

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~July 31,~~October 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number 1-6049

TARGET CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota

(State or other jurisdiction of incorporation or organization)

1000 Nicollet Mall, Minneapolis, Minnesota

(Address of principal executive offices)

41-0215170

(I.R.S. Employer Identification No.)

55403

(Zip Code)

Registrant’s telephone number, including area code: 612/304-6073

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0833 per share

TGT

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of registrant’s classes of common stock, as of the latest practicable date. Total shares of common stock, par value $0.0833, outstanding at ~~August 20,~~November 19, 2021, were ~~488,039,053.~~479,123,918.


						Table of Contents
						Index to Notes

TARGET CORPORATION

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Operations	1
	Consolidated Statements of Comprehensive Income	2
	Consolidated Statements of Financial Position	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Shareholders’ Investment	5
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2423
Item 4.	Controls and Procedures	2423

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	2524
Item 1A.	Risk Factors	2524
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2524
Item 3.	Defaults Upon Senior Securities	2524
Item 4.	Mine Safety Disclosures	2524
Item 5.	Other Information	2524
Item 6.	Exhibits	2625

Signature		2726


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations
Three Months Ended Six Months Ended
(millions, except per share data) (unaudited) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Sales $ 24,826 $ 22,696 $ 48,705 $ 42,067
Other revenue 334 279 652 523
Total revenue 25,160 22,975 49,357 42,590
Cost of sales 17,280 15,673 33,996 30,183
Selling, general and administrative expenses 4,849 4,460 9,358 8,520
Depreciation and amortization (exclusive of depreciation included in cost of sales) 564 542 1,162 1,119
Operating income 2,467 2,300 4,841 2,768
Net interest expense 104 122 212 239
Net other (income) / expense (7) (11) (350) 11
Earnings before income taxes 2,370 2,189 4,979 2,518
Provision for income taxes 553 499 1,065 544
Net earnings $ 1,817 $ 1,690 $ 3,914 $ 1,974
Basic earnings per share $ 3.68 $ 3.38 $ 7.89 $ 3.94
Diluted earnings per share $ 3.65 $ 3.35 $ 7.82 $ 3.91
Weighted average common shares outstanding
Basic 493.1 500.1 495.8 500.6
Diluted 497.5 504.4 500.4 505.1
Antidilutive shares — — — —

~~Note: Per share amounts may not foot due to rounding.~~


Consolidated Statements of Operations
	Three Months Ended				Nine Months Ended
(millions, except per share data) (unaudited)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Sales	$	25,290	$	22,336	$	73,995	$	64,403
Other revenue	362		296		1,014		819
Total revenue	25,652		22,632		75,009		65,222
Cost of sales	18,206		15,509		52,202		45,692
Selling, general and administrative expenses	4,859		4,647		14,217		13,167
Depreciation and amortization (exclusive of depreciation included in cost of sales)	577		541		1,739		1,660
Operating income	2,010		1,935		6,851		4,703
Net interest expense	105		632		317		871
Net other (income) / expense	(6)		5		(356)		16
Earnings before income taxes	1,911		1,298		6,890		3,816
Provision for income taxes	423		284		1,488		828


Net earnings	$	1,488	$	1,014	$	5,402	$	2,988



Basic earnings per share	$	3.07	$	2.02	$	10.97	$	5.97



Diluted earnings per share	$	3.04	$	2.01	$	10.87	$	5.91
Weighted average common shares outstanding
Basic	484.8		500.6		492.2		500.6
Diluted	489.4		505.4		496.8		505.2
Antidilutive shares	—		—		—		—

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			1


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income									Consolidated Statements of Comprehensive Income
		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
(millions) (unaudited)	(millions) (unaudited)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020		(millions) (unaudited)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Net earnings	Net earnings	$	1,817	$	1,690	$	3,914	$	1,974	Net earnings	$	1,488	$	1,014	$	5,402	$	2,988
Other comprehensive income / (loss), net of tax
Other comprehensive income, net of tax										Other comprehensive income, net of tax
Pension benefit liabilities	Pension benefit liabilities	20		22		42		44		Pension benefit liabilities	21		22		63		66
Currency translation adjustment and cash flow hedges	Currency translation adjustment and cash flow hedges	(8)		(1)		1		(9)		Currency translation adjustment and cash flow hedges	5		14		6		5
Other comprehensive income	Other comprehensive income	12		21		43		35		Other comprehensive income	26		36		69		71
Comprehensive income	Comprehensive income	$	1,829	$	1,711	$	3,957	$	2,009	Comprehensive income	$	1,514	$	1,050	$	5,471	$	3,059

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Financial Position	Consolidated Statements of Financial Position							Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited)	(millions, except footnotes) (unaudited)	July 31, 2021		January 30, 2021		August 1, 2020		(millions, except footnotes) (unaudited)	October 30, 2021		January 30, 2021		October 31, 2020
Assets	Assets							Assets
Cash and cash equivalents	Cash and cash equivalents	$	7,368	$	8,511	$	7,284	Cash and cash equivalents	$	5,753	$	8,511	$	5,996
Inventory	Inventory	11,259		10,653		8,876		Inventory	14,958		10,653		12,712
Other current assets	Other current assets	1,604		1,592		1,463		Other current assets	1,865		1,592		1,601
Total current assets	Total current assets	20,231		20,756		17,623		Total current assets	22,576		20,756		20,309
Property and equipment	Property and equipment							Property and equipment
Land	Land	6,148		6,141		6,027		Land	6,146		6,141		6,063
Buildings and improvements	Buildings and improvements	32,133		31,557		30,946		Buildings and improvements	32,478		31,557		31,398
Fixtures and equipment	Fixtures and equipment	5,892		5,914		5,665		Fixtures and equipment	6,144		5,914		5,843
Computer hardware and software	Computer hardware and software	2,260		2,765		2,631		Computer hardware and software	2,447		2,765		2,706
Construction-in-progress	Construction-in-progress	944		780		811		Construction-in-progress	1,302		780		518
Accumulated depreciation	Accumulated depreciation	(20,133)		(20,278)		(19,341)		Accumulated depreciation	(20,602)		(20,278)		(19,755)
Property and equipment, net	Property and equipment, net	27,244		26,879		26,739		Property and equipment, net	27,915		26,879		26,773
Operating lease assets	Operating lease assets	2,503		2,227		2,233		Operating lease assets	2,539		2,227		2,208
Other noncurrent assets	Other noncurrent assets	1,407		1,386		1,405		Other noncurrent assets	1,381		1,386		1,371
Total assets	Total assets	$	51,385	$	51,248	$	48,000	Total assets	$	54,411	$	51,248	$	50,661
Liabilities and shareholders’ investment	Liabilities and shareholders’ investment							Liabilities and shareholders’ investment
Accounts payable	Accounts payable	$	12,632	$	12,859	$	10,726	Accounts payable	$	16,250	$	12,859	$	14,203
Accrued and other current liabilities	Accrued and other current liabilities	5,600		6,122		5,057		Accrued and other current liabilities	5,925		6,122		5,023
Current portion of long-term debt and other borrowings	Current portion of long-term debt and other borrowings	1,190		1,144		109		Current portion of long-term debt and other borrowings	1,176		1,144		131
Total current liabilities	Total current liabilities	19,422		20,125		15,892		Total current liabilities	23,351		20,125		19,357
Long-term debt and other borrowings	Long-term debt and other borrowings	11,589		11,536		14,188		Long-term debt and other borrowings	11,586		11,536		12,490
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	2,462		2,218		2,241		Noncurrent operating lease liabilities	2,494		2,218		2,196
Deferred income taxes	Deferred income taxes	1,146		990		1,121		Deferred income taxes	1,246		990		1,171
Other noncurrent liabilities	Other noncurrent liabilities	1,906		1,939		1,980		Other noncurrent liabilities	1,931		1,939		2,128
Total noncurrent liabilities	Total noncurrent liabilities	17,103		16,683		19,530		Total noncurrent liabilities	17,257		16,683		17,985
Shareholders’ investment	Shareholders’ investment							Shareholders’ investment
Common stock	Common stock	41		42		42		Common stock	40		42		42
Additional paid-in capital	Additional paid-in capital	6,332		6,329		6,248		Additional paid-in capital	6,381		6,329		6,285
Retained earnings	Retained earnings	9,200		8,825		7,121		Retained earnings	8,069		8,825		7,789
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(713)		(756)		(833)		Accumulated other comprehensive loss	(687)		(756)		(797)
Total shareholders’ investment	Total shareholders’ investment	14,860		14,440		12,578		Total shareholders’ investment	13,803		14,440		13,319
Total liabilities and shareholders’ investment	Total liabilities and shareholders’ investment	$	51,385	$	51,248	$	48,000	Total liabilities and shareholders’ investment	$	54,411	$	51,248	$	50,661

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; ~~489,651,196,~~480,905,493, 500,877,129 and ~~500,252,831~~500,754,729 shares issued and outstanding as of ~~July 31,~~October 30, 2021, January 30, 2021, and ~~August 1,~~October 31, 2020, respectively.

Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			3


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Cash Flows	Consolidated Statements of Cash Flows					Consolidated Statements of Cash Flows
		Six Months Ended					Nine Months Ended
(millions) (unaudited)	(millions) (unaudited)	July 31, 2021		August 1, 2020		(millions) (unaudited)	October 30, 2021		October 31, 2020
Operating activities	Operating activities					Operating activities
Net earnings	Net earnings	$	3,914	$	1,974	Net earnings	$	5,402	$	2,988

Adjustments to reconcile net earnings to cash provided by operating activities:	Adjustments to reconcile net earnings to cash provided by operating activities:					Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	1,300		1,245		Depreciation and amortization	1,952		1,848
Share-based compensation expense	Share-based compensation expense	138		104		Share-based compensation expense	187		161
Deferred income taxes	Deferred income taxes	143		(12)		Deferred income taxes	233		26
Gain on Dermstore sale	Gain on Dermstore sale	(335)		—		Gain on Dermstore sale	(335)		—

Loss on extinguishment of debt						Loss on extinguishment of debt	—		512
Noncash losses / (gains) and other, net	Noncash losses / (gains) and other, net	7		86		Noncash losses / (gains) and other, net	18		124
Changes in operating accounts:	Changes in operating accounts:					Changes in operating accounts:
Inventory	Inventory	(606)		116		Inventory	(4,305)		(3,720)
Other assets	Other assets	3		(14)		Other assets	(117)		(174)
Accounts payable	Accounts payable	(311)		795		Accounts payable	3,284		4,287
Accrued and other liabilities	Accrued and other liabilities	(831)		822		Accrued and other liabilities	(722)		992

Cash provided by operating activities	Cash provided by operating activities	3,422		5,116		Cash provided by operating activities	5,597		7,044
Investing activities	Investing activities					Investing activities
Expenditures for property and equipment	Expenditures for property and equipment	(1,338)		(1,414)		Expenditures for property and equipment	(2,483)		(2,009)
Proceeds from disposal of property and equipment	Proceeds from disposal of property and equipment	15		10		Proceeds from disposal of property and equipment	23		27
Proceeds from Dermstore sale	Proceeds from Dermstore sale	356		—		Proceeds from Dermstore sale	356		—
Other investments	Other investments	(5)		2		Other investments	14		(3)
Cash required for investing activities	Cash required for investing activities	(972)		(1,402)		Cash required for investing activities	(2,090)		(1,985)
Financing activities	Financing activities					Financing activities
Additions to long-term debt	Additions to long-term debt	—		2,480		Additions to long-term debt	—		2,480
Reductions of long-term debt	Reductions of long-term debt	(72)		(126)		Reductions of long-term debt	(112)		(2,395)
Dividends paid	Dividends paid	(676)		(662)		Dividends paid	(1,116)		(1,002)
Repurchase of stock	Repurchase of stock	(2,850)		(706)		Repurchase of stock	(5,042)		(741)

Stock option exercises	Stock option exercises	5		7		Stock option exercises	5		18
Cash (required for) / provided by financing activities		(3,593)		993
Cash required for financing activities						Cash required for financing activities	(6,265)		(1,640)
Net (decrease) / increase in cash and cash equivalents	Net (decrease) / increase in cash and cash equivalents	(1,143)		4,707		Net (decrease) / increase in cash and cash equivalents	(2,758)		3,419
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	8,511		2,577		Cash and cash equivalents at beginning of period	8,511		2,577
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	7,368	$	7,284	Cash and cash equivalents at end of period	$	5,753	$	5,996
Supplemental information	Supplemental information					Supplemental information
Leased assets obtained in exchange for new finance lease liabilities	Leased assets obtained in exchange for new finance lease liabilities	$	182	$	246	Leased assets obtained in exchange for new finance lease liabilities	$	234	$	344
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	386		142		Leased assets obtained in exchange for new operating lease liabilities	482		186

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			4


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Shareholders’ Investment
	Common	Stock		Additional				Accumulated Other
	Stock	Par		Paid-in		Retained		Comprehensive
(millions) (unaudited)	Shares	Value		Capital		Earnings		(Loss) / Income		Total
February 1, 2020	504.2	$	42	$	6,226	$	6,433	$	(868)	$	11,833
Net earnings	—	—		—		284		—		284
Other comprehensive income	—	—		—		—		14		14
Dividends declared	—	—		—		(333)		—		(333)
Repurchase of stock	(5.7)	—		—		(609)		—		(609)

Stock options and awards	1.4	—		(20)		—		—		(20)
May 2, 2020	499.9	$	42	$	6,206	$	5,775	$	(854)	$	11,169
Net earnings	—	—		—		1,690		—		1,690
Other comprehensive income	—	—		—		—		21		21
Dividends declared	—	—		—		(344)		—		(344)

Stock options and awards	0.4	—		42		—		—		42
August 1, 2020	500.3	$	42	$	6,248	$	7,121	$	(833)	$	12,578
Net earnings	—	—		—		1,014		—		1,014
Other comprehensive income	—	—		—		—		36		36
Dividends declared	—	—		—		(346)		—		(346)


Stock options and awards	0.5	—		37		—		—		37
October 31, 2020	500.8	$	42	$	6,285	$	7,789	$	(797)	$	13,319
Net earnings	—	—		—		1,380		—		1,380
Other comprehensive income	—	—		—		—		41		41
Dividends declared	—	—		—		(344)		—		(344)

Stock options and awards	0.1	—		44		—		—		44
January 30, 2021	500.9	$	42	$	6,329	$	8,825	$	(756)	$	14,440


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			5


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Shareholders’ Investment	Consolidated Statements of Shareholders’ Investment												Consolidated Statements of Shareholders’ Investment
		Common	Stock		Additional				Accumulated Other					Common	Stock		Additional				Accumulated Other
		Stock	Par		Paid-in		Retained		Comprehensive					Stock	Par		Paid-in		Retained		Comprehensive
(millions) (unaudited)	(millions) (unaudited)	Shares	Value		Capital		Earnings		(Loss) / Income		Total		(millions) (unaudited)	Shares	Value		Capital		Earnings		(Loss) / Income		Total
January 30, 2021	January 30, 2021	500.9	$	42	$	6,329	$	8,825	$	(756)	$	14,440	January 30, 2021	500.9	$	42	$	6,329	$	8,825	$	(756)	$	14,440
Net earnings	Net earnings	—	—		—		2,097		—		2,097		Net earnings	—	—		—		2,097		—		2,097
Other comprehensive income	Other comprehensive income	—	—		—		—		31		31		Other comprehensive income	—	—		—		—		31		31
Dividends declared	Dividends declared	—	—		—		(343)		—		(343)		Dividends declared	—	—		—		(343)		—		(343)
Repurchase of stock	Repurchase of stock	(6.1)	(1)		—		(1,207)		—		(1,208)		Repurchase of stock	(6.1)	(1)		—		(1,207)		—		(1,208)
Stock options and awards	Stock options and awards	1.3	—		(58)		—		—		(58)		Stock options and awards	1.3	—		(58)		—		—		(58)
May 1, 2021	May 1, 2021	496.1	$	41	$	6,271	$	9,372	$	(725)	$	14,959	May 1, 2021	496.1	$	41	$	6,271	$	9,372	$	(725)	$	14,959
Net earnings	Net earnings	—	—		—		1,817		—		1,817		Net earnings	—	—		—		1,817		—		1,817
Other comprehensive income	Other comprehensive income	—	—		—		—		12		12		Other comprehensive income	—	—		—		—		12		12
Dividends declared	Dividends declared	—	—		—		(445)		—		(445)		Dividends declared	—	—		—		(445)		—		(445)
Repurchase of stock	Repurchase of stock	(6.6)	—		—		(1,544)		—		(1,544)		Repurchase of stock	(6.6)	—		—		(1,544)		—		(1,544)
Stock options and awards	Stock options and awards	0.2	—		61		—		—		61		Stock options and awards	0.2	—		61		—		—		61
July 31, 2021	July 31, 2021	489.7	$	41	$	6,332	$	9,200	$	(713)	$	14,860	July 31, 2021	489.7	$	41	$	6,332	$	9,200	$	(713)	$	14,860
Net earnings													Net earnings	—	—		—		1,488		—		1,488
Other comprehensive income													Other comprehensive income	—	—		—		—		26		26
Dividends declared													Dividends declared	—	—		—		(439)		—		(439)
Repurchase of stock													Repurchase of stock	(8.8)	(1)		—		(2,180)		—		(2,181)
Stock options and awards													Stock options and awards	—	—		49		—		—		49
October 30, 2021													October 30, 2021	480.9	$	40	$	6,381	$	8,069	$	(687)	$	13,803

We declared $0.90 and $0.68 dividends per share for the three months ended ~~July 31,~~October 30, 2021, and ~~August 1,~~October 31, 2020, respectively, and $2.70 per share for the fiscal year ended January 30, 2021.

