Exhibit (99)
FOR IMMEDIATE RELEASE
| Contacts: | John Hulbert, Investors, (612) 761-6627 |
| Erin Conroy, Media, (612) 761-5928 | |
| Target Media Hotline, (612) 696-3400 | |
Target Reports Fourth Quarter and Full-Year 2017 Earnings
Strong traffic growth in both stores and digital drives fourth quarter comparable sales increase of 3.6 percent
| • | Following the Company’s post-holiday update1, comparable sales grew more than 4 percent in January, leading to comparable sales growth of 3.6 percent for the fourth quarter. |
| • | Traffic grew 3.2 percent in the fourth quarter, reflecting healthy increases in both stores and digital channels. |
| • | Fourth quarter comparable digital channel sales increased 29 percent, on top of 34 percent last year, contributing 1.8 percentage points of comparable growth. |
| • | The Company saw healthy comparable sales growth across all five of its core merchandise categories in the fourth quarter. |
| • | Fourth quarter GAAP earnings per share (EPS) from continuing operations of $2.02 reflect discrete benefits related to the Tax Cuts and Jobs Act (the Tax Act). |
| • | Adjusted EPS2 of $1.37, which exclude discrete benefits related to the Tax Act, were above the midpoint of the Company’s most-recent guidance range of $1.30 to $1.40. |
| • | Target returned $591 million to shareholders in the fourth quarter through dividends and share repurchases, bringing the total to $2.4 billion for full-year 2017. |
MINNEAPOLIS (Mar. 6, 2018) - Target Corporation (NYSE: TGT) today announced its fourth quarter and full-year 2017 results. The Company reported GAAP earnings per share (EPS) from continuing operations of $2.02 in fourth quarter and $5.32 for full-year 2017, compared with $1.46 and $4.58 in 2016, respectively. Fourth quarter Adjusted EPS were $1.37,
- more -
1On Jan. 9, 2018, Target updated fourth quarter guidance for comparable sales, GAAP EPS from continuing operations, and Adjusted EPS. 2Adjusted EPS, a non-GAAP financial measure, excludes the impact of certain discretely managed items. See the “Miscellaneous” section of this release, as well as the tables of this release, for additional information about the items that have been excluded from Adjusted EPS. |
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 2 of 13
compared with $1.45 in 2016. Full-year Adjusted EPS were $4.71, compared with $5.01 in 2016. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
“Our fourth quarter results demonstrate the power of the significant investments we’ve made in our team and our business throughout 2017. Our team’s outstanding execution of Target’s strategic initiatives during the year delivered strong fourth quarter traffic growth in our stores and digital channels, which drove healthy comparable sales in every one of our five core merchandise categories,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “At our Financial Community Meeting later this morning, we will outline our plans to continue investing in our team and make 2018 a year of acceleration in the areas that set Target apart- our stores, exclusive brands, and rapidly-growing suite of fulfillment options. While we have a lot left to accomplish, our progress in 2017 gives us confidence that we are making the right long-term investments to best position Target for profitable growth in a rapidly changing consumer and retail environment.”
Fiscal 2018 Guidance
In first quarter 2018, Target expects a low-single digit increase in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of $1.25 to $1.45.
For full-year 2018, Target expects a low-single digit increase in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of $5.15 to $5.45.
First 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.
Segment Results
Fourth quarter 2017 sales increased 10.0 percent to $22.8 billion from $20.7 billion last year, reflecting the impact of an additional week in this year’s fourth quarter, a 3.6 percent increase in comparable sales, and sales in non-mature stores. Comparable digital channel sales grew 29 percent and contributed 1.8 percentage points of comparable sales growth. Segment
– more –
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 3 of 13
earnings before interest expense and income taxes (EBIT), which is Target’s measure of segment profit, were $1,152 million in fourth quarter 2017, a decrease of 14.3 percent from $1,344 million in 2016.
