TGT
$56.12
Target
($.19)
(.34%)
Earnings Details
2nd Quarter July 2017
Wednesday, August 16, 2017 6:30:00 AM
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Summary

Target Beats

Target (TGT) reported 2nd Quarter July 2017 earnings of $1.23 per share on revenue of $16.4 billion. The consensus earnings estimate was $1.20 per share on revenue of $16.2 billion. The Earnings Whisper number was $1.22 per share. Revenue grew 1.6% on a year-over-year basis.

The company said it expects third quarter earnings of $0.75 to $0.95 per share and now expects fiscal year earnings of $4.34 to $4.54 per share. The company's previous guidance was fiscal year earnings of $3.80 to $4.20 per share. The current consensus earnings estimate is $0.78 per share for the quarter ending October 31, 2017 and $4.42 per share for the year ending January 31, 2018.

Target Corp is engaged in operating general merchandise discount stores in the United States.

Results
Reported Earnings
$1.23
Earnings Whisper
$1.22
Consensus Estimate
$1.20
Reported Revenue
$16.43 Bil
Revenue Estimate
$16.22 Bil
Growth
Earnings Growth
Revenue Growth
Guidance
Power Rating
Grade
Earnings Release

Target Reports Second Quarter 2017 Earnings

Second quarter GAAP EPS from continuing operations of $1.22 were 14.2 percent higher than last year. Adjusted EPS(1) of $1.23 were essentially flat to last year.

Second quarter comparable sales increased 1.3 percent, driven by traffic growth of 2.1 percent.

Comparable digital channel sales increased 32 percent, on top of 16 percent growth in second quarter 2016.

In the second quarter, Target devoted $717 million to capital investment, paid dividends of $331 million, and returned $296 million through share repurchases.

For additional media materials, please visit: https://corporate.target.com/article/2017/08/q2-2017-earnings

Target Corporation (TGT) today reported a second quarter 2017 comparable sales increase of 1.3 percent and GAAP earnings per share (EPS) from continuing operations of $1.22, an increase of 14.2 percent from second quarter 2016. Second quarter adjusted earnings per share from continuing operations (Adjusted EPS) were $1.23, an increase of 0.1 percent from second quarter 2016. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

(1)Adjusted EPS, a non-GAAP financial measure, excludes the
impact of certain discretely managed items. See the "Miscellaneous"
section of this release, as well as the tables of this release, for
additional information about the items that have been excluded from
Adjusted EPS.

"I want to thank the team for their strong execution in the second quarter, which drove broad-based improvement in Target’s performance. In particular, we are pleased that second-quarter traffic increased more than 2 percent, reflecting growth in both our store and digital channels," said Brian Cornell, chairman and CEO of Target. "We continue to focus on our long-term strategy, as we work to transform every part of our business and build an even better Target that will thrive in this new era in retail. While our recent results are encouraging, we will continue to plan prudently as we invest in building our brands, our digital channel, the value we provide our guests and elevating service levels in our stores."

Third Quarter and Fiscal 2017 Guidance Target expects that both third quarter and fourth quarter 2017 comparable sales growth will be within the range the Company experienced in the first and second quarters of 2017. The Company expects its full-year 2017 comparable sales growth will be in a range around flat, plus or minus 1 percent.

For third quarter 2017, the Company expects both GAAP EPS from continuing operations and Adjusted EPS of $0.75 to $0.95. For full-year 2017, the Company now expects GAAP EPS from continuing operations of $4.35 to $4.55, and Adjusted EPS of $4.34 to $4.54, compared with prior guidance of $3.80 to $4.20. The 1 cent difference between the full-year guidance ranges for GAAP EPS from continuing operations and Adjusted EPS is due to the income tax matters excluded from Adjusted EPS in the first half of the year.

Third quarter and full-year 2017 GAAP EPS from continuing operations may include the impact of additional discrete items which will be excluded in calculating Adjusted EPS. The only additional discrete item of which the Company is aware is a possible net benefit from income tax matters not related to current period operations in an amount that cannot presently be estimated.

