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 Target Reports First Quarter 2017 Earnings
   Wednesday, May 17, 2017 6:30:00 AM ET

--First quarter GAAP EPS from continuing operations of $1.22 was 20.0 percent higher than first quarter 2016. First quarter 2016 performance included $0.26 of debt-retirement costs.

--Adjusted EPS was $1.21, 6.1 percent below first quarter 2016.

--First quarter comparable sales decreased 1.3 percent, driven by small declines in both traffic and basket size.

--Comparable digital channel sales increased 22 percent, on top of 23 percent growth in first quarter 2016.

--Target returned $637 million to shareholders in the first quarter through dividends and share repurchases.

--For additional media materials, please visit: https://corporate.target.com/article/2017/05/q1-2017-earnings.

Target Corporation (TGT ) today reported a first quarter 2017 comparable sales decline of 1.3 percent. First quarter GAAP earnings per share (EPS) from continuing operations were $1.22, compared with $1.02 in first quarter 2016, which included $261 million of pre-tax early debt retirement losses. The Company reported Adjusted EPS of $1.21, down 6.1 percent from $1.29 in 2016. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.

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

"Target’s first quarter financial performance was better than our expectations, reflecting strong execution by our team as they delivered for our guests in a very choppy environment. After starting the quarter with very soft trends, we saw improvement later in the quarter, particularly in March," said Brian Cornell, chairman and CEO of Target. "We are in the early stage of a multi-year effort to position Target for profitable, consistent long-term growth, and while we are confident in our plans, we are facing multiple headwinds in the current landscape. As a result, we will continue to plan our business prudently while preparing our team to chase business when we have an opportunity."

Fiscal 2017 Earnings Guidance

In second quarter 2017, Target expects a low single digit decline in comparable sales, and both GAAP EPS from continuing operations and Adjusted EPS of $0.95 to $1.15.

For full-year 2017, the Company continues to expect a low single digit decline in comparable sales.

Target did not update its full year guidance for GAAP EPS from continuing operations and Adjusted EPS, but acknowledged that better-than-expected first quarter performance increases the probability that the Company will finish the year above the midpoint of its prior guidance.

Segment Results

First quarter 2017 sales decreased 1.1 percent to $16.0 billion from $16.2 billion last year, reflecting a comparable sales decline of 1.3 percent, partially offset by the contribution from new stores. Digital channel sales grew 22 percent and contributed 0.8 percentage points of comparable sales growth. Segment earnings before interest expense and income taxes (EBIT), which is Target’s measure of segment profit, were $1,178 million in first quarter 2017, a decrease of 11.0 percent from $1,323 million in 2016.

First quarter EBITDA and EBIT margin rates were 10.9 percent and 7.4 percent, respectively, compared with 2016 results of 11.5 percent and 8.2 percent, respectively. First quarter gross margin rate was 30.5 percent, compared with 30.9 percent in 2016, reflecting increased digital channel fulfillment costs. First quarter SG&A expense rate was 19.6 percent in 2017, compared with 19.4 percent in 2016, reflecting the impact of higher compensation and marketing expenses, partially offset by continued expense discipline across the organization.

Interest Expense and Taxes from Continuing Operations

The Company’s first quarter 2017 net interest expense was $144 million, compared with $415 million last year. This decrease was driven almost entirely by a $261 million charge related to the early retirement of debt in first quarter 2016.

First quarter 2017 effective income tax rate from continuing operations was 34.5 percent, compared with 31.6 percent last year. The increase was primarily due to the recognition of $17 million of excess tax benefits related to share-based payments for the three months ended April 30, 2016, and the net tax effect of our global sourcing operations.

Capital Returned to Shareholders

In first quarter 2017, primarily under a pre-existing trading plan implemented in 2016, the Company repurchased 4.9 million shares of common stock at an average price of $61.68, for a total investment of $305 million. The Company also paid dividends of $332 million, compared with $336 million in first quarter 2016.

For the trailing twelve months through first quarter 2017, after-tax return on invested capital (ROIC) was 14.2 percent, compared with 16.0 percent for the twelve months through first quarter 2016. Excluding the net gain on the sale of the pharmacy and clinic businesses, ROIC for the trailing twelve months through first quarter 2016 was 14.0 percent. See the "Reconciliation of Non-GAAP Financial Measures" section of this release for additional information about the Company’s ROIC calculation.

