MINNEAPOLIS, Nov. 20, 2018 /PRNewswire/ --
- Comparable traffic growth of 5.3 percent and comparable
sales growth of 5.1 percent were driven by healthy increases in
both stores and digital channels.
- Third quarter comparable digital channel sales grew 49
percent, contributing 1.9 percentage points to comparable
sales.
- The Company gained market share across all five of its core
merchandising categories.
- GAAP EPS from continuing operations were $1.16, up 33.6 percent from last year. Adjusted
EPS1 were $1.09, up 20.2
percent from last year.
- For additional media materials, please visit:
https://corporate.target.com/article/2018/11/q3-2018-earnings
Target Corporation (NYSE: TGT) today announced its third
quarter 2018 financial performance, including comparable sales
growth of 5.1 percent and comparable traffic growth of 5.3
percent. The Company reported GAAP earnings per share (EPS)
from continuing operations of $1.16
in third quarter 2018, up 33.6 percent from $0.87 in third quarter 2017. Third quarter
Adjusted EPS were $1.09, up 20.2
percent from $0.90 in third quarter
2017. 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 tables of this release for
additional information about the items that have been excluded from
Adjusted EPS.
|
"Our team delivered another outstanding quarter, driving
comparable traffic and sales growth of more than 5 percent and
earnings per share growth of more than 20 percent," said
Brian Cornell, chairman and chief
executive officer of Target Corporation. "We've made significant
investments in our team heading into the holidays and they are
ready to serve our guests with a comprehensive suite of convenient
delivery and pickup options, a wide range of new products and
unique gift ideas and a strong emphasis on low prices and great
value. We plan to leverage our current momentum into 2019, when
we'll achieve greater scale across the full slate of our
initiatives - creating efficiencies and cost-savings, further
strengthening our guest experience and positioning Target for
profitable growth in the years ahead."
Fourth Quarter and Full-Year 2018 Guidance
For the fourth quarter, Target expects comparable sales growth
of approximately 5 percent, consistent with the Company's
year-to-date performance through third quarter 2018. For the full
year, the Company continues to expect Adjusted EPS of $5.30 to $5.50 and
GAAP EPS of $5.41 to $5.61. The 11-cent
difference between expected full-year Adjusted EPS and GAAP EPS is
driven by discrete items already reported through third quarter
2018.
The Company announced today that it plans to issue a
post-holiday financial update on Thursday,
January 10, 2019.
Operating Results
Total revenue of $17.8 billion
increased 5.6 percent from $16.9
billion last year, reflecting sales growth of 5.7 percent
and other revenue growth of 1.6 percent. Third quarter sales growth
included a 5.1 percent increase in comparable sales and a 0.6
percentage point contribution from non-mature stores.
Comparable digital channel sales grew 49 percent and contributed
1.9 percentage points of comparable sales growth. Operating
income was $819 million in third
quarter 2018, down 3.3 percent from $847
million in 2017.
Third quarter operating income margin rate was 4.6 percent,
compared with 5.0 percent in 2017. Third quarter gross margin rate
was 28.7 percent, compared with 29.6 percent in 2017. This decline
reflected higher supply chain costs driven by growth in digital
fulfillment costs and other expenses related to the size and timing
of holiday-related inventory receipts compared with last year,
partially offset by the benefit of merchant initiatives. Third
quarter SG&A expense rate was 22.1 percent in 2018, essentially
flat to last year. Third quarter SG&A results reflected
continued investments in our team, specifically hours, training and
wages, which were offset by continued cost discipline across the
enterprise.
Interest Expense and Taxes from Continuing Operations
The Company's third quarter 2018 net interest expense was
$115 million, down 54.1 percent from
$251 million last year, primarily
driven by early debt retirement costs recognized in third quarter
last year. Third quarter 2018 effective income tax rate from
continuing operations was 13.6 percent, compared with 22.2 percent
last year. Third quarter 2018 effective income tax rate from
continuing operations reflects the net tax effect of the federal
tax reform legislation (the Tax Act), including both ongoing and
discrete benefits.
