MINNEAPOLIS, May 23, 2018 /PRNewswire/ --
- First quarter traffic growth of 3.7 percent is the strongest
quarterly performance in over 10 years.
- First quarter digital sales increased 28 percent, on top of
21 percent growth in first quarter 2017.
- GAAP EPS from continuing operations were $1.33, up 9.1 percent from last year. Adjusted
EPS1 were $1.32, up 9.4
percent from last year.
- The Company saw broad market share gains across its core
merchandise categories.
- In the first quarter the Company completed 56 remodels,
opened 7 new stores, introduced 3 new brands and a successful
limited-time collaboration with Hunter, launched its new Drive-Up
service in more than 250 stores, expanded Target Restock nationwide
and rolled out same-day delivery from more than 700 stores, enabled
by its recent acquisition of Shipt.
- In the second quarter, Target expects an acceleration in its
comparable sales into the low to mid single-digit range.
- The midpoint of Target's second quarter EPS guidance range
is approximately 15 percent higher than second quarter 2017 GAAP
EPS from continuing operations of $1.21 and Adjusted EPS of $1.22.
- For additional media materials, please visit:
-
https://corporate.target.com/article/2018/05/q1-2018-earnings
Target Corporation (NYSE: TGT) today announced its first
quarter 2018 financial performance2, including first
quarter comparable sales growth of 3.0 percent and 3.7 percent
traffic growth. The Company reported GAAP earnings per share
(EPS) from continuing operations of $1.33 in first quarter 2018, up 9.1 percent from
$1.21 in first quarter 2017.
First quarter Adjusted EPS were $1.32, up 9.4 percent from $1.20 in first quarter 2017. The attached tables
provide a reconciliation of non-GAAP to GAAP measures. All earnings
per share figures refer to diluted EPS.
"We're very pleased that our business continued to generate
strong traffic and sales growth in the first quarter, as we made
significant progress in support of our long-term strategic
initiatives," said Brian Cornell,
chairman and chief executive officer of Target Corporation. "Our
first quarter performance reflects the benefit of our unique
multi-category portfolio. Strong sales growth in our home,
essentials and food & beverage categories offset the impact of
delayed sales in temperature-sensitive categories, which
accelerated rapidly in recent weeks as weather improved across the
country. Additionally, our team is delivering excellent execution
and guest service every day, and momentum in our traffic has
accelerated in the second quarter. As a result, we expect Target's
second quarter comparable sales growth will move into the low to
mid single-digit range, and the midpoint of our second quarter EPS
guidance represents approximately 15 percent growth over last
year."
|
|
1 Adjusted
EPS, a non-GAAP financial measure, excludes the impact of certain
discretely managed items. See the tables of this release for
additional information about the items that have been excluded from
Adjusted EPS.
|
|
2
Beginning February 4, 2018, the Company adopted the new accounting
standard for revenue recognition, leases and pensions. The
financial information included in this earnings release reflects
the adoption of these standards, with prior periods adjusted to
conform with the current period presentation. Detail on the new
accounting standards and adjusted prior period financials were
provided in the Company's Form 8-K filed on May 11,
2018.
|
Second Quarter and Full-Year 2018 Guidance
Target expects second quarter comparable sales growth to
accelerate into the low to mid single-digit range. For the second
quarter, the Company expects both GAAP EPS from continuing
operations and Adjusted EPS of $1.30
to $1.50, compared with GAAP EPS from
continuing operations of $1.21 and
Adjusted EPS of $1.22 in first
quarter 2017.
For full-year 2018, Target continues to expect a low-single
digit increase in comparable sales, and both GAAP EPS from
continuing operations and Adjusted EPS of $5.15 to $5.45.
Second quarter and full-year 2018 GAAP EPS from continuing
operations may include the impact of certain discrete items which
will be excluded in calculating Adjusted EPS. The Company is
not currently aware of any such discrete items, beyond those
matters reported in first quarter 2018.
Operating Results
Total revenue of $16.8 billion
increased 3.4 percent from $16.2
billion last year, reflecting sales growth of 3.5 percent
combined with a slight decline in other revenue. First quarter
sales growth reflected comparable sales growth of 3.0 percent
combined with the contribution from non-mature stores.
Comparable digital channel sales grew 28 percent and contributed
1.1 percentage points of comparable sales growth. Operating
income was $1,041 million in first
quarter 2018, down 9.9 percent from $1,155
million in 2017.
