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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 April 29, 2023
OR
☐    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
 
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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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0833 per shareTGTNew 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 May 19, 2023, were 461,559,612.

TARGET CORPORATION

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
   
 
   
 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations  
 Three Months Ended
(millions, except per share data) (unaudited)April 29, 2023April 30, 2022
Sales$24,948 $24,830 
Other revenue374 340 
Total revenue25,322 25,170 
Cost of sales 18,386 18,461 
Selling, general and administrative expenses5,025 4,762 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 583 601 
Operating income1,328 1,346 
Net interest expense147 112 
Net other income(23)(15)
Earnings before income taxes1,204 1,249 
Provision for income taxes254 240 
Net earnings$950 $1,009 
Basic earnings per share$2.06 $2.17 
Diluted earnings per share$2.05 $2.16 
Weighted average common shares outstanding
Basic460.9 464.0 
Diluted462.9 467.8 
Antidilutive shares1.2 — 

TARGET CORPORATION
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Q1 2023 Form 10-Q
1
Consolidated Statements of Comprehensive Income 
 Three Months Ended
(millions) (unaudited)April 29, 2023April 30, 2022
Net earnings$950 $1,009 
Other comprehensive income, net of tax  
Pension benefit liabilities2 11 
Cash flow hedges and currency translation adjustment(5)190 
Other comprehensive income(3)201 
Comprehensive income$947 $1,210 

TARGET CORPORATION
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Q1 2023 Form 10-Q
2
Consolidated Statements of Financial Position   
(millions, except footnotes) (unaudited)April 29,
2023		January 28,
2023		April 30,
2022
Assets 
Cash and cash equivalents$1,321 $2,229 $1,112 
Inventory12,616 13,499 15,083 
Other current assets1,836 2,118 1,758 
Total current assets15,773 17,846 17,953 
Property and equipment
Land6,493 6,231 6,164 
Buildings and improvements35,198 34,746 33,300 
Fixtures and equipment7,473 7,439 6,459 
Computer hardware and software3,067 3,039 2,588 
Construction-in-progress2,822 2,688 1,444 
Accumulated depreciation(22,657)(22,631)(21,285)
Property and equipment, net32,396 31,512 28,670 
Operating lease assets2,640 2,657 2,571 
Other noncurrent assets1,341 1,320 1,648 
Total assets$52,150 $53,335 $50,842 
Liabilities and shareholders’ investment
Accounts payable$11,935 $13,487 $14,053 
Accrued and other current liabilities5,732 5,883 5,582 
Current portion of long-term debt and other borrowings200 130 1,089 
Total current liabilities17,867 19,500 20,724 
Long-term debt and other borrowings16,010 16,009 13,379 
Noncurrent operating lease liabilities2,621 2,638 2,581 
Deferred income taxes2,289 2,196 1,752 
Other noncurrent liabilities1,758 1,760 1,632 
Total noncurrent liabilities22,678 22,603 19,344 
Shareholders’ investment
Common stock38 38 39 
Additional paid-in capital6,541 6,608 5,592 
Retained earnings5,448 5,005 5,495 
Accumulated other comprehensive loss(422)(419)(352)
Total shareholders’ investment11,605 11,232 10,774 
Total liabilities and shareholders’ investment$52,150 $53,335 $50,842 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 461,552,843, 460,346,947, and 463,683,711 shares issued and outstanding as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively.

