Market Overview

Target Reports Second Quarter 2017 Earnings

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Comparable sales increase on healthy traffic growth

  • Second quarter GAAP EPS from continuing operations of $1.22 were
    14.2 percent higher than last year. Adjusted EPS
    1
    of $1.23 were essentially flat to last year.
  • Second quarter comparable sales increased 1.3 percent, driven by
    traffic growth of 2.1 percent.
  • Comparable digital channel sales increased 32 percent, on top of 16
    percent growth in second quarter 2016.
  • In the second quarter, Target devoted $717 million to capital
    investment, paid dividends of $331 million, and returned $296 million
    through share repurchases.
  • For additional media materials, please visit: https://corporate.target.com/article/2017/08/q2-2017-earnings

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

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

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

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

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

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

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

Second quarter EBIT margin rate was 6.8 percent, compared with 7.7
percent in 2016. Second quarter gross margin rate2 was 30.5
percent, compared with 30.9 percent in 2016, reflecting increased
digital fulfillment costs and the Company's efforts to improve pricing
and promotions. Second quarter SG&A expense rate was 20.6 percent in
2017, compared with 20.1 percent in 2016, driven by higher compensation
costs, primarily due to increased bonus expense, and impairment losses
resulting from planned or completed store closures and supply chain
changes partially offset by the benefit of the Company's cost-saving
efforts.

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

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

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

  • Dividends of $331 million.
  • Repurchases of 5.6 million shares of common stock at an average price
    of $52.45, for a total investment of $296 million.
 
2During the second quarter of 2017, we reclassified
supply chain-related depreciation expense into cost of sales and out
of depreciation and amortization on our Consolidated Statements of
Operations. Prior year amounts have been reclassified to reflect
this change. Updated financials for the prior thirteen quarters have
been posted on our Investor Relations website at
investors.target.com.
 

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

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

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

Conference Call Details
Target will webcast its second
quarter earnings conference call at 7:00 a.m. CDT today. Investors and
the media are invited to listen to the call at investors.target.com
(hover over "company" then click on "events & presentations" in the
"investors" column). A telephone replay of the call will be available
beginning at approximately 10:30 a.m. CDT today through the end of
business on Aug. 18, 2017. The replay number is 800-238-0563.

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

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

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

 
TARGET CORPORATION
 
Consolidated Statements of Operations
                         
    Three Months Ended         Six Months Ended    
July 29,     July 30, July 29,     July 30,
(millions, except per share data) (unaudited)     2017     2016     Change     2017     2016     Change
Sales $ 16,429 $ 16,169 1.6 % $ 32,446 $ 32,364 0.3 %
Cost of sales (a)       11,419       11,172     2.2         22,618       22,421     0.9  
Gross margin 5,010 4,997 0.3 9,828 9,943 (1.2 )
Selling, general and administrative expenses 3,382 3,249 4.1 6,515 6,402 1.8
Depreciation and amortization (exclusive of depreciation included in
cost of sales) (a)
      514       500     2.8         1,022       981     4.1  
Earnings from continuing operations before interest expense and
income taxes
1,114 1,248 (10.8 ) 2,291 2,560 (10.5 )
Net interest expense       135       307     (56.2 )       278       722     (61.4 )
Earnings from continuing operations before income taxes 979 941 4.1 2,013 1,838 9.5
Provision for income taxes       308       316     (2.6 )       664       599     10.9  
Net earnings from continuing operations 671 625 7.4 1,349 1,239 8.9
Discontinued operations, net of tax       1       55             4       73      
Net earnings     $ 672     $ 680     (1.2 )%     $ 1,353     $ 1,312     3.1 %
Basic earnings per share
Continuing operations $ 1.22 $ 1.07 13.8 % $ 2.45 $ 2.10 16.7 %
Discontinued operations             0.09             0.01       0.12      
Net earnings per share     $ 1.22     $ 1.17     4.7 %     $ 2.45     $ 2.22     10.4 %
Diluted earnings per share
Continuing operations $ 1.22 $ 1.07 14.2 % $ 2.44 $ 2.08 17.1 %
Discontinued operations             0.09             0.01       0.12      
Net earnings per share     $ 1.22     $ 1.16     5.1 %     $ 2.44     $ 2.20     10.9 %
Weighted average common shares outstanding
Basic 549.3 582.2 (5.6 )% 550.8 590.3 (6.7 )%
Dilutive impact of share-based awards       2.6       4.6     0         2.8       5.0      
Diluted       551.9       586.8     (6.0 )%       553.6       595.3     (7.0 )%
Antidilutive shares       5.2       0.2             3.6       0.1      
Dividends declared per share     $ 0.62     $ 0.60     3.3 %     $ 1.22     $ 1.16     5.2 %
Note: Per share amounts may not foot due to rounding.

