of taxes during the first quarter of 2016, primarily related to the Pharmacy Transaction. These increases were partially offset by a larger inventory increase during the nine months ended October 28, 2017 compared to the nine months ended October 29, 2016, due to an earlier increase for the holiday season. In October 2017, we issued $750 million of unsecured debt that matures in 2047. Combined with our prior year-end cash position, these proceeds and operating cash flows allowed us to invest in the business, retire debt, pay dividends, and repurchase shares under our share repurchase program.
Share Repurchases
We returned $171 million and $772 million to shareholders through share repurchase during the
three and nine
months ended
October 28, 2017
, respectively, and $878 million and $3,121 million during the
three and nine
months ended
October 29, 2016
, respectively. For the three and nine months ended October 28, 2017 and October 29, 2016, these amounts include $161 million and $314 million, respectively, repurchased through ASR transactions initiated during the third quarter with the final settlement in November 2017 and November 2016, respectively. See Part II, Item 2 of this Quarterly Report on Form 10-Q and Note 11 to the Financial Statements for more information.
Dividends
We paid dividends totaling
$339 million
(
$0.62
per share) and
$1,001 million
(
$1.82
per share) for the
three and nine
months ended
October 28, 2017
, respectively, and
$345 million
(
$0.60
per share) and
$1,011 million
(
$1.72
per share) for the
three and nine
months ended
October 29, 2016
, respectively, a per share increase of
3.3
percent and
5.8
percent, respectively. We declared dividends totaling
$341 million
(
$0.62
per share) in
third
quarter
2017
, a per share increase of
3.3
percent over the
$342 million
($0.60 per share) of declared dividends during the
third
quarter of
2016
. We have paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future.
Short-term and Long-term Financing
Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings. As of
October 28, 2017
our credit ratings were as follows:
|
|
|
|
|
Credit Ratings
|
Moody’s
|
Standard and Poor’s
|
Fitch
|
Long-term debt
|
A2
|
A
|
A-
|
Commercial paper
|
P-1
|
A-1
|
F2
|
If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above.
We have additional liquidity through a committed $2.5 billion revolving credit facility obtained through a group of banks in October 2016. In October 2017, we extended this credit facility by one year, which now expires in October 2022. This unsecured revolving credit facility replaced a $2.25 billion unsecured revolving credit facility that was scheduled to expire in October 2018. No balances were outstanding under either credit facility at any time during
2017
or
2016
.
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of
October 28, 2017
, no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control; and (ii) our long-term debt ratings are either reduced and the resulting rating is noninvestment grade, or our long-term debt ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is noninvestment grade.
We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future. We continue to anticipate ample access to commercial paper and long-term financing.
Contractual Obligations and Commitments
As of the date of this report, other than the new borrowings and payments discussed in Note 7 of the Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since
January 28, 2017
as reported in our
2016
Form 10-K.
New Accounting Pronouncements
Refer to Note 2, Note 9, and Note 12 of the Financial Statements for a description of new accounting pronouncements related to revenues, leases, and pension benefits, respectively. We do not expect any other recently issued accounting pronouncements will have a material effect on our financial statements.
Forward-Looking Statements
This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or words of similar import. The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the continued execution of our share repurchase program, our expected capital expenditures, the impact of changes in the expected effective income tax rate on net income, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected return on plan assets, the expected outcome of, and adequacy of our reserves for, claims, litigation and the resolution of tax matters, and changes in our assumptions and expectations.
All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth on our description of risk factors in Item 1A of our Form 10-K for the fiscal year ended
January 28, 2017
, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.