Capital Deployment
In third quarter 2018 the Company made capital investments of
$1,017 million in property and
equipment, and returned $863 million
to shareholders, including:
- Dividends of $337 million,
compared with $339 million in third
quarter 2017, reflecting a decline in share count partially offset
by an increase in the dividend per share.
- Share repurchases totaling $526
million that retired 6.3 million shares of common stock at
an average price of $84.00.
As of the end of the third quarter, the Company had
approximately $1.8 billion of
remaining capacity under its current $5
billion share repurchase program, reflecting third quarter
purchases and an accelerated share repurchase transaction which
will settle in the fourth quarter.
For the trailing twelve months through third quarter 2018,
after-tax return on invested capital (ROIC) was 15.8 percent,
compared with 13.4 percent for the twelve months through third
quarter 2017. Excluding the discrete impacts of the Tax Act, ROIC
was 13.9 percent for the trailing twelve months ended November 3, 2018. See the tables of this
release for additional information about the Company's ROIC
calculation.
Conference Call Details
Target 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 "investors" then click on "events &
presentations"). 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 23, 2018. The replay number is
800-331-1949.
Miscellaneous
Statements in this release regarding fourth quarter and
full-year 2018 earnings per share and comparable sales guidance and
the expected 2019 impact of our initiatives 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 more than 1,800 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
the latest store count or 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) (unaudited)
|
|
November 3,
2018
|
|
October
28,
2017
As Adjusted
(a)
|
|
Change
|
|
November 3,
2018
|
|
October
28,
2017
As Adjusted
(a)
|
|
Change
|
Sales
|
|
$
|
17,590
|
|
|
$
|
16,647
|
|
|
5.7
|
%
|
|
$
|
51,699
|
|
|
$
|
49,052
|
|
|
5.4
|
%
|
Other
revenue
|
|
231
|
|
|
227
|
|
|
1.6
|
|
|
680
|
|
|
679
|
|
|
0.2
|
|
Total
revenue
|
|
17,821
|
|
|
16,874
|
|
|
5.6
|
|
|
52,379
|
|
|
49,731
|
|
|
5.3
|
|
Cost of
sales
|
|
12,535
|
|
|
11,712
|
|
|
7.0
|
|
|
36,400
|
|
|
34,330
|
|
|
6.0
|
|
Selling, general and
administrative expenses
|
|
3,937
|
|
|
3,733
|
|
|
5.5
|
|
|
11,347
|
|
|
10,686
|
|
|
6.2
|
|
Depreciation and
amortization (exclusive of depreciation included in cost of
sales)
|
|
530
|
|
|
582
|
|
|
(9.0)
|
|
|
1,639
|
|
|
1,620
|
|
|
1.2
|
|
Operating
income
|
|
819
|
|
|
847
|
|
|
(3.3)
|
|
|
2,993
|
|
|
3,095
|
|
|
(3.3)
|
|
Net interest
expense
|
|
115
|
|
|
251
|
|
|
(54.1)
|
|
|
352
|
|
|
521
|
|
|
(32.6)
|
|
Net other (income) /
expense
|
|
(9)
|
|
|
(15)
|
|
|
(39.9)
|
|
|
(21)
|
|
|
(44)
|
|
|
(53.6)
|
|
Earnings from
continuing operations before income taxes
|
|
713
|
|
|
611
|
|
|
16.7
|
|
|
2,662
|
|
|
2,618
|
|
|
1.7
|
|
Provision for income
taxes
|
|
97
|
|
|
135
|
|
|
(28.5)
|
|
|
530
|
|
|
798
|
|
|
(33.6)
|
|