Fourth quarter EBIT margin rate was 5.1 percent, compared with 6.5 percent, in 2016. Fourth quarter gross margin3 rate was 26.2 percent, compared with 26.6 percent in 2016, reflecting pressure from digital fulfillments costs. The net impact of the Company’s pricing and promotion efforts was offset by cost savings. Fourth quarter SG&A expense rate was 18.5 percent in 2017, compared with 17.5 percent in 2016, driven by higher compensation costs, including both an increase in team member incentives and the impact of investments in store team member hours and wage rates, partially offset by cost saving initiatives.
Interest Expense and Taxes from Continuing Operations
The Company’s fourth quarter 2017 net interest expense was $134 million, compared with $140 million last year. Fourth quarter 2017 effective income tax rate from continuing operations was (8.3) percent, compared with 32.0 percent last year, primarily due to the impact of the recently-enacted Tax Act. The Tax Act resulted in $36 million of benefit due to a lower structural tax rate in January and a discrete $352 million net benefit from the remeasurement of our net deferred tax liabilities.
Shareholder Returns
The Company returned $591 million to shareholders in fourth quarter 2017, including:
| • | Dividends of $337 million, compared with $337 million in fourth quarter 2016, reflecting a decline in share count offset by an increase in the dividend per share. |
| • | Share repurchases totaling $254 million that retired 4.0 million shares of common stock at an average price of $63.31. |
At the end of the fourth quarter, the Company had approximately $3.7 billion of remaining capacity under its current $5 billion share repurchase program.
– more –
3 Beginning in the second quarter of 2017, we reclassified supply chain-related depreciation expense into cost of sales and out of depreciation and amortization on our Consolidated Statements of Operations. Prior year amounts have been reclassified to reflect this change. Updated financials for the thirteen quarters prior to this change have been posted on our Investor Relations website at investors.target.com. |
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 4 of 13
For the trailing twelve months through fourth quarter 2017, after-tax return on invested capital (ROIC) was 15.9 percent, compared with 15.0 percent for the twelve months through fourth quarter 2016. The year-over-year increase in fourth quarter 2017 primarily 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 14.0 percent for the trailing twelve months ended February 3, 2018. See the “Reconciliation of Non-GAAP Financial Measures” section of this release for additional information about the Company’s ROIC calculation.
Webcast Details
Target will webcast its financial community meeting, including a Q&A session, beginning at 10:30 a.m. CST today. Investors and the media are invited to listen to the meeting at Investors.Target.com (hover over “company” then click on “events & presentations” in the “investors” column). A replay of the webcast will be available within four hours of the meeting’s conclusion.
Miscellaneous
Statements in this release regarding first 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 Jan. 28, 2017. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statement.
In addition to the GAAP results provided in this release, the Company provides Adjusted EPS, consolidated earnings from continuing operations before interest expense and income taxes (EBIT), and earnings from continuing operations before interest, taxes, depreciation and amortization (EBITDA) for the three and twelve-month periods ended Feb. 3, 2018, and Jan. 28, 2017. The Company also provides ROIC for the twelve-month periods ended Feb. 3, 2018, and Jan. 28, 2017, which is a ratio based on GAAP information, with the exception of adjustments
– more –
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 5 of 13
made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure across companies. Adjusted EPS, capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. Management believes Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s ongoing retail operations. Management believes consolidated EBIT and EBITDA are useful in providing meaningful information about our operational efficiency compared to our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels and, for EBITDA, capital investment. Management believes ROIC is useful in assessing the effectiveness of the Company’s capital allocation over time. The most comparable GAAP measure for Adjusted EPS is diluted EPS from continuing operations. The most comparable GAAP measure for consolidated EBIT and EBITDA is net earnings from continuing operations. The most comparable GAAP measure for capitalized operating lease obligations and operating lease interest is total rent expense. Adjusted EPS, capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of the Company’s results as reported under GAAP. Other companies may calculate Adjusted EPS and ROIC differently, limiting the usefulness of the measure for comparisons with other companies.
