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 Target Reports Fourth Quarter and Full-Year 2016 Earnings
   Tuesday, February 28, 2017 6:30:04 AM ET

--Fourth quarter comparable digital channel sales increased 34 percent, contributing 1.8 percentage points of comparable sales growth.

--Fourth quarter comparable sales growth in Signature Categories outpaced total comparable sales by nearly 3 percentage points.

--Fourth quarter comparable traffic increased 0.2 percent.

--Fourth quarter GAAP earnings per share (EPS) from continuing operations of $1.46 and Adjusted EPS(2) of $1.45, compared with the Company’s guidance range of $1.45 to $1.55.

--For full-year 2016, GAAP EPS from continuing operations declined 12.7 percent to $4.58, reflecting a loss of $0.44 on the early retirement of debt.

--Full-year Adjusted EPS(2) increased 6.7 percent to $5.01.

--Target returned $5.0 billion to shareholders in 2016 through dividends and share repurchases.

Target Corporation (TGT ) today announced its fourth quarter and full-year 2016 results. The Company reported GAAP earnings per share (EPS) from continuing operations of $1.46 in fourth quarter and $4.58 for full-year 2016, compared with $2.31 and $5.25 in 2015, respectively. Fourth quarter Adjusted EPS were $1.45, down 4.6 percent from $1.52 in 2015. Full-year Adjusted EPS of $5.01 was 6.7 percent higher than $4.69 in 2015. 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 reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores," said Brian Cornell, chairman and CEO of Target. "At our meeting with the financial community this morning, we will provide detail on the meaningful investments we’re making in our business and financial model which will position Target for long-term, sustainable growth in this new era in retail. We will accelerate our investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment, including the launch of more than 12 new brands, representing more than $10 billion of our sales, over the next two years. In addition, we will invest in lower gross margins to ensure we are clearly and competitively priced every day. While the transition to this new model will present headwinds to our sales and profit performance in the short term, we are confident that these changes will best-position Target for continued success over the long term."

 
----------------------------------------------------------------------------------------------------------------------
(1)On Jan. 18, 2017, Target updated fourth quarter
guidance for comparable sales, GAAP EPS from continuing
operations, and Adjusted EPS.
 
(2)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.
----------------------------------------------------------------------------------------------------------------------
 

Fiscal 2017 Guidance

Target’s 2017 guidance reflects the impact of the Company’s transition to a new financial model, which will be covered in the Company’s meeting with the financial community later today.

In first quarter 2017, Target expects a low-to-mid single digit decline in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of $0.80 to $1.00.

For full-year 2017, Target expects a low-single digit decline in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of $3.80 to $4.20.

First quarter and full-year 2017 GAAP EPS from continuing operations may include the impact of certain discrete items, which will be excluded in calculating Adjusted EPS. In the past, these items have included losses on the early retirement of debt, data breach expenses, restructuring costs, and certain other items that are discretely managed. The Company is not currently aware of any such discrete items.

Segment Results

Fourth quarter 2016 sales decreased 4.3 percent to $20.7 billion from $21.6 billion last year, reflecting a 1.5 percent decline in comparable sales combined with the removal of pharmacy and clinic sales from this year’s results. Comparable digital channel sales grew 34 percent and contributed 1.8 percentage points of comparable sales growth. Segment earnings before interest expense and income taxes (EBIT), which is Target’s measure of segment profit, were $1,344 million in fourth quarter 2016, a decrease of 13.5 percent from $1,554 million in 2015.

Fourth quarter EBITDA and EBIT margin rates were 9.5 percent and 6.5 percent, respectively, compared with 9.8 percent and 7.2 percent, respectively, in 2015. Fourth quarter gross margin rate was 26.9 percent, compared with 27.9 percent in 2015, reflecting markdown pressure from promotional and clearance activity and costs associated with the mix shift between the Company’s store and digital channels, partially offset by the benefit of the sale of the Company’s pharmacy and clinic businesses, a favorable merchandise mix, and cost of goods savings. Fourth quarter SG&A expense rate was 17.5 percent in 2016, compared with 18.1 percent in 2015, reflecting the benefit of the sale of the Company’s pharmacy and clinic businesses and continued expense discipline across the organization.