Segment Results Second quarter 2017 sales increased 1.6 percent to $16.4 billion from $16.2 billion last year, reflecting a 1.3 percent comparable sales increase combined with the benefit from sales in non-mature stores. Comparable digital channel sales grew 32 percent and contributed 1.1 percentage points to comparable sales growth. Segment earnings before interest expense and income taxes (EBIT), which is Target’s measure of segment profit, were $1,114 million in second quarter 2017, a decrease of 10.3 percent from $1,241 million in second quarter 2016.

Second quarter EBIT margin rate was 6.8 percent, compared with 7.7 percent in 2016. Second quarter gross margin rate(2) was 30.5 percent, compared with 30.9 percent in 2016, reflecting increased digital fulfillment costs and the Company’s efforts to improve pricing and promotions. Second quarter SG&A expense rate was 20.6 percent in 2017, compared with 20.1 percent in 2016, driven by higher compensation costs, primarily due to increased bonus expense, and impairment losses resulting from planned or completed store closures and supply chain changes partially offset by the benefit of the Company’s cost-saving efforts.

Interest Expense and Taxes from Continuing Operations The Company’s second quarter 2017 net interest expense was $135 million, compared with $307 million last year. The decline was primarily driven by a $161 million charge related to the early retirement of debt in second quarter 2016, combined with the benefit of lower debt balances in second quarter 2017.

Second quarter 2017 effective income tax rate from continuing operations was 31.4 percent, compared with 33.6 percent last year. The decrease was primarily due to the net tax effect of the Company’s global sourcing operations.

Capital Returned to Shareholders In second quarter 2017, the Company returned $627 million to shareholders, which consisted of:

-- Dividends of $331 million.

Repurchases of 5.6 million shares of common stock at an average price of $52.45, for a total investment of $296 million.

(2)During 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 prior thirteen quarters have
been posted on our Investor Relations website at
investors.target.com.

As of the end of second quarter 2017, the Company had approximately $4.1 billion of remaining capacity under its current $5 billion share repurchase program.

For the trailing twelve months through second quarter 2017, after-tax return on invested capital (ROIC) was 13.8 percent, compared with 15.8 percent for the twelve months through second quarter 2016. Excluding the net gain on the sale of the pharmacy and clinic businesses, ROIC for the trailing twelve months through second quarter 2016 was 13.7 percent. The year-over-year improvement in second quarter 2017 primarily reflected the benefit of a lower base of working capital partially offset by the impact of lower profits. See the "Reconciliation of Non-GAAP Financial Measures" section of this release for additional information about the Company’s ROIC calculation.

Discontinued Operations Second quarter net earnings from discontinued operations were $1 million, compared with net earnings of $55 million last year. Second quarter 2016 net earnings from discontinued operations primarily reflected tax benefits from investment losses in Canada recognized upon court approval of Target Canada’s liquidation plan.

Conference Call Details Target will webcast its second 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 Aug. 18, 2017. The replay number is 800-238-0563.

Miscellaneous Statements in this release regarding third quarter, fourth quarter and full-year 2017 earnings per share and comparable sales guidance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties which could cause the Company’s actual results to differ materially. The most important risks and uncertainties are described in Item 1A of the Company’s Form 10-K for the fiscal year ended Jan. 28, 2017. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update any forward-looking statement.

In addition to the GAAP results provided in this release, the Company provides Adjusted EPS for the three and six-month periods ended July 29, 2017 and July 30, 2016. The Company also provides ROIC for the twelve-month periods ended July 29, 2017, and July 30, 2016, which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between the Company and its competitors. Adjusted EPS, capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, generally accepted accounting principles in the United States (GAAP). Management believes Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s ongoing retail operations. Management believes ROIC is useful in assessing the effectiveness of its capital allocation over time. The most comparable GAAP measure for adjusted diluted EPS is diluted EPS from continuing operations. The most comparable GAAP measure for 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 than the Company does, limiting the usefulness of the measure for comparisons with other companies.

About Target Minneapolis-based Target Corporation (TGT) serves guests at 1,816 stores and at Target.com. Since 1946, Target has given 5 percent of its profit to communities, which today equals millions of dollars a week. For more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.

