Attached files
| file | filename |
|---|---|
| 8-K - 8-K - TARGET CORP | tgt-20200520.htm |
Exhibit (99)
FOR IMMEDIATE RELEASE
| Contacts: | John Hulbert, Investors, (612) 761-6627 | ||||
| Erin Conroy, Media, (612) 761-5928 | |||||
| Target Media Hotline, (612) 696-3400 | |||||
Target Corporation Reports First Quarter Earnings
•First quarter comparable sales grew 10.8 percent, driven by a 12.5 percent increase in average basket, as guests made fewer, bigger shopping trips.
•Store comparable sales increased 0.9 percent. Digital comparable sales grew 141 percent, accounting for 9.9 percentage points of Target’s comparable sales growth.
◦Digital comparable sales accelerated every month in the quarter, from 33 percent in February to 282 percent in April.
◦Stores fulfilled nearly 80 percent of Target’s first-quarter digital sales.
◦Same-day services (Order Pick Up, Drive Up and Shipt) grew 278 percent and accounted for approximately 5 percentage points of total Company comparable sales growth.
•The Company saw healthy market-share gains across all five of its core merchandise categories.
•First quarter GAAP EPS from continuing operations were $0.56, and Adjusted EPS1 were $0.59. This performance reflected hundreds of millions of dollars of incremental team member pay and benefits and investments to protect the health and safety of guests and team members.
•For additional media materials, please visit:
https://corporate.target.com/article/2020/05/q1-2020-earnings
MINNEAPOLIS (May 20, 2020) – Target Corporation (NYSE: TGT) today announced its first-quarter 2020 results, which reflect the impact of rapidly-evolving shopping patterns and
- more -
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 Reports First Quarter Earnings — Page 2 of 13
significant investments in response to the COVID-19 pandemic. The Company reported GAAP earnings per share (EPS) from continuing operations of $0.56 in first quarter, compared with $1.53 in 2019. First quarter Adjusted EPS were $0.59, compared with $1.53 in 2019. The attached tables provide a reconciliation of non-GAAP to GAAP measures. All earnings per share figures refer to diluted EPS.
“Throughout the first quarter, our team and guests faced unprecedented challenges arising from the spread of COVID-19. In the face of those challenges, our team showed extraordinary resilience as guests relied on Target as a trusted resource for their families. With our stores at the center of our strategy, and a significant investment in the safety of our team and guests, our operations had the agility and flexibility needed to meet the changing needs of our business,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “With the dedication of our team, the benefit of a sustainable business model and a strong balance sheet, we are confident Target will emerge from this crisis an even stronger retailer, with higher affinity and trust from our guests.”
Fiscal 2020 Guidance
On March 25th, the Company withdrew its first quarter and full-year guidance given the unusually wide range of potential outcomes as a result of the highly fluid and uncertain outlook for consumer shopping patterns and government policies related to COVID-19. As a result of continued uncertainty, the Company did not provide second-quarter or updated full-year guidance.
Operating Results
The Company’s total comparable sales grew 10.8 percent in the first quarter, reflecting comparable digital sales growth of 141 percent. Total revenue of $19.6 billion grew 11.3 percent compared with last year, reflecting sales growth of 11.3 percent and a 7.7 percent increase in other revenue. Operating income was $468 million in first quarter 2020, down 58.7 percent from $1,135 million in 2019.
First quarter operating income margin rate was 2.4 percent in 2020 compared with 6.4 percent in 2019. First quarter gross margin rate was 25.1 percent, compared with 29.6 percent in
– more –
Target Corporation Reports First Quarter Earnings — Page 3 of 13
2019. This decrease reflected the net impact of actions taken by the Company’s merchandising teams, including costs and inventory impairments related to the rapid slowdown in Apparel & Accessories sales, unfavorable category mix as guests stocked up on lower-margin categories like Essentials and Food & Beverage, and higher digital and supply chain costs, driven by unusually strong digital volume as well as investments in team member wages and benefits. First quarter SG&A expense rate was 20.7 percent in 2020, compared with 20.8 percent in 2019. First quarter SG&A results reflected higher compensation costs, including investments in wages and benefits, which were more than offset by the net impact of other factors, including leverage from strong sales growth.
Interest Expense and Taxes from Continuing Operations
The Company’s first quarter 2020 net interest expense was $117 million, compared with $126 million last year, reflecting lower average floating benchmark interest rates associated with the Company’s debt portfolio.