Interest Expense and Taxes from Continuing Operations

The Company’s fourth quarter 2016 net interest expense was $140 million, compared with $152 million last year. Fourth quarter 2016 effective income tax rate from continuing operations was 32.0 percent, compared with 29.6 percent last year. Last year’s tax rate reflected the impact of the gain on the December 2015 sale of the pharmacy and clinic businesses.

Shareholder Returns

The Company returned $902 million to shareholders in fourth quarter 2016, including:

-- Dividends of $337 million, compared with $345 million in fourth quarter 2015.

-- Share repurchases totaling $565 million, including: -- Open market transactions that retired 3.2 million shares of common stock at an average price of $66.52, for a total investment of $211 million.

-- An accelerated share repurchase (ASR) agreement that retired 4.6 million shares of common stock at an average price of $76.77, for a total investment of $355 million.

As expected, during the fourth quarter the Company completed its previous share repurchase program, which was approved in 2012 and extended to $10 billion in 2015. Upon completion of the prior program, the Company began repurchasing shares under its current $5 billion share repurchase program, which was approved in September 2016. Under the current program, the Company invested $264 million in the fourth quarter, leaving approximately $4.7 billion remaining under the current program at the end of the quarter.

For the trailing twelve months through fourth quarter 2016, after-tax return on invested capital (ROIC) was 15.0 percent, compared with 16.0 percent for the twelve months through fourth quarter 2015. Last year’s ROIC rate reflected the benefit of the gain on the December 2015 sale of the pharmacy and clinic businesses. Excluding that benefit, ROIC for the twelve months through fourth quarter 2015 was 13.9 percent. 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 Q&A, at 8 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 beginning at approximately 1 p.m. CST today.