Conference Call Details

Target will webcast its first quarter earnings conference call at 7:00 a.m. CDT today. Investors and the media are invited to listen to the call at investors.target.com (hover over "company" then click on "events & presentations" in the "investors" column). A telephone replay of the call will be available beginning at approximately 10:30 a.m. CDT today through the end of business on May 19, 2017. The replay number is (800) 568-3554.

Miscellaneous

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

In addition to the GAAP results provided in this release, the Company provides Adjusted EPS for the three-month periods ended April 29, 2017 and April 30, 2016. The Company also provides ROIC for the twelve-month periods ended April 29, 2017 and April 30, 2016, which is a ratio based on GAAP information, with the exception of adjustments made to capitalize operating leases. Operating leases are capitalized as part of the ROIC calculation to control for differences in capital structure between the Company and its competitors. Adjusted EPS, capitalized operating lease obligations and operating lease interest are not in accordance with, or an alternative for, generally accepted accounting principles in the United States (GAAP). Management believes Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s ongoing retail operations. Management believes ROIC is useful in assessing the effectiveness of its capital allocation over time. The most comparable GAAP measure for Adjusted 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 1,807 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                                                        
                                                                                     -------------------------------------------------------------------------------------------------------------------------------
(millions, except per share data) (unaudited)                                         April 29,                                              April 30,                                            Change
                                                                                                           2017                                                                      2016
--------------------------------------------------------------- -------------------- ----------------------------------------------   -------------------- ------------------------------------------------------   -------------------- -----------------------------------------
Sales                                                                                $                    16,017                        $                            16,196                                                           (1.1 )%
Cost of sales                                                       11,134               11,185                     (0.5 )
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Gross margin                                                                                               4,883                                                                         5,011                                                           (2.5 )
Selling, general and administrative expenses                                                               3,132                                                                         3,153                                                           (0.7 )
Depreciation and amortization                                          573                  546                      5.0  
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Earnings from continuing operations before interest expense and                                            1,178                                                                         1,312                                                          (10.2 )
income taxes
Net interest expense                                                   144                  415                    (65.3 )
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Earnings from continuing operations before income taxes                                                    1,034                                                                           897                                                           15.2
Provision for income taxes                                             357                  283                     25.8  
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Net earnings from continuing operations                                                                      677                                                                           614                                                           10.4
Discontinued operations, net of tax                                      4                   18      
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------------------------------
Net earnings                                                      $                       681     $                               632                      7.7  %
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Basic earnings per share
  Continuing operations                                                              $                      1.23                                           $                              1.03                                                           19.5  %
  Discontinued operations                                             0.01                 0.03      
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------------------------------
    Net earnings per share                                        $                      1.23     $                              1.06                     16.7  %
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Diluted earnings per share
  Continuing operations                                                              $                      1.22                                           $                              1.02                                                           20.0  %
  Discontinued operations                                             0.01                 0.03      
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------------------------------
    Net earnings per share                                        $                      1.23     $                              1.05                     17.1  %
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Weighted average common shares outstanding
  Basic                                                                                                    552.4                                                                         598.3                                                           (7.7 )%
  Dilutive impact of share-based awards                                2.8                  5.5        
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
  Diluted                                                            555.2                603.8                     (8.0 )%
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Antidilutive shares                                                    3.0       --      
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------------------------------
Dividends declared per share                                      $                      0.60     $                              0.56                      7.1  %
--------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ---------------------
Note: Per share amounts may not foot due to rounding.
 