(a) Refer to the Segment Results section for
information about a reclassification of supply chain-related
depreciation expense to cost of sales.

 

Subject to reclassification

 
 
TARGET CORPORATION
 
Consolidated Statements of Financial Position
                   
    July 29,     January 28,     July 30,
(millions) (unaudited)     2017     2017     2016
Assets
Cash and cash equivalents $ 2,291 $ 2,512 $ 1,480
Inventory 8,257 8,309 8,631
Assets of discontinued operations 19 69 83
Other current assets       1,053         1,100         1,309  
Total current assets 11,620 11,990 11,503
Property and equipment
Land 6,089 6,106 6,111
Buildings and improvements 28,041 27,611 27,315
Fixtures and equipment 5,361 5,503 5,282
Computer hardware and software 2,518 2,651 2,504
Construction-in-progress 423 200 232
Accumulated depreciation       (17,571 )       (17,413 )       (16,510 )
Property and equipment, net 24,861 24,658 24,934
Noncurrent assets of discontinued operations 10 12 17
Other noncurrent assets       875         771         834  
Total assets     $ 37,366       $ 37,431       $ 37,288  
Liabilities and shareholders' investment
Accounts payable $ 7,584 $ 7,252 $ 6,811
Accrued and other current liabilities 3,790 3,737 3,544
Current portion of long-term debt and other borrowings 1,354 1,718 647
Liabilities of discontinued operations       1         1         1  
Total current liabilities 12,729 12,708 11,003
Long-term debt and other borrowings 10,892 11,031 12,063
Deferred income taxes 784 861 754
Noncurrent liabilities of discontinued operations 18 18 19
Other noncurrent liabilities       1,845         1,860         1,872  
Total noncurrent liabilities 13,539 13,770 14,708
Shareholders' investment
Common stock 46 46 48
Additional paid-in capital 5,707 5,661 5,562
Retained earnings 5,961 5,884 6,579
Accumulated other comprehensive loss       (616 )       (638 )       (612 )
Total shareholders' investment       11,098         10,953         11,577  
Total liabilities and shareholders' investment     $ 37,366       $ 37,431       $ 37,288  

Common Stock Authorized 6,000,000,000 shares, $.0833 par
value; 546,183,291, 556,156,228 and 574,801,225 shares issued and
outstanding at July 29, 2017, January 28, 2017 and July 30, 2016,
respectively.

 

Preferred Stock Authorized 5,000,000 shares, $.01 par
value; no shares were issued or outstanding at July 29, 2017,
January 28, 2017 or July 30, 2016.

 

Subject to reclassification

 
TARGET CORPORATION
 
Consolidated Statements of Cash Flows
       
    Six Months Ended
July 29,     July 30,
(millions) (unaudited)     2017     2016
Operating activities
Net earnings $ 1,353 $ 1,312
Earnings from discontinued operations, net of tax       4         73  
Net earnings from continuing operations 1,349 1,239
Adjustments to reconcile net earnings to cash provided by operations
Depreciation and amortization 1,151 1,116
Share-based compensation expense 43 67
Deferred income taxes (87 ) (79 )
Loss on debt extinguishment 422
Noncash losses / (gains) and other, net 81 (26 )
Changes in operating accounts
Inventory 52 (29 )
Other assets 74 131
Accounts payable 332 (607 )
Accrued and other liabilities       (129 )       (838 )
Cash provided by operating activities—continuing operations 2,866 1,396
Cash provided by operating activities—discontinued operations       57         92  
Cash provided by operations       2,923         1,488  
Investing activities
Expenditures for property and equipment (1,203 ) (684 )
Proceeds from disposal of property and equipment 22 14
Other investments       (80 )       1  
Cash required for investing activities       (1,261 )       (669 )
Financing activities
Additions to long-term debt 1,979
Reductions of long-term debt (614 ) (2,611 )
Dividends paid (663 ) (666 )
Repurchase of stock (615 ) (2,238 )
Stock option exercises       9         151  
Cash required for financing activities       (1,883 )       (3,385 )
Net decrease in cash and cash equivalents (221 ) (2,566 )
Cash and cash equivalents at beginning of period       2,512         4,046  
Cash and cash equivalents at end of period     $ 2,291       $ 1,480  
 

