

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 30,~~October 29, 2022

☐ 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)

612-304-6073

(Registrant’s telephone number, including area code)

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

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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" 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 ☒

Total shares of common stock, par value $0.0833, outstanding at ~~August 19,~~November 18, 2022, were ~~460,262,630.~~ 460,310,088.


						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	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2223
Item 4.	Controls and Procedures	2223

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	2324
Item 1A.	Risk Factors	2324
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2324
Item 3.	Defaults Upon Senior Securities	2324
Item 4.	Mine Safety Disclosures	2324
Item 5.	Other Information	2324
Item 6.	Exhibits	2425

Signatures		2526


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


Consolidated Statements of Operations	Consolidated Statements of Operations									Consolidated Statements of Operations
		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
(millions, except per share data) (unaudited)	(millions, except per share data) (unaudited)	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021		(millions, except per share data) (unaudited)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Sales	Sales	$	25,653	$	24,826	$	50,483	$	48,705	Sales	$	26,122	$	25,290	$	76,605	$	73,995
Other revenue	Other revenue	384		334		724		652		Other revenue	396		362		1,120		1,014
Total revenue	Total revenue	26,037		25,160		51,207		49,357		Total revenue	26,518		25,652		77,725		75,009
Cost of sales	Cost of sales	20,142		17,280		38,603		33,996		Cost of sales	19,680		18,206		58,283		52,202
Selling, general and administrative expenses	Selling, general and administrative expenses	5,002		4,849		9,764		9,358		Selling, general and administrative expenses	5,219		4,859		14,983		14,217
Depreciation and amortization (exclusive of depreciation included in cost of sales)	Depreciation and amortization (exclusive of depreciation included in cost of sales)	572		564		1,173		1,162		Depreciation and amortization (exclusive of depreciation included in cost of sales)	597		577		1,770		1,739
Operating income	Operating income	321		2,467		1,667		4,841		Operating income	1,022		2,010		2,689		6,851
Net interest expense	Net interest expense	112		104		224		212		Net interest expense	125		105		349		317
Net other (income) / expense	Net other (income) / expense	(8)		(7)		(23)		(350)		Net other (income) / expense	(12)		(6)		(35)		(356)
Earnings before income taxes	Earnings before income taxes	217		2,370		1,466		4,979		Earnings before income taxes	909		1,911		2,375		6,890
Provision for income taxes	Provision for income taxes	34		553		274		1,065		Provision for income taxes	197		423		471		1,488

Net earnings	Net earnings	$	183	$	1,817	$	1,192	$	3,914	Net earnings	$	712	$	1,488	$	1,904	$	5,402

Basic earnings per share	Basic earnings per share	$	0.40	$	3.68	$	2.57	$	7.89	Basic earnings per share	$	1.55	$	3.07	$	4.11	$	10.97

Diluted earnings per share	Diluted earnings per share	$	0.39	$	3.65	$	2.55	$	7.82	Diluted earnings per share	$	1.54	$	3.04	$	4.09	$	10.87
Weighted average common shares outstanding	Weighted average common shares outstanding									Weighted average common shares outstanding
Basic	Basic	461.5		493.1		463.8		495.8		Basic	460.3		484.8		462.6		492.2
Diluted	Diluted	463.6		497.5		466.8		500.4		Diluted	462.5		489.4		465.3		496.8
Antidilutive shares	Antidilutive shares	1.3		—		1.0		—		Antidilutive shares	1.3		—		1.1		—

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2022 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 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021		(millions) (unaudited)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Net earnings	Net earnings	$	183	$	1,817	$	1,192	$	3,914	Net earnings	$	712	$	1,488	$	1,904	$	5,402
Other comprehensive income, net of tax	Other comprehensive income, net of tax									Other comprehensive income, net of tax
Pension benefit liabilities	Pension benefit liabilities	11		20		22		42		Pension benefit liabilities	11		21		33		63
Cash flow hedges and currency translation adjustment	Cash flow hedges and currency translation adjustment	(28)		(8)		162		1		Cash flow hedges and currency translation adjustment	150		5		312		6
Other comprehensive income	Other comprehensive income	(17)		12		184		43		Other comprehensive income	161		26		345		69
Comprehensive income	Comprehensive income	$	166	$	1,829	$	1,376	$	3,957	Comprehensive income	$	873	$	1,514	$	2,249	$	5,471

See accompanying Notes to Consolidated Financial ~~Statements~~Statements.


TARGET CORPORATION						Q2Q3 2022 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 30, 2022		January 29, 2022		July 31, 2021		(millions, except footnotes) (unaudited)	October 29, 2022		January 29, 2022		October 30, 2021
Assets	Assets							Assets
Cash and cash equivalents	Cash and cash equivalents	$	1,117	$	5,911	$	7,368	Cash and cash equivalents	$	954	$	5,911	$	5,753
Inventory	Inventory	15,320		13,902		11,259		Inventory	17,117		13,902		14,958
Other current assets	Other current assets	2,016		1,760		1,604		Other current assets	2,322		1,760		1,865
Total current assets	Total current assets	18,453		21,573		20,231		Total current assets	20,393		21,573		22,576
Property and equipment	Property and equipment							Property and equipment
Land	Land	6,161		6,164		6,148		Land	6,214		6,164		6,146
Buildings and improvements	Buildings and improvements	33,694		32,985		32,133		Buildings and improvements	34,279		32,985		32,478
Fixtures and equipment	Fixtures and equipment	6,744		6,407		5,892		Fixtures and equipment	7,184		6,407		6,144
Computer hardware and software	Computer hardware and software	2,684		2,505		2,260		Computer hardware and software	2,899		2,505		2,447
Construction-in-progress	Construction-in-progress	2,245		1,257		944		Construction-in-progress	2,358		1,257		1,302
Accumulated depreciation	Accumulated depreciation	(21,708)		(21,137)		(20,133)		Accumulated depreciation	(22,013)		(21,137)		(20,602)
Property and equipment, net	Property and equipment, net	29,820		28,181		27,244		Property and equipment, net	30,921		28,181		27,915
Operating lease assets	Operating lease assets	2,542		2,556		2,503		Operating lease assets	2,596		2,556		2,539
Other noncurrent assets	Other noncurrent assets	1,655		1,501		1,407		Other noncurrent assets	1,705		1,501		1,381
Total assets	Total assets	$	52,470	$	53,811	$	51,385	Total assets	$	55,615	$	53,811	$	54,411
Liabilities and shareholders’ investment	Liabilities and shareholders’ investment							Liabilities and shareholders’ investment
Accounts payable	Accounts payable	$	14,891	$	15,478	$	12,632	Accounts payable	$	15,438	$	15,478	$	16,250
Accrued and other current liabilities	Accrued and other current liabilities	5,905		6,098		5,600		Accrued and other current liabilities	6,138		6,098		5,925
Current portion of long-term debt and other borrowings	Current portion of long-term debt and other borrowings	1,649		171		1,190		Current portion of long-term debt and other borrowings	2,207		171		1,176
Total current liabilities	Total current liabilities	22,445		21,747		19,422		Total current liabilities	23,783		21,747		23,351
Long-term debt and other borrowings	Long-term debt and other borrowings	13,453		13,549		11,589		Long-term debt and other borrowings	14,237		13,549		11,586
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	2,543		2,493		2,462		Noncurrent operating lease liabilities	2,590		2,493		2,494
Deferred income taxes	Deferred income taxes	1,862		1,566		1,146		Deferred income taxes	2,240		1,566		1,246
Other noncurrent liabilities	Other noncurrent liabilities	1,575		1,629		1,906		Other noncurrent liabilities	1,746		1,629		1,931
Total noncurrent liabilities	Total noncurrent liabilities	19,433		19,237		17,103		Total noncurrent liabilities	20,813		19,237		17,257
Shareholders’ investment	Shareholders’ investment							Shareholders’ investment
Common stock	Common stock	38		39		41		Common stock	38		39		40
Additional paid-in capital	Additional paid-in capital	6,502		6,421		6,332		Additional paid-in capital	6,558		6,421		6,381
Retained earnings	Retained earnings	4,421		6,920		9,200		Retained earnings	4,631		6,920		8,069
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(369)		(553)		(713)		Accumulated other comprehensive loss	(208)		(553)		(687)
Total shareholders’ investment	Total shareholders’ investment	10,592		12,827		14,860		Total shareholders’ investment	11,019		12,827		13,803
Total liabilities and shareholders’ investment	Total liabilities and shareholders’ investment	$	52,470	$	53,811	$	51,385	Total liabilities and shareholders’ investment	$	55,615	$	53,811	$	54,411