Subject to reclassification
 

TARGET CORPORATION

Consolidated Statements of Financial Position

 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(millions) (unaudited)                                                                            April 29,                                            January 28,                                            April 30,
                                                                                                                       2017                                                                     2017                                                                     2016
------------------------------------------------------------------------- -------------------- -------------------------------------------------   -------------------- -------------------------------------------------   -------------------- -------------------------------------------------
Assets                                                                                                                                                                                 
Cash and cash equivalents, including short term investments of                                 $                        2,680                                           $                        2,512                                           $                        4,036
$1,135, $1,110 and $2,931
Inventory                                                                                                               7,986                                                                    8,309                                                                    8,459
Assets of discontinued operations                                                                                          26                                                                       69                                                                      354
Other current assets                                                              1,047           1,100           1,099  
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
  Total current assets                                                                                                 11,739                                                                   11,990                                                                   13,948
Property and equipment
  Land                                                                                                                  6,105                                                                    6,106                                                                    6,120
  Buildings and improvements                                                                                           27,740                                                                   27,611                                                                   27,198
  Fixtures and equipment                                                                                                5,177                                                                    5,503                                                                    5,112
  Computer hardware and software                                                                                        2,546                                                                    2,651                                                                    2,437
  Construction-in-progress                                                                                                379                                                                      200                                                                      242
  Accumulated depreciation                                                      (17,265 )                          (17,413 )                          (16,060 )
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
  Property and equipment, net                                                                                          24,682                                                                   24,658                                                                   25,049
Noncurrent assets of discontinued operations                                                                               10                                                                       12                                                                       81
Other noncurrent assets                                                             787             771             830  
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Total assets                                                                $                       37,218     $                       37,431     $                       39,908  
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Liabilities and shareholders’ investment
Accounts payable                                                                               $                        6,537                                           $                        7,252                                           $                        6,391
Accrued and other current liabilities                                                                                   4,137                                                                    3,737                                                                    3,833
Current portion of long-term debt and other borrowings                                                                  1,717                                                                    1,718                                                                    1,627
Liabilities of discontinued operations                                                1               1             168  
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
  Total current liabilities                                                                                            12,392                                                                   12,708                                                                   12,019
Long-term debt and other borrowings                                                                                    11,086                                                                   11,031                                                                   12,596
Deferred income taxes                                                                                                     869                                                                      861                                                                      841
Noncurrent liabilities of discontinued operations                                                                          18                                                                       18                                                                       18
Other noncurrent liabilities                                                      1,832           1,860           1,889  
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
  Total noncurrent liabilities                                                                                         13,805                                                                   13,770                                                                   15,344
Shareholders’ investment
  Common stock                                                                                                             46                                                                       46                                                                       49
  Additional paid-in capital                                                                                            5,674                                                                    5,661                                                                    5,520
  Retained earnings                                                                                                     5,927                                                                    5,884                                                                    7,593
  Accumulated other comprehensive loss                                             (626 )                             (638 )                             (617 )
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
  Total shareholders’ investment                      11,021          10,953          12,545  
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Total liabilities and shareholders’ investment   $                       37,218     $                       37,431     $                       39,908  
------------------------------------------------------------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- -------------------- -------------------- -------------------- --------- --------------------
Common Stock Authorized 6,000,000,000 shares, $.0833 par
value; 551,657,501, 556,156,228 and 593,583,619 shares issued and
outstanding at April 29, 2017, January 28, 2017 and April 30,
2016, respectively.
                                                                                                                                                                                                                                                                                 
Preferred Stock Authorized 5,000,000 shares, $.01 par
value; no shares were issued or outstanding at April 29, 2017,
January 28, 2017 or April 30, 2016.
 