Net earnings from
continuing operations
|
|
616
|
|
|
476
|
|
|
29.6
|
|
|
2,132
|
|
|
1,820
|
|
|
17.1
|
|
Discontinued
operations, net of tax
|
|
6
|
|
|
2
|
|
|
|
|
7
|
|
|
7
|
|
|
|
Net
earnings
|
|
$
|
622
|
|
|
$
|
478
|
|
|
30.2
|
%
|
|
$
|
2,139
|
|
|
$
|
1,827
|
|
|
17.1
|
%
|
Basic earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.17
|
|
|
$
|
0.87
|
|
|
34.1
|
%
|
|
$
|
4.01
|
|
|
$
|
3.31
|
|
|
20.9
|
%
|
Discontinued
operations
|
|
0.01
|
|
|
—
|
|
|
|
|
0.01
|
|
|
0.01
|
|
|
|
Net earnings per
share
|
|
$
|
1.18
|
|
|
$
|
0.88
|
|
|
34.8
|
%
|
|
$
|
4.02
|
|
|
$
|
3.33
|
|
|
20.9
|
%
|
Diluted earnings
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.16
|
|
|
$
|
0.87
|
|
|
33.6
|
%
|
|
$
|
3.98
|
|
|
$
|
3.30
|
|
|
20.5
|
%
|
Discontinued
operations
|
|
0.01
|
|
|
—
|
|
|
|
|
0.01
|
|
|
0.01
|
|
|
|
Net earnings per
share
|
|
$
|
1.17
|
|
|
$
|
0.87
|
|
|
34.2
|
%
|
|
$
|
3.99
|
|
|
$
|
3.31
|
|
|
20.5
|
%
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
525.9
|
|
|
544.5
|
|
|
(3.4)
|
%
|
|
531.5
|
|
|
548.7
|
|
|
(3.1)
|
%
|
Dilutive impact of
share-based awards
|
|
5.3
|
|
|
3.4
|
|
|
|
|
4.7
|
|
|
3.1
|
|
|
|
Diluted
|
|
531.2
|
|
|
547.9
|
|
|
(3.0)
|
%
|
|
536.2
|
|
|
551.8
|
|
|
(2.8)
|
%
|
Antidilutive
shares
|
|
—
|
|
|
4.5
|
|
|
|
|
—
|
|
|
4.1
|
|
|
|
Dividends declared
per share
|
|
$
|
0.64
|
|
|
$
|
0.62
|
|
|
3.2
|
%
|
|
$
|
1.90
|
|
|
$
|
1.84
|
|
|
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)
|
|
November 3,
2018
|
|
February
3,
2018
As Adjusted
(a)
|
|
October
28,
2017
As Adjusted
(a)
|
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
825
|
|
|
$
|
2,643
|
|
|
$
|
2,725
|
|
Inventory
|
|
12,393
|
|
|
8,597
|
|
|
10,517
|
|
Other current
assets
|
|
1,421
|
|
|
1,300
|
|
|
1,444
|
|
Total current
assets
|
|
14,639
|
|
|
12,540
|
|
|
14,686
|
|
Property and
equipment
|
|
|
|
|
|
|
Land
|
|
6,069
|
|
|
6,095
|
|
|
6,087
|
|
Buildings and
improvements
|
|
29,090
|
|
|
28,131
|
|
|
27,946
|
|
Fixtures and
equipment
|
|
5,784
|
|
|
5,623
|
|
|
5,548
|
|
Computer hardware and
software
|
|
2,660
|
|
|
2,645
|
|
|
2,658
|
|
Construction-in-progress
|
|
384
|
|
|
440
|
|
|
389
|
|
Accumulated
depreciation
|
|
(18,380)
|
|
|
(18,398)
|
|
|
(17,979)
|
|
Property and
equipment, net
|
|
25,607
|
|
|
24,536
|
|
|
24,649
|
|
Operating lease
assets
|
|
1,997
|
|
|
1,884
|
|
|
1,861
|
|
Other noncurrent
assets
|
|
1,329
|
|
|
1,343
|
|
|
813
|
|
Total
assets
|
|
$
|
43,572
|
|
|
$
|
40,303
|
|
|
$
|
42,009
|
|
Liabilities and
shareholders' investment
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
11,959
|
|
|
$
|
8,677
|
|
|
$
|
9,986
|
|
Accrued and other
current liabilities
|
|
4,096
|
|
|
4,094
|
|
|
3,875
|
|
Current portion of
long-term debt and other borrowings
|
|
1,535
|
|
|
281
|
|
|
1,366
|
|
Total current
liabilities
|
|
17,590
|
|
|
13,052
|
|
|
15,227
|
|
Long-term debt and
other borrowings
|
|
10,104
|
|
|
11,117
|
|
|
11,090
|
|
Noncurrent operating
lease liabilities
|
|
2,046
|
|
|
1,924
|
|
|
1,901
|
|
Deferred income
taxes
|
|
970
|
|
|
693
|
|