First quarter 2020 effective income tax rate from continuing operations was 13.9 percent, compared with 22.4 percent last year. First quarter 2020 effective income tax rate from continuing operations reflects the impact of lower pre-tax earnings and a larger impact from discrete tax benefits compared with last year.
Shareholder Returns
The Company returned $941 million to shareholders in first quarter 2020, including:
•Dividends of $332 million, compared with $330 million in first quarter 2019, reflecting a decline in share count offset by a 3.1 percent increase in the dividend per share.
•Share repurchases totaling $609 million that retired 5.7 million shares of common stock at an average price of $107.58.
Early in the first quarter, the Company exhausted the remaining capacity under the $5 billion share repurchase program approved in 2016 and began repurchasing shares under the new
– more –
Target Corporation Reports First Quarter Earnings — Page 4 of 13
$5 billion repurchase program approved by Target’s Board of Directors in September 2019. As of the end of the first quarter, the Company had approximately $4.5 billion of remaining capacity under the 2019 repurchase program.
On March 25, 2020, the Company announced that it had suspended share repurchase activity as a result of the current environment and the Company’s commitment to maintain its strong investment-grade credit ratings.
For the trailing twelve months through first quarter 2020, after-tax return on invested capital (ROIC) was 13.4 percent, compared with 14.3 percent for the twelve months through first quarter 2019. The tables of this release provide additional information about the Company’s ROIC calculation.
Webcast Details
Target will webcast its first 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 (hover over “investors” then click on “events & presentations”). A replay of the webcast will be available within four hours of the meeting’s conclusion. The replay number is 800-391-9851.
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 7.01 of the Company’s Form 8-K filed on May 20, 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.
– more –
Target Corporation Reports First Quarter Earnings — Page 5 of 13
About Target
Minneapolis-based Target Corporation (NYSE: TGT) 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.
# # #
Target Corporation Reports First Quarter Earnings — Page 6 of 13
TARGET CORPORATION
Consolidated Statements of Operations
| Three Months Ended | ||||||||||||||||||||
| (millions, except per share data) (unaudited) | May 2, 2020 | May 4, 2019 | Change | |||||||||||||||||
| Sales | $ | 19,371 | $ | 17,401 | 11.3 | % | ||||||||||||||
| Other revenue | 244 | 226 | 7.7 | |||||||||||||||||
| Total revenue | 19,615 | 17,627 | 11.3 | |||||||||||||||||
| Cost of sales | 14,510 | 12,248 | 18.5 | |||||||||||||||||
Selling, general and administrative expenses | 4,060 | 3,663 | 10.9 | |||||||||||||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) | 577 | 581 | (0.8) | |||||||||||||||||
Operating income | 468 | 1,135 | (58.7) | |||||||||||||||||
| Net interest expense | 117 | 126 | (6.8) | |||||||||||||||||
| Net other (income) / expense | 22 | (12) | (283.8) | |||||||||||||||||
Earnings from continuing operations before income taxes | 329 | 1,021 | (67.8) | |||||||||||||||||
| Provision for income taxes | 45 | 229 | (80.0) | |||||||||||||||||
| Net earnings from continuing operations | 284 | 792 | (64.2) | |||||||||||||||||
| Discontinued operations, net of tax | — | 3 | ||||||||||||||||||
| Net earnings | $ | 284 | $ | 795 | (64.3) | % | ||||||||||||||
| Basic earnings per share | ||||||||||||||||||||
Continuing operations | $ | 0.57 | $ | 1.54 | (63.2) | % | ||||||||||||||
Discontinued operations | — | — | ||||||||||||||||||
Net earnings per share | $ | 0.57 | $ | 1.54 | (63.3) | % | ||||||||||||||
| Diluted earnings per share | ||||||||||||||||||||
Continuing operations | $ | 0.56 | $ | 1.53 | (63.3) | % | ||||||||||||||
Discontinued operations | — | — | ||||||||||||||||||
Net earnings per share | $ | 0.56 | $ | 1.53 | (63.4) | % | ||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||
| Basic | 501.0 | 515.7 | (2.8) | % | ||||||||||||||||
| Diluted | 505.8 | 519.5 | (2.6) | % | ||||||||||||||||
| Antidilutive shares | 0.2 | 0.1 | ||||||||||||||||||
| Dividends declared per share | $ | 0.66 | $ | 0.64 | 3.1 | % | ||||||||||||||
Note: Per share amounts may not foot due to rounding.