Subject to reclassification
 

TARGET CORPORATION

Consolidated Statements of Cash Flows

 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         Three Months Ended
                                                                                                      -------------------------------------------------------------------------------------------------------------------------------
(millions) (unaudited)                                                                                     April 29,                                              April 30,
                                                                                                                                2017                                                                      2016
-------------------------------------------------------------------------------- -------------------- ------------------------------------------------------   -------------------- ----------------------------------------------
Operating activities                                                                                                                                            
Net earnings                                                                                          $                               681                                           $                       632
Earnings from discontinued operations, net of tax                                                 4           18  
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Net earnings from continuing operations                                                                                               677                                                                   614
Adjustments to reconcile net earnings to cash provided by operations
  Depreciation and amortization                                                                                                       573                                                                   546
  Share-based compensation expense                                                                                                     16                                                                    35
  Deferred income taxes                                                                                                                 3                                                                    12
  Loss on debt extinguishment                                                                                              --                                                                   261
  Noncash (gains) / losses and other, net                                                                                             (28 )                                                                 (29 )
  Changes in operating accounts
    Inventory                                                                                                                         323                                                                   142
    Other assets                                                                                                                       22                                                                    99
    Accounts payable                                                                                                                 (715 )                                                              (1,024 )
    Accrued and other liabilities                                                               384         (403 )
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Cash provided by operating activities--continuing operations                                                            1,255                                                                   253
Cash provided by / (required for) operating activities--discontinued                 48           (6 )
operations
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Cash provided by operations                                                                   1,303          247  
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Investing activities
  Expenditures for property and equipment                                                                                            (486 )                                                                (285 )
  Proceeds from disposal of property and equipment                                                                                     13                                                                     3
  Other investments                                                                              (9 )                             3  
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Cash required for investing activities                                                         (482 )                          (279 )
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Financing activities
  Additions to long-term debt                                                                                              --                                                                 1,979
  Reductions of long-term debt                                                                                                         (8 )                                                                (863 )
  Dividends paid                                                                                                                     (332 )                                                                (336 )
  Repurchase of stock                                                                                                                (317 )                                                                (898 )
  Stock option exercises                                                                          4          140  
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Cash (required for) / provided by financing activities                                         (653 )                            22  
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Net increase / (decrease) in cash and cash equivalents                                                                                168                                                                   (10 )
Cash and cash equivalents at beginning of period                                              2,512        4,046  
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
Cash and cash equivalents at end of period                                         $                             2,680     $                     4,036  
-------------------------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                 
Subject to reclassification
 

TARGET CORPORATION

Segment Results

 
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Three Months Ended                                                    
                                                   -----------------------------------------------------------------------------------------------------------------------
(millions) (unaudited)                              April 29,                                          April 30,                                 Change
                                                                         2017                                                                  2016
----------------------------- -------------------- ----------------------------------------------   -------------------- ----------------------------------------------   -------------------- --------------------------
Sales                                              $                    16,017                        $                    16,196                                             (1.1 )%
Cost of sales                     11,134       11,185       (0.5 )
----------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Gross margin                                                             4,883                                                                 5,011                                             (2.5 )
SG&A expenses (a)                  3,132        3,142       (0.3 )
----------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
EBITDA                                                                   1,751                                                                 1,869                                             (6.3 )
Depreciation and amortization        573          546        5.0  
----------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
EBIT                            $                     1,178     $                     1,323      (11.0 )%
----------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
(a) For the three months ended April 29, 2017
and April 30, 2016, SG&A includes $171 million and $158 million,
respectively, of net profit-sharing income under our credit card
program agreement.
 
 
-------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Three Months Ended
                                                                ---------------------------------------------------------------------------------
Rate Analysis                                           April 29,                       April 30,
(unaudited)                                                                  2017                                               2016
------------------------------------------ -------------------- ----------------------------  -------------------- ----------------------------
Gross margin rate                                                   30.5 %                          30.9 %
SG&A expense rate                                                   19.6                                               19.4
EBITDA margin rate                                                  10.9                                               11.5
Depreciation and amortization expense rate                           3.6                                                3.4
EBIT margin rate                                  7.4          8.2  
------------------------------------------ -------------------- -------- -------------------- -------------------- -------- --------------------
Note: Rate analysis metrics are computed by dividing the
applicable amount by sales.
                                                                                                                             
 
---------------------------------------------------------------------------------------------------------------
                                              Three Months Ended
                                      -------------------------------------------------------------------------
Sales by Channel            April 29,                   April 30,
(unaudited)                                      2017                                           2016
---------------- -------------------- ------------------------  -------------------- ------------------------
Stores                                95.7 %                      96.5 %
Digital             4.3      3.5  
---------------- -------------------- ---- -------------------- -------------------- ---- --------------------
Total               100 %                       100 %
---------------- -------------------- ---- -------------------- -------------------- ---- --------------------
                                                                                           
 
--------------------------------------------------------------------------------------------------------------------------
                                                              Three Months Ended
                                                           ---------------------------------------------------------------
Comparable Sales                           April 29,              April 30,
(unaudited)                                                     2017                                      2016
------------------------------------- -------------------- ------------  -------------------- --------------------------
Comparable sales change                                      (1.3 )%          1.2 %
Drivers of change in comparable sales
  Number of transactions                                     (0.8 )                              0.3
  Average transaction amount              (0.6 )           0.9  
------------------------------------- -------------------- ------ ------ -------------------- ------ --------------------
Note: Amounts may not foot due to rounding.
 