First quarter operating income margin rate was 6.2 percent,
compared with 7.1 percent in 2017. First quarter gross margin rate
was 29.8 percent, compared with 30.0 percent in 2017, reflecting
pressure from digital fulfillments costs and sales mix, partially
offset by the benefit of the Company's cost saving efforts and the
net impact of changes to the Company's pricing and promotions.
First quarter SG&A expense rate was 21.1 percent in 2018,
compared with 20.7 percent in 2017, driven by higher compensation
costs, including investments in store team member hours and wage
rates.
Interest Expense and Taxes from Continuing Operations
The Company's first quarter 2018 net interest expense was
$121 million, down 13.4 percent from
$140 million last year, reflecting
debt retirement and refinancing activity conducted in 2017. First
quarter 2018 effective income tax rate from continuing operations
was 22.6 percent, compared with 34.5 percent last year, primarily
due to the impact of recently-enacted federal tax reform
legislation (the Tax Act).
Capital Deployment
In first quarter 2018 the Company made capital investments of
$827 million in property and
equipment, and returned $828 million
to shareholders, including:
- Dividends of $334 million,
compared with $332 million in first
quarter 2017, reflecting an increase in the dividend per share
offset by a decline in share count.
- Share repurchases totaling $494
million that retired 6.9 million shares of common stock at
an average price of $71.24.
As of the end of the first quarter, the Company had
approximately $2.8 billion of
remaining capacity under its current $5
billion share repurchase program, reflecting first quarter
purchases and an accelerated share repurchase transaction which
will settle in the second quarter.
For the trailing twelve months through first quarter 2018,
after-tax return on invested capital (ROIC) was 15.2 percent,
compared with 13.8 percent for the twelve months through first
quarter 2017. The year-over-year increase in first quarter 2018
reflected discrete impacts of the Tax Act combined with the benefit
of a lower structural tax rate and lower working capital, partially
offset by the impact of lower pretax earnings. Excluding the
discrete impacts of the Tax Act, ROIC was 13.5 percent for the
trailing twelve months ended May 5,
2018. See the tables of this release for additional
information about the Company's ROIC calculation.
Conference Call Details
Target will webcast its first quarter earnings conference call
at 7:00 a.m. CDT 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. CDT today through the end of business on May 25, 2018. The replay number is
866-505-9259.
Miscellaneous
Statements in this release regarding second quarter and
full-year 2018 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 Feb. 3,
2018. 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.
About Target
Minneapolis-based Target
Corporation (NYSE: TGT) serves guests at 1,829 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.
|
Contacts:
|
John Hulbert,
Investors, (612) 761-6627
|
|
Erin Conroy, Media,
(612) 761-5928
|
|
Target Media Hotline,
(612) 696-3400
|
|
TARGET
CORPORATION
|
|
|
Consolidated
Statements of Operations
|
|
|
|
Three Months Ended
|
|
|
|
(millions, except per share data) (unaudited)
|
|
May 5,
2018
|
|
April 29,
2017
As Adjusted
(a)
|
|
Change
|
|
Sales
|
|
$
|
16,556
|
|
|
$
|
15,995
|
|
|
3.5
|
%
|
|
Other
revenue
|
|
225
|
|
|
228
|
