Market Overview

Target Reports Fourth Quarter and Full-Year 2016 Earnings

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Target Corporation (NYSE: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."

 

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

 

2Adjusted EPS, a non-GAAP financial measure, excludes
the impact of certain discretely managed items. See the
"Miscellaneous" section of this release, as well as the tables of
this release, for additional information about the items that have
been excluded from Adjusted EPS.

 

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 (NYSE: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,
2017

    January 30,
2016
    Change     January 28,
2017
    January 30,
2016
    Change
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
income taxes
1,348 2,169 (37.9 ) 4,969 5,530 (10.1 )
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,
2017
    January 30,
2016
Assets        
Cash and cash equivalents, including short-term investments of
$1,110 and $3,008
$ 2,512 $ 4,046
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,
2017

    January 30,
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
operations
(1,473 ) 489
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,
2017
   

January 30,
2016 (a)

    Change     January 28,
2017
   

January 30,
2016 (a)

    Change
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
(unaudited)

  January 28,
2017
  January 30,
2016
  January 28,
2017
  January 30,
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
(unaudited)

    January 28,
2017
   

January 30,
2016 (a)

    January 28,
2017
   

January 30,
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
(unaudited)

  January 28,
2017
  January 30,
2016
  January 28,
2017
  January 30,
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
(unaudited)

    January 28,
2017
    January 30,
2016
    January 28,
2017
    January 30,
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
(unaudited)

    January 28,
2017
    January 30,
2016
    January 28,
2017
    January 30,
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
Retail Square Feet
(unaudited)

    Number of Stores     Retail Square Feet (a)
    January 28,
2017
    January 30,
2016
    January 28,
2017
    January 30,
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,
2017
    January 30,
2016
Earnings from continuing operations before interest expense and
income taxes
$ 4,969   $ 5,530
+ Operating lease interest (a)(b)       71         87  
Adjusted earnings from continuing operations before interest expense
and income taxes
5,040 5,617
- Income taxes (c)       1,648         1,827  
Net operating profit after taxes     $ 3,392       $ 3,790  
 
                   
Denominator

(dollars in millions) (unaudited)

    January 28,
2017
    January 30,
2016
    January 31,
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,
2017
    January 30,
2016
    January 31,
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
6%)
      71       87       n/a
 

Subject to reclassification

 

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