 
----------------------------------------------------------------------------------------------------------------------------------------------------------
Contribution to Comparable Sales Change                                                Three Months Ended
(unaudited)
                                                                             ------------------------------------------------------------------------
                                                                  April 29,                     April 30,
                                                                    2017                                             2016
                                                        --------------------------  -------------------- --------------------------
Stores channel comparable sales change                                         (2.2 )%                        0.6 %
Digital channel contribution to comparable sales change      0.8        0.6  
------------------------------------------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Total comparable sales change                               (1.3 )%                        1.2 %
------------------------------------------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Note: Amounts may not foot due to rounding.
 
 
----------------------------------------------------------------------------------------------------------------------------
                                                         Three Months Ended
                                               -----------------------------------------------------------------------------
REDcard Penetration                   April 29,                     April 30,
(unaudited)                                                2017                                             2016
------------------------- -------------------- --------------------------  -------------------- --------------------------
Target Debit Card                                13.5 %                        13.0 %
Target Credit Cards           11.0       10.4  
------------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Total REDcard Penetration     24.5 %                        23.4 %
------------------------- -------------------- ------ -------------------- -------------------- ------ --------------------
Note: Amounts may not foot due to rounding.
 
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Stores and Retail Square Feet                                                        Number of Stores                                                                                                             Retail Square Feet (a)
(unaudited)
                                                             -------------------------------------------------------------------------------------------------------------------                             -------------------------------------------------------------------------------------------------------------------------
                                                 April 29,                   January 28,                   April 30,                     April 29,                     January 28,                     April 30,
                                                   2017                                            2017                                            2016                                             2017                                              2017                                              2016
                                        -------------------------  -------------------- -------------------------  -------------------- -------------------------  -------------------- ---------------------------  -------------------- ---------------------------  -------------------- ---------------------------
170,000 or more sq. ft.                                        276                          276                          278                                            49,328                         49,328                         49,688
50,000 to 169,999 sq. ft.                                    1,505                                           1,504                                           1,505                                           189,746                                           189,620                                           189,677
49,999 or less sq. ft.                       26        22        10         709         554         211  
--------------------------------------- -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- --------------------
Total                                     1,807     1,802     1,793     239,783     239,502     239,576  
--------------------------------------- -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ----- -------------------- -------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- --------------------
(a) In thousands, reflects total square feet
less office, distribution center, and vacant space.
 
Subject to reclassification
 

TARGET CORPORATION

Reconciliation of Non-GAAP Financial Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing operations (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States (GAAP). The most comparable GAAP measure is diluted earnings per share from continuing operations. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported under GAAP. Other companies may calculate Adjusted EPS differently than we do, limiting the usefulness of the measure for comparisons with other companies.

 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                           Three Months Ended                                                                                                                                                           
                                                                                    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                   April 29, 2017                                                                                                                                             April 30, 2016
                                                                                    -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------                     ------------------------------------------------------------------------------------------------------------------------------------
(millions, except per share data) (unaudited)                                                 Pretax                                  Net of                               Per Share                  Pretax         Net of          Per Share                             Change
                                                                                                                                                                               Tax                                                                       Amounts                                                                                             Tax                                                  Amounts
-------------------------------------------------------------- -------------------- ----------------------------------  -------------------- -----------------------------------   -------------------- ------------------------------------------------------   -------------------- --------------------  -------------------- -----------------------------   -------------------- ----------------------------------  -------------------- -------------------------------
GAAP diluted earnings per share from continuing operations                                                                                                        $                              1.22                                                                                                     $                              1.02                            20.0  %
Adjustments
  Loss on early retirement of debt                                                  $                    --                      $                    --                        $                    --                                           $                 261                      $                         159                        $                              0.26
  Pharmacy Transaction-related costs (a)                                                                 --                                           --                                             --                                                              11                                                  7                                                       0.01
  Resolution of income tax matters                                 --                 (7 )              (0.01 )                             --           (2 )     --    
-------------------------------------------------------------- -------------------- -------------------- -------------- -------------------- -------------------- -------------- - -------------------- -------------------- -------------- -------------------- -------------------- ------------------------------------------ -------------------- -------- - -------------------- -------------------- -------------- -------------------- ---------------------------------
Adjusted diluted earnings per share from continuing operations                                           $                              1.21                         $                              1.29         (6.1 )%
-------------------------------------------------------------- -------------------- -------------------------------------------------------- ---------------------------------------------------------- -------------------- -------------- -------------------- -------------------- ------------------------------------------ ---------------------------------------------------- -------------------- -------------- -------------------- ---------- ---------------------
Note: Amounts may not foot due to rounding.
(a) Represents costs related to the December
2015 sale of our pharmacy and clinic businesses to CVS (Pharmacy
Transaction).
                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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