|
|
(1.2)
|
|
|
Total
revenue
|
|
16,781
|
|
|
16,223
|
|
|
3.4
|
|
|
Cost of
sales
|
|
11,625
|
|
|
11,199
|
|
|
3.8
|
|
|
Selling, general and
administrative expenses
|
|
3,545
|
|
|
3,353
|
|
|
5.7
|
|
|
Depreciation and
amortization (exclusive of depreciation included in cost of
sales)
|
|
570
|
|
|
516
|
|
|
10.5
|
|
|
Operating
income
|
|
1,041
|
|
|
1,155
|
|
|
(9.9)
|
|
|
Net interest
expense
|
|
121
|
|
|
140
|
|
|
(13.4)
|
|
|
Net other (income) /
expense
|
|
(7)
|
|
|
(15)
|
|
|
(51.2)
|
|
|
Earnings from
continuing operations before income taxes
|
|
927
|
|
|
1,030
|
|
|
(10.0)
|
|
|
Provision for income
taxes
|
|
210
|
|
|
355
|
|
|
(41.0)
|
|
|
Net earnings from
continuing operations
|
|
717
|
|
|
675
|
|
|
6.3
|
|
|
Discontinued
operations, net of tax
|
|
1
|
|
|
3
|
|
|
|
|
Net
earnings
|
|
$
|
718
|
|
|
$
|
678
|
|
|
5.9
|
%
|
|
Basic earnings per
share
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.34
|
|
|
$
|
1.22
|
|
|
9.4
|
%
|
|
Discontinued
operations
|
|
—
|
|
|
0.01
|
|
|
|
|
Net earnings per
share
|
|
$
|
1.34
|
|
|
$
|
1.23
|
|
|
8.9
|
%
|
|
Diluted earnings
per share
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.33
|
|
|
$
|
1.21
|
|
|
9.1
|
%
|
|
Discontinued
operations
|
|
—
|
|
|
0.01
|
|
|
|
|
Net earnings per
share
|
|
$
|
1.33
|
|
|
$
|
1.22
|
|
|
8.7
|
%
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
|
536.9
|
|
|
552.4
|
|
|
(2.8)
|
%
|
|
Dilutive impact of
share-based awards
|
|
4.1
|
|
|
2.8
|
|
|
|
|
Diluted
|
|
541.0
|
|
|
555.2
|
|
|
(2.6)
|
%
|
|
Antidilutive
shares
|
|
2.2
|
|
|
3.0
|
|
|
|
|
Dividends declared
per share
|
|
$
|
0.62
|
|
|
$
|
0.60
|
|
|
3.3
|
%
|
|
Note: Per share
amounts may not foot due to rounding.
|
|
|
(a)
Beginning with the first quarter 2018, we
adopted the new accounting standards for revenue recognition,
leases, and pensions. We are presenting prior period results on a
basis consistent with the new standards and conformed to the
current period presentation. We provided additional information
about the impact of the new accounting standards on previously
reported financial information in a Form 8-K filed on May 11,
2018.
|
|
TARGET
CORPORATION
|
|
|
Consolidated
Statements of Financial Position
|
|
|
(millions) (unaudited)
|
|
May 5,
2018
|
|
February
3,
2018
As Adjusted
(a)
|
|
April 29,
2017
As Adjusted
(a)
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,060
|
|
|
$
|
2,643
|
|
|
$
|
2,680
|
|
|
Inventory
|
|
8,652
|
|
|
8,597
|
|
|
7,920
|
|
|
Other current
assets
|
|
1,164
|
|
|
1,300
|
|
|
1,116
|
|
|
Total current
assets
|
|
10,876
|
|
|
12,540
|
|
|
11,716
|
|
|
Property and
equipment
|
|
|
|
|
|
|
|
Land
|
|
6,090
|
|
|
6,095
|
|
|
6,105
|
|
|
Buildings and
improvements
|
|
28,363
|
|
|
28,131
|
|
|
27,320
|
|
|
Fixtures and
equipment
|
|
5,135
|
|
|
5,623
|
|
|
5,177
|
|
|
Computer hardware and
software
|
|
2,511
|
|
|
2,645
|
|
|
2,546
|
|
|
Construction-in-progress
|
|
639
|
|
|
440
|
|
|
379
|
|
|
Accumulated
depreciation
|
|
(17,971)
|
|
|
(18,398)
|
|
|
(17,285)
|
|
|
Property and
equipment, net
|
|
24,767
|
|
|
24,536
|
|
|
24,242
|
|
|
Operating lease
assets
|
|
1,958
|
|
|
1,884
|
|
|
1,879
|
|
|
Other noncurrent
assets
|
|
1,328
|
|
|
1,343
|
|
|
723
|
|
|
Total
assets
|
|
$
|
38,929
|
|
|
$
|
40,303
|
|
|
$
|
38,560
|
|
|
Liabilities and
shareholders' investment
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
8,131
|
|
|
$
|
8,677
|
|
|
$
|
6,537
|
|
|
Accrued and other
current liabilities