Miscellaneous

Statements in this release regarding first 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. 30, 2016. 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 twelve-month periods ended Jan. 28, 2017, and Jan. 30, 2016. The Company also provides ROIC for the twelve-month periods ended Jan. 28, 2017, and Jan. 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. 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 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 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 1,802 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                                                                                                                                                            Twelve Months Ended                                                             
                                                                                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------                                                                                                         ---------------------------------------------------------------------------------------------------------------------------------------
(millions, except per share data) (unaudited)                                              January 28,                                                  January 30,                                  Change                         January 28,                                       January 30,                                        Change
                                                                                                                                    2017                                                                                               2016                                                                                                                                                    2017                                                                                    2016
--------------------------------------------------------------- -------------------- -------------------- ------------------------------------------------------   -------------------- -------------------- ------------------------------------------------------   -------------------- -------------------- -------------------  -------------------- -------------------- ----------------------------------  -------------------- -------------------- ------------------------------------------------------   -------------------- -------------------- ------------------------------
Sales                                                                                                               $                  20,690                                    $                  21,626                                                                      (4.3 )%                                                            $                  69,495               $                  73,785                                                                      (5.8 )%
Cost of sales                                                                 15,116                 15,594             (3.1 )                       48,872               51,997             (6.0 )
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Gross margin                                                                                                                            5,574                                                                                              6,032                                                                      (7.6 )                                                                                20,623                                                                        21,788                                                                      (5.4 )
Selling, general and administrative expenses                                                                                            3,614                                                                                              3,921                                                                      (7.8 )                                                                                13,356                                                                        14,665                                                                      (8.9 )
Depreciation and amortization                                                                                                             612                                                                                                562                                                                       8.8                                                                                   2,298                                                                         2,213                                                                       3.8
Gain on sale                                                          --                   (620 )                            (100.0 )               --                 (620 )                            (100.0 )
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Earnings from continuing operations before interest expense and                                                                         1,348                                                                                              2,169                                                                     (37.9 )                                                                                 4,969                                                                         5,530                                                                     (10.1 )
income taxes
Net interest expense                                                             140                    152             (8.1 )                        1,004                  607             65.3  
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Earnings from continuing operations before income taxes                                                                                 1,208                                                                                              2,017                                                                     (40.1 )                                                                                 3,965                                                                         4,923                                                                     (19.5 )
Provision for income taxes                                                       387                    596            (35.2 )                        1,296                1,602            (19.1 )
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Net earnings from continuing operations                                                                                                   821                                                                                              1,421                                                                     (42.2 )%                                                                                2,669                                                                         3,321                                                                     (19.6 )%
Discontinued operations, net of tax                                               (4 )                                       5                           68                   42        
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ----------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- --------------------------------
Net earnings                                                                  $                     817                 $                   1,426            (42.7 )%                      $                   2,737               $                   3,363            (18.6 )%
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Basic earnings/(loss) per share
   Continuing operations                                                                                            $                    1.47                                                                          $                    2.33                                                                     (36.9 )%                                                            $                    4.62                                                     $                    5.29                                                                     (12.7 )%
   Discontinued operations                                                     (0.01 )                                    0.01                         0.12                 0.07        
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ----------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- --------------------------------
      Net earnings per share                                                  $                    1.46                 $                    2.33            (37.5 )%                      $                    4.74               $                    5.35            (11.5 )%
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Diluted earnings/(loss) per share
   Continuing operations                                                                                            $                    1.46                                                                          $                    2.31                                                                     (37.0 )%                                                            $                    4.58                                                     $                    5.25                                                                     (12.7 )%
   Discontinued operations                                                     (0.01 )                                    0.01                         0.12                 0.07        
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ----------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- --------------------------------
      Net earnings per share                                                  $                    1.45                 $                    2.32            (37.6 )%                      $                    4.70               $                    5.31            (11.6 )%
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Weighted average common shares outstanding
   Basic                                                                                                                                559.7                                                                                              610.5                                                                      (8.3 )%                                                                                577.6                                                                         627.7                                                                      (8.0 )%
   Dilutive impact of share-based awards                                         4.8                    4.8                          4.9                  5.2        
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ----------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- --------------------------------
   Diluted                                                                     564.5                  615.3             (8.2 )%                       582.5                632.9             (8.0 )%
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Antidilutive shares                                                              0.1         --                          0.1       --        
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ----------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- --------------------------------
Dividends declared per share                                                  $                    0.60                 $                    0.56              7.1 %                       $                    2.36               $                    2.20              7.3 %
--------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------- --------------------
Note: Per share amounts may not foot due to rounding.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
Subject to reclassification
 
