Target Corporation Reports Second Quarter Earnings
Minneapolis, MN — Target Corporation today announced its second quarter 2020 results, which reflect the continuation of heightened sales volume and significant investments in response to the COVID-19 pandemic. The Company reported GAAP earnings per share (EPS) from continuing operations of $3.35 in the second quarter, an increase of 84.4 percent from $1.82 in 2019. Second quarter Adjusted EPS of $3.38 grew 85.7 percent compared with $1.82 in 2019. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
“Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9 percent and stores enabling more than three-quarters of Target’s digital sales, which rose nearly 200 percent. We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year. With our differentiated merchandising assortment, a comprehensive set of convenient fulfillment options, a strong balance sheet, and our deeply dedicated team, we are well-equipped to navigate the ongoing challenges of the pandemic, and continue to grow profitably in the years ahead.”
Fiscal 2020 Guidance
During the first quarter, the Company withdrew its guidance given the unusually wide range of potential outcomes, in light of the highly fluid and uncertain outlook for consumer shopping patterns and government policies related to COVID-19.
Operating Results
The Company’s total comparable sales grew 24.3 percent in the second quarter, reflecting comparable stores sales growth of 10.9 percent and digital sales growth of 195 percent. Total revenue of $23.0 billion grew 24.7 percent compared with last year, reflecting sales growth of 24.8 percent and a 16.6 percent increase in other revenue. Operating income was $2.3 billion in second quarter 2020, up 73.8 percent from $1.3 billion in 2019.
Second quarter operating income margin rate was 10.0 percent in 2020 compared with 7.2 percent in 2019, driven primarily by strong expense leverage on robust topline performance. Second quarter gross margin rate was 30.9 percent, compared with 30.6 percent in 2019. This increase reflected sales strength across our entire multi-category assortment and lower discounts driven by high sell through rates. Second quarter SG&A expense rate was 19.4 percent in 2020, compared with 21.2 percent in 2019, reflecting higher compensation costs, including investments in wages and benefits, which were more than offset by the net impact of other factors, most prominently the leverage from strong sales growth.
Interest Expense and Taxes
The Company’s second quarter 2020 net interest expense was $122 million, compared with $120 million last year.
Second quarter 2020 effective income tax rate was 22.8 percent, compared with 23.0 percent last year, reflecting a larger rate benefit from discrete items, primarily related to share-based payments, compared with the prior year.
Shareholder Returns
The Company paid dividends of $330 million, compared with $328 million in second quarter 2019, reflecting a 3.1 percent increase in the dividend per share, partially offset by a decline in average share count.
On March 25, 2020, the Company announced that it had suspended share repurchase activity as a result of the high level of uncertainty in the current environment. As of the end of the second quarter, the Company had approximately $4.5 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in September 2019.
For the trailing twelve months through second quarter 2020, after-tax return on invested capital (ROIC) was 17.2 percent, compared with 15.2 percent for the twelve months through second quarter 2019. The increase to ROIC was driven primarily by increased profitability combined with a small decrease in capital base. The tables in this release provide additional information about the Company’s ROIC calculation.
Webcast Details
Target will webcast its second quarter earnings conference call at 7:00 a.m. CT today. Investors and the media are invited to listen to the meeting at Investors.Target.com (click “investors” then click on “events & presentations”). A replay of the webcast will be provided when available. The replay number is 1-800-391-9846.
Miscellaneous
Statements in this release regarding the Company’s future financial performance and future effects of COVID-19 on the Company’s business 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 Feb. 1, 2020 and Item 1A of the Company’s Form 10-Q for the fiscal quarter ended May 2, 2020. 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.
About Target
Minneapolis-based Target Corporation serves guests at nearly 1,900 stores and at Target.com. Since 1946, Target has given 5% of its profit to communities, which today equals millions of dollars a week. For the latest store count or for more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit Target.com/abullseyeview or follow @TargetNews on Twitter.