|
|
3,630
|
|
|
4,094
|
|
|
3,973
|
|
|
Current portion of
long-term debt and other borrowings
|
|
283
|
|
|
281
|
|
|
1,729
|
|
|
Total current
liabilities
|
|
12,044
|
|
|
13,052
|
|
|
12,239
|
|
|
Long-term debt and
other borrowings
|
|
11,107
|
|
|
11,117
|
|
|
10,916
|
|
|
Noncurrent operating
lease liabilities
|
|
2,007
|
|
|
1,924
|
|
|
1,923
|
|
|
Deferred income
taxes
|
|
744
|
|
|
693
|
|
|
843
|
|
|
Other noncurrent
liabilities
|
|
1,869
|
|
|
1,866
|
|
|
1,660
|
|
|
Total noncurrent
liabilities
|
|
15,727
|
|
|
15,600
|
|
|
15,342
|
|
|
Shareholders'
investment
|
|
|
|
|
|
|
|
Common
stock
|
|
44
|
|
|
45
|
|
|
46
|
|
|
Additional paid-in
capital
|
|
5,664
|
|
|
5,858
|
|
|
5,674
|
|
|
Retained
earnings
|
|
6,187
|
|
|
6,495
|
|
|
5,885
|
|
|
Accumulated other
comprehensive loss
|
|
(737)
|
|
|
(747)
|
|
|
(626)
|
|
|
Total shareholders'
investment
|
|
11,158
|
|
|
11,651
|
|
|
10,979
|
|
|
Total liabilities
and shareholders' investment
|
|
$
|
38,929
|
|
|
$
|
40,303
|
|
|
$
|
38,560
|
|
|
Common Stock
Authorized 6,000,000,000 shares, $.0833 par value; 532,916,612,
541,681,670 and 551,657,501 shares issued and outstanding at
May 5, 2018, February 3, 2018 and April 29, 2017,
respectively.
|
|
|
Preferred
Stock Authorized 5,000,000 shares, $.01 par value; no shares
were issued or outstanding during any period presented.
|
|
|
(a)
Additional information
is provided on page 6.
|
|
TARGET
CORPORATION
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
Three Months
Ended
|
|
(millions) (unaudited)
|
|
May 5,
2018
|
|
April 29,
2017
As Adjusted
(a)
|
|
Operating
activities
|
|
|
|
|
|
Net
earnings
|
|
$
|
718
|
|
|
$
|
678
|
|
|
Earnings from
discontinued operations, net of tax
|
|
1
|
|
|
3
|
|
|
Net earnings from
continuing operations
|
|
717
|
|
|
675
|
|
|
Adjustments to
reconcile net earnings to cash provided by operations
|
|
|
|
|
|
Depreciation and
amortization
|
|
631
|
|
|
581
|
|
|
Share-based
compensation expense
|
|
42
|
|
|
16
|
|
|
Deferred income
taxes
|
|
48
|
|
|
2
|
|
|
Noncash losses /
(gains) and other, net
|
|
40
|
|
|
(19)
|
|
|
Changes in operating
accounts
|
|
|
|
|
|
Inventory
|
|
(55)
|
|
|
323
|
|
|
Other
assets
|
|
26
|
|
|
22
|
|
|
Accounts
payable
|
|
(604)
|
|
|
(715)
|
|
|
Accrued and other
liabilities
|
|
(333)
|
|
|
372
|
|
|
Cash provided by
operating activities—continuing operations
|
|
512
|
|
|
1,257
|
|
|
Cash provided by
operating activities—discontinued operations
|
|
2
|
|
|
48
|
|
|
Cash provided by
operations
|
|
514
|
|
|
1,305
|
|
|
Investing
activities
|
|
|
|
|
|
Expenditures for
property and equipment
|
|
(827)
|
|
|
(486)
|
|
|
Proceeds from
disposal of property and equipment
|
|
4
|
|
|
13
|
|
|
Other
investments
|
|
5
|
|
|
(9)
|
|
|
Cash required for
investing activities
|
|
(818)
|
|
|
(482)
|
|
|
Financing
activities
|
|
|
|
|
|
Reductions of
long-term debt
|
|
(12)
|
|
|
(10)
|
|
|
Dividends
paid
|
|
(334)
|
|
|
(332)
|
|
|
Repurchase of
stock
|
|
(524)
|
|
|
(317)
|
|
|
Accelerated share
repurchase pending final settlement
|
|
(425)
|
|
|
—
|
|
|
Stock option
exercises
|
|
16
|
|
|
4
|
|
|
Cash required for
financing activities
|
|
(1,279)
|
|
|
(655)
|
|
|
Net (decrease) /
increase in cash and cash equivalents
|
|
(1,583)
|
|
|
168
|
|
|
Cash and cash
equivalents at beginning of period
|
|
2,643
|
|
|
2,512
|
|
|
Cash and cash
equivalents at end of period
|
|
$
|
1,060
|
|
|
$
|
2,680
|
|
|
(a)
Additional information
is provided on page 6.