About Target
Minneapolis-based Target Corporation (NYSE: TGT) serves guests at 1,822 stores and at Target.com. Since 1946, Target has given 5 percent of its profit to communities, which today equals millions of dollars a week. For more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.
# # #
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 6 of 13
TARGET CORPORATION
Consolidated Statements of Operations
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
| (millions, except per share data) (unaudited) | February 3, 2018 (a) | January 28, 2017 | Change | February 3, 2018 (a) | January 28, 2017 | Change | ||||||||||||||||
| Sales | $ | 22,766 | $ | 20,690 | 10.0 | % | $ | 71,879 | $ | 69,495 | 3.4 | % | ||||||||||
Cost of sales (b) | 16,795 | 15,188 | 10.6 | 51,125 | 49,145 | 4.0 | ||||||||||||||||
| Gross margin | 5,971 | 5,502 | 8.5 | 20,754 | 20,350 | 2.0 | ||||||||||||||||
| Selling, general and administrative expenses | 4,221 | 3,614 | 16.8 | 14,248 | 13,356 | 6.7 | ||||||||||||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) (b) | 598 | 540 | 11.1 | 2,194 | 2,025 | 8.4 | ||||||||||||||||
| Earnings from continuing operations before interest expense and income taxes | 1,152 | 1,348 | (14.6 | ) | 4,312 | 4,969 | (13.2 | ) | ||||||||||||||
| Net interest expense | 134 | 140 | (4.2 | ) | 666 | 1,004 | (33.6 | ) | ||||||||||||||
| Earnings from continuing operations before income taxes | 1,018 | 1,208 | (15.8 | ) | 3,646 | 3,965 | (8.1 | ) | ||||||||||||||
| Provision for income taxes | (84 | ) | 387 | (121.8 | ) | 718 | 1,296 | (44.7 | ) | |||||||||||||
| Net earnings from continuing operations | 1,102 | 821 | 34.1 | % | 2,928 | 2,669 | 9.7 | % | ||||||||||||||
| Discontinued operations, net of tax | (1 | ) | (4 | ) | 6 | 68 | ||||||||||||||||
| Net earnings | $ | 1,101 | $ | 817 | 34.7 | % | $ | 2,934 | $ | 2,737 | 7.2 | % | ||||||||||
| Basic earnings / (loss) per share | ||||||||||||||||||||||
| Continuing operations | $ | 2.03 | $ | 1.47 | 38.6 | % | $ | 5.35 | $ | 4.62 | 15.9 | % | ||||||||||
| Discontinued operations | — | (0.01 | ) | 0.01 | 0.12 | |||||||||||||||||
| Net earnings per share | $ | 2.03 | $ | 1.46 | 39.3 | % | $ | 5.36 | $ | 4.74 | 13.2 | % | ||||||||||
| Diluted earnings / (loss) per share | ||||||||||||||||||||||
| Continuing operations | $ | 2.02 | $ | 1.46 | 38.7 | % | $ | 5.32 | $ | 4.58 | 16.2 | % | ||||||||||
| Discontinued operations | — | (0.01 | ) | 0.01 | 0.12 | |||||||||||||||||
| Net earnings per share | $ | 2.02 | $ | 1.45 | 39.3 | % | $ | 5.33 | $ | 4.70 | 13.5 | % | ||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||
| Basic | 541.5 | 559.7 | (3.2 | )% | 546.8 | 577.6 | (5.3 | )% | ||||||||||||||
| Dilutive impact of share-based awards | 4.4 | 4.8 | 3.5 | 4.9 | ||||||||||||||||||
| Diluted | 545.9 | 564.5 | (3.3 | )% | 550.3 | 582.5 | (5.5 | )% | ||||||||||||||
| Antidilutive shares | 2.2 | 0.1 | 4.1 | 0.1 | ||||||||||||||||||
| Dividends declared per share | $ | 0.62 | $ | 0.60 | 3.3 | % | $ | 2.46 | $ | 2.36 | 4.2 | % | ||||||||||
Note: Per share amounts may not foot due to rounding.