For more on the Target Foundation, click here.
| 1Adjusted EPS, a non-GAAP financial measure, excludes the impact of certain discretely managed items. See the tables of this release for additional information about the items that have been excluded from Adjusted EPS. |
| TARGET CORPORATION | ||||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| (millions, except per share data) (unaudited) | August 1, 2020 |
August 3,
2019 |
Change | August 1, 2020 |
August 3,
2019 |
Change | ||||||||||||||||
| Sales | $ | 22,696 | $ | 18,183 | 24.8 | % | $ | 42,067 | $ | 35,584 | 18.2 | % | ||||||||||
| Other revenue | 279 | 239 | 16.6 | 523 | 465 | 12.3 | ||||||||||||||||
| Total revenue | 22,975 | 18,422 | 24.7 | 42,590 | 36,049 | 18.1 | ||||||||||||||||
| Cost of sales | 15,673 | 12,625 | 24.1 | 30,183 | 24,874 | 21.3 | ||||||||||||||||
| Selling, general and administrative expenses | 4,460 | 3,912 | 14.0 | 8,520 | 7,575 | 12.5 | ||||||||||||||||
| Depreciation and amortization (exclusive of depreciation included in cost of sales) | 542 | 561 | (3.5) | 1,119 | 1,142 | (2.1) | ||||||||||||||||
| Operating income | 2,300 | 1,324 | 73.8 | 2,768 | 2,458 | 12.6 | ||||||||||||||||
| Net interest expense | 122 | 120 | 1.9 | 239 | 246 | (2.5) | ||||||||||||||||
| Net other (income) / expense | (11) | (13) | (19.5) | 11 | (27) | (141.9) | ||||||||||||||||
| Earnings from continuing operations before income taxes | 2,189 | 1,217 | 79.8 | 2,518 | 2,239 | 12.5 | ||||||||||||||||
| Provision for income taxes | 499 | 279 | 78.3 | 544 | 509 | 7.0 | ||||||||||||||||
| Net earnings from continuing operations | 1,690 | 938 | 80.3 | 1,974 | 1,730 | 14.1 | ||||||||||||||||
| Discontinued operations, net of tax | — | — | — | 3 | ||||||||||||||||||
| Net earnings | $ | 1,690 | $ | 938 | 80.3 | % | $ | 1,974 | $ | 1,733 | 13.9 | % | ||||||||||
| Basic earnings per share | ||||||||||||||||||||||
| Continuing operations | $ | 3.38 | $ | 1.83 | 84.6 | % | $ | 3.94 | $ | 3.37 | 17.1 | % | ||||||||||
| Discontinued operations | — | — | — | 0.01 | ||||||||||||||||||
| Net earnings per share | $ | 3.38 | $ | 1.83 | 84.6 | % | $ | 3.94 | $ | 3.37 | 16.9 | % | ||||||||||
| Diluted earnings per share | ||||||||||||||||||||||
| Continuing operations | $ | 3.35 | $ | 1.82 | 84.4 | % | $ | 3.91 | $ | 3.34 | 17.0 | % | ||||||||||
| Discontinued operations | — | — | — | 0.01 | ||||||||||||||||||
| Net earnings per share | $ | 3.35 | $ | 1.82 | 84.4 | % | $ | 3.91 | $ | 3.35 | 16.8 | % | ||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||
| Basic | 500.1 | 512.1 | (2.3) | % | 500.6 | 513.9 | (2.6) | % | ||||||||||||||
| Diluted | 504.4 | 516.1 | (2.3) | % | 505.1 | 517.8 | (2.5) | % | ||||||||||||||
| Antidilutive shares | — | — | — | — | ||||||||||||||||||
| Dividends declared per share | $ | 0.68 | $ | 0.66 | 3.0 | % | $ | 1.34 | $ | 1.30 | 3.1 | % | ||||||||||
| Note: Per share amounts may not foot due to rounding. |
| TARGET CORPORATION | ||||||||||||
| Consolidated Statements of Financial Position | ||||||||||||
| (millions, except footnotes) (unaudited) | August 1, 2020 |
February 1, 2020 |
August 3, 2019 |
|||||||||
| Assets | ||||||||||||
| Cash and cash equivalents | $ | 7,284 | $ | 2,577 | $ | 1,656 | ||||||
| Inventory | 8,876 | 8,992 | 9,122 | |||||||||
| Other current assets | 1,463 | 1,333 | 1,341 | |||||||||
| Total current assets | 17,623 | 12,902 | 12,119 | |||||||||
| Property and equipment | ||||||||||||
| Land | 6,027 | 6,036 | 6,054 | |||||||||
| Buildings and improvements | 30,946 | 30,603 | 29,908 | |||||||||