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

TARGET CORPORATION
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Q1 2023 Form 10-Q
3
Consolidated Statements of Cash Flows  
 Three Months Ended
(millions) (unaudited)April 29, 2023April 30, 2022
Operating activities  
Net earnings$950 $1,009 
Adjustments to reconcile net earnings to cash provided by operating activities:  
Depreciation and amortization667 679 
Share-based compensation expense43 83 
Deferred income taxes95 115 
Noncash losses / (gains) and other, net
(11)52 
Changes in operating accounts: 
Inventory883 (1,181)
Other assets34 (86)
Accounts payable(1,463)(1,560)
Accrued and other liabilities67 (505)
Cash provided by (required for) operating activities1,265 (1,394)
Investing activities  
Expenditures for property and equipment(1,605)(952)
Proceeds from disposal of property and equipment2 2 
Other investments1 2 
Cash required for investing activities(1,602)(948)
Financing activities  
Change in commercial paper, net90 945 
Reductions of long-term debt(46)(48)
Dividends paid(497)(424)
Repurchase of stock— (10)
Accelerated share repurchase pending final settlement— (2,750)
Shares withheld for taxes on share-based compensation(118)(171)
Stock option exercises— 1 
Cash required for financing activities(571)(2,457)
Net decrease in cash and cash equivalents(908)(4,799)
Cash and cash equivalents at beginning of period 2,229 5,911 
Cash and cash equivalents at end of period $1,321 $1,112 
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities$15 $62 
Leased assets obtained in exchange for new operating lease liabilities54 59 
 
TARGET CORPORATION
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Q1 2023 Form 10-Q
4
Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
January 29, 2022471.3 $39 $6,421 $6,920 $(553)$12,827 
Net earnings— — — 1,009 — 1,009 
Other comprehensive income— — — — 201 201 
Dividends declared— — — (426)— (426)
Repurchase of stock(0.1)— — (10)— (10)
Accelerated share repurchase pending final settlement(8.9)(1)(751)(1,998)— (2,750)
Stock options and awards1.4 1 (78)— — (77)
April 30, 2022463.7 $39 $5,592 $5,495 $(352)$10,774 
Net earnings— — — 183 — 183 
Other comprehensive loss— — — — (17)(17)
Dividends declared— — — (502)— (502)
Repurchase of stock(3.6)(1)870 (755)— 114 
Stock options and awards0.1 — 40 — — 40 
July 30, 2022460.2 $38 $6,502 $4,421 $(369)$10,592 
Net earnings— — — 712 — 712 
Other comprehensive income— — — — 161 161 
Dividends declared— — — (502)— (502)
Stock options and awards0.1 — 56 — — 56 
October 29, 2022460.3 $38 $6,558 $4,631 $(208)$11,019 
Net earnings— — — 876 — 876 
Other comprehensive loss— — — — (211)(211)
Dividends declared— — — (502)— (502)
Stock options and awards— — 50 — — 50 
January 28, 2023460.3 $38 $6,608 $5,005 $(419)$11,232 

TARGET CORPORATION
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Q1 2023 Form 10-Q
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Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
January 28, 2023460.3 $38 $6,608 $5,005 $(419)$11,232 
Net earnings— — — 950 — 950 
Other comprehensive loss— — — — (3)(3)
Dividends declared— — — (507)— (507)
Stock options and awards1.3 — (67)— — (67)
April 29, 2023461.6 $38 $6,541 $5,448 $(422)$11,605 

We declared $1.08 and $0.90 dividends per share for the three months ended April 29, 2023, and April 30, 2022, and $4.14 per share for the fiscal year ended January 28, 2023.


TARGET CORPORATION
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Q1 2023 Form 10-Q
6
FINANCIAL STATEMENTS
INDEX

TARGET CORPORATION
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Q1 2023 Form 10-Q
7
FINANCIAL STATEMENTS
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 most recent 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.

TARGET CORPORATION
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FINANCIAL STATEMENTS
NOTES
2. Revenue

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).

RevenueThree Months Ended
(millions)April 29, 2023April 30, 2022
Apparel & accessories (a)
$3,967 $4,239 
Beauty & household essentials (b)
7,682 7,053 
Food & beverage (c)
5,997 5,505 
Hardlines (d)
3,391 3,713 
Home furnishings & décor (e)
3,855 4,271 
Other56 49 
Sales24,948 24,830 
Credit card profit sharing174 185 
Other200 155 
Other revenue374 340 
Total revenue$25,322 $25,170 
(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 April 29, 2023, January 28, 2023, and April 30, 2022, the accrual for estimated returns was $206 million, $174 million, and $204 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 ActivityJanuary 28,
2023
Gift Cards Issued During Current Period But Not Redeemed (b)
Revenue Recognized From Beginning LiabilityApril 29,
2023
(millions)
Gift card liability (a)
$1,240 $268 $(481)$1,027 
(a)Included in Accrued and Other Current Liabilities.
(b)Net of estimated breakage.