TARGET CORPORATION
Consolidated Statements of Operations
Three Months Ended
Six Months Ended
July 29,
July 30,
July 29,
July 30,
(millions, except per share data) (unaudited)
2017
2016
Change
2017
2016
Change
Sales
$
16,429
$
16,169
1.6 %
$
32,446
$
32,364
0.3 %
Cost of sales (a)
11,419
11,172
2.2
22,618
22,421
0.9
Gross margin
5,010
4,997
0.3
9,828
9,943
(1.2 )
Selling, general and administrative expenses
3,382
3,249
4.1
6,515
6,402
1.8
Depreciation and amortization (exclusive of depreciation included in
514
500
2.8
1,022
981
4.1
cost of sales) (a)
Earnings from continuing operations before interest expense and
1,114
1,248
(10.8 )
2,291
2,560
(10.5 )
income taxes
Net interest expense
135
307
(56.2 )
278
722
(61.4 )
Earnings from continuing operations before income taxes
979
941
4.1
2,013
1,838
9.5
Provision for income taxes
308
316
(2.6 )
664
599
10.9
Net earnings from continuing operations
671
625
7.4
1,349
1,239
8.9
Discontinued operations, net of tax
1
55
4
73
Net earnings
$
672
$
680
(1.2 )%
$
1,353
$
1,312
3.1 %
Basic earnings per share
Continuing operations
$
1.22
$
1.07
13.8 %
$
2.45
$
2.10
16.7 %
Discontinued operations
--
0.09
0.01
0.12
Net earnings per share
$
1.22
$
1.17
4.7 %
$
2.45
$
2.22
10.4 %
Diluted earnings per share
Continuing operations
$
1.22
$
1.07
14.2 %
$
2.44
$
2.08
17.1 %
Discontinued operations
--
0.09
0.01
0.12
Net earnings per share
$
1.22
$
1.16
5.1 %
$
2.44
$
2.20
10.9 %
Weighted average common shares outstanding
Basic
549.3
582.2
(5.6 )%
550.8
590.3
(6.7 )%
Dilutive impact of share-based awards
2.6
4.6
0
2.8
5.0
Diluted
551.9
586.8
(6.0 )%
553.6
595.3
(7.0 )%
Antidilutive shares
5.2
0.2
3.6
0.1
Dividends declared per share
$
0.62
$
0.60
3.3 %
$
1.22
$
1.16
5.2 %
Note: Per share amounts may not foot due to rounding.
(a) Refer to the Segment Results section for
information about a reclassification of supply chain-related
depreciation expense to cost of sales.
Subject to reclassification
TARGET CORPORATION
Consolidated Statements of Financial Position
July 29,
January 28,
July 30,
(millions) (unaudited)
2017
2017
2016
Assets
Cash and cash equivalents
$
2,291
$
2,512
$
1,480
Inventory
8,257
8,309
8,631
Assets of discontinued operations
19
69
83
Other current assets
1,053
1,100
1,309
Total current assets
11,620
11,990
11,503
Property and equipment
Land
6,089
6,106
6,111
Buildings and improvements
28,041
27,611
27,315
Fixtures and equipment
5,361
5,503
5,282
Computer hardware and software
2,518
2,651
2,504
Construction-in-progress
423
200
232
Accumulated depreciation
(17,571 )
(17,413 )
(16,510 )
Property and equipment, net
24,861
24,658
24,934
Noncurrent assets of discontinued operations
10
12
17
Other noncurrent assets
875
771
834
Total assets
$
37,366
$
37,431
$
37,288
Liabilities and shareholders’ investment
Accounts payable
$
7,584
$
7,252
$
6,811
Accrued and other current liabilities
3,790
3,737
3,544
Current portion of long-term debt and other borrowings
1,354
1,718
647
Liabilities of discontinued operations
1
1
1
Total current liabilities
12,729
12,708
11,003
Long-term debt and other borrowings
10,892
11,031
12,063
Deferred income taxes
784
861
754
Noncurrent liabilities of discontinued operations
18
18
19
Other noncurrent liabilities
1,845
1,860
1,872
Total noncurrent liabilities
13,539
13,770
14,708
Shareholders’ investment
Common stock
46
46
48
Additional paid-in capital
5,707
5,661
5,562
Retained earnings
5,961
5,884
6,579
Accumulated other comprehensive loss
(616 )
(638 )
(612 )
Total shareholders’ investment
11,098
10,953
11,577
Total liabilities and shareholders’ investment
$
37,366
$
37,431
$
37,288
Common Stock Authorized 6,000,000,000 shares, $.0833 par
value; 546,183,291, 556,156,228 and 574,801,225 shares issued and
outstanding at July 29, 2017, January 28, 2017 and July 30, 2016,