|
915
|
|
Other noncurrent
liabilities
|
|
1,782
|
|
|
1,866
|
|
|
1,784
|
|
Total noncurrent
liabilities
|
|
14,902
|
|
|
15,600
|
|
|
15,690
|
|
Shareholders'
investment
|
|
|
|
|
|
|
Common
stock
|
|
43
|
|
|
45
|
|
|
45
|
|
Additional paid-in
capital
|
|
5,867
|
|
|
5,858
|
|
|
5,762
|
|
Retained
earnings
|
|
5,884
|
|
|
6,495
|
|
|
5,895
|
|
Accumulated other
comprehensive loss
|
|
(714)
|
|
|
(747)
|
|
|
(610)
|
|
Total shareholders'
investment
|
|
11,080
|
|
|
11,651
|
|
|
11,092
|
|
Total liabilities
and shareholders' investment
|
|
$
|
43,572
|
|
|
$
|
40,303
|
|
|
$
|
42,009
|
|
|
Common Stock
Authorized 6,000,000,000 shares, $0.0833 par value; 521,810,597,
541,681,670 and 543,913,318 shares issued and outstanding at
November 3, 2018, February 3, 2018 and October 28,
2017, respectively.
|
|
Preferred
Stock Authorized 5,000,000 shares, $0.01 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
|
|
|
|
Nine Months
Ended
|
(millions) (unaudited)
|
|
November 3,
2018
|
|
October
28,
2017
As Adjusted
(a)
|
Operating
activities
|
|
|
|
|
Net
earnings
|
|
$
|
2,139
|
|
|
$
|
1,827
|
|
Earnings from
discontinued operations, net of tax
|
|
7
|
|
|
7
|
|
Net earnings from
continuing operations
|
|
2,132
|
|
|
1,820
|
|
Adjustments to
reconcile net earnings to cash provided by operations
|
|
|
|
|
Depreciation and
amortization
|
|
1,826
|
|
|
1,809
|
|
Share-based
compensation expense
|
|
106
|
|
|
81
|
|
Deferred income
taxes
|
|
261
|
|
|
33
|
|
Loss on debt
extinguishment
|
|
—
|
|
|
123
|
|
Noncash losses /
(gains) and other, net
|
|
85
|
|
|
209
|
|
Changes in operating
accounts
|
|
|
|
|
Inventory
|
|
(3,796)
|
|
|
(2,277)
|
|
Other
assets
|
|
(140)
|
|
|
(88)
|
|
Accounts
payable
|
|
3,298
|
|
|
2,735
|
|
Accrued and other
liabilities
|
|
(158)
|
|
|
(25)
|
|
Cash provided by
operating activities—continuing operations
|
|
3,614
|
|
|
4,420
|
|
Cash provided by
operating activities—discontinued operations
|
|
10
|
|
|
75
|
|
Cash provided by
operations
|
|
3,624
|
|
|
4,495
|
|
Investing
activities
|
|
|
|
|
Expenditures for
property and equipment
|
|
(2,873)
|
|
|
(2,049)
|
|
Proceeds from
disposal of property and equipment
|
|
39
|
|
|
27
|
|
Other
investments
|
|
15
|
|
|
(62)
|
|
Cash required for
investing activities
|
|
(2,819)
|
|
|
(2,084)
|
|
Financing
activities
|
|
|
|
|
Change in commercial
paper, net
|
|
490
|
|
|
—
|
|
Additions to
long-term debt
|
|
—
|
|
|
739
|
|
Reductions of
long-term debt
|
|
(268)
|
|
|
(1,093)
|
|
Dividends
paid
|
|
(1,001)
|
|
|
(1,001)
|
|
Repurchase of stock
(b)
|
|
(1,485)
|
|
|
(618)
|
|
Accelerated share
repurchase pending final settlement
(b)
|
|
(450)
|
|
|
(250)
|
|
Stock option
exercises
|
|
91
|
|
|
25
|
|
Cash required for
financing activities
|
|
(2,623)
|
|
|
(2,198)
|
|
Net (decrease) /
increase in cash and cash equivalents
|
|
(1,818)
|
|
|
213
|
|
Cash and cash
equivalents at beginning of period
|
|
2,643
|
|
|
2,512
|
|
Cash and cash
equivalents at end of period
|
|
$
|
825
|
|
|
$
|
2,725
|
|
|
|
(a)
|
Additional
information is provided on page 6.