| Fixtures and equipment | 5,665 | 6,083 | 5,622 | |||||||||
| Computer hardware and software | 2,631 | 2,692 | 2,627 | |||||||||
| Construction-in-progress | 811 | 533 | 667 | |||||||||
| Accumulated depreciation | (19,341) | (19,664) | (18,866) | |||||||||
| Property and equipment, net | 26,739 | 26,283 | 26,012 | |||||||||
| Operating lease assets | 2,233 | 2,236 | 2,062 | |||||||||
| Other noncurrent assets | 1,405 | 1,358 | 1,373 | |||||||||
| Total assets | $ | 48,000 | $ | 42,779 | $ | 41,566 | ||||||
| Liabilities and shareholders’ investment | ||||||||||||
| Accounts payable | $ | 10,726 | $ | 9,920 | $ | 9,152 | ||||||
| Accrued and other current liabilities | 5,057 | 4,406 | 4,059 | |||||||||
| Current portion of long-term debt and other borrowings | 109 | 161 | 1,153 | |||||||||
| Total current liabilities | 15,892 | 14,487 | 14,364 | |||||||||
| Long-term debt and other borrowings | 14,188 | 11,338 | 10,365 | |||||||||
| Noncurrent operating lease liabilities | 2,241 | 2,275 | 2,111 | |||||||||
| Deferred income taxes | 1,121 | 1,122 | 1,082 | |||||||||
| Other noncurrent liabilities | 1,980 | 1,724 | 1,808 | |||||||||
| Total noncurrent liabilities | 19,530 | 16,459 | 15,366 | |||||||||
| Shareholders’ investment | ||||||||||||
| Common stock | 42 | 42 | 43 | |||||||||
| Additional paid-in capital | 6,248 | 6,226 | 6,114 | |||||||||
| Retained earnings | 7,121 | 6,433 | 6,461 | |||||||||
| Accumulated other comprehensive loss | (833) | (868) | (782) | |||||||||
| Total shareholders’ investment | 12,578 | 11,833 | 11,836 | |||||||||
| Total liabilities and shareholders’ investment | $ | 48,000 | $ | 42,779 | $ | 41,566 | ||||||
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 500,252,831, 504,198,962 and 511,335,375 shares issued and outstanding as of August 1, 2020, February 1, 2020, and August 3, 2019, respectively.
Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.
| TARGET CORPORATION | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Six Months Ended | ||||||||
| (millions) (unaudited) | August 1, 2020 |
August 3, 2019 |
||||||
| Operating activities | ||||||||
| Net earnings | $ | 1,974 | $ | 1,733 | ||||
| Earnings from discontinued operations, net of tax | — | 3 | ||||||
| Net earnings from continuing operations | 1,974 | 1,730 | ||||||
| Adjustments to reconcile net earnings to cash provided by operations: | ||||||||
| Depreciation and amortization | 1,245 | 1,267 | ||||||
| Share-based compensation expense | 104 | 86 | ||||||
| Deferred income taxes | (12) | 104 | ||||||
| Noncash losses / (gains) and other, net | 86 | 42 | ||||||
| Changes in operating accounts: | ||||||||
| Inventory | 116 | 375 | ||||||
| Other assets | (14) | 64 | ||||||
| Accounts payable | 795 | (731) | ||||||
| Accrued and other liabilities | 822 | (127) | ||||||
| Cash provided by operating activities—continuing operations | 5,116 | 2,810 | ||||||
| Cash provided by operating activities—discontinued operations | — | 2 | ||||||
| Cash provided by operations | 5,116 | 2,812 | ||||||
| Investing activities | ||||||||
| Expenditures for property and equipment | (1,414) | (1,394) | ||||||
| Proceeds from disposal of property and equipment | 10 | 10 | ||||||
| Other investments | 2 | — | ||||||
| Cash required for investing activities | (1,402) | (1,384) | ||||||
| Financing activities | ||||||||
| Additions to long-term debt | 2,480 | 994 | ||||||
| Reductions of long-term debt | (126) | (1,026) | ||||||
| Dividends paid | (662) | (658) | ||||||
| Repurchase of stock | (706) | (662) | ||||||
| Stock option exercises | 7 | 24 | ||||||