 
TARGET CORPORATION
 
Consolidated Statements of Financial Position
                                                                                                            
------------------------------------------------------------------------- -------------------- -------------------- ----------------------------------------------------------------------------------- -------------------- ---------------------------------------------------
(millions) (unaudited)                                                                                  January 28,                                                  January 30,
                                                                                                                                                 2017                                                                                               2016
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------------------------------   -------------------- -------------------- ------------------------------------------------
Assets                                                                                                                                          
Cash and cash equivalents, including short-term investments of                                                                $                         2,512                                                                          $             4,046
$1,110 and $3,008
Inventory                                                                                                                                               8,309                                                                                        8,601
Assets of discontinued operations                                                                                                                          69                                                                                          322
Other current assets                                                                           1,100            1,161  
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
   Total current assets                                                                                                                                11,990                                                                                       14,130
Property and equipment
   Land                                                                                                                                                 6,106                                                                                        6,125
   Buildings and improvements                                                                                                                          27,611                                                                                       27,059
   Fixtures and equipment                                                                                                                               5,503                                                                                        5,347
   Computer hardware and software                                                                                                                       2,651                                                                                        2,617
   Construction-in-progress                                                                                                                               200                                                                                          315
   Accumulated depreciation                                                                  (17,413 )                           (16,246 )
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
   Property and equipment, net                                                                                                                         24,658                                                                                       25,217
Noncurrent assets of discontinued operations                                                                                                               12                                                                                           75
Other noncurrent assets                                                                          771              840  
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
Total assets                                                                            $                        37,431                 $            40,262  
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
Liabilities and shareholders’ investment
Accounts payable                                                                                                              $                         7,252                                                                          $             7,418
Accrued and other current liabilities                                                                                                                   3,737                                                                                        4,236
Current portion of long-term debt and other borrowings                                                                                                  1,718                                                                                          815
Liabilities of discontinued operations                                                             1              153  
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
   Total current liabilities                                                                                                                           12,708                                                                                       12,622
Long-term debt and other borrowings                                                                                                                    11,031                                                                                       11,945
Deferred income taxes                                                                                                                                     861                                                                                          823
Noncurrent liabilities of discontinued operations                                                                                                          18                                                                                           18
Other noncurrent liabilities                                                                   1,860            1,897  
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
   Total noncurrent liabilities                                                                                                                        13,770                                                                                       14,683
Shareholders’ investment                                                                                       
   Common stock                                                                                                                                            46                                                                                           50
   Additional paid-in capital                                                                                                                           5,661                                                                                        5,348
   Retained earnings                                                                                                                                    5,884                                                                                        8,188
   Accumulated other comprehensive loss
      Pension and other benefit liabilities                                                                                                              (601 )                                                                                       (588 )
      Currency translation adjustment and cash flow hedges                                       (37 )                               (41 )
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
   Total shareholders’ investment                                  10,953           12,957  
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
Total liabilities and shareholders’ investment               $                        37,431                 $            40,262  
------------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------- --------------------
Common Stock Authorized 6,000,000,000 shares, $.0833 par
value; 556,156,228 and 602,226,517 shares issued and outstanding
at January 28, 2017 and January 30, 2016, respectively.
                                                                                                                                                                                                                              
Preferred Stock Authorized 5,000,000 shares, $.01 par
value; no shares were issued or outstanding at January 28, 2017 or
January 30, 2016.
                                                                                                                                                                                                                              
Subject to reclassification
                                                                                                                                                                                                                              
 
TARGET CORPORATION
 
Consolidated Statements of Cash Flows
                                                                 
------------------------------------------------------------------------------ -------------------- -------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        Twelve Months Ended
                                                                                                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------
(millions) (unaudited)                                                                                    January 28,                                                  January 30,
                                                                                                                                                   2017                                                                                               2016
------------------------------------------------------------------------------ -------------------- -------------------- ------------------------------------------------------   -------------------- -------------------- ------------------------------------------------------
Operating activities                                                                                                                                                                 
Net earnings                                                                                                                       $                   2,737                                                                          $                   3,363
Earnings from discontinued operations, net of tax                                                68                     42  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Net earnings from continuing operations                                                                                                                2,669                                                                                              3,321
Adjustments to reconcile net earnings to cash provided by operations:
   Depreciation and amortization                                                                                                                       2,298                                                                                              2,213
   Share-based compensation expense                                                                                                                      113                                                                                                115
   Deferred income taxes                                                                                                                                  41                                                                                               (322 )
   Gain on sale                                                                                                                               --                                                                                               (620 )
   Loss on debt extinguishment                                                                                                                           422                                                                                     --
   Noncash (gains) / losses and other, net                                                                                                    --                                                                                                 57
   Changes in operating accounts:
      Inventory                                                                                                                                          293                                                                                               (316 )
      Other assets                                                                                                                                        36                                                                                                227
      Accounts payable and accrued liabilities                                                 (543 )                                     579  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Cash provided by operating activities--continuing operations                                                                               5,329                                                                                              5,254
Cash provided by operating activities--discontinued operations                      107                    704  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Cash provided by operations                                                                   5,436                  5,958  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Investing activities
   Expenditures for property and equipment                                                                                                            (1,547 )                                                                                           (1,438 )
   Proceeds from disposal of property and equipment                                                                                                       46                                                                                                 28
   Proceeds from sale of business                                                                                                             --                                                                                              1,875
   Other investments                                                                             28                     24  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Cash (required for) / provided by investing activities--continuing                                                                        (1,473 )                                                                                              489
operations
Cash provided by investing activities--discontinued operations           --                     19  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Cash (required for) / provided by investing activities                                       (1,473 )                                     508  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Financing activities
   Additions to long-term debt                                                                                                                         1,977                                                                                     --
   Reductions of long-term debt                                                                                                                       (2,641 )                                                                                              (85 )
   Dividends paid                                                                                                                                     (1,348 )                                                                                           (1,362 )
   Repurchase of stock                                                                                                                                (3,706 )                                                                                           (3,483 )
   Stock option exercises                                                                       221                    300  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Cash required for financing activities                                                       (5,497 )                                  (4,630 )
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Net (decrease) / increase in cash and cash equivalents                                                                                                (1,534 )                                                                                            1,836
Cash and cash equivalents at beginning of period                                              4,046                  2,210  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
Cash and cash equivalents at end of period                                                   $                   2,512                 $                   4,046  
------------------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- --------------------
                                                                                                                                                                                                                             