|
(b)
|
Prior year amounts
have been reclassified to conform with the current year
presentation.
|
TARGET
CORPORATION
|
|
Operating
Results
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
Rate Analysis
(unaudited)
|
November 3,
2018
|
|
October 28,
2017
As Adjusted (a)
|
|
November 3,
2018
|
|
October 28,
2017
As Adjusted (a)
|
Gross margin rate
(b)
|
28.7
|
%
|
|
29.6
|
%
|
|
29.6
|
%
|
|
30.0
|
%
|
SG&A expense rate
(c)
|
22.1
|
|
|
22.1
|
|
|
21.7
|
|
|
21.5
|
|
Depreciation and
amortization (exclusive of depreciation included in cost of sales)
expense rate (c)
|
3.0
|
|
|
3.4
|
|
|
3.1
|
|
|
3.3
|
|
Operating income
margin rate (c)
|
4.6
|
|
|
5.0
|
|
|
5.7
|
|
|
6.2
|
|
|
|
(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
$169 million and $503 million of profit-sharing income under our
credit card program agreement for the three and nine months ended
November 3, 2018, respectively, and $170 million and $512
million for the three and nine months ended October 28, 2017,
respectively.
|
|
Three Months Ended
|
|
Nine Months
Ended
|
Comparable Sales
(unaudited)
|
November 3,
2018
|
|
October 28,
2017
|
|
November 3,
2018
|
|
October 28,
2017
|
Comparable sales
change
|
5.1
|
%
|
|
0.9
|
%
|
|
4.9
|
%
|
|
0.3
|
%
|
Drivers of change in
comparable sales
|
|
|
|
|
|
|
|
Number of
transactions
|
5.3
|
|
|
1.4
|
|
|
5.1
|
|
|
0.9
|
|
Average transaction
amount
|
(0.2)
|
|
|
(0.5)
|
|
|
(0.2)
|
|
|
(0.6)
|
|
|
Note: Amounts may not
foot due to rounding.
|
|
Contribution to
Comparable Sales Change
(unaudited)
|
Three Months Ended
|
|
Nine Months
Ended
|
November 3,
2018
|
|
October 28,
2017
|
|
November 3,
2018
|
|
October 28,
2017
|
Stores channel
comparable sales change
|
3.2
|
%
|
|
—
|
%
|
|
3.4
|
%
|
|
(0.6)
|
%
|
Digital channel
contribution to comparable sales change
|
1.9
|
|
|
0.8
|
|
|
1.5
|
|
|
0.9
|
|
Total comparable
sales change
|
5.1
|
%
|
|
0.9
|
%
|
|
4.9
|
%
|
|
0.3
|
%
|
|
Note: Amounts may not
foot due to rounding.
|
|
|
Three Months Ended
|
|
Nine Months
Ended
|
Sales by Channel
(unaudited)
|
November 3,
2018
|
|
October 28,
2017
As Adjusted (a)
|
|
November 3,
2018
|
|
October 28,
2017
As Adjusted (a)
|
Stores
|
94.0
|
%
|
|
95.8
|
%
|
|
94.4
|
%
|
|
95.8
|
%
|
Digital
|
6.0
|
|
|
4.2
|
|
|
5.6
|
|
|
4.2
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
(a)
Additional information is provided on
page 6.