(a) The fourth quarter and full year 2017 consisted of 14 weeks and 53 weeks, respectively, compared with 13 weeks and 52 weeks in the comparable prior-year periods. The extra week contributed 5.6 percentage points and 1.7 percentage points of the sales increase for the fourth quarter and full year 2017, respectively.
(b) Refer to the Segment Results section for information about a reclassification of supply chain-related depreciation expense to cost of sales.
Subject to reclassification
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 7 of 13
TARGET CORPORATION
Consolidated Statements of Financial Position
| (millions) (unaudited) | February 3, 2018 | January 28, 2017 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 2,643 | $ | 2,512 | ||||
| Inventory | 8,657 | 8,309 | ||||||
| Other current assets | 1,264 | 1,169 | ||||||
| Total current assets | 12,564 | 11,990 | ||||||
| Property and equipment | ||||||||
| Land | 6,095 | 6,106 | ||||||
| Buildings and improvements | 28,396 | 27,611 | ||||||
| Fixtures and equipment | 5,623 | 5,503 | ||||||
| Computer hardware and software | 2,645 | 2,651 | ||||||
| Construction-in-progress | 440 | 200 | ||||||
| Accumulated depreciation | (18,181 | ) | (17,413 | ) | ||||
| Property and equipment, net | 25,018 | 24,658 | ||||||
| Other noncurrent assets | 1,417 | 783 | ||||||
| Total assets | $ | 38,999 | $ | 37,431 | ||||
| Liabilities and shareholders’ investment | ||||||||
| Accounts payable | $ | 8,677 | $ | 7,252 | ||||
| Accrued and other current liabilities | 4,254 | 3,737 | ||||||
| Current portion of long-term debt and other borrowings | 270 | 1,718 | ||||||
| Total current liabilities | 13,201 | 12,707 | ||||||
| Long-term debt and other borrowings | 11,317 | 11,031 | ||||||
| Deferred income taxes | 713 | 861 | ||||||
| Other noncurrent liabilities | 2,059 | 1,879 | ||||||
| Total noncurrent liabilities | 14,089 | 13,771 | ||||||
| Shareholders’ investment | 53 | |||||||
| Common stock | 45 | 46 | ||||||
| Additional paid-in capital | 5,858 | 5,661 | ||||||
| Retained earnings | 6,553 | 5,884 | ||||||
| Accumulated other comprehensive loss | (747 | ) | (638 | ) | ||||
| Total shareholders’ investment | 11,709 | 10,953 | ||||||
| Total liabilities and shareholders’ investment | $ | 38,999 | $ | 37,431 | ||||
Common Stock Authorized 6,000,000,000 shares, $.0833 par value; 541,681,670 and 556,156,228 shares issued and outstanding at February 3, 2018 and January 28, 2017, respectively.
Preferred Stock Authorized 5,000,000 shares, $.01 par value; no shares were issued or outstanding at February 3, 2018 or January 28, 2017.