| Cash provided by / (required for) financing activities | 993 | (1,328) | ||||||
| Net increase in cash and cash equivalents | 4,707 | 100 | ||||||
| Cash and cash equivalents at beginning of period | 2,577 | 1,556 | ||||||
| Cash and cash equivalents at end of period | $ | 7,284 | $ | 1,656 | ||||
| TARGET CORPORATION | ||||||||||||
| Operating Results | ||||||||||||
| Rate Analysis | Three Months Ended | Six Months Ended | ||||||||||
| (unaudited) | August 1, 2020 |
August 3, 2019 |
August 1, 2020 |
August 3, 2019 |
||||||||
| Gross margin rate | 30.9 | % | 30.6 | % | 28.3 | % | 30.1 | % | ||||
| SG&A expense rate | 19.4 | 21.2 | 20.0 | 21.0 | ||||||||
| Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate | 2.4 | 3.0 | 2.6 | 3.2 | ||||||||
| Operating income margin rate | 10.0 | 7.2 | 6.5 | 6.8 | ||||||||
| Note: | Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue. Other revenue includes $158 million and $324 million of profit-sharing income under our credit card program agreement for the three and six months ended August 1, 2020, respectively, and $168 million and $328 million for the three and six months ended August 3, 2019, respectively. |
| Comparable Sales | Three Months Ended | Six Months Ended | ||||||||||
| (unaudited) | August 1, 2020 |
August 3, 2019 |
August 1, 2020 |
August 3, 2019 |
||||||||
| Comparable sales change | 24.3 | % | 3.4 | % | 17.7 | % | 4.1 | % | ||||
| Drivers of change in comparable sales | ||||||||||||
| Number of transactions | 4.6 | 2.4 | 1.6 | 3.3 | ||||||||
| Average transaction amount | 18.8 | 0.9 | 15.8 | 0.7 | ||||||||
| Contribution to Comparable Sales Change | Three Months Ended | Six Months Ended | ||||||||||
| (unaudited) | August 1, 2020 |
August 3, 2019 |
August 1, 2020 |
August 3, 2019 |
||||||||
| Stores originated channel comparable sales change | 10.9 | % | 1.5 | % | 6.0 | % | 2.1 | % | ||||
| Contribution from digitally originated sales | 13.4 | 1.8 | 11.7 | 1.9 | ||||||||
| Total comparable sales change | 24.3 | % | 3.4 | % | 17.7 | % | 4.1 | % | ||||
| Note: Amounts may not foot due to rounding. |
| Sales by Channel | Three Months Ended | Six Months Ended | ||||||||||
| (unaudited) | August 1, 2020 |
August 3, 2019 |
August 1, 2020 |
August 3, 2019 |
||||||||
| Stores originated | 82.8 | % | 92.7 | % | 83.7 | % | 92.8 | % | ||||
| Digitally originated | 17.2 | 7.3 | 16.3 | 7.2 | ||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||
| RedCard Penetration | Three Months Ended | Six Months Ended | ||||||||||
| (unaudited) | August 1, 2020 |
August 3, 2019 |
August 1, 2020 |
August 3, 2019 |
||||||||
| Target Debit Card | 11.8 | % | 12.5 | % | 12.2 | % | 12.8 | % | ||||
| Target Credit Cards | 8.7 | 10.7 | 9.2 | 10.6 | ||||||||
| Total RedCard Penetration | 20.5 | % | 23.2 | % | 21.4 | % | 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) | August 1, 2020 |
February 1, 2020 |
August 3, 2019 |
August 1, 2020 |
February 1, 2020 |
August 3, 2019 |
||||||||||||
| 170,000 or more sq. ft. | 272 | 272 | 272 | 48,613 | 48,619 | 48,619 | ||||||||||||
| 50,000 to 169,999 sq. ft. | 1,505 | 1,505 | 1,499 | 189,224 | 189,227 | 188,711 | ||||||||||||
| 49,999 or less sq. ft. | 94 | 91 | 82 | 2,745 | 2,670 | 2,357 | ||||||||||||
| Total | 1,871 | 1,868 | 1,853 | 240,582 | 240,516 | 239,687 | ||||||||||||
| (a) | In thousands, reflects total square feet less office, distribution center, and vacant space. |
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 in accordance with GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies.