Target Corporation Reports First Quarter Earnings — Page 7 of 13
TARGET CORPORATION
Consolidated Statements of Financial Position
| (millions, except footnotes) (unaudited) | May 2, 2020 | February 1, 2020 | May 4, 2019 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 4,566 | $ | 2,577 | $ | 1,173 | ||||||||||||||
| Inventory | 8,584 | 8,992 | 9,060 | |||||||||||||||||
| Other current assets | 1,465 | 1,333 | 1,374 | |||||||||||||||||
| Total current assets | 14,615 | 12,902 | 11,607 | |||||||||||||||||
| Property and equipment | ||||||||||||||||||||
| Land | 6,034 | 6,036 | 6,061 | |||||||||||||||||
| Buildings and improvements | 30,756 | 30,603 | 29,573 | |||||||||||||||||
| Fixtures and equipment | 5,486 | 6,083 | 5,401 | |||||||||||||||||
| Computer hardware and software | 2,597 | 2,692 | 2,553 | |||||||||||||||||
| Construction-in-progress | 803 | 533 | 574 | |||||||||||||||||
| Accumulated depreciation | (19,087) | (19,664) | (18,456) | |||||||||||||||||
| Property and equipment, net | 26,589 | 26,283 | 25,706 | |||||||||||||||||
| Operating lease assets | 2,235 | 2,236 | 2,019 | |||||||||||||||||
| Other noncurrent assets | 1,367 | 1,358 | 1,287 | |||||||||||||||||
| Total assets | $ | 44,806 | $ | 42,779 | $ | 40,619 | ||||||||||||||
| Liabilities and shareholders’ investment | ||||||||||||||||||||
| Accounts payable | $ | 9,625 | $ | 9,920 | $ | 8,360 | ||||||||||||||
| Accrued and other current liabilities | 4,619 | 4,406 | 3,823 | |||||||||||||||||
| Current portion of long-term debt and other borrowings | 168 | 161 | 1,056 | |||||||||||||||||
| Total current liabilities | 14,412 | 14,487 | 13,239 | |||||||||||||||||
| Long-term debt and other borrowings | 14,073 | 11,338 | 11,357 | |||||||||||||||||
| Noncurrent operating lease liabilities | 2,249 | 2,275 | 2,064 | |||||||||||||||||
| Deferred income taxes | 1,122 | 1,122 | 1,034 | |||||||||||||||||
| Other noncurrent liabilities | 1,781 | 1,724 | 1,808 | |||||||||||||||||
| Total noncurrent liabilities | 19,225 | 16,459 | 16,263 | |||||||||||||||||
| Shareholders’ investment | ||||||||||||||||||||
| Common stock | 42 | 42 | 43 | |||||||||||||||||
| Additional paid-in capital | 6,206 | 6,226 | 5,908 | |||||||||||||||||
| Retained earnings | 5,775 | 6,433 | 5,958 | |||||||||||||||||
| Accumulated other comprehensive loss | (854) | (868) | (792) | |||||||||||||||||
| Total shareholders’ investment | 11,169 | 11,833 | 11,117 | |||||||||||||||||
| Total liabilities and shareholders’ investment | $ | 44,806 | $ | 42,779 | $ | 40,619 | ||||||||||||||
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 499,919,691, 504,198,962 and 512,312,434 shares issued and outstanding as of May 2, 2020, February 1, 2020, and May 4, 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 Reports First Quarter Earnings — Page 8 of 13
TARGET CORPORATION
Consolidated Statements of Cash Flows
| Three Months Ended | ||||||||||||||
| (millions) (unaudited) | May 2, 2020 | May 4, 2019 | ||||||||||||
| Operating activities | ||||||||||||||
| Net earnings | $ | 284 | $ | 795 | ||||||||||
| Earnings from discontinued operations, net of tax | — | 3 | ||||||||||||
| Net earnings from continuing operations | 284 | 792 | ||||||||||||
| Adjustments to reconcile net earnings to cash provided by operations: | ||||||||||||||
| Depreciation and amortization | 641 | 644 | ||||||||||||
| Share-based compensation expense | 49 | 46 | ||||||||||||
| Deferred income taxes | (4) | 59 | ||||||||||||