Other Revenue

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
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FINANCIAL STATEMENTS
NOTES

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


3. 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 BasisFair Value
(millions)ClassificationMeasurement LevelApril 29, 2023January 28, 2023April 30, 2022
Assets   
Short-term investmentsCash and Cash EquivalentsLevel 1$408 $1,343 $182 
Prepaid forward contracts Other Current AssetsLevel 125 27 37 
Interest rate swapsOther Current AssetsLevel 2— — 41 
Interest rate swapsOther Noncurrent AssetsLevel 27 7 292 
Liabilities   
Interest rate swapsOther Noncurrent LiabilitiesLevel 272 81 27 

Significant Financial Instruments Not Measured at Fair Value (a)

(millions)
April 29, 2023January 28, 2023April 30, 2022
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Long-term debt, including current portion (b)
$14,144 $13,672 $14,141 $13,688 $11,549 $11,466 
(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, fair value hedge adjustments, and lease liabilities.

4. Supplier Finance Programs

We have arrangements with several financial institutions to act as our paying agents to certain vendors. The arrangements also permit the financial institutions to provide vendors with an option, at our vendors' sole discretion, to sell their receivables from Target to the financial institutions. A vendor’s election to receive early payment at a discounted amount from the financial institutions does not change the amount that we must remit to the financial institutions or our payment date, which is up to 120 days from the invoice date.

We do not pay any fees or pledge any security to these financial institutions under these arrangements. The arrangements can be terminated by either party with notice ranging up to 120 days.

Our outstanding vendor obligations eligible for early payment under these arrangements totaled $3.3 billion, $3.4 billion, and $4.4 billion as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively, and are included within Accounts Payable on our Consolidated Statements of Financial Position. Our outstanding vendor obligations do not represent actual receivables sold by our vendors to the financial institutions, which may be lower.

5. Commercial Paper and Long-Term Debt

We obtain short-term financing from time to time under our commercial paper program. For the three months ended April 29, 2023 and April 30, 2022, the maximum amounts outstanding were $90 million and $1.1 billion, respectively, and the average daily amounts outstanding were $2 million and $291 million, respectively, at a weighted average annual interest rate of 4.8 percent and 0.4 percent, respectively. As of April 29, 2023 and April 30, 2022, $90 million and $945 million, respectively, were outstanding and are classified within Current Portion of Long-Term Debt and Other Borrowings on our Consolidated Statements of Financial Position.
TARGET CORPORATION
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FINANCIAL STATEMENTS
NOTES

6. 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 3 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

We were party to interest rate swaps with notional amounts totaling $2.45 billion as of April 29, 2023 and January 28, 2023, and $1.50 billion as of April 30, 2022. 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 months ended April 29, 2023 and April 30, 2022.

During the first quarter of 2023, we amended certain of our interest rate swaps, with notional amounts totaling $1.25 billion, to replace the London Interbank Offered Rate (LIBOR) with the daily Secured Overnight Financing Rate (SOFR) as part of our planned reference rate reform activities. These amendments did not result in any change to our application of hedge accounting or any impact to our consolidated financial statements.

We were party to forward-starting interest rate swaps with notional amounts totaling $2.15 billion as of April 30, 2022. During 2022, we terminated all remaining forward-starting interest rate swap agreements. The resulting gains upon termination were recorded in Accumulated Other Comprehensive Loss and will be recognized as a reduction to Net Interest Expense over the respective term of the debt.