respectively.
Preferred Stock Authorized 5,000,000 shares, $.01 par
value; no shares were issued or outstanding at July 29, 2017,
January 28, 2017 or July 30, 2016.
Subject to reclassification
TARGET CORPORATION
Consolidated Statements of Cash Flows
Six Months Ended
July 29,
July 30,
(millions) (unaudited)
2017
2016
Operating activities
Net earnings
$
1,353
$
1,312
Earnings from discontinued operations, net of tax
4
73
Net earnings from continuing operations
1,349
1,239
Adjustments to reconcile net earnings to cash provided by operations
Depreciation and amortization
1,151
1,116
Share-based compensation expense
43
67
Deferred income taxes
(87 )
(79 )
Loss on debt extinguishment
--
422
Noncash losses / (gains) and other, net
81
(26 )
Changes in operating accounts
Inventory
52
(29 )
Other assets
74
131
Accounts payable
332
(607 )
Accrued and other liabilities
(129 )
(838 )
Cash provided by operating activities--continuing operations
2,866
1,396
Cash provided by operating activities--discontinued operations
57
92
Cash provided by operations
2,923
1,488
Investing activities
Expenditures for property and equipment
(1,203 )
(684 )
Proceeds from disposal of property and equipment
22
14
Other investments
(80 )
1
Cash required for investing activities
(1,261 )
(669 )
Financing activities
Additions to long-term debt
--
1,979
Reductions of long-term debt
(614 )
(2,611 )
Dividends paid
(663 )
(666 )
Repurchase of stock
(615 )
(2,238 )
Stock option exercises
9
151
Cash required for financing activities
(1,883 )
(3,385 )
Net decrease in cash and cash equivalents
(221 )
(2,566 )
Cash and cash equivalents at beginning of period
2,512
4,046
Cash and cash equivalents at end of period
$
2,291
$
1,480
Subject to reclassification
TARGET CORPORATION
Segment Results
Three Months Ended
Six Months Ended
July 29,
July 30,
July 29,
July 30,
(millions) (unaudited)
2017
2016
Change
2017
2016
Change
Sales
$
16,429
$
16,169
1.6 %
$
32,446
$
32,364
0.3 %
Cost of sales (a)
11,419
11,172
2.2
22,618
22,421
0.9
Gross margin
5,010
4,997
0.3
9,828
9,943
(1.2 )
SG&A expenses (b)
3,382
3,256
3.9
6,515
6,398
1.8
Depreciation and amortization (exclusive of depreciation included in
514
500
2.8
1,022
981
4.1
cost of sales) (a)
EBIT
$
1,114
$
1,241
(10.3 )%
$
2,291
$
2,564
(10.6 )%
(a) During 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 $64 million and $129 million for the three and six
months ended July 29, 2017, respectively, and $70 million and $135
million for the three and six months ended July 30, 2016,
respectively, with equal and offsetting decreases to depreciation
and amortization. This reclassification had no impact on sales,
EBIT, net earnings or earnings per share.
(b) SG&A includes $172 million and $342 million
net profit-sharing income under our credit card program agreement
for the three and six months ended July 29, 2017, respectively,
and $163 million and $321 million for the three and six months
ended July 30, 2016, respectively.
Three Months Ended
Six Months Ended
Rate Analysis
July 29,
July 30,
July 29,
July 30,
(unaudited)
2017
2016
2017
2016
Gross margin rate (a)
30.5 %
30.9 %
30.3 %
30.7 %
SG&A expense rate
20.6
20.1
20.1
19.8
Depreciation and amortization (exclusive of depreciation included in
3.1
3.1
3.2
3.0
cost of sales) expense rate (a)
EBIT margin rate
6.8
7.7
7.1
7.9
Note: Rate analysis metrics are computed by dividing the
applicable amount by sales.
(a) Reclassifying supply chain-related
depreciation expense to cost of sales reduced the gross margin and
depreciation and amortization rates by (0.4) percent for all
periods presented.
Three Months Ended
Six Months Ended
Sales by Channel
July 29,
July 30,
July 29,
July 30,
(unaudited)
2017
2016
2017
2016
Stores
95.7 %
96.7 %
95.7 %
96.6 %
Digital
4.3