| Reconciliation of Non-GAAP Adjusted EPS |
Three Months Ended | ||||||||||||||||||||||||||
| August 1, 2020 | August 3, 2019 | ||||||||||||||||||||||||||
| (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 | $ | 3.35 | $ | 1.82 | 84.4 | % | |||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||
| Gain on investment (a) | $ | (9) | $ | (6) | $ | (0.01) | $ | — | $ | — | $ | — | |||||||||||||||
| Other (b) | 25 | 18 | 0.04 | — | — | — | |||||||||||||||||||||
| Adjusted diluted earnings per share from continuing operations | $ | 3.38 | $ | 1.82 | 85.7 | % | |||||||||||||||||||||
| Reconciliation of Non-GAAP Adjusted EPS |
Six Months Ended | ||||||||||||||||||||||||||
| August 1, 2020 | August 3, 2019 | ||||||||||||||||||||||||||
| (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 | $ | 3.91 | $ | 3.34 | 17.0 | % | |||||||||||||||||||||
| Adjustments | |||||||||||||||||||||||||||
| Loss on investment (a) | $ | 12 | $ | 9 | $ | 0.02 | $ | — | $ | — | $ | — | |||||||||||||||
| Other (b) | 25 | 18 | 0.04 | — | — | — | |||||||||||||||||||||
| Adjusted diluted earnings per share from continuing operations | $ | 3.96 | $ | 3.34 | 18.6 | % | |||||||||||||||||||||
| Note: Amounts may not foot due to rounding. | |
| (a) | Includes an unrealized (gain) / loss on our investment in Casper Sleep Inc., which is not core to our continuing operations. |
| (b) | Includes store damage and inventory losses related to civil unrest. |
Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings from continuing operations before interest expense, income taxes, depreciation and amortization (EBITDA) are non-GAAP financial measures. We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative for, GAAP. The most comparable GAAP measure is net earnings from continuing operations. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.
| EBIT and EBITDA | Three Months Ended | Six Months Ended | ||||||||||||||||||||
| (dollars in millions) (unaudited) | August 1, 2020 |
August 3, 2019 |
Change | August 1, 2020 |
August 3, 2019 |
Change | ||||||||||||||||
| Net earnings from continuing operations | $ | 1,690 | $ | 938 | 80.3 | % | $ | 1,974 | $ | 1,730 | 14.1 | % | ||||||||||
| + Provision for income taxes | 499 | 279 | 78.3 | 544 | 509 | 7.0 | ||||||||||||||||
| + Net interest expense | 122 | 120 | 1.9 | 239 | 246 | (2.5) | ||||||||||||||||
| EBIT | $ | 2,311 | $ | 1,337 | 72.8 | % | $ | 2,757 | $ | 2,485 | 11.0 | % | ||||||||||
| + Total depreciation and amortization (a) | 604 | 624 | (3.2) | 1,245 | 1,267 | (1.9) | ||||||||||||||||
| EBITDA | $ | 2,915 | $ | 1,961 | 48.6 | % | $ | 4,002 | $ | 3,752 | 6.7 | % | ||||||||||
| (a) | Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales. |
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 the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.
| After-Tax Return on Invested Capital | ||||||||
| (dollars in millions) | ||||||||
| Trailing Twelve Months | ||||||||
| Numerator | August 1, 2020 |
August 3, 2019 |
||||||
| Operating income | $ | 4,968 | $ | 4,395 | ||||
| + Net other income / (expense) | (28) | 42 | ||||||
| EBIT | 4,940 | 4,437 | ||||||
| + Operating lease interest (a) | 87 | 85 | ||||||
| – Income taxes (b) | 1,076 | 937 | ||||||
| Net operating profit after taxes | $ | 3,951 | $ | 3,585 | ||||
| Denominator | August 1, 2020 |
August 3, 2019 |
August 4, 2018 |
|||||||||
| Current portion of long-term debt and other borrowings | $ | 109 | $ | 1,153 | $ | 1,044 | ||||||
| + Noncurrent portion of long-term debt | 14,188 | 10,365 | 10,108 | |||||||||
| + Shareholders’ investment | 12,578 | 11,836 | 11,167 | |||||||||
| + Operating lease liabilities (c) | 2,448 | 2,285 | 2,183 | |||||||||
| – Cash and cash equivalents | 7,284 | 1,656 | 1,180 | |||||||||
| Invested capital | $ | 22,039 | $ | 23,983 | $ | 23,322 | ||||||
| Average invested capital (d) | $ | 23,011 | $ | 23,652 | ||||||||
| After-tax return on invested capital | 17.2 | % | 15.2 | % | ||||||||
| (a) | Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A. Operating lease interest is added back to Operating Income in the ROIC calculation to control for differences in capital structure between us and our competitors. |
| (b) | Calculated using the effective tax rates for continuing operations, which were 21.4 percent and 20.7 percent for the trailing twelve months ended August 1, 2020, and August 3, 2019, respectively. For the twelve months ended August 1, 2020, and August 3, 2019, includes tax effect of $1,057 million and $919 million, respectively, related to EBIT and $19 million and $18 million, respectively, related to operating lease interest. |
| (c) | Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities. |
| (d) | 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. |