Subject to reclassification
 
 
TARGET CORPORATION
 
Segment Results
                                                                                                                                                                                                       
----------------------------- -------------------- -------------------- ---------------------------------------------------------------------------------------------------------------------- -------------------- ---------------------------------------------------- -------------------- ---------------------------------------------------------------------------------------------------------------------- -------------------- --------------------------------
                                                                          Three Months Ended                                                                                                                        Twelve Months Ended                                          
                                                                        --------------------------------------------------------------------------------------------------                                                                                                                    --------------------------------------------------------------------------------------------------
(millions) (unaudited)                     January 28,                     January 30,                         Change                          January 28,                     January 30,                         Change
                                                                                    2017                                                                2016 (a)                                                                                                                                          2017                                                                2016 (a)
----------------------------- -------------------- -------------------- --------------------------  -------------------- -------------------- --------------------------  -------------------- -------------------- ------------------------------  -------------------- -------------------- --------------------------  -------------------- -------------------- --------------------------  -------------------- -------------------- ------------------------------
Sales                                                                             $          20,690               $          21,626                                                 (4.3 )%                                                                       $          69,495               $          73,785                                                 (5.8 )%
Cost of sales                       15,116       15,594           (3.1 )                          48,872       51,997           (6.0 )
----------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- --------------------
Gross margin                                                                                  5,574                                                                 6,032                                                 (7.6 )                                                                                   20,623                                                                21,788                                                 (5.4 )
SG&A expenses (b)                    3,618        3,916           (7.6 )                          13,360       14,448           (7.5 )
----------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- --------------------
EBITDA                                                                                        1,956                                                                 2,116                                                 (7.6 )                                                                                    7,263                                                                 7,340                                                 (1.1 )
Depreciation and amortization          612          562            8.8          2,298        2,213            3.8  
----------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- --------------------
EBIT                                        $           1,344               $           1,554          (13.5 )%                                 $           4,965               $           5,127           (3.2 )%
----------------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ---------- --------------------
(a) Sales include $574 million and $3,815
million related to our former pharmacy and clinic businesses for
the three and twelve months ended January 30, 2016, respectively,
and cost of sales include $503 million and $3,076 million,
respectively. The December 2015 sale of these businesses to CVS
(Pharmacy Transaction) had no notable impact on EBITDA or EBIT.
(b) SG&A includes net profit sharing income from
the arrangement with TD Bank of $174 million and $663 million for
the three and twelve months ended January 28, 2017, respectively,
and $163 million and $641 million for the three and twelve months
ended January 30, 2016.
 
                                                                                     
------------------------------------------ -------------------- ----------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------
                                                                         Three Months Ended                                                           Twelve Months Ended
                                                                ---------------------------------------------------------------------------                     ---------------------------------------------------------------------------
Rate Analysis                                        January 28,                  January 30,                  January 28,                  January 30,
(unaudited)                                                                2017                                            2016                                            2017                                            2016
------------------------------------------ -------------------- -------------------------  -------------------- -------------------------  -------------------- -------------------------  -------------------- -------------------------
Gross margin rate                                                26.9 %                       27.9 %                                          29.7 %                       29.5 %
SG&A expense rate                                                17.5                                            18.1                                            19.2                                            19.6
EBITDA margin rate (a)                                            9.5                                             9.8                                            10.5                                             9.9
Depreciation and amortization expense rate                        3.0                                             2.6                                             3.3                                             3.0
EBIT margin rate (a)                           6.5       7.2       7.1       6.9  
------------------------------------------ -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ----- --------------------
Rate analysis metrics are computed by dividing the applicable
amount by sales.
(a) Excluding sales of our former pharmacy and
clinic businesses, EBITDA margin rates were 10.1 percent and 10.5
percent for the three and twelve months ended January 30, 2016,
respectively, and EBIT margin rates were 7.4 percent and 7.3
percent, respectively.
 