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; ~~460,236,393,~~460,297,654, 471,274,073 and ~~489,651,196~~480,905,493 shares issued and outstanding as of ~~July 30,~~October 29, 2022, January 29, 2022, and ~~July 31,~~October 30, 2021, 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 2022 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 30, 2022		July 31, 2021		(millions) (unaudited)	October 29, 2022		October 30, 2021
Operating activities	Operating activities					Operating activities
Net earnings	Net earnings	$	1,192	$	3,914	Net earnings	$	1,904	$	5,402

Adjustments to reconcile net earnings to cash (required for) 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	1,329		1,300		Depreciation and amortization	2,004		1,952
Share-based compensation expense	Share-based compensation expense	122		138		Share-based compensation expense	177		187
Deferred income taxes	Deferred income taxes	227		143		Deferred income taxes	548		233
Gain on Dermstore sale	Gain on Dermstore sale	—		(335)		Gain on Dermstore sale	—		(335)

Noncash losses / (gains) and other, net	Noncash losses / (gains) and other, net	108		7		Noncash losses / (gains) and other, net	141		18
Changes in operating accounts:	Changes in operating accounts:					Changes in operating accounts:
Inventory	Inventory	(1,418)		(606)		Inventory	(3,215)		(4,305)
Other assets	Other assets	(179)		3		Other assets	(205)		(117)
Accounts payable	Accounts payable	(784)		(311)		Accounts payable	(224)		3,284
Accrued and other liabilities	Accrued and other liabilities	(644)		(831)		Accrued and other liabilities	(578)		(722)

Cash (required for) provided by operating activities		(47)		3,422
Cash provided by operating activities						Cash provided by operating activities	552		5,597
Investing activities	Investing activities					Investing activities
Expenditures for property and equipment	Expenditures for property and equipment	(2,523)		(1,338)		Expenditures for property and equipment	(4,323)		(2,483)
Proceeds from disposal of property and equipment	Proceeds from disposal of property and equipment	4		15		Proceeds from disposal of property and equipment	4		23
Proceeds from Dermstore sale	Proceeds from Dermstore sale	—		356		Proceeds from Dermstore sale	—		356
Other investments	Other investments	1		(5)		Other investments	16		14
Cash required for investing activities	Cash required for investing activities	(2,518)		(972)		Cash required for investing activities	(4,303)		(2,090)
Financing activities	Financing activities					Financing activities
Change in commercial paper, net	Change in commercial paper, net	1,545		—		Change in commercial paper, net	2,104		—

Additions to long-term debt						Additions to long-term debt	991		—
Reductions of long-term debt	Reductions of long-term debt	(113)		(72)		Reductions of long-term debt	(139)		(112)
Dividends paid	Dividends paid	(842)		(676)		Dividends paid	(1,339)		(1,116)
Repurchase of stock	Repurchase of stock	(2,821)		(2,850)		Repurchase of stock	(2,825)		(5,042)

Stock option exercises	Stock option exercises	2		5		Stock option exercises	2		5
Cash required for financing activities	Cash required for financing activities	(2,229)		(3,593)		Cash required for financing activities	(1,206)		(6,265)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(4,794)		(1,143)		Net decrease in cash and cash equivalents	(4,957)		(2,758)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	5,911		8,511		Cash and cash equivalents at beginning of period	5,911		8,511
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,117	$	7,368	Cash and cash equivalents at end of period	$	954	$	5,753
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	$	107	$	182	Leased assets obtained in exchange for new finance lease liabilities	$	116	$	234
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	97		386		Leased assets obtained in exchange for new operating lease liabilities	203		482

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2022 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
January 30, 2021	500.9	$	42	$	6,329	$	8,825	$	(756)	$	14,440
Net earnings	—	—		—		2,097		—		2,097
Other comprehensive income	—	—		—		—		31		31
Dividends declared	—	—		—		(343)		—		(343)
Repurchase of stock	(6.1)	(1)		—		(1,207)		—		(1,208)

Stock options and awards	1.3	—		(58)		—		—		(58)
May 1, 2021	496.1	$	41	$	6,271	$	9,372	$	(725)	$	14,959
Net earnings	—	—		—		1,817		—		1,817
Other comprehensive income	—	—		—		—		12		12
Dividends declared	—	—		—		(445)		—		(445)
Repurchase of stock	(6.6)	—		—		(1,544)		—		(1,544)
Stock options and awards	0.2	—		61		—		—		61
July 31, 2021	489.7	$	41	$	6,332	$	9,200	$	(713)	$	14,860
Net earnings	—	—		—		1,488		—		1,488
Other comprehensive income	—	—		—		—		26		26
Dividends declared	—	—		—		(439)		—		(439)
Repurchase of stock	(8.8)	(1)		—		(2,180)		—		(2,181)

Stock options and awards	—	—		49		—		—		49
October 30, 2021	480.9	$	40	$	6,381	$	8,069	$	(687)	$	13,803
Net earnings	—	—		—		1,544		—		1,544
Other comprehensive income	—	—		—		—		134		134
Dividends declared	—	—		—		(428)		—		(428)
Repurchase of stock	(9.8)	(1)		—		(2,265)		—		(2,266)
Stock options and awards	0.2	—		40		—		—		40
January 29, 2022	471.3	$	39	$	6,421	$	6,920	$	(553)	$	12,827


TARGET CORPORATION						Q2Q3 2022 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 29, 2022	January 29, 2022	471.3	$	39	$	6,421	$	6,920	$	(553)	$	12,827	January 29, 2022	471.3	$	39	$	6,421	$	6,920	$	(553)	$	12,827
Net earnings	Net earnings	—	—		—		1,009		—		1,009		Net earnings	—	—		—		1,009		—		1,009
Other comprehensive income	Other comprehensive income	—	—		—		—		201		201		Other comprehensive income	—	—		—		—		201		201
Dividends declared	Dividends declared	—	—		—		(426)		—		(426)		Dividends declared	—	—		—		(426)		—		(426)
Repurchase of stock	Repurchase of stock	(0.1)	—		—		(10)		—		(10)		Repurchase of stock	(0.1)	—		—		(10)		—		(10)
Accelerated share repurchase pending final settlement	Accelerated share repurchase pending final settlement	(8.9)	(1)		(751)		(1,998)		—		(2,750)		Accelerated share repurchase pending final settlement	(8.9)	(1)		(751)		(1,998)		—		(2,750)
Stock options and awards	Stock options and awards	1.4	1		(78)		—		—		(77)		Stock options and awards	1.4	1		(78)		—		—		(77)
April 30, 2022	April 30, 2022	463.7	$	39	$	5,592	$	5,495	$	(352)	$	10,774	April 30, 2022	463.7	$	39	$	5,592	$	5,495	$	(352)	$	10,774
Net earnings	Net earnings	—	—		—		183		—		183		Net earnings	—	—		—		183		—		183
Other comprehensive income	Other comprehensive income	—	—		—		—		(17)		(17)		Other comprehensive income	—	—		—		—		(17)		(17)
Dividends declared	Dividends declared	—	—		—		(502)		—		(502)		Dividends declared	—	—		—		(502)		—		(502)
Repurchase of stock	Repurchase of stock	(3.6)	(1)		870		(755)		—		114		Repurchase of stock	(3.6)	(1)		870		(755)		—		114
Stock options and awards	Stock options and awards	0.1	—		40		—		—		40		Stock options and awards	0.1	—		40		—		—		40
July 31, 2022	July 31, 2022	460.2	$	38	$	6,502	$	4,421	$	(369)	$	10,592	July 31, 2022	460.2	$	38	$	6,502	$	4,421	$	(369)	$	10,592
Net earnings													Net earnings	—	—		—		712		—		712
Other comprehensive income													Other comprehensive income	—	—		—		—		161		161
Dividends declared													Dividends declared	—	—		—		(502)		—		(502)

Stock options and awards													Stock options and awards	0.1	—		56		—		—		56
October 29, 2022													October 29, 2022	460.3	$	38	$	6,558	$	4,631	$	(208)	$	11,019

We declared $1.08 and $0.90 dividends per share for the three months ended ~~July 30,~~October 29, 2022, and ~~July 31,~~October 30, 2021, and $3.38 per share for the fiscal year ended January 29, 2022.