|
|
TARGET
CORPORATION
|
|
|
Operating
Results
|
|
|
Three Months
Ended
|
|
Rate Analysis
(unaudited)
|
May 5,
2018
|
|
April
29,
2017
As Adjusted
(a)
|
|
Gross margin rate
(b)
|
29.8
|
%
|
|
30.0
|
%
|
|
SG&A expense rate
(c)
|
21.1
|
|
|
20.7
|
|
|
Depreciation and
amortization (exclusive of depreciation included in cost of sales)
expense rate (b)
|
3.4
|
|
|
3.2
|
|
|
Operating income
margin rate (c)
|
6.2
|
|
|
7.1
|
|
|
(a)
Additional information is provided on page 6.
|
|
(b)
Calculated as gross margin (sales less cost of sales) divided by
sales.
|
|
(c)
Calculated as the applicable amount divided by total revenue. Other
revenue includes $167 million and $171 million of profit-sharing
income under our credit card program agreement for the three months
ended May 5, 2018 and April 29, 2017,
respectively.
|
|
Three Months Ended
|
|
Comparable Sales
(unaudited)
|
May 5,
2018
|
|
April 29,
2017
|
|
Comparable sales
change
|
3.0
|
%
|
|
(1.3)
|
%
|
|
Drivers of change in
comparable sales
|
|
|
|
|
Number of
transactions
|
3.7
|
|
|
(0.8)
|
|
|
Average transaction
amount
|
(0.6)
|
|
|
(0.6)
|
|
|
Note: Amounts may not
foot due to rounding.
|
|
Contribution to
Comparable Sales Change
(unaudited)
|
Three Months Ended
|
|
May 5,
2018
|
|
April 29,
2017
|
|
Stores channel
comparable sales change
|
1.9
|
%
|
|
(2.2)
|
%
|
|
Digital channel
contribution to comparable sales change
|
1.1
|
|
|
0.8
|
|
|
Total comparable
sales change
|
3.0
|
%
|
|
(1.3)
|
%
|
|
Note: Amounts may not
foot due to rounding.
|
|
Three Months Ended
|
|
Sales by Channel
(unaudited)
|
May 5,
2018
|
|
April 29,
2017
As Adjusted
(a)
|
|
Stores
|
94.8
|
%
|
|
95.8
|
%
|
|
Digital
|
5.2
|
|
|
4.2
|
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
(a)
Additional information is provided on page 6.
|
|
Three Months
Ended
|
|
REDcard
Penetration
(unaudited)
|
May 5,
2018
|
|
April 29,
2017
|
|
Target Debit
Card
|
13.5
|
%
|
|
13.6
|
%
|
|
Target Credit
Cards
|
10.6
|
|
|
11.1
|
|
|
Total REDcard
Penetration
|
24.1
|
%
|
|
24.7
|
%
|
|
Note: Amounts may not
foot due to rounding. In Q1 2018, we refined our calculation of
REDcard penetration. The prior period amount has been updated to
conform with the current period methodology, resulting in an
increase of 0.2 percentage points to the Total REDcard Penetration
at April 29, 2017.
|
|
Number of Stores
and Retail Square Feet
(unaudited)
|
Number of
Stores
|
|
Retail Square Feet
(a)
|
|
May 5,
2018
|
February
3,
2018
|
April 29,
2017
|
|
May 5,
2018
|
February
3,
2018
|
April 29,
2017
|
|
170,000 or more sq.
ft.
|
274
|
|
274
|
|
276
|
|
|
48,951
|
|
48,966
|
|
49,328
|
|
|
50,000 to 169,999 sq.
ft.
|
1,502
|
|
1,500
|
|
1,505
|
|
|
189,258
|
|
189,030
|
|
189,746
|
|
|
49,999 or less sq.
ft.
|
53
|
|
48
|
|
26
|
|
|
1,477
|
|
1,359
|
|
709
|
|
|
Total
|
1,829
|
|
1,822
|
|
1,807
|
|
|
239,686
|
|
239,355
|
|
239,783
|
|
|
(a)
In thousands, reflects total square feet less office, distribution
center, and vacant space.