                                                                                        
-------------------- -------------------- -------------------- -------------------------------------------------------------------------------------------------------------------- -------------------- ------------------------------------------------------------------------------------------------
                                                                Three Months Ended                                                                                  Twelve Months Ended
                                                               ------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------
Sales by Channel                 January 28,                    January 30,                    January 28,                    January 30,
(unaudited)                                                               2017                                                               2016 (a)                                                               2017                                                               2016 (a)
-------------------- -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------
Stores                                                          93.2 %                         95.0 %                                                               95.6 %                         96.6 %
Digital                    6.8         5.0         4.4         3.4  
-------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------
Total                      100 %                          100 %                          100 %                          100 %
-------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------
(a) Excluding sales of our former pharmacy and
clinic businesses, stores channels sales were 94.9 percent and
96.4 percent of total sales, respectively, for the three and
twelve months ended January 30, 2016, and digital channels sales
were 5.1 percent and 3.6 percent of total sales, respectively.
 
                                                                  
-------------------------------------- -------------------- -------------------------------------------------------------------------------- ---------------------------------------------------------------------------
                                                              Three Months Ended                                                   Twelve Months Ended
                                                            ------------------------------------------------------------                     ---------------------------------------------------------------------------
Comparable Sales                          January 28,          January 30,                  January 28,                  January 30,
(unaudited)                                                     2017                                    2016                                            2017                                            2016
-------------------------------------- -------------------- ----------  -------------------- -------------------------  -------------------- -------------------------  -------------------- -------------------------
Comparable sales change                                      (1.5 )%        1.9 %                                          (0.5 )%                       2.1 %
Drivers of change in comparable sales:
   Number of transactions                                     0.2                              1.3                                            (0.8 )                                           1.3
   Average transaction amount             (1.6 )         0.6       0.3       0.8  
-------------------------------------- -------------------- ----- ----- -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ----- --------------------
                                                                                                                                                                                                    
                                                                                                                           
------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------------------------------------------------------------- -------------------- ------------------------------------------------------------------------------------------------
                                                                                                   Three Months Ended                                                                                  Twelve Months Ended
                                                                                                  ------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------
Contribution to Comparable Sales Change                             January 28,                    January 30,                    January 28,                    January 30,
(unaudited)                                                                                                  2017                                                                 2016                                                                 2017                                                                 2016
------------------------------------------------------- -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------
Stores channel comparable sales change                                                             (3.3 )%                         0.6 %                                                               (1.5 )%                         1.3 %
Digital channel contribution to comparable sales change       1.8         1.3         1.0         0.8  
------------------------------------------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------
Total comparable sales change                                (1.5 )%                         1.9 %                         (0.5 )%                         2.1 %
------------------------------------------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------
Note: Amounts may not foot due to rounding.
                                                                                                                                                                                                                                                                                                                        
                                                                                             
------------------------- -------------------- -------------------- -------------------------------------------------------------------------------------------------------------------- -------------------- ------------------------------------------------------------------------------------------------
                                                                     Three Months Ended                                                                                  Twelve Months Ended
                                                                    ------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------
REDcard Penetration                   January 28,                    January 30,                    January 28,                    January 30,
(unaudited)                                                                    2017                                                                 2016                                                                 2017                                                                 2016
------------------------- -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------
Target Debit Card                                                    12.7 %                         12.3 %                                                               12.8 %                         12.1 %
Target Credit Cards            11.6        10.7        11.2        10.1  
------------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------
Total REDcard Penetration      24.3 %                         23.0 %                         24.0 %                         22.3 %
------------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- --------------------
Note: Amounts may not foot due to rounding.
Represents the percentage of Target sales that are paid with
REDcards. Excluding pharmacy and clinic sales, total REDcard
penetration would have been 23.5 percent and 23.2 percent for the
three and twelve months ended January 30, 2016, respectively.
 