| Noncash losses / (gains) and other, net | 5 | 10 | ||||||||||||
| Changes in operating accounts: | ||||||||||||||
| Inventory | 408 | 438 | ||||||||||||
| Other assets | 11 | 17 | ||||||||||||
| Accounts payable | (280) | (1,402) | ||||||||||||
| Accrued and other liabilities | 170 | (281) | ||||||||||||
| Cash provided by operations | 1,284 | 323 | ||||||||||||
| Investing activities | ||||||||||||||
| Expenditures for property and equipment | (751) | (655) | ||||||||||||
| Proceeds from disposal of property and equipment | 6 | 5 | ||||||||||||
| Other investments | 1 | 1 | ||||||||||||
| Cash required for investing activities | (744) | (649) | ||||||||||||
| Financing activities | ||||||||||||||
| Additions to long-term debt | 2,480 | 994 | ||||||||||||
| Reductions of long-term debt | (17) | (13) | ||||||||||||
| Dividends paid | (332) | (330) | ||||||||||||
| Repurchase of stock | (686) | (320) | ||||||||||||
| Accelerated share repurchase pending final settlement | — | (400) | ||||||||||||
| Stock option exercises | 4 | 12 | ||||||||||||
| Cash provided by / (required for) financing activities | 1,449 | (57) | ||||||||||||
| Net increase / (decrease) in cash and cash equivalents | 1,989 | (383) | ||||||||||||
| Cash and cash equivalents at beginning of period | 2,577 | 1,556 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 4,566 | $ | 1,173 | ||||||||||
Target Corporation Reports First Quarter Earnings — Page 9 of 13
TARGET CORPORATION
Operating Results
| Rate Analysis | Three Months Ended | |||||||||||||
| (unaudited) | May 2, 2020 | May 4, 2019 | ||||||||||||
| Gross margin rate | 25.1 | % | 29.6 | % | ||||||||||
| SG&A expense rate | 20.7 | 20.8 | ||||||||||||
Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate | 2.9 | 3.3 | ||||||||||||
| Operating income margin rate | 2.4 | 6.4 | ||||||||||||
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 $166 million and $160 million of profit-sharing income under our credit card program agreement for the three months ended May 2, 2020, and May 4, 2019, respectively.
| Comparable Sales | Three Months Ended | |||||||||||||
| (unaudited) | May 2, 2020 | May 4, 2019 | ||||||||||||
| Comparable sales change | 10.8 | % | 4.8 | % | ||||||||||
| Drivers of change in comparable sales: | ||||||||||||||
| Number of transactions | (1.5) | 4.3 | ||||||||||||
| Average transaction amount | 12.5 | 0.5 | ||||||||||||
Note: Amounts may not foot due to rounding.
| Contribution to Comparable Sales Change | Three Months Ended | |||||||||||||
| (unaudited) | May 2, 2020 | May 4, 2019 | ||||||||||||
Stores originated channel comparable sales change | 0.9 | % | 2.7 | % | ||||||||||
Contribution from digitally originated sales to comparable sales change | 9.9 | 2.1 | ||||||||||||
| Total comparable sales change | 10.8 | % | 4.8 | % | ||||||||||
Note: Amounts may not foot due to rounding.
| Sales by Channel | Three Months Ended | |||||||||||||
| (unaudited) | May 2, 2020 | May 4, 2019 | ||||||||||||
| Stores originated | 84.7 | % | 92.9 | % | ||||||||||
| Digitally originated | 15.3 | 7.1 | ||||||||||||
| Total | 100 | % | 100 | % | ||||||||||
| RedCard Penetration | Three Months Ended | |||||||||||||
| (unaudited) | May 2, 2020 | May 4, 2019 | ||||||||||||
| Target Debit Card | 12.7 | % | 13.1 | % | ||||||||||
| Target Credit Cards | 9.7 | 10.4 | ||||||||||||
| Total RedCard Penetration | 22.4 | % | 23.5 | % | ||||||||||
Note: Amounts may not foot due to rounding.