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			6


			FINANCIAL STATEMENTS			Table of Contents
			INDEX			Index to Notes


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			7


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

Notes to Consolidated Financial Statements (unaudited)

1. Accounting Policies

These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (U.S. GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in our 2020 Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements.

We operate as a single segment that is designed to enable guests to purchase products seamlessly in stores or through our digital channels. Nearly all of our revenues are generated in the U.S. The vast majority of our long-lived assets are located within the U.S.

Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year.

2. Coronavirus (COVID-19)

The novel coronavirus (COVID-19) pandemic continues to evolve. In 2020, states and cities took various measures in response to COVID-19, including mandating the closure of certain businesses and encouraging or requiring citizens to avoid large gatherings. To date, virtually all of our stores, digital channels, and distribution centers have remained open.

Since the onset of the COVID-19 pandemic, we have experienced strong comparable sales growth and significant volatility in our sales category and channel mix, including same-day fulfillment options. Note 4 presents sales by category. We have taken various actions, including accelerating purchases of certain merchandise in our core categories and, early in the pandemic, slowing or canceling purchase orders, primarily for Apparel and Accessories. As a result, during the quarter ended May 2, 2020, we recorded $216 million of purchase order cancellation fees in Cost of Sales.

3. Dermstore Sale

In February 2021, we sold our wholly owned subsidiary Dermstore LLC (Dermstore) for $356 million in cash and recognized a $335 million pretax gain, which is included in Net Other (Income) / Expense. Dermstore has historically represented less than 1 percent of our consolidated revenues, operating income, and net assets.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			8


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

4. Revenues

General merchandise sales represent the vast majority of our revenues. We also earn revenues from a variety of other sources, most notably credit card profit-sharing income from our arrangement with TD Bank Group (TD).


Revenues	Revenues	Three Months Ended				Six Months Ended				Revenues	Three Months Ended				Nine Months Ended
(millions)	(millions)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020		(millions)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Apparel and accessories (a)	Apparel and accessories (a)	$	4,751	$	4,084	$	9,020	$	6,703	Apparel and accessories (a)	$	4,364	$	3,927	$	13,384	$	10,630
Beauty and household essentials (b)	Beauty and household essentials (b)	6,726		6,158		13,090		12,069		Beauty and household essentials (b)	6,980		6,103		20,070		18,172
Food and beverage (c)	Food and beverage (c)	4,687		4,186		9,543		8,761		Food and beverage (c)	5,074		4,397		14,617		13,158
Hardlines (d)	Hardlines (d)	3,867		3,608		7,813		6,582		Hardlines (d)	3,841		3,377		11,654		9,959
Home furnishings and décor (e)	Home furnishings and décor (e)	4,748		4,625		9,158		7,889		Home furnishings and décor (e)	4,989		4,506		14,147		12,395
Other	Other	47		35		81		63		Other	42		26		123		89
Sales	Sales	24,826		22,696		48,705		42,067		Sales	25,290		22,336		73,995		64,403

Credit card profit sharing	Credit card profit sharing	172		158		343		324		Credit card profit sharing	184		164		527		488
Other	Other	162		121		309		199		Other	178		132		487		331
Other revenue	Other revenue	334		279		652		523		Other revenue	362		296		1,014		819

Total revenue	Total revenue	$	25,160	$	22,975	$	49,357	$	42,590	Total revenue	$	25,652	$	22,632	$	75,009	$	65,222

(a)Includes apparel for women, men, boys, girls, toddlers, infants and newborns, as well as jewelry, accessories, and shoes.

(b)Includes beauty and personal care, baby gear, cleaning, paper products, and pet supplies.

(c)Includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and food service in our stores.

(d)Includes electronics (including video game hardware and software), toys, entertainment, sporting goods, and luggage.

(e)Includes furniture, lighting, storage, kitchenware, small appliances, home décor, bed and bath, home improvement, school and office supplies, greeting cards and party supplies, and other seasonal merchandise.

Merchandise sales — We record almost all retail store revenues at the point of sale. Digitally originated sales may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Sales are recognized net of expected returns, which we estimate using historical return patterns. As of ~~July 31,~~October 30, 2021, January 30, 2021, and ~~August 1,~~October 31, 2020, the accrual for estimated returns was ~~$176~~$210 million, $139 million, and ~~$201~~$182 million, respectively.

Revenue from Target gift card sales is recognized upon gift card redemption, which is typically within one year of issuance.


Gift Card Liability Activity	Gift Card Liability Activity	January 30, 2021		Gift Cards Issued During Current Period But Not Redeemed (b)			Revenue Recognized From Beginning Liability			July 31, 2021	Gift Card Liability Activity	January 30, 2021			Gift Cards Issued During Current Period But Not Redeemed (b)			Revenue Recognized From Beginning Liability			October 30, 2021
(millions)	(millions)							(millions)
Gift card liability (a)	Gift card liability (a)	$	1,035		$	378		$	(533)				$	880	Gift card liability (a)	$	1,035		$	502		$	(631)	$	906

(a)Included in Accrued and Other Current Liabilities.

(b)Net of estimated breakage.

Credit card profit sharing — We receive payments under a credit card program agreement with TD. Under the agreement, we receive a percentage of the profits generated by the Target Credit Card and Target MasterCard receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			9


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

5. Fair Value Measurements

Fair value measurements are reported in one of three levels reflecting the valuation techniques used to determine fair value.

Financial Instruments Measured On a Recurring Basis

Fair Value

Financial Instruments Measured On a Recurring Basis

Fair Value

(millions)

Classification

Pricing Category

July 31, 2021

January 30, 2021

August 1, 2020

(millions)

Classification

Pricing Category

October 30, 2021

January 30, 2021

October 31, 2020

Assets

Short-term investments

Cash and Cash Equivalents

Level 1

6,439

7,644

6,370

Short-term investments

Cash and Cash Equivalents

Level 1

4,818

7,644

5,089

Prepaid forward contracts

Other Current Assets

Level 1

Prepaid forward contracts

Other Current Assets

Level 1

Equity securities

Other Current Assets

Level 1

—

Equity securities

Other Current Assets

Level 1

—

Interest rate swaps

Other Noncurrent Assets

Level 2

160

188

239

Interest rate swaps

Other Current Assets

Level 2

—

Interest rate swaps

Other Noncurrent Assets

Level 2

116

188

205

Liabilities

Interest rate swaps

Other Noncurrent Liabilities

Level 2

—

Interest rate swaps

Other Noncurrent Liabilities

Level 2

—


Significant Financial Instruments Not Measured at Fair Value (a) (millions)	Significant Financial Instruments Not Measured at Fair Value (a) (millions)	July 31, 2021				January 30, 2021				August 1, 2020				Significant Financial Instruments Not Measured at Fair Value (a) (millions)	October 30, 2021				January 30, 2021				October 31, 2020
		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion (b)	Long-term debt, including current portion (b)	$	10,620	$	12,594	$	10,643	$	12,787	$	12,384	$	15,457	Long-term debt, including current portion (b)	$	10,605	$	12,300	$	10,643	$	12,787	$	10,641	$	12,787

(a)The carrying amounts of certain other current assets, commercial paper, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.

(b)The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for the same or similar types of financial instruments and would be classified as Level 2. These amounts exclude commercial paper, unamortized swap valuation adjustments, and lease liabilities.

6. Property and Equipment

We review long-lived assets for impairment when store performance expectations, events, or changes in circumstances—such as a decision to relocate or close a store, office, or distribution center, discontinue a project, or make significant software changes—indicate that the asset’s carrying value may not be recoverable. We recognized impairment charges of ~~$39~~$3 million and ~~$81~~$84 million during the three and ~~six~~nine months ended ~~July 31,~~October 30, 2021, respectively. We recognized impairment charges of ~~$25~~$2 million and ~~$60~~$62 million during the three and ~~six~~nine months ended ~~August 1,~~October 31, 2020, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

7. Commercial Paper and Long-Term Debt

In October 2021, we obtained a committed $3.0 billion unsecured revolving credit facility that will expire in October 2026. This new facility replaced our $2.5 billion unsecured revolving credit facility that was set to expire in October 2023. No balances were outstanding under either credit facility at any time during 2021 or 2020.