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			6


			FINANCIAL STATEMENTS			Table of Contents
			INDEX			Index to Notes


TARGET CORPORATION						Q2Q3 2022 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 2021 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. 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 represented less than 1 percent of our consolidated revenues, operating income and net assets.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			8


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

3. Revenues

~~General merchandise~~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 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021		(millions)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Apparel and accessories (a)	Apparel and accessories (a)	$	4,617	$	4,751	$	8,856	$	9,020	Apparel and accessories (a)	$	4,367	$	4,364	$	13,223	$	13,384
Beauty and household essentials (b)	Beauty and household essentials (b)	7,208		6,726		14,261		13,090		Beauty and household essentials (b)	7,465		6,980		21,726		20,070
Food and beverage (c)	Food and beverage (c)	5,268		4,687		10,773		9,543		Food and beverage (c)	5,748		5,074		16,521		14,617
Hardlines (d)	Hardlines (d)	3,866		3,867		7,579		7,813		Hardlines (d)	3,665		3,841		11,244		11,654
Home furnishings and décor (e)	Home furnishings and décor (e)	4,647		4,748		8,918		9,158		Home furnishings and décor (e)	4,832		4,989		13,750		14,147
Other	Other	47		47		96		81		Other	45		42		141		123
Sales	Sales	25,653		24,826		50,483		48,705		Sales	26,122		25,290		76,605		73,995

Credit card profit sharing	Credit card profit sharing	181		172		366		343		Credit card profit sharing	184		184		550		527
Other	Other	203		162		358		309		Other	212		178		570		487
Other revenue	Other revenue	384		334		724		652		Other revenue	396		362		1,120		1,014

Total revenue	Total revenue	$	26,037	$	25,160	$	51,207	$	49,357	Total revenue	$	26,518	$	25,652	$	77,725	$	75,009

(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/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 and our expectation of future returns. As of ~~July 30,~~October 29, 2022, January 29, 2022, and ~~July 31,~~October 30, 2021, the accrual for estimated returns was ~~$175~~$209 million, $165 million, and ~~$176~~$210 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 29, 2022		Gift Cards Issued During Current Period But Not Redeemed (b)			Revenue Recognized From Beginning Liability			July 30, 2022	Gift Card Liability Activity	January 29, 2022			Gift Cards Issued During Current Period But Not Redeemed (b)			Revenue Recognized From Beginning Liability			October 29, 2022
(millions)	(millions)							(millions)
Gift card liability (a)	Gift card liability (a)	$	1,202		$	423		$	(660)				$	965	Gift card liability (a)	$	1,202		$	533		$	(772)	$	963

(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 2022 Form 10-Q			9


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

Other — Includes advertising, Shipt membership and service revenues, commissions earned on third-party sales through Target.com, rental income, and other miscellaneous revenues.

4. Fair Value Measurements

Fair value measurements are reported in one of three levels reflecting the significant inputs 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

Measurement Level

July 30, 2022

January 29, 2022

July 31, 2021

(millions)

Classification

Measurement Level

October 29, 2022

January 29, 2022

October 30, 2021

Assets

Short-term investments

Cash and Cash Equivalents

Level 1

189

4,985

6,439

Short-term investments

Cash and Cash Equivalents

Level 1

—

4,985

4,818

Prepaid forward contracts

Other Current Assets

Level 1

Prepaid forward contracts

Other Current Assets

Level 1

Interest rate swaps

Other Current Assets

Level 2

—

Interest rate swaps

Other Current Assets

Level 2

Interest rate swaps

Other Noncurrent Assets

Level 2

290

135

160

Interest rate swaps

Other Noncurrent Assets

Level 2

341

135

116

Liabilities

Interest rate swaps

Other Noncurrent Liabilities

Level 2

—

Interest rate swaps

Other Noncurrent Liabilities

Level 2

147

—


Significant Financial Instruments Not Measured at Fair Value (a) (millions)	Significant Financial Instruments Not Measured at Fair Value (a) (millions)	July 30, 2022				January 29, 2022				July 31, 2021				Significant Financial Instruments Not Measured at Fair Value (a) (millions)	October 29, 2022				January 29, 2022				October 30, 2021
		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)	$	11,511	$	11,529	$	11,568	$	12,808	$	10,620	$	12,594	Long-term debt, including current portion (b)	$	12,505	$	11,291	$	11,568	$	12,808	$	10,605	$	12,300

(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.

5. 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 ~~$27~~$5 million and ~~$50~~$55 million for the three and ~~six~~nine months ended ~~July 30,~~October 29, 2022, respectively. We recognized impairment charges of ~~$39~~$3 million and ~~$81~~$84 million for the three and ~~six~~nine months ended ~~July 31,~~October 30, 2021, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

6. Commercial Paper and Long-Term Debt

In September 2022, we issued unsecured fixed rate debt of $1.0 billion at 4.5 percent that matures in September 2032. In connection with this issuance, we terminated certain of our forward-starting interest rate swaps. Note 7 provides additional information.

We obtain short-term financing from time to time under our commercial paper program. For the ~~six~~nine months ended ~~July 30,~~October 29, 2022, the maximum amount outstanding was ~~$1.5~~$2.1 billion, and the average daily amount outstanding was ~~$538~~$713 million, at a weighted average annual interest rate of ~~1.1~~1.91 percent. As of ~~July 30,~~October 29, 2022, ~~$1.5~~$2.1 billion was outstanding and is classified within Current Portion of Long-Term Debt and Other Borrowings on our Consolidated Statement of Financial Position. No balances were outstanding at any time during 2021.


TARGET CORPORATION						Q3 2022 Form 10-Q			10


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

In October 2022, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2023. We also extended our existing committed $3.0 billion unsecured revolving credit facility, which now expires in October 2027. No balances were outstanding under either credit facility at any time during 2021 or 2022.

7. 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 4 to the Consolidated Financial Statements provides the fair value and classification of these instruments.


~~TARGET CORPORATION~~						~~Q2 2022 Form 10-Q~~			10


			~~FINANCIAL STATEMENTS~~			~~Table of Contents~~
			~~NOTES~~			~~Index to Notes~~

We were party to interest rate swaps with notional amounts totaling ~~$2.25~~$2.45 billion as of ~~July 30,~~October 29, 2022, and ~~$1.5~~$1.50 billion as of January 29, 2022, and ~~July 31,~~October 30, 2021. 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 30,~~October 29, 2022, and ~~July 31,~~October 30, 2021.

We were party to forward-starting interest rate swaps with notional amounts totaling $1.45 billion as of October 29, 2022, $2.15 billion as of ~~July 30, 2022, and~~ January 29, 2022, and ~~$250 million~~$1.25 billion as of ~~July 31,~~October 30, 2021. 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~~two years. In September 2022, we terminated forward-starting interest rate swap agreements that hedged $700 million of the $1.0 billion debt issuance described in Note 6. The resulting gain of $109 million was recorded in Accumulated Other Comprehensive Loss (AOCI) and will be recognized as a reduction to Net Interest Expense over the term of the debt. Based on the fair value of ~~these~~our remaining forward-starting interest rate swaps as of ~~July 30,~~October 29, 2022, ~~Accumulated Other Comprehensive Loss (AOCI)~~AOCI included an unrealized gain of ~~$296~~$394 million. Any unrealized gain or loss at the time of debt issuance will be reclassified and impact Net Interest Expense as we record interest expense on the associated debt.