3.3
4.3
3.4
Total
100 %
100 %
100 %
100 %
Three Months Ended
Six Months Ended
Comparable Sales
July 29,
July 30,
July 29,
July 30,
(unaudited)
2017
2016
2017
2016
Comparable sales change
1.3 %
(1.1 )%
-- %
-- %
Drivers of change in comparable sales
Number of transactions
2.1
(2.2 )
0.6
(0.9 )
Average transaction amount
(0.7 )
1.1
(0.7 )
1.0
Note: Amounts may not foot due to rounding.
Contribution to Comparable Sales Change
Three Months Ended
Six Months Ended
(unaudited)
July 29,
July 30,
July 29,
July 30,
2017
2016
2017
2016
Stores channel comparable sales change
0.2 %
(1.6 )%
(1.0 )%
(0.5 )%
Digital channel contribution to comparable sales change
1.1
0.5
0.9
0.6
Total comparable sales change
1.3 %
(1.1 )%
-- %
-- %
Note: Amounts may not foot due to rounding.
Three Months Ended
Six Months Ended
REDcard Penetration
July 29,
July 30,
July 29,
July 30,
(unaudited)
2017
2016
2017
2016
Target Debit Card
13.0 %
12.7 %
13.2 %
12.9 %
Target Credit Cards
11.6
11.1
11.3
10.7
Total REDcard Penetration
24.6 %
23.9 %
24.5 %
23.6 %
Note: Amounts may not foot due to rounding.
Number of Stores and Retail Square Feet
Number of Stores
Retail Square Feet (a)
(unaudited)
July 29,
January 28,
July 30,
July 29,
January 28,
July 30,
2017
2017
2016
2017
2017
2016
170,000 or more sq. ft.
276
276
278
49,328
49,328
49,688
50,000 to 169,999 sq. ft.
1,506
1,504
1,505
189,796
189,620
189,732
49,999 or less sq. ft.
34
22
14
958
554
300
Total
1,816
1,802
1,797
240,082
239,502
239,720
(a) In thousands, reflects total square feet
less office, distribution center, and vacant space.
Subject to reclassification
TARGET CORPORATION
Reconciliation of Non-GAAP Financial Measures
To provide additional transparency, we have disclosed non-GAAP
adjusted diluted earnings per share from continuing operations
(Adjusted EPS). This metric excludes certain items presented
below. We believe this information is useful in providing
period-to-period comparisons of the results of our continuing
operations. This measure is not in accordance with, or an
alternative for, generally accepted accounting principles in the
United States (GAAP). The most comparable GAAP measure is diluted
earnings per share from continuing operations. Adjusted EPS should
not be considered in isolation or as a substitution for analysis
of our results as reported under GAAP. Other companies may
calculate Adjusted EPS differently than we do, limiting the
usefulness of the measure for comparisons with other companies.
Three Months Ended
July 29, 2017
July 30, 2016
Net of
Per Share
Net of
Per Share
(millions, except per share data) (unaudited)
Pretax
Tax
Amounts
Pretax
Tax
Amounts
Change
GAAP diluted earnings per share from continuing operations
$
1.22
$
1.07
14.2 %
Adjustments
Loss on early retirement of debt
$
--
$
--
$
--
$
161
$
98
$
0.17
Pharmacy Transaction-related costs (a)
--
--
--
(7 )
(4 )
(0.01 )
Income tax matters (b)
--
5
0.01
--
--
--
Adjusted diluted earnings per share from continuing operations
$
1.23
$
1.23
0.1 %
Six Months Ended
July 29, 2017
July 30, 2016
Net of
Per Share
Net of
Per Share
(millions, except per share data) (unaudited)
Pretax
Tax
Amounts
Pretax
Tax
Amounts
Change
GAAP diluted earnings per share from continuing operations
$
2.44
$
2.08
17.1 %
Adjustments
Loss on early retirement of debt
$
--
$
--
$
--
$
422
$
257
$
0.43
Pharmacy Transaction-related costs (a)
--
--
--
4
3
--
Income tax matters (b)
--
(2 )
--
--
(3 )
--
Adjusted diluted earnings per share from continuing operations
$
2.43
$
2.51
(3.2 )%
Note: Amounts may not foot due to rounding.
(a) Represents items related to the December 2015 sale
of our pharmacy and clinic businesses to CVS (Pharmacy
Transaction).
(b) Represents expense/(income) from income tax
matters not related to current period operations.