Effect of Hedges on Debt
(millions)
April 29, 2023January 28, 2023April 30, 2022
Long-term debt and other borrowings
Carrying amount of hedged debt$2,376 $2,366 $1,468 
Cumulative hedging adjustments, included in carrying amount(65)(74)(27)

Effect of Hedges on Net Interest ExpenseThree Months Ended
(millions)April 29, 2023April 30, 2022
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges$9 $(104)
Hedged debt(9)104 
Gain on cash flow hedges recognized in Net Interest Expense6 — 
Total$6 $— 

TARGET CORPORATION
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Q1 2023 Form 10-Q
11
FINANCIAL STATEMENTS
NOTES
7. Share Repurchase

We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase (ASR) arrangements, and other privately negotiated transactions with financial institutions. We did not repurchase any of our shares during the three months ended April 29, 2023.

Share Repurchase ActivityThree Months Ended
(millions, except per share data)April 29, 2023April 30, 2022
Number of shares purchased— 0.1 
Average price paid per share$— $208.60 
Total investment$— $10 
Note: This table excludes activity related to the ASR arrangement described below because final settlement had not occurred as of April 30, 2022.

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 agreement, we paid $2.75 billion and received an initial delivery of 8.9 million shares, which were retired, resulting in a $2.0 billion reduction to Retained Earnings. As of April 30, 2022, $751 million was included in the Consolidated Statement of Financial Position as a reduction to Additional Paid-in Capital. Final settlement occurred during the second quarter of 2022. In total, under the ASR arrangement, we repurchased 12.5 million shares for a total cash investment of $2.6 billion.

8. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits ExpenseThree Months Ended
(millions)ClassificationApril 29, 2023April 30, 2022
Service cost benefits earnedSG&A $20 $23 
Interest cost on projected benefit obligationNet Other Income41 29 
Expected return on assetsNet Other Income(67)(59)
Amortization of lossesNet Other Income— 15 
Prior service costNet Other Income3 — 
Total$(3)$8 
 
9. Accumulated Other Comprehensive Income (Loss)

 
Change in Accumulated Other Comprehensive Income (Loss)Cash Flow HedgesCurrency Translation AdjustmentPensionTotal
(millions)
January 28, 2023$300 $(23)$(696)$(419)
Other comprehensive income (loss) before reclassifications, net of tax— — — — 
Amounts reclassified from AOCI, net of tax(5)— 2 (3)
April 29, 2023$295 $(23)$(694)$(422)


TARGET CORPORATION
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Q1 2023 Form 10-Q
12
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL SUMMARY
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Summary

First quarter 2023 included the following notable items:

•GAAP and Adjusted diluted earnings per share were $2.05.
•Total revenue was $25.3 billion, an increase of 0.6 percent, reflecting total sales growth of 0.5 percent and a 10.2 percent increase in other revenue.
•Comparable sales were flat, reflecting a 0.9 percent increase in traffic and a (0.9) percent decrease in average transaction amount.
◦Comparable stores originated sales grew 0.7 percent.
◦Comparable digitally originated sales declined (3.4) percent.
•Operating income of $1.3 billion was (1.4) percent lower than the comparable prior-year period. See Business Environment below for additional information.

Cash flow provided by operating activities was $1.3 billion for the three months ended April 29, 2023, compared with $(1.4) billion cash flow required for operating activities for the three months ended April 30, 2022. The drivers of the operating cash flow increase are described on page 20.

Earnings Per ShareThree Months Ended
April 29, 2023April 30, 2022Change
GAAP diluted earnings per share$2.05 $2.16 (4.8)%
Adjustments— 0.03 
Adjusted diluted earnings per share$2.05 $2.19 (6.2)%
Note: 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 18.

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 April 29, 2023, after-tax ROIC was 11.4 percent, compared with 25.3 percent for the trailing twelve months ended April 30, 2022. The calculation of ROIC is provided on page 19.