|
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
|
|
|
|
|
May 5,
2018
|
|
April 29,
2017
As Adjusted
(a)
|
|
|
|
(millions, except
per share data) (unaudited)
|
|
Pretax
|
|
Net of
Tax
|
|
Per Share
Amounts
|
|
Pretax
|
|
Net of
Tax
|
|
Per Share
Amounts
|
|
Change
|
|
GAAP diluted earnings
per share from continuing operations
|
|
|
|
|
|
$
|
1.33
|
|
|
|
|
|
|
$
|
1.21
|
|
|
9.1
|
%
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax matters
(b)
|
|
$
|
—
|
|
|
$
|
(5)
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
$
|
(7)
|
|
|
$
|
(0.01)
|
|
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
|
|
|
|
|
$
|
1.32
|
|
|
|
|
|
|
$
|
1.20
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Amounts
may not foot due to rounding.
|
|
(a)
Additional information is provided on page 6. Lease standard
adoption resulted in a $0.01 reduction in both GAAP and Adjusted
diluted earnings per share from continuing operations for the three
months ended April 29, 2017.
|
|
(b)
Represents income from income tax matters not related to current
period operations.
|
Consolidated earnings from continuing operations before interest
expense and income taxes (EBIT) and earnings before interest,
taxes, depreciation and amortization (EBITDA) are non-GAAP
financial measures which we believe 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, 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
|
|
|
|
(millions) (unaudited)
|
|
May 5,
2018
|
|
April 29,
2017
As Adjusted
(a)
|
|
Change
|
|
Net earnings from
continuing operations
|
|
$
|
717
|
|
|
$
|
675
|
|
|
6.3
|
%
|
|
+ Provision for
income taxes
|
|
210
|
|
|
355
|
|
|
(41.0)
|
|
|
+ Net interest
expense
|
|
121
|
|
|
140
|
|
|
(13.4)
|
|
|
EBIT
(a)
|
|
$
|
1,048
|
|
|
$
|
1,170
|
|
|
(10.4)
|
%
|
|
+ Total depreciation
and amortization (b)
|
|
631
|
|
|
581
|
|
|
8.6
|
|
|
EBITDA
(a)
|
|
$
|
1,679
|
|
|
$
|
1,751
|
|
|
(4.1)
|
%
|
|
(a)
Additional information is provided on page 6. Adoption of the new
accounting standards resulted in an $8 million decrease in EBIT for
the three months ended April 29, 2017, with no impact on
EBITDA.
|
|
(b)
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. We believe this metric is useful in assessing 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) (unaudited)
|
|
May 5,
2018
(a)
|
|
April 29,
2017
As Adjusted
(b)
|
|
|
|
|
|
Operating
income
|
|
$
|
4,110
|
|
|
$
|
4,723
|
|
|
|
|
|
|
+ Net other income /
(expense)
|
|
51
|
|
|
93
|
|
|
|
|
|
|
EBIT
|
|
4,161
|
|
|
4,816
|
|
|
|
|
|
|
+ Operating lease
interest (c)
|
|
80
|
|
|
75
|
|
|
|
|
|
|
Adjusted
EBIT
|
|
4,241
|
|
|
4,891
|
|
|
|
|
|
|
- Income taxes
(d)
|
|
692
|
|
(e)
|
1,633
|
|
|
|
|
|
|
Net operating
profit after taxes
|
|
$
|
3,549
|
|
|
$
|
3,258
|
|
|
|
|
|
|
|
|
Denominator
(dollars in
millions) (unaudited)
|
|
May 5,
2018
|
|
April 29,
2017
As Adjusted
(b)
|
|
April 30,
2016
As Adjusted
(b)
|
|
Current portion of
long-term debt and other borrowings
|
|
$
|
283
|
|
|
$
|
1,729
|
|
|
$
|
1,634
|
|
|
+ Noncurrent portion
of long-term debt
|
|
11,107
|
|
|
10,916
|
|
|
12,431
|
|
|
+ Shareholders'
equity
|
|
11,158
|
|
|
10,979
|
|
|
12,506
|
|
|
+ Operating lease
liabilities (f)
|
|
2,157
|
|
|
2,049
|
|
|
1,902
|
|
|
- Cash and cash
equivalents
|
|
1,060
|
|
|
2,680
|
|
|
4,036
|
|
|
- Net assets of
discontinued operations (g)
|
|
—
|
|
|
17
|
|
|
249
|
|
|
Invested
capital
|
|
$
|
23,645
|
|
|
$
|
22,976
|
|
|
$
|
24,188
|
|
|
Average invested
capital (h)
|
|
$
|
23,310
|
|
|
$
|
23,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax return
on invested capital (i)
|
|
|
15.2
|
%
|
(e)
|
|
13.8
|
%
|
|
|
|
|
|
After-tax return
on invested capital excluding discrete impacts of Tax
Act
|
|
|
13.5
|
%
|
(e)
|
|
|
|
|
|
|
|
|
(a)
Consisted of 53 weeks.
|
|
(b)
Additional information is provided on page 6.
|
|
(c)
Represents the add-back to operating income driven by the
hypothetical interest expense we would incur if the property under
our operating leases were owned or accounted for as finance leases.