8. Derivative Financial Instruments

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 5 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

As of ~~July 31,~~October 30, 2021, January 30, 2021, and ~~August 1,~~October 31, 2020, we were party to interest rate swaps with notional amounts totaling $1.5 billion. We pay a floating rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during the three and ~~six~~nine months ended ~~July 31, 2021, and August 1, 2020.~~

~~As of July 31, 2021, January~~October 30, 2021, and August 1, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $250 million. We use these derivative financial instruments, which have been designated as cash flow hedges, to hedge the interest rate exposure of anticipated future debt issuances. As of JulyOctober 31, ~~2021, Accumulated Other Comprehensive Loss (AOCI) included $6 million that will be reclassified and reduce Net Interest Expense when the forecasted transaction affects earnings.~~2020.

~~During August 2021, we entered into additional forward-starting interest rate swaps with notional amounts totaling~~ ~~$675 million.~~


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			10


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

Effect of Hedges on Debt
(millions)
July 31, 2021 January 30, 2021 August 1, 2020
Long-term debt and other borrowings
Carrying amount of hedged debt $ 1,649 $ 1,677 $ 1,732
Cumulative hedging adjustments, included in carrying amount 154 183 239
As of October 30, 2021, we were party to forward-starting interest rate swaps with notional amounts totaling $1.25 billion. As of January 30, 2021, and October 31, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $250 million. We use these derivative financial instruments, which have been designated as cash flow hedges, to hedge the interest rate exposure of anticipated future debt issuances during the next three years. As of October 30, 2021, Accumulated Other Comprehensive Loss (AOCI) included a gain of $15 million that will be reclassified and reduce Net Interest Expense as we record interest expense on the associated debt.

Effect of Hedges on Net Interest Expense Three Months Ended Six Months Ended
(millions) July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges $ 22 $ 11 $ (29) $ 102
Hedged debt (22) (11) 29 (102)
Total $ — $ — $ — $ —


Effect of Hedges on Debt (millions)	October 30, 2021		January 30, 2021		October 31, 2020



Long-term debt and other borrowings
Carrying amount of hedged debt	$	1,609	$	1,677	$	1,696
Cumulative hedging adjustments, included in carrying amount	114		183		203

~~8. Income Taxes~~

~~For the three and six months ended July 31, 2021, our effective tax rate was 23.4 percent and 21.4 percent,~~ respectively, compared with 22.8 percent and 21.6 percent for the three and six months ended August 1, 2020, as higher pretax earnings diluted the tax-rate benefit from fixed and discrete items, such as employee share-based compensation and the Dermstore sale. A~~dditionally, for the six months ended July 31, 2021, the favorable resolution of certain income tax matters resulted in a $44 million discrete tax benefit.~~


Effect of Hedges on Net Interest Expense	Three Months Ended				Nine Months Ended
(millions)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020


Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges	$	(40)	$	(36)	$	(69)	$	66
Hedged debt	40		36		69		(66)
Total	$	—	$	—	$	—	$	—

9. Share Repurchase

We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase arrangements, and other privately negotiated transactions with financial institutions.


Share Repurchase Activity	Share Repurchase Activity	Three Months Ended				Six Months Ended				Share Repurchase Activity	Three Months Ended				Nine Months Ended
(millions, except per share data)	(millions, except per share data)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020		(millions, except per share data)	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Number of shares purchased	Number of shares purchased	6.6		—		12.7		5.7		Number of shares purchased	8.8		—		21.5		5.7
Average price paid per share	Average price paid per share	$	233.81	$	—	$	213.06	$	107.58	Average price paid per share	$	246.80	$	—	$	226.93	$	107.58
Total investment	Total investment	$	1,535	$	—	$	2,700	$	609	Total investment	$	2,184	$	—	$	4,884	$	609

10. Pension Benefits

We provide pension plan benefits to eligible team members.


Net Pension Benefits Expense		Three Months Ended				Nine Months Ended
(millions)	Classification	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Service cost benefits earned	SG&A	$	25	$	25	$	73	$	76
Interest cost on projected benefit obligation	Net Other (Income) / Expense	24		30		72		89
Expected return on assets	Net Other (Income) / Expense	(60)		(61)		(178)		(182)
Amortization of losses	Net Other (Income) / Expense	28		32		85		96
Amortization of prior service cost	Net Other (Income) / Expense	2		(3)		1		(9)
Settlement charges	Net Other (Income) / Expense	—		1		—		1
Total		$	19	$	24	$	53	$	71


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			11


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

~~10. Pension Benefits~~

~~We provide pension plan benefits to eligible team members.~~

Net Pension Benefits Expense Three Months Ended Six Months Ended
(millions) Classification July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Service cost benefits earned SG&A $ 24 $ 25 $ 48 $ 51
Interest cost on projected benefit obligation Net Other (Income) / Expense 24 29 48 59
Expected return on assets Net Other (Income) / Expense (59) (60) (118) (121)
Amortization of losses Net Other (Income) / Expense 28 32 57 64
Amortization of prior service cost Net Other (Income) / Expense (1) (3) (1) (6)
Total $ 16 $ 23 $ 34 $ 47

11. Accumulated Other Comprehensive Loss


Change in Accumulated Other Comprehensive Loss	Change in Accumulated Other Comprehensive Loss	Cash Flow Hedges		Currency Translation Adjustment				Pension				Total		Change in Accumulated Other Comprehensive Loss	Cash Flow Hedges				Currency Translation Adjustment				Pension				Total
(millions)	(millions)									(millions)
January 30, 2021	January 30, 2021	$	(3)			$	(18)			$	(735)						$	(756)	January 30, 2021		$	(3)			$	(18)			$	(735)	$	(756)
Other comprehensive income before reclassifications, net of tax		1		—				—				1
Other comprehensive income (loss) before reclassifications, net of tax														Other comprehensive income (loss) before reclassifications, net of tax		7				(1)				—				6
Amounts reclassified from AOCI, net of tax	Amounts reclassified from AOCI, net of tax	—		—				42				42		Amounts reclassified from AOCI, net of tax	—				—				63				63
July 31, 2021		$	(2)	$	(18)			$	(693)			$	(713)
October 30, 2021														October 30, 2021	$	4			$	(19)			$	(672)			$	(687)


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			12


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			FINANCIAL SUMMARY			Index to Notes

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Summary

~~Second~~Third quarter 2021 included the following notable items:

•GAAP diluted earnings per share ~~was $3.65.~~were $3.04.

•Adjusted diluted earnings per share ~~was $3.64.~~were $3.03.

•Total revenue increased ~~9.5~~13.3 percent, driven by an increase in comparable sales.

•Comparable sales increased ~~8.9~~12.7 percent, driven primarily by a ~~12.7~~12.9 percent increase in traffic.

◦Comparable stores originated sales grew ~~8.7~~9.7 percent.

◦Comparable digitally originated sales increased ~~9.9~~ 28.9 percent.

•Operating income of ~~$2.5~~$2.0 billion was ~~7.2~~3.9 percent higher than for the comparable prior-year period.

Sales were ~~$24.8~~$25.3 billion for the three months ended ~~July 31,~~October 30, 2021, an increase of ~~$2.1~~$3.0 billion, or ~~9.4~~13.2 percent, from the comparable prior-year period. Cash flow provided by operating activities was ~~$3.4~~$5.6 billion for the ~~six~~nine months ended ~~July 31,~~October 30, 2021, a decrease of ~~$1.7~~$1.4 billion, or ~~(33.1)~~(20.5) percent, from ~~$5.1~~$7.0 billion for the ~~six~~nine months ended ~~August 1,~~October 31, 2020. The drivers of the operating cash flow decrease are described on page 2221.


Earnings Per Share	Earnings Per Share	Three Months Ended						Six Months Ended						Earnings Per Share	Three Months Ended						Nine Months Ended
		July 31, 2021		August 1, 2020		Change		July 31, 2021		August 1, 2020		Change			October 30, 2021		October 31, 2020		Change		October 30, 2021		October 31, 2020		Change
GAAP diluted earnings per share	GAAP diluted earnings per share	$	3.65	$	3.35	8.9	%	$	7.82	$	3.91	100.1	%	GAAP diluted earnings per share	$	3.04	$	2.01	51.6	%	$	10.87	$	5.91	83.9	%
Adjustments	Adjustments	(0.01)		0.03				(0.48)		0.06				Adjustments	(0.01)		0.78				(0.50)		0.83
Adjusted diluted earnings per share	Adjusted diluted earnings per share	$	3.64	$	3.38	7.9	%	$	7.34	$	3.96	85.1	%	Adjusted diluted earnings per share	$	3.03	$	2.79	8.7	%	$	10.37	$	6.75	53.7	%

Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 1918.