Business Environment

During the first quarter of 2023, sales growth in our Frequency categories (Beauty & Household Essentials and Food & Beverage) was offset by decreases in our Discretionary categories (Apparel & Accessories, Hardlines, and Home Furnishings & Decor). Inventory as of April 29, 2023 decreased compared with January 28, 2023 and April 30, 2022. This decrease was driven by actions we took during 2022 and strategies we employed to align inventories with sales trends, as well as improvements in the supply chain that reduced in-transit inventory. These improvements have resulted in a reduction in costs related to managing elevated inventory levels and reduced our working capital investment. In addition, we experienced a significant decrease in freight costs due to a decline in freight rates compared to 2022.

We continue to experience higher inventory shrink, as a percentage of sales, relative to historical levels — including significantly higher shrink rates at certain stores. We believe that this trend is pervasive across the retail industry. Increased shrink has had, and if current trends persist will continue to have, an adverse impact on our results of operations, including potential impairment of our long-lived assets.

The Gross Margin Rate analysis on page 16 and the Inventory section on page 20 provide additional information.

TARGET CORPORATION
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Q1 2023 Form 10-Q
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Analysis of Results of Operations

Summary of Operating Income Three Months Ended 
(dollars in millions)April 29, 2023April 30, 2022Change
Sales$24,948 $24,830 0.5 %
Other revenue374 340 10.2 
Total revenue25,322 25,170 0.6 
Cost of sales18,386 18,461 (0.4)
Selling, general and administrative expenses5,025 4,762 5.5 
Depreciation and amortization (exclusive of depreciation included in cost of sales)583 601 (3.0)
Operating income$1,328 $1,346 (1.4)%

Rate AnalysisThree Months Ended
April 29, 2023April 30, 2022
Gross margin rate26.3 %25.7 %
SG&A expense rate19.8 18.9 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)2.3 2.4 
Operating income margin rate5.2 5.3 
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.

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 (number of transactions, or "traffic") and the amount spent each visit (average transaction amount).

Comparable SalesThree Months Ended
 April 29, 2023April 30, 2022
Comparable sales change0.0 %3.3 %
Drivers of change in comparable sales  
Number of transactions (traffic)0.9 3.9 
Average transaction amount(0.9)(0.6)

TARGET CORPORATION
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Q1 2023 Form 10-Q
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Comparable Sales by ChannelThree Months Ended
 April 29, 2023April 30, 2022
Stores originated comparable sales change0.7 %3.4 %
Digitally originated comparable sales change(3.4)3.2 

Sales by ChannelThree Months Ended
 April 29, 2023April 30, 2022
Stores originated82.5 %81.8 %
Digitally originated17.5 18.2 
Total100 %100 %

Sales by Fulfillment ChannelThree Months Ended
 April 29, 2023April 30, 2022
Stores 97.2 %96.5 %
Other2.8 3.5 
Total100 %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 CategoryThree Months Ended
April 29, 2023April 30, 2022
Apparel & accessories16 %17 %
Beauty & household essentials31 29 
Food & beverage24 22 
Hardlines14 15 
Home furnishings & décor15 17 
Total100 %100 %

Note 2 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.

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. For the three months ended April 29, 2023 and April 30, 2022, total RedCard Penetration was 19.0 percent and 20.3 percent, respectively.


TARGET CORPORATION
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Q1 2023 Form 10-Q
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Gross Margin Rate

23
For the three months ended April 29, 2023, our gross margin rate was 26.3 percent compared with 25.7 percent in the comparable prior-year period. The increase reflected the net impact of

•merchandising benefit, including
◦lower freight costs;
◦retail price increases; and
◦lower clearance markdown rates compared with the prior-year, which included the impact of inventory impairments and other actions;
•lower digital fulfillment costs due to a decrease in digital volume and a beneficial mix of sales fulfilled through lower-cost same-day fulfillment options; and
•higher inventory shrink.

Business Environment on page 13 provides additional information.