Target Corporation Reports First Quarter Earnings — Page 10 of 13
| Number of Stores and Retail Square Feet | Number of Stores | Retail Square Feet (a) | ||||||||||||||||||||||||||||||||||||
| (unaudited) | May 2, 2020 | February 1, 2020 | May 4, 2019 | May 2, 2020 | February 1, 2020 | May 4, 2019 | ||||||||||||||||||||||||||||||||
| 170,000 or more sq. ft. | 272 | 272 | 272 | 48,613 | 48,619 | 48,603 | ||||||||||||||||||||||||||||||||
| 50,000 to 169,999 sq. ft. | 1,505 | 1,505 | 1,501 | 189,226 | 189,227 | 188,918 | ||||||||||||||||||||||||||||||||
| 49,999 or less sq. ft. | 94 | 91 | 78 | 2,745 | 2,670 | 2,276 | ||||||||||||||||||||||||||||||||
| Total | 1,871 | 1,868 | 1,851 | 240,584 | 240,516 | 239,797 | ||||||||||||||||||||||||||||||||
(a)In thousands, reflects total square feet less office, distribution center, and vacant space.
Target Corporation Reports First Quarter Earnings — Page 11 of 13
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 | |||||||||||||||||||||||||||||||||||||||||||
| May 2, 2020 | May 4, 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 | $ | 0.56 | $ | 1.53 | (63.3) | % | ||||||||||||||||||||||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||||||||||
Loss on investment (a) | $ | 21 | $ | 15 | $ | 0.03 | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||
Adjusted diluted earnings per share from continuing operations | $ | 0.59 | $ | 1.53 | (61.3) | % | ||||||||||||||||||||||||||||||||||||||
Note: Amounts may not foot due to rounding.
(a)Includes an unrealized loss on our investment in Casper Sleep Inc., which is not core to our continuing operations.
Target Corporation Reports First Quarter Earnings — Page 12 of 13
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 | |||||||||||||||||||
| (dollars in millions) (unaudited) | May 2, 2020 | May 4, 2019 | Change | |||||||||||||||||
| Net earnings from continuing operations | $ | 284 | $ | 792 | (64.2) | % | ||||||||||||||
| + Provision for income taxes | 45 | 229 | (80.0) | |||||||||||||||||
| + Net interest expense | 117 | 126 | (6.8) | |||||||||||||||||
EBIT | $ | 446 | $ | 1,147 | (61.1) | % | ||||||||||||||
+ Total depreciation and amortization (a) | 641 | 644 | (0.6) | |||||||||||||||||
EBITDA | $ | 1,087 | $ | 1,791 | (39.3) | % | ||||||||||||||
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.
Target Corporation Reports First Quarter Earnings — Page 13 of 13
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 | May 2, 2020 | May 4, 2019 | ||||||||||||||||||||||||
Operating income | $ | 3,992 | $ | 4,204 | ||||||||||||||||||||||
+ Net other income / (expense) | (26) | 33 | ||||||||||||||||||||||||
EBIT | 3,966 | 4,237 | ||||||||||||||||||||||||
+ Operating lease interest (a) | 87 | 84 | ||||||||||||||||||||||||
- Income taxes (b) | 855 | 878 | ||||||||||||||||||||||||
| Net operating profit after taxes | $ | 3,198 | $ | 3,443 | ||||||||||||||||||||||
Denominator | May 2, 2020 | May 4, 2019 | May 5, 2018 | |||||||||||||||||
| Current portion of long-term debt and other borrowings | $ | 168 | $ | 1,056 | $ | 283 | ||||||||||||||
| + Noncurrent portion of long-term debt | 14,073 | 11,357 | 11,107 | |||||||||||||||||
| + Shareholders' investment | 11,169 | 11,117 | 11,158 | |||||||||||||||||
+ Operating lease liabilities (c) | 2,448 | 2,231 | 2,157 | |||||||||||||||||
| - Cash and cash equivalents | 4,566 | 1,173 | 1,060 | |||||||||||||||||
| Invested capital | $ | 23,292 | $ | 24,588 | $ | 23,645 | ||||||||||||||
Average invested capital (d) | $ | 23,940 | $ | 24,116 | ||||||||||||||||
After-tax return on invested capital | 13.4 | % | 14.3 | % | ||||||||||||||||
(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 21.1 percent and 20.3 percent for the trailing twelve months ended May 2, 2020, and May 4, 2019, respectively. For the twelve months ended May 2, 2020, and May 4, 2019, includes tax effect of $837 million and $861 million, respectively, related to EBIT and $18 million and $17 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.