We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital allocation effectiveness over time. For the trailing twelve months ended ~~July 31,~~October 30, 2021, after-tax ROIC was ~~31.7~~31.3 percent,, compared with ~~17.2~~19.9 percent for the trailing twelve months ended ~~August 1,~~October 31, 2020. The calculation of ROIC is provided on page 2120.

COVID-19

Since the onset of the COVID-19 pandemic, we have experienced strong comparable sales growth and significant volatility in our sales category and channel ~~mix, including same-day fulfillment options.~~mix.

Supply Chain Disruptions

In recent months, we have seen increasing supply chain disruptions, including country of origin production and port delays. Additionally, trucker and dockworker shortages, a broad-based surge in consumer demand, and other factors have led to industry-wide U.S. port and ground transportation delays. In response, we have taken various actions, including ordering merchandise earlier, securing ocean freight routes, and increased use of air transport for certain merchandise. While our inventory position is over $2 billion higher than a year ago, if we are unable to continue to source enough inventory and move it through our supply chain to our stores on a timely basis, we may experience increased out-of-stocks and lost sales. Some of these supply chain disruptions and resulting actions have resulted in increased costs. The Gross Margin Rate analysis on page 16 provides additional information.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			13


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS			~~Index to Notes~~

Analysis of Results of Operations


Summary of Operating Income	Summary of Operating Income	Three Months Ended						Six Months Ended						Summary of Operating Income	Three Months Ended						Nine Months Ended
(dollars in millions)	(dollars in millions)	July 31, 2021		August 1, 2020		Change		July 31, 2021		August 1, 2020		Change		(dollars in millions)	October 30, 2021		October 31, 2020		Change		October 30, 2021		October 31, 2020		Change
Sales	Sales	$	24,826	$	22,696	9.4	%	$	48,705	$	42,067	15.8	%	Sales	$	25,290	$	22,336	13.2	%	$	73,995	$	64,403	14.9	%
Other revenue	Other revenue	334		279		20.0		652		523		24.8		Other revenue	362		296		22.3		1,014		819		23.9
Total revenue	Total revenue	25,160		22,975		9.5		49,357		42,590		15.9		Total revenue	25,652		22,632		13.3		75,009		65,222		15.0
Cost of sales	Cost of sales	17,280		15,673		10.3		33,996		30,183		12.6		Cost of sales	18,206		15,509		17.4		52,202		45,692		14.2
Selling, general and administrative expenses	Selling, general and administrative expenses	4,849		4,460		8.8		9,358		8,520		9.8		Selling, general and administrative expenses	4,859		4,647		4.6		14,217		13,167		8.0
Depreciation and amortization (exclusive of depreciation included in cost of sales)	Depreciation and amortization (exclusive of depreciation included in cost of sales)	564		542		4.0		1,162		1,119		3.9		Depreciation and amortization (exclusive of depreciation included in cost of sales)	577		541		6.4		1,739		1,660		4.8
Operating income	Operating income	$	2,467	$	2,300	7.2	%	$	4,841	$	2,768	74.9	%	Operating income	$	2,010	$	1,935	3.9	%	$	6,851	$	4,703	45.7	%


Rate Analysis	Rate Analysis	Three Months Ended				Six Months Ended				Rate Analysis	Three Months Ended				Nine Months Ended
		July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020			October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Gross margin rate	Gross margin rate	30.4	%	30.9	%	30.2	%	28.3	%	Gross margin rate	28.0	%	30.6	%	29.5	%	29.1	%
SG&A expense rate	SG&A expense rate	19.3		19.4		19.0		20.0		SG&A expense rate	18.9		20.5		19.0		20.2
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)	Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)	2.2		2.4		2.4		2.6		Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)	2.2		2.4		2.3		2.5
Operating income margin rate	Operating income margin rate	9.8		10.0		9.8		6.5		Operating income margin rate	7.8		8.5		9.1		7.2

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.

Sales

Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage. We use comparable sales to evaluate the performance of our stores and digital channel sales by measuring the change in sales for a period over the comparable prior-year period of equivalent length. Comparable sales include all sales—except sales from stores open less than 13 months, digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies. Digitally originated sales include all sales initiated through mobile applications and our websites. Our stores fulfill the majority of digitally originated sales, including shipment from stores to guests, store Order Pickup or Drive Up, and delivery via our wholly owned subsidiary, Shipt. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.

Sales growth—from both comparable sales and new stores—represents an important driver of our long-term profitability. We expect that comparable sales growth will drive the majority of our total sales growth. We believe that our ability to successfully differentiate our guests’ shopping experience through a careful combination of merchandise assortment, price, convenience, guest experience, and other factors will, over the long-term, drive both increasing shopping frequency (traffic) and the amount spent each visit (average transaction amount).


Comparable Sales	Three Months Ended				Nine Months Ended
	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Comparable sales change	12.7	%	20.7	%	14.4	%	18.7	%
Drivers of change in comparable sales
Number of transactions	12.9		4.5		14.0		2.6
Average transaction amount	(0.2)		15.6		0.3		15.7


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			14


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS			~~Index to Notes~~


Comparable Sales by Channel	Three Months Ended				Nine Months Ended
	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Stores originated comparable sales change	9.7	%	9.9	%	11.9	%	7.3	%
Digitally originated comparable sales change	28.9		154.5		27.8		163.9

The increase in sales during the three and six months ended July 31, 2021, is due to a comparable sales increase of 8.9 percent and 15.3 percent, respectively, and the contribution from new stores. The COVID-19 pandemic has affected the amount and mix of sales across channels and categories.


Sales by Channel	Three Months Ended				Nine Months Ended
	October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Stores originated	82.4	%	84.3	%	82.3	%	83.9	%
Digitally originated	17.6		15.7		17.7		16.1
Total	100	%	100	%	100	%	100	%

Comparable Sales Three Months Ended Six Months Ended
July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Comparable sales change 8.9 % 24.3 % 15.3 % 17.7 %
Drivers of change in comparable sales
Number of transactions 12.7 4.6 14.8 1.6
Average transaction amount (3.4) 18.8 0.5 15.8

Comparable Sales by Channel Three Months Ended Six Months Ended
July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Stores originated comparable sales change 8.7 % 10.9 % 13.0 % 6.0 %
Digitally originated comparable sales change 9.9 195.4 27.3 168.9

Sales by Channel Three Months Ended Six Months Ended
July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020
Stores originated 83.0 % 82.8 % 82.3 % 83.7 %
Digitally originated 17.0 17.2 17.7 16.3
Total 100 % 100 % 100 % 100 %


Sales by Fulfillment Channel	Sales by Fulfillment Channel	Three Months Ended				Six Months Ended				Sales by Fulfillment Channel	Three Months Ended				Nine Months Ended
		July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020			October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Stores	Stores	96.6	%	96.0	%	96.4	%	96.3	%	Stores	96.7	%	96.1	%	96.5	%	96.2	%
Other	Other	3.4		4.0		3.6		3.7		Other	3.3		3.9		3.5		3.8
Total	Total	100	%	100	%	100	%	100	%	Total	100	%	100	%	100	%	100	%

Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Shipt.


Sales by Product Category	Sales by Product Category	Three Months Ended				Six Months Ended				Sales by Product Category	Three Months Ended				Nine Months Ended
		July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020			October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Apparel and accessories	Apparel and accessories	19	%	18	%	18	%	16	%	Apparel and accessories	17	%	18	%	18	%	17	%
Beauty and household essentials	Beauty and household essentials	27		27		27		29		Beauty and household essentials	28		27		27		28
Food and beverage	Food and beverage	19		19		20		21		Food and beverage	20		20		20		20
Hardlines	Hardlines	16		16		16		15		Hardlines	15		15		16		16
Home furnishings and décor	Home furnishings and décor	19		20		19		19		Home furnishings and décor	20		20		19		19
Total	Total	100	%	100	%	100	%	100	%	Total	100	%	100	%	100	%	100	%

The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix and the transfer of sales to new stores, makes further analysis of sales metrics infeasible.


~~TARGET CORPORATION~~						~~Q2 2021 Form 10-Q~~			15


			~~MANAGEMENT'S DISCUSSION AND ANALYSIS~~			~~Table of Contents~~
			~~ANALYSIS OF OPERATIONS~~			~~Index to Notes~~

We monitor the percentage of purchases that are paid for using RedCards (RedCard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on RedCards are also incremental sales for Target. Guests receive a 5 percent discount on virtually all purchases when they use a RedCard at Target. RedCard sales increased for the three and ~~six~~nine months ended ~~July 31,~~October 30, 2021, and ~~August 1,~~October 31, 2020; however, RedCard penetration declined as total Sales increased at a faster pace.