Effect of Hedges on Debt
(millions)
July 30, 2022 January 29, 2022 July 31, 2021
Long-term debt and other borrowings
Carrying amount of hedged debt $ 2,263 $ 1,572 $ 1,649
Cumulative hedging adjustments, included in carrying amount 22 77 154

Effect of Hedges on Net Interest Expense Three Months Ended Six Months Ended
(millions) July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges $ 49 $ 22 $ (55) $ (29)
Hedged debt (49) (22) 55 29
Total $ — $ — $ — $ —

~~8. Income Taxes~~

~~For the~~ ~~three and six~~ ~~months ended~~ ~~July 30, 2022, our effective tax rate was 15.8 percent and 18.7 percent, respectively, compared with 23.4 percent and 21.4 percent for the~~ ~~three and six~~ ~~months ended~~ July 31, 2021, respectively. For the three month period, the decrease reflects lower pretax earnings during the three months ended July 30, 2022, resulting in a larger tax rate benefit from ongoing and discrete tax items, compared with the prior year. For the six month period, the decrease reflects lower pretax earnings during the six months ended July 30, 2022, compared with the prior year, partially offset by the impacts of discrete tax benefits during the six months ended July 31, 2021, including the resolution of certain income tax matters.

~~9. Share Repurchase~~


Effect of Hedges on Debt (millions)	October 29, 2022		January 29, 2022		October 30, 2021



Long-term debt and other borrowings
Carrying amount of hedged debt	$	2,294	$	1,572	$	1,609
Cumulative hedging adjustments, included in carrying amount	(146)		77		114

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


Effect of Hedges on Net Interest Expense	Three Months Ended				Nine Months Ended
(millions)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021


Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges	$	(168)	$	(40)	$	(223)	$	(69)
Hedged debt	168		40		223		69
Total	$	—	$	—	$	—	$	—

Share Repurchase Activity Three Months Ended Six Months Ended
(millions, except per share data)
July 31, 2022 (a)
July 31, 2021
July 31, 2022 (a)
July 31, 2021
Number of shares purchased 12.5 6.6 12.5 12.7
Average price paid per share $ 211.58 $ 233.81 $ 211.57 $ 213.06
Total investment $ 2,636 $ 1,535 $ 2,646 $ 2,700

~~(a)~~ Includes activity related to the ASR arrangement entered in first quarter 2022 because final settlement occurred in second quarter 2022. Under the ASR arrangement, we repurchased 12.5 million shares for a total cash investment of $2.6 billion. We did not enter into any other ASR arrangements during the periods presented.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			11


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

~~10.~~8. Share Repurchase


Share Repurchase Activity	Three Months Ended				Nine Months Ended
(millions, except per share data)	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Number of shares purchased	—		8.8		12.5		21.5
Average price paid per share	$	—	$	246.80	$	211.57	$	226.93
Total investment	$	—	$	2,184	$	2,646	$	4,884

During the first quarter of 2022, we entered into an ASR arrangement to repurchase up to $2.75 billion of our common stock. Under the ASR arrangement, we repurchased 12.5 million shares for a total cash investment of $2.6 billion. We did not enter into any other ASR arrangements during the periods presented.

9. Pension Benefits

We provide pension plan benefits to eligible team members.


Net Pension Benefits Expense	Net Pension Benefits Expense		Three Months Ended				Six Months Ended				Net Pension Benefits Expense		Three Months Ended				Nine Months Ended
(millions)	(millions)	Classification	July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021		(millions)	Classification	October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Service cost benefits earned	Service cost benefits earned	SG&A	$	23	$	24	$	46	$	48	Service cost benefits earned	SG&A	$	22	$	25	$	68	$	73
Interest cost on projected benefit obligation	Interest cost on projected benefit obligation	Net Other (Income) / Expense	30		24		59		48		Interest cost on projected benefit obligation	Net Other (Income) / Expense	29		24		88		72
Expected return on assets	Expected return on assets	Net Other (Income) / Expense	(58)		(59)		(117)		(118)		Expected return on assets	Net Other (Income) / Expense	(59)		(60)		(176)		(178)
Amortization of losses	Amortization of losses	Net Other (Income) / Expense	15		28		30		57		Amortization of losses	Net Other (Income) / Expense	16		28		46		85
Amortization of prior service cost	Amortization of prior service cost	Net Other (Income) / Expense	10		(1)		10		(1)		Amortization of prior service cost	Net Other (Income) / Expense	—		2		10		1

Total	Total		$	20	$	16	$	28	$	34	Total		$	8	$	19	$	36	$	53

~~11.~~10. Accumulated Other Comprehensive Income (Loss)


Change in Accumulated Other Comprehensive Income (Loss)	Change in Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Currency Translation Adjustment				Pension				Total		Change in Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges				Currency Translation Adjustment				Pension				Total
(millions)	(millions)									(millions)
January 29, 2022	January 29, 2022	$	49			$	(19)			$	(583)						$	(553)	January 29, 2022		$	49			$	(19)			$	(583)	$	(553)
Other comprehensive income (loss) before reclassifications, net of tax	Other comprehensive income (loss) before reclassifications, net of tax	163		(1)				—				162		Other comprehensive income (loss) before reclassifications, net of tax		316				(3)				—				313
Amounts reclassified from AOCI, net of tax	Amounts reclassified from AOCI, net of tax	—		—				22				22		Amounts reclassified from AOCI, net of tax	(1)				—				33				32
July 30, 2022		$	212	$	(20)			$	(561)			$	(369)
October 29, 2022														October 29, 2022	$	364			$	(22)			$	(550)			$	(208)


TARGET CORPORATION						Q2Q3 2022 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 2022 included the following notable items:

•GAAP diluted earnings per share were ~~$0.39.~~$1.54.

•Adjusted diluted earnings per share were ~~$0.39.~~$1.54.

•Total revenue increased ~~3.5~~3.4 percent, reflecting total sales growth of 3.3 percent and a ~~14.8~~9.5 percent increase in other revenue.

•Comparable sales increased ~~2.6~~2.7 percent, driven by a ~~2.7~~1.4 percent increase in ~~traffic.~~traffic and a 1.3 percent increase in average transaction amount.

◦Comparable stores originated sales grew ~~1.3~~3.2 percent.

◦Comparable digitally originated sales increased ~~9.0~~0.3 percent.

•Operating income of ~~$321 million~~$1.0 billion was ~~87.0~~49.2 percent lower than the comparable prior-year period, driven primarily by a decrease in gross margin, reflecting higher clearance and promotional markdown rates, inventory ~~actions taken as a result of lower-than-expected sales in our discretionary categories (Apparel~~shrink, and ~~Accessories, Hardlines, and Home Furnishings and Décor) and supply chain disruptions, as well as increased~~higher freight and merchandise ~~costs.~~costs, partially offset by the benefit of retail price increases. See Business Environment and Gross Margin Rate sections below for additional information.

Sales were ~~$25.7~~$26.1 billion for the three months ended ~~July 30,~~October 29, 2022, an increase of $~~0.8 billion~~832 million, or 3.3 percent, from the comparable prior-year period. Cash flow ~~required for operating activities was $47 million for the six months ended July 30, 2022, compared with $3.4 billion cash flow~~ provided by operating activities was $552 million for the ~~six~~nine months ended ~~July 31,~~October 29, 2022, compared with $5.6 billion for the nine months ended October 30, 2021. The drivers of the operating cash flow decrease are described on page 2021.