We have also disclosed after-tax return on invested capital from continuing operations (ROIC), which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between us and our competitors. We believe this metric provides a meaningful measure of the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently than we do, limiting the usefulness of the measure for comparisons with other companies.

After-Tax Return on Invested Capital
Numerator
Trailing Twelve Months
July 29,
July 30,
(dollars in millions) (unaudited)
2017
2016
Earnings from continuing operations before interest expense and
$
4,700
$
5,605
income taxes
+ Operating lease interest (a)(b)
76
77
Adjusted earnings from continuing operations before interest expense
4,776
5,682
and income taxes
- Income taxes (c)
1,571
1,791
Net operating profit after taxes
$
3,205
$
3,891
Denominator
July 29,
July 30,
August 1,
(dollars in millions) (unaudited)
2017
2016
2015
Current portion of long-term debt and other borrowings
$
1,354
$
647
$
841
+ Noncurrent portion of long-term debt
10,892
12,063
11,817
+ Shareholders’ equity
11,098
11,577
13,942
+ Capitalized operating lease obligations (b)(d)
1,257
1,274
1,497
- Cash and cash equivalents
2,291
1,480
2,742
- Net assets of discontinued operations
10
80
217
Invested capital
$
22,300
$
24,001
$
25,138
Average invested capital (e)
$
23,150
$
24,569
After-tax return on invested capital (f)
13.8 %
15.8 %
(a) Represents the add-back to operating income to
reflect the hypothetical interest expense we would incur if the
property under our operating leases were owned or accounted for as
capital leases, using eight times our trailing twelve months rent
expense and an estimated interest rate of six percent.
(b) See the following Reconciliation of
Capitalized Operating Leases table for the adjustments to our GAAP
total rent expense to obtain the hypothetical capitalization of
operating leases and related operating lease interest.
(c) Calculated using the effective tax rate for
continuing operations, which was 32.9 percent and 31.5 percent for
the trailing twelve months ended July 29, 2017 and July 30, 2016,
respectively. For the trailing twelve months ended July 29, 2017
and July 30, 2016, includes tax effect of $1,546 million and
$1,767 million, respectively, related to EBIT and $25 million and
$24 million, respectively, related to operating lease interest.
(d) Calculated as eight times our trailing
twelve months rent expense.
(e) Average based on the invested capital at the
end of the current period and the invested capital at the end of
the comparable prior period.
(f) Excluding the net gain on the Pharmacy
Transaction, ROIC was 13.7 percent for the trailing twelve months
ended July 30, 2016.

Capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, GAAP. The most comparable GAAP measure is total rent expense. Capitalized operating lease obligations and operating lease interest should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP.

Reconciliation of Capitalized Operating Leases
Trailing Twelve Months
July 29,
July 30,
August 1,
(dollars in millions) (unaudited)
2017
2016
2015
Total rent expense
$
157
$
159
$
187
Capitalized operating lease obligations (total rent expense x 8)
1,257
1,274
1,497
Operating lease interest (capitalized operating lease obligations x
76
77
n/a
6%)
Subject to reclassification

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SOURCE: Target Corporation

Target Corporation
Investors:
John Hulbert, 612-761-6627
or
Media:
Erin Conroy, 612-761-5928
or
Target Media Hotline, 612-696-3400