 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
After-Tax Return on Invested Capital                                                                                                                                                                              
                                                     
-------------------------------------------------------------------- -------------------- -----------------------------------------------------------------------------------------------------------------------
Numerator                                                                                                              Trailing Twelve Months
                                                                                          -----------------------------------------------------------------------------------------------------------------------
(dollars in millions) (unaudited)                                                          April 29,                                          April 30,
                                                                                                                2017                                                                  2016
-------------------------------------------------------------------- -------------------- ----------------------------------------------   -------------------- ----------------------------------------------
Earnings from continuing operations before interest expense and                           $                     4,835                        $                     5,688
income taxes
+ Operating lease interest (a)(b)                                            72           82  
-------------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
Adjusted earnings from continuing operations before interest expense                                            4,907                                                                 5,770
and income taxes
- Income taxes (c)                                                        1,638        1,840  
-------------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
Net operating profit after taxes                                       $                     3,269     $                     3,930  
-------------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                                                                      
 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Denominator                                                                                April 29,                                          April 30,                                             May 2,
(dollars in millions) (unaudited)                                                                               2017                                                                  2016                                                                    2015
-------------------------------------------------------------------- -------------------- ----------------------------------------------   -------------------- ----------------------------------------------   -------------------- --------------------------------------------------
Current portion of long-term debt and other borrowings                                    $                     1,717                                           $                     1,627                                           $                           112
+ Noncurrent portion of long-term debt                                                                         11,086                                                                12,596                                                                    12,585
+ Shareholders’ equity                                                                                         11,021                                                                12,545                                                                    14,174
+ Capitalized operating lease obligations (b)(d)                                                                1,210                                                                 1,367                                                                     1,495
- Cash and cash equivalents                                                                                     2,680                                                                 4,036                                                                     2,768
- Net assets of discontinued operations                                      17          249              335  
-------------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ---------- --------------------
Invested capital                                                       $                    22,337     $                    23,850     $                        25,263  
-------------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ---------- --------------------
Average invested capital (e)                                           $                    23,093     $                    24,556  
-------------------------------------------------------------------- -------------------- -------------------- ------ -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                     
-------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------
After-tax return on invested capital (f)                                                                          14.2%                                              16.0%    
-------------------------------------------------------------------- -------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------
(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 33.4 percent and 31.9 percent for
the trailing twelve months ended April 29, 2017 and April 30,
2016, respectively. For the trailing twelve months ended April 29,
2017 and April 30, 2016, includes tax effect of $1,614 million and
$1,814 million, respectively, related to EBIT and $24 million and
$26 million, respectively, related to operating lease interest.
(d) Calculated as eight times our trailing
twelve months rent expense.
(e) Average based on the invested capital at the
end of the current period and the invested capital at the end of
the comparable prior period.
(f) Excluding the net gain on the Pharmacy
Transaction, ROIC was 14.0 percent for the trailing twelve months
ended April 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)                                                         April 29,                                         April 30,                                       May 2,
                                                                                                               2017                                                                 2016                                                              2015
------------------------------------------------------------------- -------------------- ---------------------------------------------   -------------------- ---------------------------------------------   -------------------- ----------------------------------------
Total rent expense                                                                       $                      151                        $                      171                        $                                     187
Capitalized operating lease obligations (total rent expense x 8)                                              1,210                                                                1,367                                                                               1,495
Operating lease interest (capitalized operating lease obligations x        72          82                        n/a
6%)
------------------------------------------------------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- --------------------
                                                                                                                                                                                                                                                         
Subject to reclassification

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170517005525r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170517005525/en/

SOURCE: Target Corporation

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


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