Calculated using the discount rate for each lease and recorded as a
component of rent expense within SG&A. Operating lease interest
is added back to Operating Income in the ROIC calculation to
control for differences in capital structure between us and our
competitors.
|
|
(d)
Calculated using the effective tax rates for continuing operations,
which were 16.3 percent and 33.4 percent for the trailing twelve
months ended May 5, 2018, and April 29, 2017, respectively. For the
twelve months ended May 5, 2018, and April 29, 2017, includes tax
effect of $679 million and $1,608 million, respectively, related to
EBIT and $13 million and $25 million, respectively, related to
operating lease interest.
|
|
(e)
The effective tax rate for the trailing twelve months ended May 5,
2018, includes discrete tax benefits of $343 million related to the
Tax Cuts and Jobs Act (Tax Act), and the impact of the new lower
U.S. corporate income tax rate.
|
|
(f)
Total short-term and long-term operating lease liabilities included
within Accrued and Other Current Liabilities and Noncurrent
Operating Lease Liabilities on the Consolidated Statements of
Financial Position.
|
|
(g)
Included in Other Assets and Liabilities on the Consolidated
Statements of Financial Position.
|
|
(h)
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.
|
|
(i)
Adoption of the new lease standard reduced ROIC by approximately
0.5 percentage points for all periods presented.
|
Beginning with the first quarter 2018, we adopted the new
accounting standards for revenue recognition, leases, and pensions.
To inform investors how Adjusted EPS from prior periods are
affected, the following presents Adjusted EPS reflecting the impact
of these accounting standards for the last three fiscal years,
calculated in the same manner as described on page 11. We provided
additional information about the impact of the new accounting
standards on previously reported financial information in a Form
8-K filed on May 11, 2018.
|
As previously
reported
|
Full-Year
|
|
(dollars in millions)
(unaudited)
|
2017
|
2016
|
2015
|
|
GAAP diluted earnings
per share from continuing operations
|
$
|
5.32
|
|
$
|
4.58
|
|
$
|
5.25
|
|
|
Adjustments
|
|
|
|
|
Tax Act
(b)
|
$
|
(0.64)
|
|
$
|
—
|
|
$
|
—
|
|
|
Loss on early
retirement of debt
|
0.14
|
|
0.44
|
|
—
|
|
|
Gain on sale
(c)
|
—
|
|
—
|
|
(0.77)
|
|
|
Restructuring costs
(d)
|
—
|
|
—
|
|
0.14
|
|
|
Pharmacy
Transaction-related costs (e)
|
—
|
|
—
|
|
—
|
|
|
Data breach-related
costs, net of insurance (f)
|
(0.01)
|
|
—
|
|
0.04
|
|
|
Impairments
(g)
|
—
|
|
—
|
|
0.05
|
|
|
Other income tax
matters (h)
|
(0.10)
|
|
(0.01)
|
|
(0.01)
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
$
|
4.71
|
|
$
|
5.01
|
|
$
|
4.69
|
|
|
Amounts may not foot due to
rounding. Footnote explanations are provided on page
14.
|
|
As
adjusted (a)
|
Full-Year
|
|
(dollars in millions)
(unaudited)
|
2017
|
2016
|
2015
|
|
GAAP diluted earnings
per share from continuing operations
|
$
|
5.29
|
|
$
|
4.58
|
|
$
|
5.25
|
|
|
Adjustments
|
|
|
|
|
Tax Act
(b)
|
$
|
(0.62)
|
|
$
|
—
|
|
$
|
—
|
|
|
Loss on early
retirement of debt
|
0.14
|
|
0.44
|
|
—
|
|
|
Gain on sale
(c)
|
—
|
|
—
|
|
(0.77)
|
|
|
Restructuring costs
(d)
|
—
|
|
—
|
|
0.14
|
|
|
Pharmacy
Transaction-related costs (e)
|
—
|
|
—
|
|
—
|
|
|
Data breach-related
costs, net of insurance (f)
|
(0.01)
|
|
—
|
|
0.04
|
|
|
Impairments
(g)
|
—
|
|
—
|
|
0.05
|
|
|
Other income tax
matters (h)
|
(0.10)
|
|
(0.01)
|
|
(0.01)
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
$
|
4.69
|
|
$
|
5.00
|
|
$
|
4.69
|
|
|
Amounts may not foot due to
rounding. Footnote explanations are provided on page
14.