Subject to reclassification
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 8 of 13
TARGET CORPORATION
Consolidated Statements of Cash Flows
| Twelve Months Ended | ||||||||
| (millions) (unaudited) | February 3, 2018 (a) | January 28, 2017 | ||||||
| Operating activities | ||||||||
Net earnings | $ | 2,934 | $ | 2,737 | ||||
| Earnings from discontinued operations, net of tax | 6 | 68 | ||||||
| Net earnings from continuing operations | 2,928 | 2,669 | ||||||
| Adjustments to reconcile net earnings to cash provided by operations: | ||||||||
| Depreciation and amortization | 2,445 | 2,298 | ||||||
| Share-based compensation expense | 112 | 113 | ||||||
| Deferred income taxes | (192 | ) | 41 | |||||
| Loss on debt extinguishment | 123 | 422 | ||||||
Noncash (gains) / losses and other, net | 192 | (21 | ) | |||||
| Changes in operating accounts: | ||||||||
| Inventory | (348 | ) | 293 | |||||
| Other assets | (168 | ) | 30 | |||||
| Accounts payable | 1,307 | (166 | ) | |||||
| Accrued and other liabilities | 450 | (350 | ) | |||||
| Cash provided by operating activities—continuing operations | 6,849 | 5,329 | ||||||
| Cash provided by operating activities—discontinued operations | 74 | 107 | ||||||
| Cash provided by operations | 6,923 | 5,436 | ||||||
| Investing activities | ||||||||
| Expenditures for property and equipment | (2,533 | ) | (1,547 | ) | ||||
| Proceeds from disposal of property and equipment | 31 | 46 | ||||||
| Cash paid for acquisitions, net of cash assumed | (518 | ) | — | |||||
| Other investments | (55 | ) | 28 | |||||
| Cash required for investing activities | (3,075 | ) | (1,473 | ) | ||||
| Financing activities | ||||||||
| Additions to long-term debt | 739 | 1,977 | ||||||
| Reductions of long-term debt | (2,180 | ) | (2,641 | ) | ||||
| Dividends paid | (1,338 | ) | (1,348 | ) | ||||
| Repurchase of stock | (1,046 | ) | (3,706 | ) | ||||
| Stock option exercises | 108 | 221 | ||||||
| Cash required for financing activities | (3,717 | ) | (5,497 | ) | ||||
Net increase / (decrease) in cash and cash equivalents | 131 | (1,534 | ) | |||||
| Cash and cash equivalents at beginning of period | 2,512 | 4,046 | ||||||
| Cash and cash equivalents at end of period | $ | 2,643 | $ | 2,512 | ||||
(a) Consisted of 53 weeks.
Subject to reclassification
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 9 of 13
TARGET CORPORATION
Segment Results
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||
| (millions) (unaudited) | February 3, 2018 (a) | January 28, 2017 | Change | February 3, 2018 (a) | January 28, 2017 | Change | ||||||||||||||||
| Sales | $ | 22,766 | $ | 20,690 | 10.0 | % | $ | 71,879 | $ | 69,495 | 3.4 | % | ||||||||||
Cost of sales (b) | 16,795 | 15,188 | 10.6 | 51,125 | 49,145 | 4.0 | ||||||||||||||||
| Gross margin | 5,971 | 5,502 | 8.5 | 20,754 | 20,350 | 2.0 | ||||||||||||||||
SG&A expenses (c) | 4,221 | 3,618 | 16.6 | 14,248 | 13,360 | 6.6 | ||||||||||||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) (b) | 598 | 540 | 11.1 | 2,194 | 2,025 | 8.4 | ||||||||||||||||
| EBIT | $ | 1,152 | $ | 1,344 | (14.3 | )% | $ | 4,312 | $ | 4,965 | (13.2 | )% | ||||||||||
(a) The fourth quarter and total year 2017 consisted of 14 weeks and 53 weeks, respectively, compared with 13 weeks and 52 weeks in the comparable prior-year periods.
(b) Beginning in the second quarter of 2017, we reclassified supply chain-related depreciation expense to cost of sales, whereas it was previously included in depreciation and amortization on our Consolidated Statements of Operations. We reclassified prior year amounts to reflect this change. This reclassification increased cost of sales by $62 million and $251 million for the three and twelve months ended February 3, 2018, respectively, and $72 million and $273 million for the three and twelve months ended January 28, 2017, respectively, with equal and offsetting decreases to depreciation and amortization. This reclassification had no impact on sales, EBIT, net earnings or earnings per share.