Subject to reclassification

 
 
TARGET CORPORATION
 
Segment Results
                         
    Three Months Ended         Six Months Ended    
July 29,     July 30, July 29,     July 30,
(millions) (unaudited)     2017     2016     Change     2017     2016     Change
Sales $ 16,429 $ 16,169 1.6 % $ 32,446 $ 32,364 0.3 %
Cost of sales (a)       11,419       11,172     2.2         22,618       22,421     0.9  
Gross margin 5,010 4,997 0.3 9,828 9,943 (1.2 )
SG&A expenses (b) 3,382 3,256 3.9 6,515 6,398 1.8
Depreciation and amortization (exclusive of depreciation included in
cost of sales) (a)
      514       500     2.8         1,022       981     4.1  
EBIT     $ 1,114     $ 1,241     (10.3 )%     $ 2,291     $ 2,564     (10.6 )%
(a) During the second quarter of 2017, we reclassified
supply chain-related depreciation expense to cost of sales whereas
it was previously included in depreciation and amortization on our
Consolidated Statements of Operations. We reclassified prior year
amounts to reflect this change. This reclassification increased cost
of sales by $64 million and $129 million for the three and six
months ended July 29, 2017, respectively, and $70 million and $135
million for the three and six months ended July 30, 2016,
respectively, with equal and offsetting decreases to depreciation
and amortization. This reclassification had no impact on sales,
EBIT, net earnings or earnings per share.

(b) SG&A includes $172 million and $342 million
net profit-sharing income under our credit card program agreement
for the three and six months ended July 29, 2017, respectively,
and $163 million and $321 million for the three and six months
ended July 30, 2016, respectively.

 
             
    Three Months Ended     Six Months Ended
Rate Analysis July 29,     July 30, July 29,     July 30,
(unaudited)     2017     2016     2017     2016
Gross margin rate (a) 30.5 % 30.9 % 30.3 % 30.7 %
SG&A expense rate 20.6 20.1 20.1 19.8
Depreciation and amortization (exclusive of depreciation included in
cost of sales) expense rate (a)
3.1 3.1 3.2 3.0
EBIT margin rate     6.8       7.7       7.1       7.9  

Note: Rate analysis metrics are computed by dividing the
applicable amount by sales.

(a) Reclassifying supply chain-related
depreciation expense to cost of sales reduced the gross margin and
depreciation and amortization rates by (0.4) percent for all
periods presented.

 

             
    Three Months Ended     Six Months Ended
Sales by Channel July 29,     July 30, July 29,     July 30,
(unaudited)     2017     2016     2017     2016
Stores 95.7 % 96.7 % 95.7 % 96.6 %
Digital     4.3       3.3       4.3       3.4  
Total     100 %     100 %     100 %     100 %
 
             
    Three Months Ended     Six Months Ended
Comparable Sales July 29,     July 30, July 29,     July 30,
(unaudited)     2017     2016     2017     2016
Comparable sales change 1.3 % (1.1 )% % %
Drivers of change in comparable sales
Number of transactions 2.1 (2.2 ) 0.6 (0.9 )
Average transaction amount     (0.7 )     1.1       (0.7 )     1.0  

Note: Amounts may not foot due to rounding.

 
             

Contribution to Comparable Sales Change
(unaudited)

 

    Three Months Ended     Six Months Ended
    July 29,
2017
    July 30,
2016
    July 29,
2017
    July 30,
2016
Stores channel comparable sales change 0.2 %     (1.6 )% (1.0 )%     (0.5 )%
Digital channel contribution to comparable sales change     1.1       0.5       0.9       0.6  
Total comparable sales change     1.3 %     (1.1 )%     %     %

Note: Amounts may not foot due to rounding.

 
             
    Three Months Ended     Six Months Ended
REDcard Penetration July 29,     July 30, July 29,     July 30,
(unaudited)     2017     2016     2017     2016
Target Debit Card 13.0 % 12.7 % 13.2 % 12.9 %
Target Credit Cards     11.6       11.1       11.3       10.7  
Total REDcard Penetration     24.6 %     23.9 %     24.5 %     23.6 %

Note: Amounts may not foot due to rounding.