|
|
As previously
reported
|
Quarterly
|
|
2017
|
|
2016
|
|
(dollars in
millions) (unaudited)
|
4Q
|
3Q
|
2Q
|
1Q
|
|
4Q
|
3Q
|
2Q
|
1Q
|
|
GAAP diluted earnings
per share from continuing operations
|
$
|
2.02
|
|
$
|
0.87
|
|
$
|
1.22
|
|
$
|
1.22
|
|
|
$
|
1.46
|
|
$
|
1.06
|
|
$
|
1.07
|
|
$
|
1.02
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Tax Act
(b)
|
$
|
(0.64)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Loss on early
retirement of debt
|
—
|
|
0.14
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
0.17
|
|
0.26
|
|
|
Pharmacy
Transaction-related costs (e)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(0.01)
|
|
0.01
|
|
|
Data breach-related
costs, net of insurance (f)
|
(0.01)
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Other income tax
matters (h)
|
—
|
|
(0.10)
|
|
0.01
|
|
(0.01)
|
|
|
—
|
|
(0.01)
|
|
—
|
|
—
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
$
|
1.37
|
|
$
|
0.91
|
|
$
|
1.23
|
|
$
|
1.21
|
|
|
$
|
1.45
|
|
$
|
1.04
|
|
$
|
1.23
|
|
$
|
1.29
|
|
|
Amounts may not foot
due to rounding.
|
|
As
adjusted (a)
|
Quarterly
|
|
2017
|
|
2016
|
|
(dollars in
millions) (unaudited)
|
4Q
|
3Q
|
2Q
|
1Q
|
|
4Q
|
3Q
|
2Q
|
1Q
|
|
GAAP diluted earnings
per share from continuing operations
|
$
|
1.99
|
|
$
|
0.87
|
|
$
|
1.21
|
|
$
|
1.21
|
|
|
$
|
1.46
|
|
$
|
1.06
|
|
$
|
1.06
|
|
$
|
1.01
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Tax Act
(b)
|
$
|
(0.63)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Loss on early
retirement of debt
|
—
|
|
0.14
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
0.17
|
|
0.26
|
|
|
Pharmacy
Transaction-related costs (e)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(0.01)
|
|
0.01
|
|
|
Data breach-related
costs, net of insurance (f)
|
(0.01)
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Other income tax
matters (h)
|
—
|
|
(0.10)
|
|
0.01
|
|
(0.01)
|
|
|
—
|
|
(0.01)
|
|
—
|
|
—
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
$
|
1.36
|
|
$
|
0.90
|
|
$
|
1.22
|
|
$
|
1.20
|
|
|
$
|
1.45
|
|
$
|
1.04
|
|
$
|
1.22
|
|
$
|
1.28
|
|
|
Amounts may not foot
due to rounding.
|
|
(a)
Additional information is provided on page 6.
|
|
(b)
Represents discrete impacts of the Tax Cuts and Jobs Act
legislation (the Tax Act) enacted in December of 2017, including
remeasurement of our net deferred tax liabilities at the new 21
percent U.S. corporate income tax rate, providing deferred taxes
for accumulated foreign earnings we no longer consider indefinitely
reinvested, and other items not individually
significant.
|
|
(c)
Represents the gain on the December 2015 sale of our pharmacy and
clinic businesses (Pharmacy Transaction).
|
|
(d) Costs
related to our corporate restructuring announced during the first
quarter of 2015.
|
|
(e)
Represents items related to the Pharmacy Transaction.
|
|
(f)
Represents costs related to the 2013 data breach, net of insurance
recoveries.
|
|
(g)
Represents impairments related to our decision to wind down certain
noncore operations.
|
|
(h)
Represents expense / (income) from other income tax matters not
related to current period operations.
|
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SOURCE Target Corporation