Earnings Per Share	Earnings Per Share	Three Months Ended						Six Months Ended						Earnings Per Share	Three Months Ended						Nine Months Ended
		July 30, 2022		July 31, 2021		Change		July 30, 2022		July 31, 2021		Change
															October 29, 2022		October 30, 2021		Change		October 29, 2022		October 30, 2021		Change
GAAP diluted earnings per share	GAAP diluted earnings per share	$	0.39	$	3.65	(89.2)	%	$	2.55	$	7.82	(67.4)	%	GAAP diluted earnings per share	$	1.54	$	3.04	(49.3)	%	$	4.09	$	10.87	(62.4)	%
Adjustments	Adjustments	—		(0.01)				0.03		(0.48)				Adjustments	—		(0.01)				0.03		(0.50)
Adjusted diluted earnings per share	Adjusted diluted earnings per share	$	0.39	$	3.64	(89.2)	%	$	2.59	$	7.34	(64.8)	%	Adjusted diluted earnings per share	$	1.54	$	3.03	(49.1)	%	$	4.12	$	10.37	(60.2)	%

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 1819.

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 30,~~October 29, 2022, after-tax ROIC was ~~18.4~~14.6 percent, compared with ~~31.7~~31.3 percent for the trailing twelve months ended ~~July 31,~~October 30, 2021. The calculation of ROIC is provided on page 1920.

Business Environment

During the ~~first two quarters~~third quarter of 2022, we have ~~seen a shift~~continued to see soft trends in ~~consumer demand away from discretionary~~Discretionary categories (Apparel and Accessories, Hardlines, and Home Furnishings and Décor), ~~resulting~~which accelerated in ~~lower-than-expected~~October. We believe this is consistent with the broader industry trends. Our overall comparable sales increase reflects growth in our Frequency categories (Beauty and ~~higher-than-expected inventories~~Household Essentials and Food and Beverage), partially offset by sales decreases in ~~these areas. In response to this shift in demand, we took several actions to address~~ our inventory position and create additional flexibility in a rapidly changing environment, including increasing promotional and clearance markdowns, removing excess inventory, and cancelling purchase orders. These factors, net of pricing actions we have taken to addressDiscretionary categories. Our comparable sales performance also reflects the impact of ~~merchandise~~retail price increases. Within the quarter, comparable sales grew 2.8 percent in August, 4.0 percent in September, and ~~freight cost inflation, have resulted~~0.9 percent in ~~decreased profitability~~October. Notably, within October, we saw a significant change in the pace of sales, with an increase in comparable sales during the first ~~half~~week, followed by a decrease over the last three weeks of ~~2022 compared to~~ the ~~prior-year period. Additionally, in response to continued disruption~~month, driven by steeper declines in our supply chain, we have ordered and are receiving merchandise earlier, and added incremental holding capacity near U.S. ports to add flexibility in the portions of the supply chain most affected by external volatility. We believe that the actions we have taken, including the reduction of orders for Fall merchandise in our discretionary categories, reduce our risks and provide additional flexibility to focus on serving guests in a rapidly changing environment. The ~~Gross Margin Rate~~ ~~analysis on~~ ~~page~~ 16 ~~and the~~ ~~Inventory~~ ~~section on~~ ~~page 20~~ ~~provide additional information.~~Discretionary categories.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			13


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

Throughout the COVID-19 pandemic, the retail industry has experienced continued disruption and volatility in the global supply chain. In response, we have ordered import merchandise (which typically has longer lead times) earlier, and added incremental holding capacity near U.S. ports to add flexibility in the portions of the supply chain most affected by external volatility. During the third quarter of 2022, port congestion, shipping container availability, and other supply chain pressures have improved. This has resulted in inventory arriving earlier than anticipated, which has resulted in increased costs of managing elevated inventory levels. These factors, net of pricing actions we have taken to address the impact of higher merchandise and freight costs, have resulted in decreased profitability in the three and nine months ended October 29, 2022, compared to the prior-year periods. We believe that the actions we have taken reduce our risks and provide additional flexibility to focus on serving guests in a rapidly changing environment. The Gross Margin Rate analysis on page 17 and the Inventory section on page 21 provide additional information.

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 30, 2022		July 31, 2021		Change		July 30, 2022		July 31, 2021		Change		(dollars in millions)	October 29, 2022		October 30, 2021		Change		October 29, 2022		October 30, 2021		Change
Sales	Sales	$	25,653	$	24,826	3.3	%	$	50,483	$	48,705	3.7	%	Sales	$	26,122	$	25,290	3.3	%	$	76,605	$	73,995	3.5	%
Other revenue	Other revenue	384		334		14.8		724		652		10.9		Other revenue	396		362		9.5		1,120		1,014		10.4
Total revenue	Total revenue	26,037		25,160		3.5		51,207		49,357		3.7		Total revenue	26,518		25,652		3.4		77,725		75,009		3.6
Cost of sales	Cost of sales	20,142		17,280		16.6		38,603		33,996		13.6		Cost of sales	19,680		18,206		8.1		58,283		52,202		11.6
Selling, general and administrative expenses	Selling, general and administrative expenses	5,002		4,849		3.1		9,764		9,358		4.3		Selling, general and administrative expenses	5,219		4,859		7.4		14,983		14,217		5.4
Depreciation and amortization (exclusive of depreciation included in cost of sales)	Depreciation and amortization (exclusive of depreciation included in cost of sales)	572		564		1.5		1,173		1,162		0.9		Depreciation and amortization (exclusive of depreciation included in cost of sales)	597		577		3.6		1,770		1,739		1.8
Operating income	Operating income	$	321	$	2,467	(87.0)	%	$	1,667	$	4,841	(65.6)	%	Operating income	$	1,022	$	2,010	(49.2)	%	$	2,689	$	6,851	(60.8)	%


Rate Analysis	Rate Analysis	Three Months Ended				Six Months Ended				Rate Analysis	Three Months Ended				Nine Months Ended
		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Gross margin rate	Gross margin rate	21.5	%	30.4	%	23.5	%	30.2	%	Gross margin rate	24.7	%	28.0	%	23.9	%	29.5	%
SG&A expense rate	SG&A expense rate	19.2		19.3		19.1		19.0		SG&A expense rate	19.7		18.9		19.3		19.0
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		2.2		2.3		2.4		Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)	2.3		2.2		2.3		2.3
Operating income margin rate	Operating income margin rate	1.2		9.8		3.3		9.8		Operating income margin rate	3.9		7.8		3.5		9.1

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 Shipt. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.


TARGET CORPORATION						Q3 2022 Form 10-Q			14


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS

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	Comparable Sales	Three Months Ended				Six Months Ended				Comparable Sales	Three Months Ended				Nine Months Ended
		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Comparable sales change	Comparable sales change	2.6	%	8.9	%	3.0	%	15.3	%	Comparable sales change	2.7	%	12.7	%	2.9	%	14.4	%
Drivers of change in comparable sales	Drivers of change in comparable sales									Drivers of change in comparable sales
Number of transactions (traffic)	Number of transactions (traffic)	2.7		12.7		3.3		14.8		Number of transactions (traffic)	1.4		12.9		2.6		14.0
Average transaction amount	Average transaction amount	0.0		(3.4)		(0.3)		0.5		Average transaction amount	1.3		(0.2)		0.2		0.3


~~TARGET CORPORATION~~						~~Q2 2022 Form 10-Q~~			14


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


Comparable Sales by Channel	Comparable Sales by Channel	Three Months Ended				Six Months Ended				Comparable Sales by Channel	Three Months Ended				Nine Months Ended
		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Stores originated comparable sales change	Stores originated comparable sales change	1.3	%	8.7	%	2.3	%	13.0	%	Stores originated comparable sales change	3.2	%	9.7	%	2.6	%	11.9	%
Digitally originated comparable sales change	Digitally originated comparable sales change	9.0		9.9		6.1		27.3		Digitally originated comparable sales change	0.3		28.9		4.1		27.8