(c) SG&A includes net profit sharing income from the arrangement with TD Bank of $182 million and $694 million for the three and twelve months ended February 3, 2018, respectively, and $174 million and $663 million for the three and twelve months ended January 28, 2017, respectively. For both the three and twelve months ended January 28, 2017, SG&A excludes $4 million of benefit for items related to the 2015 sale of our pharmacy and clinic businesses.
| Three Months Ended | Twelve Months Ended | |||||||||||
Rate Analysis (unaudited) | February 3, 2018 (a) | January 28, 2017 | February 3, 2018 (a) | January 28, 2017 | ||||||||
Gross margin rate (b) | 26.2 | % | 26.6 | % | 28.9 | % | 29.3 | % | ||||
| SG&A expense rate | 18.5 | 17.5 | 19.8 | 19.2 | ||||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate (b) | 2.6 | 2.6 | 3.1 | 2.9 | ||||||||
| EBIT margin rate | 5.1 | 6.5 | 6.0 | 7.1 | ||||||||
Rate analysis metrics are computed by dividing the applicable amount by sales.
(a) The fourth quarter and total year 2017 consisted of 14 weeks and 53 weeks, respectively, compared with 13 weeks and 52 weeks in the comparable prior-year periods.
(b) Reclassifying supply chain-related depreciation expense to cost of sales reduced the gross margin and depreciation and amortization rates by 0.3-0.4 percentage points for all periods presented.
| Three Months Ended | Twelve Months Ended | |||||||||||
Sales by Channel (unaudited) | February 3, 2018 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||
| Stores | 91.8 | % | 93.2 | % | 94.5 | % | 95.6 | % | ||||
| Digital | 8.2 | 6.8 | 5.5 | 4.4 | ||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 10 of 13
| Three Months Ended | Twelve Months Ended | |||||||||||
Comparable Sales (unaudited) | February 3, 2018 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||
| Comparable sales change | 3.6 | % | (1.5 | )% | 1.3 | % | (0.5 | )% | ||||
| Drivers of change in comparable sales: | ||||||||||||
| Number of transactions | 3.2 | 0.2 | 1.6 | (0.8 | ) | |||||||
| Average transaction amount | 0.4 | (1.6 | ) | (0.3 | ) | 0.3 | ||||||
Note: Amounts may not foot due to rounding.
| Three Months Ended | Twelve Months Ended | |||||||||||
Contribution to Comparable Sales Change (unaudited) | February 3, 2018 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||
| Stores channel comparable sales change | 1.8 | % | (3.3 | )% | 0.1 | % | (1.5 | )% | ||||
| Digital channel contribution to comparable sales change | 1.8 | 1.8 | 1.2 | 1.0 | ||||||||
| Total comparable sales change | 3.6 | % | (1.5 | )% | 1.3 | % | (0.5 | )% | ||||
Note: Amounts may not foot due to rounding.
| Three Months Ended | Twelve Months Ended | |||||||||||
REDcard Penetration (unaudited) | February 3, 2018 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||
| Target Debit Card | 12.7 | % | 12.7 | % | 13.0 | % | 12.8 | % | ||||
| Target Credit Cards | 11.4 | 11.6 | 11.3 | 11.2 | ||||||||
| Total REDcard Penetration | 24.0 | % | 24.3 | % | 24.3 | % | 24.0 | % | ||||
Note: Amounts may not foot due to rounding.
Represents the percentage of Target sales that are paid with REDcards.
Number of Stores and Retail Square Feet (unaudited) | Number of Stores | Retail Square Feet (a) | |||||||
| February 3, 2018 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||
| 170,000 or more sq. ft. | 274 | 276 | 48,966 | 49,328 | |||||
| 50,000 to 169,999 sq. ft. | 1,500 | 1,504 | 189,030 | 189,620 | |||||
| 49,999 or less sq. ft. | 48 | 22 | 1,359 | 554 | |||||
| Total | 1,822 | 1,802 | 239,355 | 239,502 | |||||
(a) In thousands: reflects total square feet, less office, distribution center and vacant space.