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
REDcard
Penetration
(unaudited)
|
November 3,
2018
|
|
October 28,
2017
|
|
November 3,
2018
|
|
October 28,
2017
|
Target Debit
Card
|
12.9
|
%
|
|
13.0
|
%
|
|
13.1
|
%
|
|
13.3
|
%
|
Target Credit
Cards
|
10.8
|
|
|
11.4
|
|
|
10.8
|
|
|
11.3
|
|
Total REDcard
Penetration
|
23.7
|
%
|
|
24.4
|
%
|
|
23.9
|
%
|
|
24.6
|
%
|
|
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
for both the three and nine months ended October 28,
2017.
|
|
Number of Stores
and Retail Square Feet
(unaudited)
|
Number of
Stores
|
|
Retail Square Feet
(a)
|
November 3,
2018
|
February 3,
2018
|
October 28,
2017
|
|
November 3,
2018
|
February 3,
2018
|
October 28,
2017
|
170,000 or more sq.
ft.
|
273
|
|
274
|
|
276
|
|
|
48,778
|
|
48,966
|
|
49,326
|
|
50,000 to 169,999 sq.
ft.
|
1,505
|
|
1,500
|
|
1,508
|
|
|
189,496
|
|
189,030
|
|
190,038
|
|
49,999 or less sq.
ft.
|
68
|
|
48
|
|
44
|
|
|
1,984
|
|
1,359
|
|
1,268
|
|
Total
|
1,846
|
|
1,822
|
|
1,828
|
|
|
240,258
|
|
239,355
|
|
240,632
|
|
|
|
(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 (GAAP EPS).
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
|
|
|
|
|
November 3,
2018
|
|
October 28,
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
|
|
|
|
|
|
$
|
1.16
|
|
|
|
|
|
|
$
|
0.87
|
|
|
33.6
|
%
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Act
(b)
|
|
$
|
—
|
|
|
$
|
(39)
|
|
|
$
|
(0.07)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Loss on early
retirement of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
75
|
|
|
0.14
|
|
|
|
Income tax matters
(c)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55)
|
|
|
(0.10)
|
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
|
|
|
|
|
$
|
1.09
|
|
|
|
|
|
|
$
|
0.90
|
|
|
20.2
|
%
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
|
|
November 3,
2018
|
|
October 28,
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
|
|
|
|
|
|
$
|
3.98
|
|
|
|
|
|
|
$
|
3.30
|
|
|
20.5
|
%
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Act
(b)
|
|
$
|
—
|
|
|
$
|
(39)
|
|
|
$
|
(0.07)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Loss on early
retirement of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
75
|
|
|
0.14
|
|
|
|
Income tax matters
(c)
|
|
—
|
|
|
(18)
|
|
|
(0.03)
|
|
|
—
|
|
|
(56)
|
|
|
(0.10)
|
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
|
|
|
|
|
$
|
3.87
|
|
|
|
|
|
|
$
|
3.33
|
|
|
16.2
|
%
|
|
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 GAAP EPS for the nine months ended
October 28, 2017, and in Adjusted EPS for both the three and
nine months ended October 28, 2017, and less than $0.01 in
GAAP EPS for the three months ended October 28,
2017.
|
(b)
|
Represents
measurement period adjustments to previously-recorded provisional
amounts related to the Tax Cuts and Jobs Act (the Tax
Act).
|
(c)
|
Represents income
from income tax matters not related to current period
operations.