RedCard Penetration	RedCard Penetration	Three Months Ended				Six Months Ended				RedCard Penetration	Three Months Ended				Nine Months Ended
		July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020			October 30, 2021		October 31, 2020		October 30, 2021		October 31, 2020
Target Debit Card	Target Debit Card	11.6	%	11.8	%	11.9	%	12.2	%	Target Debit Card	11.7	%	12.2	%	11.8	%	12.2	%
Target Credit Cards	Target Credit Cards	8.7		8.7		8.6		9.2		Target Credit Cards	8.9		9.3		8.7		9.2
Total RedCard Penetration	Total RedCard Penetration	20.3	%	20.5	%	20.4	%	21.4	%	Total RedCard Penetration	20.7	%	21.5	%	20.5	%	21.4	%

Note: Amounts may not foot due to rounding.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			1615


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS			~~Index to Notes~~

Gross Margin Rate

For the three months ended ~~July 31,~~October 30, 2021, our gross margin rate was ~~30.4~~28.0 percent compared with ~~30.9~~30.6 percent in the comparable prior-year period. This decrease reflected the net impact of

•pressure from higher merchandise and freight costs and higher inventory shrink, partially offset by the benefit of historically low promotional and clearance markdown rates;

•~~the prior-year rate benefit from a second quarter 2020 change~~supply chain pressure related to increased compensation and headcount in our ~~returns estimate for sales during the temporary returns suspension period;~~distribution centers; and

•favorable ~~category~~ mix ~~reflecting strength~~ in the relative growth rates of higher and lower margin categories.

For the nine months ended October 30, 2021, our ~~higher-margin categories~~gross margin rate was 29.5 percent compared with 29.1 percent in the comparable prior-year period. This increase reflected the net impact of

•favorable mix in the relative ~~to our lower-margin~~growth rates of higher and lower margin categories;

•higher merchandise and freight costs partially offset by historically low promotional and clearance markdown rates; and

•supply chain pressure related to increased compensation and headcount in our distribution centers, partially offset by the small net benefit of a higher percentage of digital sales fulfilled through our lower-cost same-day fulfillment options.

Selling, General, and Administrative Expense Rate

For the ~~six~~three months ended ~~July 31,~~October 30, 2021, our ~~gross margin~~SG&A expense rate was ~~30.2~~18.9 percent compared with ~~28.3~~20.5 percent infor the ~~comparable prior-year pe~~three months ended October 31, 2020. For the ~~riod. This increase reflected~~nine months ended October 30, 2021, our SG&A expense rate was 19.0 percent compared with 20.2 percent for the nine months ended October 31, 2020. The decreases reflect the net leverage benefit from strong revenue growth.

•~~merchandising benefits, including exceptionally low promotional and clearance markdown rates, partially offset by higher merchandise and freight costs;~~

•~~favorable category mix, reflecting strength in our higher-margin categories relative to our lower-margin categories; and~~

•~~the benefit of a higher percentage of digital sales fulfilled through our lower-cost same-day fulfillment options.~~


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			1716


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS			~~Index to Notes~~

~~Selling, General, and Administrative Expense Rate~~

For the three months ended July 31, 2021, our SG&A expense rate was 19.3 percent compared with 19.4 percent for the three months ended August 1, 2020. For the six months ended July 31, 2021, our SG&A expense rate was 19.0 percent compared with 20.0 percent for the six months ended August 1, 2020. The decreases reflect the continued leverage benefit from strong revenue growth, offset by pressure from increases in some expense categories—such as marketing—from lower-than-normal levels in 2020.

Store Data


Change in Number of Stores	Change in Number of Stores	Three Months Ended		Six Months Ended		Change in Number of Stores	Three Months Ended		Nine Months Ended
		July 31, 2021	August 1, 2020	July 31, 2021	August 1, 2020		October 30, 2021	October 31, 2020	October 30, 2021	October 31, 2020
Beginning store count	Beginning store count	1,909	1,871	1,897	1,868	Beginning store count	1,909	1,871	1,897	1,868
Opened	Opened	2	—	14	3	Opened	15	27	29	30
Closed	Closed	(2)	—	(2)	—	Closed	—	(1)	(2)	(1)

Ending store count	Ending store count	1,909	1,871	1,909	1,871	Ending store count	1,924	1,897	1,924	1,897


Number of Stores and Retail Square Feet	Number of Stores and Retail Square Feet	Number of Stores			Retail Square Feet (a)			Number of Stores and Retail Square Feet	Number of Stores			Retail Square Feet (a)
		July 31, 2021	January 30, 2021	August 1, 2020	July 31, 2021	January 30, 2021	August 1, 2020		October 30, 2021	January 30, 2021	October 31, 2020	October 30, 2021	January 30, 2021	October 31, 2020
170,000 or more sq. ft.	170,000 or more sq. ft.	273	273	272	48,798	48,798	48,613	170,000 or more sq. ft.	274	273	273	49,071	48,798	48,798
50,000 to 169,999 sq. ft.	50,000 to 169,999 sq. ft.	1,510	1,509	1,505	189,624	189,508	189,224	50,000 to 169,999 sq. ft.	1,515	1,509	1,509	190,116	189,508	189,508
49,999 or less sq. ft.	49,999 or less sq. ft.	126	115	94	3,709	3,342	2,745	49,999 or less sq. ft.	135	115	115	3,952	3,342	3,342
Total	Total	1,909	1,897	1,871	242,131	241,648	240,582	Total	1,924	1,897	1,897	243,139	241,648	241,648

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

Other Performance Factors

Net Interest Expense

Net interest expense was ~~$104~~$105 million and ~~$212~~$317 million for the three and ~~six~~nine months ended ~~July 31,~~October 30, 2021, respectively, compared with ~~$122~~$632 million and ~~$239~~$871 million, respectively, in the comparable prior-year period. The decrease in net interest expense was primarily due to ~~lower average~~a loss on early retirement of debt ~~balances~~of $512 million for the three and ~~six~~nine months ended ~~July~~October 31, ~~2021,~~2020, compared with the ~~prior-year~~current-year periods.

Net Other (Income) / Expense

Net Other (Income) / Expense was ~~$(7)~~$(6) million and ~~$(350)~~$(356) million for the three and ~~six~~nine months ended ~~July 31,~~October 30, 2021, respectively, compared with ~~$(11)~~$5 million and ~~$11~~$16 million, respectively, in the comparable prior-year periods. The ~~increase for the six~~nine months ended ~~July 31,~~October 30, 2021, ~~was due to~~included the $335 million gain on the February 2021 sale of Dermstore. Note 3 to the Financial Statements provides additional information.

Provision for Income Taxes

Our effective income tax rate for the three and ~~six~~nine months ended ~~July 31,~~October 30, 2021, was ~~23.4~~22.1 percent and ~~21.4~~21.6 percent, respectively, compared with ~~22.8~~21.9 percent and ~~21.6~~21.7 percent, respectively, in the comparable prior-year periods, reflecting significantly higher earnings during the current-year periods which diluted the tax rate impact of fixed deductions and discrete items. The effective tax rate impact of higher earnings for the six months ended July 31, 2021, was offset by the resolution of certain income tax matters during the first quarter.periods.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			1817


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			RECONCILIATION OF NON-GAAP FINANCIAL MEASURES			Index to Notes

Reconciliation of Non-GAAP Financial Measures to GAAP Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (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 operations. This measure is not in accordance with, or an alternative to, U.S. GAAP. The most comparable GAAP measure is diluted earnings per share. 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	Reconciliation of Non-GAAP Adjusted EPS	Three Months Ended												Reconciliation of Non-GAAP Adjusted EPS	Three Months Ended
		July 31, 2021						August 1, 2020							October 30, 2021						October 31, 2020
(millions, except per share data)	(millions, except per share data)	Pretax		Net of Tax		Per Share Amounts		Pretax		Net of Tax		Per Share Amounts		(millions, except per share data)	Pretax		Net of Tax		Per Share Amounts		Pretax		Net of Tax		Per Share Amounts
GAAP diluted earnings per share	GAAP diluted earnings per share					$	3.65					$	3.35	GAAP diluted earnings per share					$	3.04					$	2.01
Adjustments	Adjustments													Adjustments
Loss on debt extinguishment														Loss on debt extinguishment	$	—	$	—	$	—	$	512	$	379	$	0.75

Gain on investment (a)		$	—	$	—	$	—	$	(9)	$	(6)	$	(0.01)
Loss on investment (a)														Loss on investment (a)	—		—		—		8		9		0.02