Sales by Channel	Sales by Channel	Three Months Ended				Six Months Ended				Sales by Channel	Three Months Ended				Nine Months Ended
		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Stores originated	Stores originated	82.1	%	83.0	%	81.9	%	82.3	%	Stores originated	82.9	%	82.4	%	82.3	%	82.3	%
Digitally originated	Digitally originated	17.9		17.0		18.1		17.7		Digitally originated	17.1		17.6		17.7		17.7
Total	Total	100	%	100	%	100	%	100	%	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 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Stores	Stores	96.6	%	96.6	%	96.6	%	96.4	%	Stores	96.8	%	96.7	%	96.7	%	96.5	%
Other	Other	3.4		3.4		3.4		3.6		Other	3.2		3.3		3.3		3.5
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 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Apparel and accessories	Apparel and accessories	18	%	19	%	18	%	18	%	Apparel and accessories	17	%	17	%	17	%	18	%
Beauty and household essentials	Beauty and household essentials	28		27		28		27		Beauty and household essentials	29		28		28		27
Food and beverage	Food and beverage	21		19		21		20		Food and beverage	22		20		22		20
Hardlines	Hardlines	15		16		15		16		Hardlines	14		15		15		16
Home furnishings and décor	Home furnishings and décor	18		19		18		19		Home furnishings and décor	18		20		18		19
Total	Total	100	%	100	%	100	%	100	%	Total	100	%	100	%	100	%	100	%

Note 3 to the Financial Statements provides additional product category sales information. 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						Q3 2022 Form 10-Q			15


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS

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 months ended July 30, 2022, and July 31, 2021; 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 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021
Target Debit Card	Target Debit Card	11.2	%	11.6	%	11.4	%	11.9	%	Target Debit Card	10.8	%	11.7	%	11.2	%	11.8	%
Target Credit Cards	Target Credit Cards	8.9		8.7		8.8		8.6		Target Credit Cards	8.8		8.9		8.8		8.7
Total RedCard Penetration	Total RedCard Penetration	20.1	%	20.3	%	20.2	%	20.4	%	Total RedCard Penetration	19.6	%	20.7	%	20.0	%	20.5	%

Note: Amounts may not foot due to rounding.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			1516


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS

Gross Margin Rate

~~Quarter-to-Date~~

~~Year-to-Date~~

For the three months ended ~~July 30,~~October 29, 2022, our gross margin rate was ~~21.5~~24.7 percent compared with ~~30.4~~28.0 percent in the comparable prior-year period. For the six months ended July 30, 2022, our gross margin rate was 23.5 percent compared with 30.2 percent in the comparable prior-year period. For both the three and six months ended July 30, 2022, theThe decrease reflected the net impact of

•merchandising pressure, including

◦higher clearance and promotional markdown rates, which were ~~largely the result of inventory impairments and other actions taken~~primarily in our ~~discretionary~~Discretionary categories; ~~and~~

◦higher merchandise and freight costs, ~~and higher inventory shrink,~~ partially offset by the benefit of retail price increases;

◦higher inventory shrink;

•supply chain pressure related to increased compensation and headcount in our distribution centers and costs of managing ~~excess~~elevated inventory ~~and higher last-mile shipping cost;~~levels, including the impact of early receipts; and

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

For the nine months ended October 29, 2022, our gross margin rate was 23.9 percent compared with 29.5 percent in the comparable prior-year period. The decrease reflected the net impact of

•merchandising pressure, including

◦higher clearance and promotional markdown rates, which were primarily the result of inventory impairments and other actions taken in our Discretionary categories;

◦higher merchandise and freight costs, partially offset by the benefit of retail price increases;

◦higher inventory shrink; and

•supply chain pressure related to increased compensation and headcount in our distribution centers and costs of managing elevated inventory levels, including the impact of early receipts.

Business Environment on page 13 provides additional information.

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

For the three months ended July 30, 2022, our SG&A expense rate was 19.2 percent compared with 19.3 percent for the comparable prior-year period. For the six months ended July 30, 2022, our SG&A expense rate was 19.1 percent compared with 19.0 percent for the comparable prior-year end. For both the three and six months ended July 30, 2022, the rates reflected lower incentive compensation, and the net impact of cost increases across our business, including investments in hourly team member wages, compared to the comparable prior-year periods.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			1617


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS

Selling, General, and Administrative Expense Rate

For the three months ended October 29, 2022, our SG&A expense rate was 19.7 percent compared with 18.9 percent for the comparable prior-year period. For the nine months ended October 29, 2022, our SG&A expense rate was 19.3 percent compared with 19.0 percent for the comparable prior-year period. For both the three and nine months ended October 29, 2022, the rates reflected the net impact of cost increases across our business, including investments in hourly team member wages, partially offset by lower incentive compensation expense, compared to the comparable prior-year periods.

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 30, 2022	July 31, 2021	July 30, 2022	July 31, 2021
							October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021
Beginning store count	Beginning store count	1,933	1,909	1,926	1,897	Beginning store count	1,937	1,909	1,926	1,897
Opened	Opened	5	2	12	14	Opened	4	15	16	29
Closed	Closed	(1)	(2)	(1)	(2)	Closed	—	—	(1)	(2)

Ending store count	Ending store count	1,937	1,909	1,937	1,909	Ending store count	1,941	1,924	1,941	1,924


Number of Stores and Retail Square Feet		Number of Stores			Retail Square Feet (a)
		July 30, 2022	January 29, 2022	July 31, 2021	July 30, 2022	January 29, 2022	July 31, 2021
Number of Stores and								Number of Stores and	Number of Stores			Retail Square Feet (a)
Retail Square Feet								Retail Square Feet	October 29, 2022	January 29, 2022	October 30, 2021	October 29, 2022	January 29, 2022	October 30, 2021
170,000 or more sq. ft.	170,000 or more sq. ft.	273	274	273	48,798	49,071	48,798	170,000 or more sq. ft.	274	274	274	48,985	49,071	49,071
50,000 to 169,999 sq. ft.	50,000 to 169,999 sq. ft.	1,521	1,516	1,510	190,734	190,205	189,624	50,000 to 169,999 sq. ft.	1,522	1,516	1,515	190,739	190,205	190,116
49,999 or less sq. ft.	49,999 or less sq. ft.	143	136	126	4,256	4,008	3,709	49,999 or less sq. ft.	145	136	135	4,305	4,008	3,952
Total	Total	1,937	1,926	1,909	243,788	243,284	242,131	Total	1,941	1,926	1,924	244,029	243,284	243,139

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

Other Performance Factors

Net Interest Expense

~~Net~~Net interest expense was ~~$112~~$125 million and ~~$224~~$349 million for the three and ~~six~~nine months ended ~~July 30,~~October 29, 2022, respectively, compared with ~~$104~~$105 million and ~~$212~~$317 million in the comparable prior-year ~~period~~s.periods. The increase in net interest expense was primarily due to higher average debt and commercial paper levels for the three and ~~six~~nine months ended ~~July 30,~~October 29, 2022, compared with the prior-year periods.