                                                                                 
------------------------- -------------------- -------------------- -------------------------------------------------------------------------------------------------------- -------------------- -----------------------------------------------------------------------
Number of Stores and                                            Number of Stores                                                              Retail Square Feet (a)
Retail Square Feet
(unaudited)
                                                                    --------------------------------------------------------------------------------                                              -------------------------------------------------------------------
                                 January 28,              January 30,              January 28,              January 30,
                                                       2017                                                           2016                                                           2017                                                           2016
                          -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
170,000 or more sq. ft.                                                              276                      278                                                         49,328      49,688
50,000 to 169,999 sq. ft.                                                          1,504                                                          1,505                                                        189,620                                           189,677
49,999 or less sq. ft.                          22                        9                      554         174
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------
Total                                        1,802                    1,792                  239,502     239,539
------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------
(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 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                                                                                                                                                                                                                                             
                                                                                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                January 28, 2017                                                                                                                                                                                                                                                   January 30, 2016
                                                                                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(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                                                                                                                                                                                   $                    1.46                                                                                                                                                                                                    $                    2.31                                                                               (37.0 )%
Adjustments:
   Gain on sale transaction (a)                                                                                    $          --                                                                          $          --                                                                          $          --                                                                          $                    (620 )                                                                        $                    (487 )                                                                                 $          (0.79 )                                                               
   Restructuring costs (b)                                                                                                    --                                                                                     --                                                                                     --                                                                                                  3                                                                                                  2                                                                                     --
   Other (c)                                                                                                                              (4 )                                                                                               (2 )                                                                                   --                                                                                                  1                                                                                                  1                                                                                     --
   Resolution of income tax matters                                  --         --         --         --         --         --        
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------------------------
Adjusted diluted earnings per share from continuing operations                                                                                                   $                    1.45                                                                                                     $                    1.52                       (4.6 )%
-------------------------------------------------------------- -------------------- -------------------- ----------------------------------------------------------------------------- -------------------- ----------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ----------------------------------------------------------------------------- -------------------- ----------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- --
                                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                           
-------------------------------------------------------------- -------------------- -------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------- ------------------------
                                                                                                                                                                                                                                                                                                                                              Twelve Months Ended
                                                                                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                January 28, 2017                                                                                                                                                                                                                                                                                         January 30, 2016
                                                                                                         ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(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                                                                                                                                                                                                                                                               $                    4.58                                                                                                                                                                                                                                                                                $                    5.25                                                                               (12.7 )%
Adjustments:
   Loss on early retirement of debt                                                                                $                     422                                                                          $                     257                                                                          $                    0.44                                                                          $          --                                                                          $          --                                                                          $          --
   Gain on sale (a)                                                                                                           --                                                                                     --                                                                                     --                                                                                               (620 )                                                                                             (487 )                                                                                            (0.77 )
   Restructuring costs (b)                                                                                                    --                                                                                     --                                                                                     --                                                                                                138                                                                                                 87                                                                                               0.14
   Impairments (d)                                                                                                            --                                                                                     --                                                                                     --                                                                                                 39                                                                                                 29                                                                                               0.05
   Other (c)                                                                                                                              (4 )                                                                                               (2 )                                                                                   --                                                                                                 39                                                                                                 28                                                                                               0.04
   Resolution of income tax matters                                  --                     (7 )                                   (0.01 )                          --                     (8 )                                   (0.01 )                         
-------------------------------------------------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------------------------
Adjusted diluted earnings per share from continuing operations                                                                                                   $                    5.01                                                                                                     $                    4.69                        6.7 %
-------------------------------------------------------------- -------------------- -------------------- ----------------------------------------------------------------------------- -------------------- ----------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ----------------------------------------------------------------------------- -------------------- ----------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- -------------------- --
Note: Amounts may not foot due to rounding.
(a) Represents the gain on the Pharmacy
Transaction.
(b) Costs related to our corporate restructuring
announced during the first quarter of 2015.
(c) For the three and twelve months ended
January 28, 2017, represents items related to the Pharmacy
Transaction. For the three and twelve months ended January 30,
2016, represents costs related to the 2013 data breach.
(d) For the twelve months ended January 30,
2016, represents impairments related to our decision to wind down
certain noncore operations.
 