Other (b)	Other (b)	(5)		(4)		(0.01)		25		18		0.04		Other (b)	(9)		(7)		(0.01)		8		6		0.01
Adjusted diluted earnings per share	Adjusted diluted earnings per share					$	3.64					$	3.38	Adjusted diluted earnings per share					$	3.03					$	2.79


Reconciliation of Non-GAAP Adjusted EPS	Reconciliation of Non-GAAP Adjusted EPS	Six Months Ended												Reconciliation of Non-GAAP Adjusted EPS	Nine Months Ended
		July 31, 2021						August 1, 2020							October 30, 2021						October 31, 2020
(millions, except per share data)	(millions, except per share data)	Pretax		Net of Tax		Per Share Amounts		Pretax		Net of Tax		Per Share Amounts		(millions, except per share data)	Pretax		Net of Tax		Per Share Amounts		Pretax		Net of Tax		Per Share Amounts
GAAP diluted earnings per share	GAAP diluted earnings per share					$	7.82					$	3.91	GAAP diluted earnings per share					$	10.87					$	5.91
Adjustments	Adjustments													Adjustments

Gain on Dermstore sale	Gain on Dermstore sale	$	(335)	$	(269)	$	(0.54)	$	—	$	—	$	—	Gain on Dermstore sale	$	(335)	$	(269)	$	(0.54)	$	—	$	—	$	—
Loss on debt extinguishment														Loss on debt extinguishment	—		—		—		512		379		0.75
Loss on investment (a)	Loss on investment (a)	—		—		—		12		9		0.02		Loss on investment (a)	—		—		—		19		18		0.03

Other (b)	Other (b)	36		27		0.05		25		18		0.04		Other (b)	27		20		0.04		33		24		0.05
Adjusted diluted earnings per share	Adjusted diluted earnings per share					$	7.34					$	3.96	Adjusted diluted earnings per share					$	10.37					$	6.75

Note: Amounts may not foot due to rounding.

(a)Represented a ~~(gain) /~~ loss on our investment in Casper Sleep Inc., which was not core to our operations. We sold this investment during the fourth quarter of 2020.

(b)~~Includes civil unrest-related losses, net of associated insurance recoveries, and headquarters office space impairments,~~Other items unrelated to current period operations, none of which were individually significant.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			1918


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			RECONCILIATION OF NON-GAAP FINANCIAL MEASURES			Index to Notes

Earnings before interest expense and income taxes (EBIT) and earnings 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 to, GAAP. The most comparable GAAP measure is net earnings. 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	EBIT and EBITDA	Three Months Ended						Six Months Ended						EBIT and EBITDA	Three Months Ended						Nine Months Ended
(dollars in millions)	(dollars in millions)	July 31, 2021		August 1, 2020		Change		July 31, 2021		August 1, 2020		Change		(dollars in millions)	October 30, 2021		October 31, 2020		Change		October 30, 2021		October 31, 2020		Change
Net earnings	Net earnings	$	1,817	$	1,690	7.4	%	$	3,914	$	1,974	98.2	%	Net earnings	$	1,488	$	1,014	46.8	%	$	5,402	$	2,988	80.8	%
+ Provision for income taxes	+ Provision for income taxes	553		499		11.3		1,065		544		95.9		+ Provision for income taxes	423		284		48.7		1,488		828		79.7
+ Net interest expense	+ Net interest expense	104		122		(15.5)		212		239		(11.7)		+ Net interest expense	105		632		(83.2)		317		871		(63.5)
EBIT	EBIT	$	2,474	$	2,311	7.1	%	$	5,191	$	2,757	88.2	%	EBIT	$	2,016	$	1,930	4.5	%	$	7,207	$	4,687	53.8	%
+ Total depreciation and amortization (a)	+ Total depreciation and amortization (a)	633		604		4.9		1,300		1,245		4.5		+ Total depreciation and amortization (a)	652		603		7.9		1,952		1,848		5.6
EBITDA	EBITDA	$	3,107	$	2,915	6.6	%	$	6,491	$	4,002	62.2	%	EBITDA	$	2,668	$	2,533	5.3	%	$	9,159	$	6,535	40.2	%

(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2019


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			RECONCILIATION OF NON-GAAP FINANCIAL MEASURES			Index to Notes

We have also disclosed after-tax 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	After-Tax Return on Invested Capital					After-Tax Return on Invested Capital
(dollars in millions)	(dollars in millions)					(dollars in millions)
		Trailing Twelve Months					Trailing Twelve Months
Numerator	Numerator	July 31, 2021		August 1, 2020		Numerator	October 30, 2021		October 31, 2020
Operating income	Operating income	$	8,611	$	4,968	Operating income	$	8,687	$	5,901
+ Net other income / (expense)	+ Net other income / (expense)	346		(28)		+ Net other income / (expense)	358		(46)
EBIT	EBIT	8,957		4,940		EBIT	9,045		5,855
+ Operating lease interest (a)	+ Operating lease interest (a)	84		87		+ Operating lease interest (a)	85		87
- Income taxes (b)	- Income taxes (b)	1,918		1,076		- Income taxes (b)	1,947		1,277
Net operating profit after taxes	Net operating profit after taxes	$	7,123	$	3,951	Net operating profit after taxes	$	7,183	$	4,665


Denominator	Denominator	July 31, 2021			August 1, 2020			August 3, 2019		Denominator	October 30, 2021			October 31, 2020			November 2, 2019
Current portion of long-term debt and other borrowings	Current portion of long-term debt and other borrowings	$	1,190		$	109		$	1,153	Current portion of long-term debt and other borrowings	$	1,176		$	131		$	1,159
+ Noncurrent portion of long-term debt	+ Noncurrent portion of long-term debt	11,589			14,188			10,365		+ Noncurrent portion of long-term debt	11,586			12,490			10,513
+ Shareholders' investment	+ Shareholders' investment	14,860			12,578			11,836		+ Shareholders' investment	13,803			13,319			11,545
+ Operating lease liabilities (c)	+ Operating lease liabilities (c)	2,695			2,448			2,285		+ Operating lease liabilities (c)	2,737			2,400			2,390
- Cash and cash equivalents	- Cash and cash equivalents	7,368			7,284			1,656		- Cash and cash equivalents	5,753			5,996			969
Invested capital	Invested capital	$	22,966		$	22,039		$	23,983	Invested capital	$	23,549		$	22,344		$	24,638
Average invested capital (d)	Average invested capital (d)	$	22,502		$	23,011				Average invested capital (d)	$	22,947		$	23,491

After-tax return on invested capital	After-tax return on invested capital	31.7		%	17.2		%			After-tax return on invested capital	31.3		%	19.9		%

(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, which were~~21.2~~ 21.3 percent and ~~21.4~~21.5 percent for the trailing twelve months ended ~~July 31,~~October 30, 2021, and ~~August 1,~~October 31, 2020, respectively. For the trailing twelve months ended ~~July 31,~~October 30, 2021, and ~~August 1,~~October 31, 2020, includes tax effect of $1.9 billion and ~~$1.1~~$1.3 billion, respectively, related to EBIT, and $18 million and $19 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, respectively.

(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.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2120


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF FINANCIAL CONDITION			Index to Notes

Analysis of Financial Condition

Liquidity and Capital Resources

Capital Allocation

We follow a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to profitably grow our business, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.

Our cash and cash equivalents balance was ~~$7.4~~$5.8 billion, $8.5 billion, and ~~$7.3~~$6.0 billion as of ~~July 31,~~October 30, 2021, January 30, 2021, and ~~August 1,~~October 31, 2020, respectively. Our cash and cash equivalents balance includes short-term investments of ~~$6.4~~$4.8 billion, $7.6 billion, and ~~$6.4~~$5.1 billion as of ~~July 31,~~October 30, 2021, January 30, 2021, and ~~August 1,~~October 31, 2020, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place dollar limits on our investments in individual funds or instruments.

Operating Cash Flows

Cash flows provided by operating activities were ~~$3.4~~$5.6 billion for the ~~six~~nine months ended ~~July 31,~~October 30, 2021, compared with ~~$5.1~~$7.0 billion for the ~~six~~nine months ended ~~August 1,~~October 31, 2020. For the ~~six~~nine months ended ~~July 31,~~October 30, 2021, operating cash flows reflect stronger operating results, offset by increased inventory investment and ~~higher net settlement of~~lower accounts payable leverage, compared with the ~~six~~nine months ended ~~August 1,~~October 31, 2020. Additionally, operating cash flows for 2021 reflect a ~~$1.2~~$1.1 billion increase in income tax payments.