 
             
Number of Stores and Retail Square Feet

(unaudited)

    Number of Stores     Retail Square Feet (a)
    July 29,
2017
    January 28,
2017
    July 30,
2016
    July 29,
2017
    January 28,
2017
    July 30,
2016
170,000 or more sq. ft. 276     276     278 49,328     49,328     49,688
50,000 to 169,999 sq. ft. 1,506 1,504 1,505 189,796 189,620 189,732
49,999 or less sq. ft.     34     22     14     958     554     300
Total     1,816     1,802     1,797     240,082     239,502     239,720

(a) In thousands, reflects total square feet
less office, distribution center, and vacant space.

 

Subject to reclassification

 
 

TARGET CORPORATION

 

Reconciliation of Non-GAAP Financial Measures

 

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

             
    Three Months Ended    
July 29, 2017     July 30, 2016
    Net of    

Per Share

    Net of     Per Share
(millions, except per share data) (unaudited)     Pretax     Tax     Amounts     Pretax     Tax     Amounts     Change
GAAP diluted earnings per share from continuing operations $ 1.22 $ 1.07 14.2 %
Adjustments
Loss on early retirement of debt $ $ $ $ 161 $ 98 $ 0.17
Pharmacy Transaction-related costs (a) (7 ) (4 ) (0.01 )
Income tax matters (b)             5         0.01                              
Adjusted diluted earnings per share from continuing operations                 $ 1.23                 $ 1.23       0.1 %
 
             
Six Months Ended
July 29, 2017 July 30, 2016
Net of

Per Share

Net of Per Share
(millions, except per share data) (unaudited)     Pretax     Tax     Amounts     Pretax     Tax     Amounts     Change
GAAP diluted earnings per share from continuing operations $ 2.44 $ 2.08 17.1 %
Adjustments
Loss on early retirement of debt $ $ $ $ 422 $ 257 $ 0.43
Pharmacy Transaction-related costs (a) 4 3
Income tax matters (b)             (2 )                     (3 )              
Adjusted diluted earnings per share from continuing operations                 $ 2.43                 $ 2.51       (3.2 )%
Note: Amounts may not foot due to rounding.

(a) Represents items related to the December 2015 sale
of our pharmacy and clinic businesses to CVS (Pharmacy
Transaction).

(b) Represents expense/(income) from income tax
matters not related to current period operations.

 

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

       
After-Tax Return on Invested Capital    
       

Numerator

    Trailing Twelve Months
July 29,     July 30,
(dollars in millions) (unaudited)     2017     2016
Earnings from continuing operations before interest expense and
income taxes
$ 4,700 $ 5,605
+ Operating lease interest (a)(b)       76         77  
Adjusted earnings from continuing operations before interest expense
and income taxes
4,776 5,682
- Income taxes (c)       1,571         1,791  
Net operating profit after taxes     $ 3,205       $ 3,891  
 
                   

Denominator

July 29, July 30, August 1,
(dollars in millions) (unaudited)     2017     2016     2015
Current portion of long-term debt and other borrowings $ 1,354 $ 647 $ 841
+ Noncurrent portion of long-term debt 10,892 12,063 11,817
+ Shareholders' equity 11,098 11,577 13,942
+ Capitalized operating lease obligations (b)(d) 1,257 1,274 1,497
- Cash and cash equivalents 2,291 1,480 2,742
- Net assets of discontinued operations       10         80         217
Invested capital     $ 22,300       $ 24,001       $ 25,138
Average invested capital (e)     $ 23,150       $ 24,569  
                           
After-tax return on invested capital (f)       13.8 %       15.8 %      
(a) Represents the add-back to operating income to
reflect the hypothetical interest expense we would incur if the
property under our operating leases were owned or accounted for as
capital leases, using eight times our trailing twelve months rent
expense and an estimated interest rate of six percent.

(b) See the following Reconciliation of
Capitalized Operating Leases table for the adjustments to our GAAP
total rent expense to obtain the hypothetical capitalization of
operating leases and related operating lease interest.

(c) Calculated using the effective tax rate for
continuing operations, which was 32.9 percent and 31.5 percent for
the trailing twelve months ended July 29, 2017 and July 30, 2016,
respectively. For the trailing twelve months ended July 29, 2017
and July 30, 2016, includes tax effect of $1,546 million and
$1,767 million, respectively, related to EBIT and $25 million and
$24 million, respectively, related to operating lease interest.

(d) Calculated as eight times our trailing
twelve months rent expense.

(e) Average based on the invested capital at the
end of the current period and the invested capital at the end of
the comparable prior period.

(f) Excluding the net gain on the Pharmacy
Transaction, ROIC was 13.7 percent for the trailing twelve months
ended July 30, 2016.

 

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

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

Subject to reclassification

 

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