Subject to reclassification
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 11 of 13
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 to, 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 than we do, limiting the usefulness of the measure for comparisons with other companies.
| Three Months Ended | |||||||||||||||||||||||||||
February 3, 2018 (a) | January 28, 2017 | ||||||||||||||||||||||||||
| (millions, except per share data) (unaudited) | Pretax | Net of Tax | Per Share | Pretax | Net of Tax | Per Share | Change | ||||||||||||||||||||
| GAAP diluted earnings per share from continuing operations | $ | 2.02 | $ | 1.46 | 38.7 | % | |||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||
Tax Act (b) | $ | — | $ | (352 | ) | $ | (0.64 | ) | $ | — | $ | — | $ | — | |||||||||||||
Other (c) | (5 | ) | (3 | ) | (0.01 | ) | (4 | ) | (2 | ) | — | ||||||||||||||||
| Other income tax matters | — | (1 | ) | — | — | — | — | ||||||||||||||||||||
| Adjusted diluted earnings per share from continuing operations | $ | 1.37 | $ | 1.45 | (5.8 | )% | |||||||||||||||||||||
| Twelve Months Ended | |||||||||||||||||||||||||||
February 3, 2018 (a) | January 28, 2017 | ||||||||||||||||||||||||||
| (millions, except per share data) (unaudited) | Pretax | Net of Tax | Per Share | Pretax | Net of Tax | Per Share | Change | ||||||||||||||||||||
| GAAP diluted earnings per share from continuing operations | $ | 5.32 | $ | 4.58 | 16.2 | % | |||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||
Tax Act (b) | $ | — | $ | (352 | ) | $ | (0.64 | ) | $ | — | $ | — | $ | — | |||||||||||||
| Loss on early retirement of debt | 123 | 75 | 0.14 | 422 | 257 | 0.44 | |||||||||||||||||||||
Other (c) | (5 | ) | (3 | ) | (0.01 | ) | (4 | ) | (2 | ) | — | ||||||||||||||||
| Other income tax matters | — | (57 | ) | (0.10 | ) | — | (7 | ) | (0.01 | ) | |||||||||||||||||
| Adjusted diluted earnings per share from continuing operations | $ | 4.71 | $ | 5.01 | (5.9 | )% | |||||||||||||||||||||
Note: Amounts may not foot due to rounding.
(a) The fourth quarter and total year 2017 consisted of 14 weeks and 53 weeks, respectively, compared with 13 weeks and 52 weeks in the comparable prior-year periods.
(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) For the three and twelve months ended February 3, 2018, represents an insurance recovery related to the 2013 data breach. For the three and twelve months ended January 28, 2017, represents items related to the 2015 sale of our pharmacy and clinic businesses.
Subject to reclassification
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 12 of 13
We have presented consolidated earnings from continuing operations before interest expense and income taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA), non-GAAP financial measures, because we believe they provide investors with meaningful information about our operational efficiency compared to our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative for, 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 | Twelve Months Ended | ||||||||||||||||||||
(millions) (unaudited) | February 3, 2018 (a) | January 28, 2017 | Change | February 3, 2018 (a) | January 28, 2017 | Change | ||||||||||||||||
| Net earnings from continuing operations | $ | 1,102 | $ | 821 | 34.1 | % | $ | 2,928 | $ | 2,669 | 9.7 | % | ||||||||||
| + Provision for income taxes | (84 | ) | 387 | (121.8 | ) | 718 | 1,296 | (44.7 | ) | |||||||||||||
| + Net interest expense | 134 | 140 | (4.2 | ) | 666 | 1,004 | (33.6 | ) | ||||||||||||||
| EBIT | 1,152 | 1,348 | (14.6 | ) | 4,312 | 4,969 | (13.2 | ) | ||||||||||||||
+ Total depreciation and amortization (b) | 660 | 612 | 8.0 | 2,445 | 2,298 | 6.4 | ||||||||||||||||
| EBITDA | $ | 1,812 | $ | 1,960 | (7.5 | )% | $ | 6,757 | $ | 7,267 | (7.0 | )% | ||||||||||
(a) Consisted of 53 weeks.