Selling, General, and Administrative Expense Rate

For the three months ended April 29, 2023, our SG&A expense rate was 19.8 percent compared with 18.9 percent for the comparable prior-year period. The increase reflected the net impact of cost increases across our business, including investments in team member pay and benefits.

Store Data

Change in Number of StoresThree Months Ended
April 29, 2023April 30, 2022
Beginning store count1,948 1,926 
Opened6 7 
Closed— — 
Ending store count1,954 1,933 

Number of Stores andNumber of Stores
Retail Square Feet (a)
Retail Square FeetApril 29, 2023January 28, 2023April 30, 2022April 29, 2023January 28, 2023April 30, 2022
170,000 or more sq. ft.274 274 274 48,985 48,985 49,071 
50,000 to 169,999 sq. ft.1,530 1,527 1,519 191,543 191,241 190,461 
49,999 or less sq. ft.150 147 140 4,465 4,358 4,147 
Total1,954 1,948 1,933 244,993 244,584 243,679 
(a)In thousands; reflects total square feet less office, supply chain facilities, and vacant space.
 
TARGET CORPORATION
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Q1 2023 Form 10-Q
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Other Performance Factors

Net Interest Expense

Net interest expense was $147 million for the three months ended April 29, 2023 and $112 million for the three months ended April 30, 2022. The increase in net interest expense was primarily due to higher average debt levels in addition to higher floating interest rates for the three months ended April 29, 2023 compared with the prior-year period.

Provision for Income Taxes
 
Our effective income tax rate for the three months ended April 29, 2023 was 21.1 percent, compared with 19.2 percent in the comparable prior-year period. The increase reflects higher discrete tax benefits in the prior-year, primarily related to share-based compensation.
TARGET CORPORATION
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Q1 2023 Form 10-Q
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
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 EPSThree Months Ended
April 29, 2023April 30, 2022
(millions, except per share data)PretaxNet of TaxPer SharePretaxNet of TaxPer Share
GAAP diluted earnings per share $2.05 $2.16 
Adjustments
Other (a)
$— $— $— $20 $15 $0.03 
Adjusted diluted earnings per share $2.05 $2.19 
(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 EBITDAThree Months Ended 
(dollars in millions)April 29, 2023April 30, 2022Change
Net earnings$950 $1,009 (5.8)%
+ Provision for income taxes254 240 6.0 
+ Net interest expense147 112 31.2 
EBIT$1,351 $1,361 (0.7)%
+ Total depreciation and amortization (a)
667 679 (1.8)
EBITDA$2,018 $2,040 (1.1)%
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

TARGET CORPORATION
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Q1 2023 Form 10-Q
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
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
(dollars in millions)
Trailing Twelve Months
NumeratorApril 29, 2023April 30, 2022
Operating income$3,830 $7,918 
 + Net other income57 55 
EBIT3,887 7,973 
 + Operating lease interest (a)
96 87 
  - Income taxes (b)
770 1,804 
Net operating profit after taxes$3,213 $6,256 

DenominatorApril 29, 2023April 30, 2022May 1, 2021
Current portion of long-term debt and other borrowings$200 $1,089 $1,173 
 + Noncurrent portion of long-term debt16,010 13,379 11,509 
 + Shareholders' investment11,605 10,774 14,959 
 + Operating lease liabilities (c)
2,921 2,854 2,563 
  - Cash and cash equivalents1,321 1,112 7,816 
Invested capital$29,415 $26,984 $22,388 
Average invested capital (d)
$28,199 $24,686 
After-tax return on invested capital11.4 %25.3 %
(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 19.3 percent and 22.4 percent for the trailing twelve months ended April 29, 2023 and April 30, 2022, respectively. For the trailing twelve months ended April 29, 2023 and April 30, 2022, includes tax effect of $0.8 billion and $1.8 billion, respectively, related to EBIT and $18 million and $19 million, respectively, related to operating lease interest.
(c)Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.
(d)Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

TARGET CORPORATION
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Q1 2023 Form 10-Q
19
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF FINANCIAL CONDITION
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 $1.3 billion, $2.2 billion, and $1.1 billion as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively. Our cash and cash equivalents balance included short-term investments of $408 million, $1.3 billion, and $182 million as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place dollar limits on our investments in individual funds or instruments.