Subject to reclassification
 

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 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
                                                                                                               ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions) (unaudited)                                                                  January 28,                                                        January 30,
                                                                                                                                            2017                                                                                                     2016
-------------------------------------------------------------------- -------------------- -------------------- ------------------------------------------------------------   -------------------- -------------------- ------------------------------------------------------------
Earnings from continuing operations before interest expense and                                                          $                         4,969                                                       $                         5,530
income taxes
+ Operating lease interest (a)(b)                                                            71                           87  
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted earnings from continuing operations before interest expense                                                                               5,040                                                                                                    5,617
and income taxes
- Income taxes (c)                                                                        1,648                        1,827  
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net operating profit after taxes                                                   $                         3,392                 $                         3,790  
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                       
-------------------------------------------------------------------- -------------------- -------------------- ----------------------------------------------------------------------------------- -------------------- ----------------------------------------------------------------------------------- -------------------- --------------------------------
Denominator                                                                                        January 28,                                                        January 30,                                         January 31,
(dollars in millions) (unaudited)                                                                                                           2017                                                                                                     2016                                                                                      2015
-------------------------------------------------------------------- -------------------- -------------------- ------------------------------------------------------------   -------------------- -------------------- ------------------------------------------------------------   -------------------- -------------------- ------------------------------
Current portion of long-term debt and other borrowings                                                                   $                         1,718                                                                          $                           815                                                                          $                  91
+ Noncurrent portion of long-term debt                                                                                                            11,031                                                                                                   11,945                                                                                         12,634
+ Shareholders’ equity                                                                                                                            10,953                                                                                                   12,957                                                                                         13,997
+ Capitalized operating lease obligations (b)(d)                                                                                                   1,187                                                                                                    1,457                                                                                          1,490
- Cash and cash equivalents                                                                                                                        2,512                                                                                                    4,046                                                                                          2,210
- Net assets of discontinued operations                                                      62                          226              1,479
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ----------
Invested capital                                                                   $                        22,315                 $                        22,902                 $              24,523
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ----------
Average invested capital (e)                                                       $                        22,608                 $                        23,713  
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                           
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------------------
After-tax return on invested capital                                                       15.0 %                                          16.0 %                    (f)                     
-------------------------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------------------
(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 32.7% and 32.5% for the trailing
twelve months ended January 28, 2017 and January 30, 2016. For the
twelve months ended January 28, 2017 and January 30, 2016,
includes tax effect of $1,624 million and $1,799 million,
respectively, related to EBIT and $23 million and $28 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 prior period.
(f) Excluding the net gain on the sale of
our pharmacy and clinic businesses, ROIC was 13.9 percent for the
trailing twelve months ended January 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
                                                                                                              ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(dollars in millions) (unaudited)                                               January 28,                    January 30,                            January 31,
                                                                                                                         2017                                                                 2016                                                                         2015
------------------------------------------------------------------- -------------------- -------------------- -------------------------  -------------------- -------------------- -------------------------  -------------------- -------------------- ----------------------------------------
Total rent expense                                                                                                      $            148               $            182               $                           186
Capitalized operating lease obligations (total rent expense x 8)                                                                   1,187                                                                1,457                                                                               1,490
Operating lease interest (capitalized operating lease obligations x          71          87                        n/a
6%)
------------------------------------------------------------------- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                                              
Subject to reclassification
                                                                                                                                                                                                                                                                              

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170228005902r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170228005902/en/

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


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