Net Other (Income) / Expense

Net Other (Income) / Expense was ~~$(8)~~$(12) million and ~~$(23)~~$(35) million for the three and ~~six~~nine months ended ~~July 30,~~October 29, 2022, respectively, compared with ~~$(7)~~$(6) million and ~~$(350)~~$(356) million in the comparable prior-year periods. The ~~six~~nine months ended ~~July 31,~~October 30, 2021, included the $335 million pretax gain on the February 2021 sale of Dermstore. Note 2 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 30,~~October 29, 2022, was ~~15.8~~21.6 percent and ~~18.7~~19.8 percent, respectively, compared with ~~23.4~~22.1 percent and ~~21.4~~21.6 percent in the respective comparable prior-year periods. For the three and nine month ~~period,~~periods, the decrease reflects lower pretax earnings ~~in the current year~~ resulting in a larger tax rate benefit from ongoing and discrete tax ~~items. For the six month period, the decrease reflects lower pretax earnings~~items in the current ~~period,~~year, partially offset by the impacts of discrete tax benefits in the ~~prior-year period, including the resolution of certain income tax matters.~~prior-year. Our effective tax rate is generally more volatile at lower amounts of pretax income because the impact of discrete, deductible, and nondeductible tax items and credits is greater.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			1718


			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 30, 2022						July 31, 2021							October 29, 2022						October 30, 2021
(millions, except per share data)	(millions, except per share data)	Pretax		Net of Tax		Per Share		Pretax		Net of Tax		Per Share		(millions, except per share data)	Pretax		Net of Tax		Per Share		Pretax		Net of Tax		Per Share
GAAP diluted earnings per share	GAAP diluted earnings per share					$	0.39					$	3.65	GAAP diluted earnings per share					$	1.54					$	3.04
Adjustments	Adjustments													Adjustments

Other (a)	Other (a)	$	—	$	—	$	—	$	(5)	$	(4)	$	(0.01)	Other (a)	$	—	$	—	$	—	$	(9)	$	(7)	$	(0.01)
Adjusted diluted earnings per share	Adjusted diluted earnings per share					$	0.39					$	3.64	Adjusted diluted earnings per share					$	1.54					$	3.03


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 30, 2022						July 31, 2021							October 29, 2022						October 30, 2021
(millions, except per share data)	(millions, except per share data)	Pretax		Net of Tax		Per Share		Pretax		Net of Tax		Per Share		(millions, except per share data)	Pretax		Net of Tax		Per Share		Pretax		Net of Tax		Per Share
GAAP diluted earnings per share	GAAP diluted earnings per share					$	2.55					$	7.82	GAAP diluted earnings per share					$	4.09					$	10.87
Adjustments	Adjustments													Adjustments

Gain on Dermstore sale	Gain on Dermstore sale	$	—	$	—	$	—	$	(335)	$	(269)	$	(0.54)	Gain on Dermstore sale	$	—	$	—	$	—	$	(335)	$	(269)	$	(0.54)

Other (a)	Other (a)	20		15		0.03		36		27		0.05		Other (a)	20		15		0.03		27		20		0.04
Adjusted diluted earnings per share	Adjusted diluted earnings per share					$	2.59					$	7.34	Adjusted diluted earnings per share					$	4.12					$	10.37

Note: Amounts may not foot due to rounding.

(a)Other items unrelated to current period operations, none of which were individually significant.

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 30, 2022		July 31, 2021		Change		July 30, 2022		July 31, 2021		Change		(dollars in millions)	October 29, 2022		October 30, 2021		Change		October 29, 2022		October 30, 2021		Change
Net earnings	Net earnings	$	183	$	1,817	(89.9)	%	$	1,192	$	3,914	(69.6)	%	Net earnings	$	712	$	1,488	(52.1)	%	$	1,904	$	5,402	(64.7)	%
+ Provision for income taxes	+ Provision for income taxes	34		553		(93.8)		274		1,065		(74.3)		+ Provision for income taxes	197		423		(53.6)		471		1,488		(68.4)
+ Net interest expense	+ Net interest expense	112		104		8.0		224		212		5.8		+ Net interest expense	125		105		17.5		349		317		9.8
EBIT	EBIT	$	329	$	2,474	(86.7)	%	$	1,690	$	5,191	(67.4)	%	EBIT	$	1,034	$	2,016	(48.7)	%	$	2,724	$	7,207	(62.2)	%
+ Total depreciation and amortization (a)	+ Total depreciation and amortization (a)	650		633		2.8		1,329		1,300		2.3		+ Total depreciation and amortization (a)	674		652		3.5		2,004		1,952		2.7
EBITDA	EBITDA	$	979	$	3,107	(68.5)	%	$	3,019	$	6,491	(53.5)	%	EBITDA	$	1,708	$	2,668	(36.0)	%	$	4,728	$	9,159	(48.4)	%

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


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			1819


			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 30, 2022		July 31, 2021		Numerator	October 29, 2022		October 30, 2021
Operating income	Operating income	$	5,773	$	8,611	Operating income	$	4,784	$	8,687
+ Net other income / (expense)	+ Net other income / (expense)	54		346		+ Net other income / (expense)	61		358
EBIT	EBIT	5,827		8,957		EBIT	4,845		9,045
+ Operating lease interest (a)	+ Operating lease interest (a)	88		84		+ Operating lease interest (a)	89		85
- Income taxes (b)	- Income taxes (b)	1,282		1,918		- Income taxes (b)	1,059		1,947
Net operating profit after taxes	Net operating profit after taxes	$	4,633	$	7,123	Net operating profit after taxes	$	3,875	$	7,183


Denominator	Denominator	July 30, 2022			July 31, 2021			August 1, 2020		Denominator	October 29, 2022			October 30, 2021			October 31, 2020
Current portion of long-term debt and other borrowings	Current portion of long-term debt and other borrowings	$	1,649		$	1,190		$	109	Current portion of long-term debt and other borrowings	$	2,207		$	1,176		$	131
+ Noncurrent portion of long-term debt	+ Noncurrent portion of long-term debt	13,453			11,589			14,188		+ Noncurrent portion of long-term debt	14,237			11,586			12,490
+ Shareholders' investment	+ Shareholders' investment	10,592			14,860			12,578		+ Shareholders' investment	11,019			13,803			13,319
+ Operating lease liabilities (c)	+ Operating lease liabilities (c)	2,823			2,695			2,448		+ Operating lease liabilities (c)	2,879			2,737			2,400
- Cash and cash equivalents	- Cash and cash equivalents	1,117			7,368			7,284		- Cash and cash equivalents	954			5,753			5,996
Invested capital	Invested capital	$	27,400		$	22,966		$	22,039	Invested capital	$	29,388		$	23,549		$	22,344
Average invested capital (d)	Average invested capital (d)	$	25,183		$	22,502				Average invested capital (d)	$	26,469		$	22,947

After-tax return on invested capital	After-tax return on invested capital	18.4		%	31.7		%			After-tax return on invested capital	14.6		%	31.3		%

(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, which were ~~21.7~~21.5 percent and ~~21.2~~21.3 percent for the trailing twelve months ended ~~July 30,~~October 29, 2022, and ~~July 31,~~October 30, 2021, respectively. For the trailing twelve months ended ~~July 30,~~October 29, 2022, and ~~July 31,~~October 30, 2021, includes tax effect of ~~$1.3~~$1.0 billion and $1.9 billion related to EBIT, and $19 million and $18 million, respectively, related to operating lease interest.

(c)Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, 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 2022 Form 10-Q			1920


			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 ~~$1.1 billion,~~$954 million, $5.9 billion, and ~~$7.4~~$5.8 billion as of ~~July 30,~~October 29, 2022, January 29, 2022, and ~~July 31,~~October 30, 2021, respectively. Our cash and cash equivalents balance includes short-term investments of ~~$189 million,~~ $5.0 billion and ~~$6.4~~$4.8 billion as of ~~July 30, 2022,~~ January 29, 2022 and ~~July 31,~~October 30, 2021, respectively. We had no short-term investments as of October 29, 2022. 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 ~~required for~~provided by operating activities were ~~$47~~$552 million for the ~~six~~nine months ended ~~July 30,~~October 29, 2022, compared with ~~$3.4~~$5.6 billion of cash flows provided by operating activities for the ~~six~~nine months ended ~~July 31,~~October 30, 2021. For the ~~six~~nine months ended ~~July 30,~~October 29, 2022, operating cash flows decreased as a result of lower earnings, increased inventory levels, and lower accounts payable leverage, ~~due to decreased inventory turnover,~~ compared with the ~~six~~nine months ended ~~July 31,~~October 30, 2021.