Operating Cash Flows
 
Cash flows provided by operating activities were $1.3 billion for the three months ended April 29, 2023, compared with $(1.4) billion of cash flows required for operating activities for the three months ended April 30, 2022. For the three months ended April 29, 2023, operating cash flows increased as a result of an improvement in working capital, including lower inventory levels, compared with the three months ended April 30, 2022.

Inventory

Inventory was $12.6 billion as of April 29, 2023, compared with $13.5 billion and $15.1 billion at January 28, 2023 and April 30, 2022, respectively. The decrease over the balance as of April 30, 2022 primarily reflects actions taken to align inventory levels with sales trends, as well as improvements in the supply chain that reduced in-transit inventory.

The Business Environment section on page 13 provides additional information.

Investing Cash Flows

Investing cash flows included capital investments of $1.6 billion and $1.0 billion for the three months ended April 29, 2023 and April 30, 2022, respectively. The increase primarily reflects real estate acquisitions for new store and supply chain sites and timing of remodel activity.

Dividends
 
We paid dividends totaling $497 million ($1.08 per share) for the three months ended April 29, 2023, and $424 million ($0.90 per share) for the three months ended April 30, 2022, a per share increase of 20.0 percent. We declared dividends totaling $507 million ($1.08 per share) during the first quarter of 2023 and $426 million ($0.90 per share) during the first quarter of 2022, 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 did not repurchase any shares during the three months ended April 29, 2023. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 7 to the Financial Statements for more information.

TARGET CORPORATION
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Q1 2023 Form 10-Q
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF FINANCIAL CONDITION
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 April 29, 2023, our credit ratings were as follows:

Credit RatingsMoody’sStandard and Poor’sFitch
Long-term debtA2AA
Commercial paperP-1A-1F1

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 facilities. Our committed $1.0 billion 364-day and $3.0 billion unsecured revolving credit facilities that will expire in October 2023 and October 2027, respectively, backstop our commercial paper program. No balances were outstanding under either credit facility at any time during 2023 or 2022. We had $90 million and $945 million outstanding under our commercial paper program as of April 29, 2023 and April 30, 2022, respectively. Note 5 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 facilities also contain a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of April 29, 2023, 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.

New Accounting Pronouncements

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

TARGET CORPORATION
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Q1 2023 Form 10-Q
21
MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL INFORMATION
FORWARD LOOKING STATEMENTS & CONTROLS AND PROCEDURES
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 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 28, 2023, 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 28, 2023.

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
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Q1 2023 Form 10-Q
22
SUPPLEMENTAL INFORMATION
PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On March 29, 2023, Target Corporation and certain of its officers were named as defendants in a purported federal securities law class action filed in the United States District Court for the District of Minnesota. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 relating to certain prior disclosures of Target about its business model, strategy, and inventory. The plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired Target common stock between August 18, 2021 and May 17, 2022. The plaintiff seeks damages and other relief, including attorneys’ fees, based on allegations that the defendants misled investors about Target’s business model, strategy, and inventory and that such conduct affected the value of Target common stock. Target intends to vigorously defend this lawsuit.

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 28, 2023.

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. As of April 29, 2023, 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 April 29, 2023 by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

TARGET CORPORATION
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Q1 2023 Form 10-Q
23
SUPPLEMENTAL INFORMATION
Item 6. Exhibits

3.1
3.2
10.21.4** +
31.1**
31.2**
32.1***
32.2***
101.INS**Inline 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)
**
Filed herewith.
***
Furnished herewith.
+
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.

    
    
    

TARGET CORPORATION
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Q1 2023 Form 10-Q
24
SUPPLEMENTAL INFORMATION
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: May 26, 2023By: /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
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Q1 2023 Form 10-Q
25
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