Inventory

Inventory was ~~$11.3~~$15.0 billion as of ~~July 31,~~October 30, 2021, compared with $10.7 billion and ~~$8.9~~$12.7 billion at January 30, 2021, and ~~August 1,~~October 31, 2020, ~~respectively.~~ respectively. The increase over the balance as of ~~August 1,~~October 31, 2020, reflects efforts to align inventory with sales trends. ~~Additionally, the lower inventory balance as of August 1, 2020, reflected the impact of elevated sell-through rates in longer lead-time merchandise categories.~~

Investing Cash Flows

Investing cash flows included capital investments of ~~$1.3~~$2.5 billion and ~~$1.4~~$2.0 billion for the ~~six~~nine months ended ~~July 31,~~October 30, 2021, and ~~August 1,~~October 31, 2020, respectively. ~~We now expect full-year capital investments of approximately $3.5 billion compared with our previous expectation of $4 billion, reflecting~~For the ~~re-timing of some projects into next year. For the six~~nine months ended ~~July~~October 31, 2021, investing cash flows includes $356 million of proceeds from the sale of Dermstore.

Dividends

We paid dividends totaling ~~$336~~$440 million ($0.90 per share) and $1.1 billion ($2.26 per share) for the three and nine months ended October 30, 2021, respectively, and $340 million ($0.68 per share) and ~~$676 million~~$1.0 billion ($~~1.36~~2.00 per share) for the three and ~~six~~nine months ended ~~July~~October 31, ~~2021, respectively, and $330 million ($0.66 per share) and $662 million ($1.32 per share) for the three and six months ended August 1,~~ 2020, respectively, a per share increase of ~~3.0 percent.~~32.4 percent and 13.0 percent, respectively. We declared dividends totaling ~~$445~~$439 million ($0.90 per share) during the ~~second~~third quarter of 2021 and ~~$344~~$346 million ($0.68 per share) during the ~~second~~third quarter of 2020, a per share increase of 32.4 percent. We have paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future.

Share Repurchase

We returned ~~$2.7~~$4.9 billion to shareholders through share repurchase during the ~~six~~nine months ended ~~July 31,~~October 30, 2021. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 9 to the Financial Statements for more information.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2221


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF FINANCIAL CONDITION			Index to Notes

Financing

Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings. As of ~~July 31,~~October 30, 2021, our credit ratings were as follows:


Credit Ratings	Moody’s	Standard and Poor’s	Fitch
Long-term debt	A2	A	A
Commercial paper	P-1	A-1	F1

If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically, and there is no guarantee our current credit ratings will remain the same as described above. ~~Fitch raised our long-term debt rating from A- to A during the three months ended July 31, 2021.~~

We obtain short-term financing from time to time under our commercial paper program. No balances were outstanding at any time during the ~~six~~nine months ended ~~July 31,~~October 30, 2021, and ~~August 1,~~October 31, 2020. ~~We have additional liquidity through~~In October 2021, we obtained a committed ~~$2.5~~$3.0 billion unsecured revolving credit facility that ~~expires~~will expire in October 2026. This new facility replaced our $2.5 billion unsecured revolving credit facility that was set to expire in October 2023. No balances were outstanding under either credit facility at any time during 2021 or 2020.

Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of ~~July 31,~~October 30, 2021, no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control and (ii) our long-term credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.

We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future. We continue to anticipate ample access to commercial paper and long-term financing.

New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2322


			MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL INFORMATION			Table of Contents
			FORWARD LOOKING STATEMENTS & CONTROLS AND PROCEDURES			Index to Notes

Forward-Looking Statements

This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or similar words. The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the continued execution of our share repurchase program, our expected capital expenditures and new lease commitments, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected return on plan assets, the expected outcome of, and adequacy of our reserves for, claims, litigation and the resolution of tax matters, the expected impact of changes in information technology systems, future responses to and effects of the COVID-19 pandemic, and changes in our assumptions and expectations.

All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors included in Part I, Item 1A, Risk Factors of our Form 10-K for the fiscal year ended January 30, 2021, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk of our Form 10-K for the fiscal year ended January 30, 2021.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, the following changes materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:

•We are in the process of a broad multi-year migration of many mainframe-based systems and middleware products to a modern platform, including systems and processes supporting inventory, sales, and supply chain-related transactions.

During the most recently completed fiscal quarter, no other changes in our internal control over financial reporting materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2423


			SUPPLEMENTAL INFORMATION			Table of Contents
						Index to Notes

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

No response is required under Item 103 of Regulation S-K, nor have there been any material developments for any previously reported legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors described in Part I, Item 1A, Risk Factors of our Form 10-K for the fiscal year ended January 30, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 19, 2019, our Board of Directors authorized a $5 billion share repurchase program ~~with no stated expiration~~ (2019 Program). ~~We began repurchasing shares under the authorization during the first quarter of 2020.~~ On August 11, 2021, our Board of Directors authorized a new, $15 billion share repurchase program with no stated expiration (2021 Program). We ~~expect to begin~~began repurchasing shares under the 2021 Program during the third quarter of 2021 upon completion of the 2019 Program. Under the 2019 Program, we ~~have~~ repurchased ~~17.2~~24.5 million shares of common stock at an average price of $~~184.62~~203.82, for a total investment of $~~3.2~~5.0 billion. Under the 2021 Program, we repurchased 1.6 million shares of common stock at an average price of $235.22, for a total investment of $368 million. The table below presents information with respect to Target common stock purchases made during the three months ended ~~July 31,~~October 30, 2021, by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.


Share Repurchase Activity	Share Repurchase Activity	Total Number of Shares Purchased	Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Programs		Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs				Share Repurchase Activity	Total Number of Shares Purchased			Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Programs		Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs
Period	Period										Period
May 2, 2021 through May 29, 2021
August 1, 2021 through August 28, 2021													August 1, 2021 through August 28, 2021
Open market and privately negotiated purchases	Open market and privately negotiated purchases	1,548,804			$	211.66		1,548,804			$	3,023,026,963			Open market and privately negotiated purchases	2,952,200			$	255.68		2,952,200			$	16,061,054,829
May 30, 2021 through July 3, 2021
August 29, 2021 through October 2, 2021													August 29, 2021 through October 2, 2021
Open market and privately negotiated purchases	Open market and privately negotiated purchases	2,934,662	233.31				2,934,662		2,338,345,656				Open market and privately negotiated purchases	4,380,548			244.84				4,380,548		14,988,537,728
July 4, 2021 through July 31, 2021
October 3, 2021 through October 30, 2021													October 3, 2021 through October 30, 2021
Open market and privately negotiated purchases	Open market and privately negotiated purchases	2,081,640	250.98				2,081,640		1,815,885,962				Open market and privately negotiated purchases	1,517,041			235.18				1,517,041		14,631,757,193
Total	Total	6,565,106	$	233.81			6,565,106		$	1,815,885,962			Total	8,849,789			$	246.80			8,849,789		$	14,631,757,193

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2524


			SUPPLEMENTAL INFORMATION			Table of Contents
						Index to Notes

Item 6. Exhibits


(3)A						Amended and Restated Articles of Incorporation (as amended through June 9, 2010) (1)

(3)B						Bylaws (as amended through March 27, 2020) (2)

(10)L						Target Corporation DDCP (2022 Plan Statement) (as amended and restated effective January 1, 2022)

(10)DD						Five-Year Credit Agreement dated as of October 18, 2021 among Target Corporation, Bank of America, N.A. as Administrative Agent and the Banks listed therein

(31)A						Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(31)B						Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32)A						Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32)B						Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1) Incorporated by reference to Exhibit (3)A to the Registrant’s Form 8-K Report filed June 10, 2010.

(2) Incorporated by reference to Exhibit (3)B to the Registrant’s Form 8-K Report filed April 2, 2020.


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2625


			SUPPLEMENTAL INFORMATION			Table of Contents
						Index to Notes

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TARGET CORPORATION



Dated: ~~August 27,~~November 24, 2021	By:	/s/ Michael J. Fiddelke
			Michael J. Fiddelke
			Executive Vice President and
			Chief Financial Officer
			(Duly Authorized Officer and
			Principal Financial Officer)


		/s/ Robert M. Harrison
			Robert M. Harrison
			Senior Vice President, Chief Accounting Officer
			and Controller


TARGET CORPORATION						Q2Q3 2021 Form 10-Q			2726


INDEX TO NOTES

Notes to Consolidated Financial Statements		7
Note 1	Accounting Policies	8
Note 2	Coronavirus (COVID-19)	8
Note 3	Dermstore Sale	8
Note 4	Revenues	9
Note 5	Fair Value Measurements	10
Note 6	Property and Equipment	10
Note 7	~~Derivative Financial Instruments~~Commercial Paper and Long-Term Debt	10
Note 8	~~Income Taxes~~Derivative Financial Instruments	1110
Note 9	Share Repurchase	11
Note 10	Pension Benefits	1211
Note 11	Accumulated Other Comprehensive Loss	12