Inventory

Inventory was ~~$15.3~~$17.1 billion as of ~~July 30,~~October 29, 2022, compared with $13.9 billion and ~~$11.3~~$15.0 billion at January 29, 2022, and ~~July 31,~~October 30, 2021, respectively. The increase over the balance as of ~~July 31,~~October 30, 2021, primarily reflects the following:

•our decision to move import merchandise receipt timing earlier due to expected supply chain volatility, coupled with recent decreases in shipping times, resulting in earlier-than-expected inventory receipts,

•investments in our inventory position in our frequency categories (Food and Beverage and Beauty and Household Essentials),

•lower-than-expected sales in our discretionary categories, partially offset by actions taken during the current year to reduce excess inventory in these categories, and

•increases in unit costs across all of our categories.

The increase was amplified by unintentionally low inventory levels last year resulting from supply chain disruptions and ~~demand shifts, described within the~~high sell-through rates. The Business En ~~vironmen~~Environment section on page 13. provides additional information.

Investing Cash Flows

Investing cash flows included capital investments of ~~$2.5~~$4.3 billion and ~~$1.3~~$2.5 billion for the ~~six~~nine months ended ~~July 30,~~October 29, 2022, and ~~July 31,~~October 30, 2021, respectively. The increase primarily reflects an increase in store remodel activity, investment in supply chain, and the impact of inflation on these projects. ForFor the ~~six~~nine months ended ~~July 31,~~October 30, 2021,, investing cash flows included $356 million of proceeds from the sale of Dermstore.

~~Dividends~~

We paid dividends totaling $417 million ($0.90 per share) and $841 million ($1.80 per share) for the three and six months ended July 30, 2022, respectively, and $336 million ($0.68 per share) and $676 million ($1.36 per share) for the three and six months ended July 31, 2021, respectively, a per share increase of 32.4 percent. We declared dividends totaling $502 million ($1.08 per share) during the second quarter of 2022 and $445 million ($0.90 per share) during the second quarter of 2021, a per share increase of 20.0 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.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			2021


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

Dividends

We paid dividends totaling $497 million ($1.08 per share) and $1.3 billion ($2.88 per share) for the three and nine months ended October 29, 2022, respectively, and $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, a per share increase of 20.0 percent for the three month period and 27.4 percent for the nine month period. We declared dividends totaling $502 million ($1.08 per share) during the third quarter of 2022 and $439 million ($0.90 per share) during the third quarter of 2021, a per share increase of 20.0 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 $2.6 billion to shareholders through share repurchase during the ~~six~~nine months ended ~~July 30,~~October 29, 2022. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 98 to the Financial Statements for more information.

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 30,~~October 29, 2022, 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.

We have the ability to obtain short-term financing from time to time under our commercial paper program and credit facility. ~~Our~~In October 2022, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2023. We also extended our existing committed $3.0 billion unsecured revolving credit facility, which now expires in October ~~2026 and backstops~~2027. Both credit facilities backstop our commercial paper program. No balances were outstanding under ~~our~~either credit facility at any time during ~~2022~~2021 or ~~2021.~~2022. As of ~~July 30,~~October 29, 2022, we had ~~$1.5~~$2.1 billion outstanding under our commercial paper program. We did not have any balances outstanding under our commercial paper program as of ~~July 31,~~October 30, 2021. Note 6 to the Financial Statements provides additional information.

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~~facilities also ~~contains~~contain a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of ~~July 30,~~October 29, 2022, 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, namely operating cash flows, credit facility capacity, and access to capital markets, will continue to be adequate to meet our contractual obligations, working capital and planned capital expenditures, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future.


TARGET CORPORATION						Q3 2022 Form 10-Q			22


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

New Accounting Pronouncements

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


~~TARGET CORPORATION~~						~~Q2 2022 Form 10-Q~~			21


			~~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, 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 29, 2022, 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 29, 2022.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there were no changes which 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 2022 Form 10-Q			2223


			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.

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 29, 2022.

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

On August 11, 2021, our Board of Directors authorized a $15 billion share repurchase program with no stated expiration. Under the program, we have repurchased 23.8 million shares of common stock at an average price of $223.52, for a total investment of $5.3 billion. ~~The table below presents information with respect to~~As of October 29, 2022, the dollar value of shares that may yet be purchased under the program is $9.7 billion. There were no Target common stock purchases made during the three months ended ~~July 30,~~October 29, 2022 by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.

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
May 1, 2022 through May 28, 2022
Open market and privately negotiated purchases — $ — — $ 12,316,056,660
May 29, 2022 through July 2, 2022
Open market and privately negotiated purchases — — — 12,316,056,660
March 2022 ASR (a)
3,569,904 211.58 3,569,904 9,680,505,231
July 3, 2022 through July 30, 2022
Open market and privately negotiated purchases — — — 9,680,505,231
Total 3,569,904 $ 211.58 3,569,904 $ 9,680,505,231

~~(a)~~Represents the incremental shares received upon final settlement of the accelerated share repurchase (ASR) agreement initiated in first quarter 2022. $211.58 represents the average price paid per share for the 12.5 million total shares repurchased under the ASR, which consists of the 8.9 million shares initially delivered in first quarter 2022 and the 3.6 million shares received upon final settlement in second quarter 2022. Note 9 to the Financial Statements provides additional information.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			2324


			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)EBB ‡						Aircraft Time Sharing Agreement as of October 4, 2022 among Target Corporation ~~SPP I (2022 Plan Statement) (as amended~~ and ~~restated effective May 1, 2022)~~Brian C. Cornell

(10)FEE ‡						Amendment No. 1 to Five-Year Credit Agreement dated as of October 25, 2022 among Target Corporation, ~~SPP II (2022 Plan Statement) (as amended~~Bank of America, N.A., as Administrative Agent, and ~~restated effective May 1, 2022)~~the Banks listed therein

(10)JFF ‡						364-Day Credit Agreement dated as of October 25, 2022 among Target Corporation, ~~Officer EDCP (2022 Plan Statement) (as amended~~the Banks listed therein, the Co-Documentation Agents and ~~restated effective May 1, 2022)~~Syndication Agent listed therein, and Bank of America, N.A., as Administrative Agent

(10)KKJJ +						~~Transition~~Third Amendment dated November 1, 2022 to Credit Card Program Agreement ~~dated May 4, 2022~~among Target Corporation, Target Enterprise, Inc. and TD Bank USA, N.A.

(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 Pursuant to 18 U.S.C. Section 1350,, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32)B						Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,, As Adopted 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)

+ Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The

Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.

‡ Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to

furnish a copy of such schedules and exhibits to the Securities and Exchange Commission upon its request.

(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 2022 Form 10-Q			2425


			SUPPLEMENTAL INFORMATION			Table of Contents
						Index to Notes

SIGNATURES

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 26,~~November 23, 2022	By:	/s/ Michael J. Fiddelke
			Michael J. Fiddelke
			Executive Vice President and
			Chief Financial Officer
			(Duly Authorized Officer and
			Principal Financial Officer)


		/s/ Matthew A. Liegel
			Matthew A. Liegel
			Senior Vice President, Chief Accounting Officer
			and Controller


TARGET CORPORATION						Q2Q3 2022 Form 10-Q			2526


INDEX TO NOTES

Notes to Consolidated Financial Statements		8
Note 1	Accounting Policies	8
Note 2	Dermstore Sale	8
Note 3	Revenues	9
Note 4	Fair Value Measurements	10
Note 5	Property and Equipment	10
Note 6	Commercial Paper and Long-Term Debt	10
Note 7	Derivative Financial Instruments	1011
Note 8	~~Income Taxes~~Share Repurchase	1112
Note 9	~~Share Repurchase~~	11
~~Note 10~~	Pension Benefits	12
Note 1110	Accumulated Other Comprehensive Income (Loss)	12


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
May 1, 2022 through May 28, 2022
Open market and privately negotiated purchases	—	$	—	—	$	12,316,056,660
May 29, 2022 through July 2, 2022
Open market and privately negotiated purchases	—	—		—	12,316,056,660
March 2022 ASR (a)	3,569,904	211.58		3,569,904	9,680,505,231
July 3, 2022 through July 30, 2022
Open market and privately negotiated purchases	—	—		—	9,680,505,231
Total	3,569,904	$	211.58	3,569,904	$	9,680,505,231