|
Earnings from continuing operations before interest expense and
income taxes (EBIT) and earnings before interest expense, income
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. 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 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)
|
|
November 3,
2018
|
|
October
28,
2017
As Adjusted
(a)
|
|
Change
|
|
November 3,
2018
|
|
October
28,
2017
As Adjusted
(a)
|
|
Change
|
Net earnings from
continuing operations
|
|
$
|
616
|
|
|
$
|
476
|
|
|
29.6
|
%
|
|
$
|
2,132
|
|
|
$
|
1,820
|
|
|
17.1
|
%
|
+ Provision for
income taxes
|
|
97
|
|
|
135
|
|
|
(28.5)
|
|
|
530
|
|
|
798
|
|
|
(33.6)
|
|
+ Net interest
expense
|
|
115
|
|
|
251
|
|
|
(54.1)
|
|
|
352
|
|
|
521
|
|
|
(32.6)
|
|
EBIT
(a)
|
|
$
|
828
|
|
|
$
|
862
|
|
|
(3.9)
|
%
|
|
$
|
3,014
|
|
|
$
|
3,139
|
|
|
(4.0)
|
%
|
+ Total depreciation
and amortization (b)
|
|
592
|
|
|
642
|
|
|
(7.8)
|
|
|
1,826
|
|
|
1,809
|
|
|
1.0
|
|
EBITDA
(a)
|
|
$
|
1,420
|
|
|
$
|
1,504
|
|
|
(5.6)
|
%
|
|
$
|
4,840
|
|
|
$
|
4,948
|
|
|
(2.2)
|
%
|
|
|
(a)
|
Additional
information is provided on page 6. Adoption of the new accounting
standards resulted in a $7 million and $21 million decrease in EBIT
and a $2 million and $4 million increase in EBITDA for the three
and nine months ended October 28, 2017,
respectively.
|
(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)
|
|
November
3,
2018
(a)
|
|
October
28,
2017
As Adjusted
(b)
|
Operating
income
|
|
$
|
4,122
|
|
|
$
|
4,418
|
|
+ Net other income /
(expense)
|
|
35
|
|
|
69
|
|
EBIT
|
|
4,157
|
|
|
4,487
|
|
+ Operating lease
interest (c)
|
|
83
|
|
|
77
|
|
- Income taxes
(d)
|
|
524
|
|
(e)
|
1,413
|
|
Net operating
profit after taxes
|
|
$
|
3,716
|
|
|
$
|
3,151
|
|
|
|
Denominator
(dollars in
millions) (unaudited)
|
|
November 3,
2018
|
|
October
28,
2017
As Adjusted
(b)
|
|
October
29,
2016
As Adjusted
(b)
|
Current portion of
long-term debt and other borrowings
|
|
$
|
1,535
|
|
|
$
|
1,366
|
|
|
$
|
739
|
|
+ Noncurrent portion
of long-term debt
|
|
10,104
|
|
|
11,090
|
|
|
11,939
|
|
+ Shareholders'
equity
|
|
11,080
|
|
|
11,092
|
|
|
11,030
|
|
+ Operating lease
liabilities (f)
|
|
2,208
|
|
|
2,041
|
|
|
1,925
|
|
- Cash and cash
equivalents
|
|
825
|
|
|
2,725
|
|
|
1,231
|
|
- Net assets of
discontinued operations (g)
|
|
—
|
|
|
4
|
|
|
60
|
|
Invested
capital
|
|
$
|
24,102
|
|
|
$
|
22,860
|
|
|
$
|
24,342
|
|
Average invested
capital (h)
|
|
$
|
23,481
|
|
|
$
|
23,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax return
on invested capital (i)
|
|
15.8
|
%
|
(e)
|
|
13.4
|
%
|
|
After-tax return
on invested capital excluding discrete impacts of Tax
Act
|
|
13.9
|
%
|
(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 12.3
percent and 31.0 percent for the trailing twelve months ended
November 3, 2018, and October 28, 2017, respectively. For
the twelve months ended November 3, 2018, and October 28,
2017, includes tax effect of $514 million and $1,389 million,
respectively, related to EBIT, and $10 million and $24 million,
respectively, related to operating lease interest.
|
(e)
|
The effective tax
rate for the trailing twelve months ended November 3, 2018,
includes discrete tax benefits of $382 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.
|
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SOURCE Target Corporation