(b) Represents total depreciation and amortization, including amounts classified within depreciation and amortization and within cost of sales on our Consolidated Statements of Operations.
Subject to reclassification
Target Corporation Reports Fourth Quarter and Full-Year 2017 Earnings - Page 13 of 13
We have also disclosed after-tax return on invested capital for continuing operations (ROIC), which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure across companies. This metric provides a measure of the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure.
| After-Tax Return on Invested Capital | ||||||||||||
| Numerator | Trailing Twelve Months | |||||||||||
| (dollars in millions) (unaudited) | February 3, 2018 (a) | January 28, 2017 | ||||||||||
| Earnings from continuing operations before interest expense and income taxes | $ | 4,312 | $ | 4,969 | ||||||||
+ Operating lease interest (b)(c) | 80 | 71 | ||||||||||
| Adjusted earnings from continuing operations before interest expense and income taxes | 4,392 | 5,040 | ||||||||||
- Income taxes (d) | 864 | 1,648 | ||||||||||
| Net operating profit after taxes | $ | 3,528 | $ | 3,392 | ||||||||
Denominator (dollars in millions) (unaudited) | February 3, 2018 | January 28, 2017 | January 30, 2016 | |||||||||
| Current portion of long-term debt and other borrowings | $ | 270 | $ | 1,718 | $ | 815 | ||||||
| + Noncurrent portion of long-term debt | 11,317 | 11,031 | 11,945 | |||||||||
| + Shareholders' equity | 11,709 | 10,953 | 12,957 | |||||||||
+ Capitalized operating lease obligations (c)(e) | 1,339 | 1,187 | 1,457 | |||||||||
| - Cash and cash equivalents | 2,643 | 2,512 | 4,046 | |||||||||
- Net assets of discontinued operations (f) | 2 | 62 | 226 | |||||||||
| Invested capital | $ | 21,990 | $ | 22,315 | $ | 22,902 | ||||||
Average invested capital (g) | $ | 22,152 | $ | 22,608 | ||||||||
| After-tax return on invested capital | 15.9 | % | (d) | 15.0 | % | |||
(a) Consisted of 53 weeks.
(b) 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.
(c) 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.
(d) Calculated using the effective tax rates for continuing operations, which were 19.7% and 32.7% for the trailing twelve months ended February 3, 2018 and January 28, 2017, respectively. For the twelve months ended February 3, 2018 and January 28, 2017, includes tax effect of $848 million and $1,624 million, respectively, related to EBIT and $16 million and $23 million, respectively, related to operating lease interest. The effective tax rate for the trailing twelve months ended February 3, 2018 includes discrete tax benefits related to the Tax Act and the impact of the new lower U.S. corporate income tax rate. Excluding the discrete impacts of the Tax Act, ROIC was 14.0 percent for the trailing twelve months ended February 3, 2018.
(e) Calculated as eight times our trailing twelve months rent expense.
(f) Included in other assets and liabilities on the Consolidated Statements of Financial Position.
(g) Average based on the invested capital at the end of the current period and the invested capital at the end of the prior period.
Capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, GAAP. The most comparable GAAP measure is total rent expense. Capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP.
| Reconciliation of Capitalized Operating Leases | Trailing Twelve Months | |||||||||||||
| (dollars in millions) (unaudited) | February 3, 2018 | January 28, 2017 | January 30, 2016 | |||||||||||
| Total rent expense | $ | 167 | $ | 148 | $ | 182 | ||||||||
| Capitalized operating lease obligations (total rent expense x 8) | 1,339 | 1,187 | 1,457 | |||||||||||
| Operating lease interest (capitalized operating lease obligations x 6%) | 80 | 71 | n/a | |||||||||||
Subject to reclassification