What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-03-10 compared with 2020-03-11 · 56 added, 25 removed, 141 unchanged (36% of the section changed)

4 unchanged sentences

Our continued success is dependent on positive perceptions of Target which, if eroded, could adversely affect our business and our relationships with our guests and team members.

We believe that one of the reasons our guests, team members, and vendors choose Target is the positive reputation we have built over many years for serving our four primary constituencies:

guests, team members, shareholders, and the communities in which we operate.

We believe that one of the reasons our shareholders, guests, team members, and vendors choose Target is the positive reputation we have built over many years for serving those different constituencies and the communities in which we operate.

To be successful in the future, we must continue to preserve Target's reputation.

Reputational value is based in large part on perceptions, and broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of Target.

Our reputation is based in large part on perceptions, and broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of Target.

It may be difficult to control negative publicity, regardless of whether it is accurate.

Target’s position or perceived lack of position on social, environmental, public policy or other sensitive issues, and any perceived lack of transparency about those matters, could harm our reputation with certain groups or guests.

While reputations may take decades to build, negative incidents can quickly erode trust and confidence and can result in consumer boycotts, governmental investigations, or litigation.

3 unchanged sentences

If we are unable to positively differentiate ourselves from other retailers, our results of operations could be adversely affected.

In the past, we have been able to compete successfully by differentiating our guests’ shopping experience through a careful combination of price, merchandise assortment, store environment, convenience, guest service, loyalty programs, and marketing efforts.

We have been able to compete successfully by differentiating our guests’ shopping experience through a careful combination of price, merchandise assortment, store environment, convenience, guest service, loyalty programs, and marketing efforts.

Guest perceptions regarding the cleanliness and safety of our stores, the functionality, reliability, and speed of our digital channels and fulfillment options, our in-stock levels, and the value of our promotions are among the factors that affect our ability to compete.

7 unchanged sentences

Index to Financial Statements

The retail industry's continuing migration to digital channels has affected the ways we differentiate ourselves from other retailers.

The retail industry's continuing migration to digital channels has affected the ways we differentiate from other retailers.

In particular, consumers are able to quickly and conveniently comparison shop and determine real-time product availability using digital tools, which can lead to decisions based solely on price or the functionality of the digital tools.

10 unchanged sentences

If we do not anticipate and respond quickly to changing consumer preferences, our sales and profitability could suffer.

A large part of our business is dependent on our ability to make trend-right decisions and effectively manage our inventory in a broad range of merchandise categories, including apparel, accessories, home décor, electronics, toys, seasonal offerings, food, and other merchandise.

If we do not obtain accurate and relevant data on guest preferences, predict changing consumer tastes, preferences, spending patterns and other lifestyle decisions, emphasize the correct categories, implement competitive and effective pricing and promotion strategies, or personalize our offerings to our guests, we may experience lost sales, spoilage, and increased inventory markdowns, which could adversely affect our results of operations by reducing our profitability.

If we do not obtain accurate and relevant data on guest preferences, predict and quickly respond to changing consumer tastes, preferences, spending patterns and other lifestyle decisions, emphasize the correct categories, implement competitive and effective pricing and promotion strategies, or personalize our offerings to our guests, we may experience lost sales, spoilage, and increased inventory markdowns, which could adversely affect our results of operations.

Investments and Infrastructure Risks

1 unchanged sentence

Our business depends, in part, on our ability to remodel existing stores and build new stores in a manner that achieves appropriate returns on our capital investment.

Our store remodel program is larger than historic levels and is being implemented using a custom approach based on the condition of each store and characteristics of the surrounding neighborhood.

Our store remodel program is large and is being implemented using a custom approach based on the condition of each store and characteristics of the surrounding neighborhood.

When building new stores, we compete with other retailers and businesses for suitable locations for our stores.

16 unchanged sentences

The potential problems and interruptions associated with implementing technology initiatives, as well as providing training and support for those initiatives, could disrupt or reduce our operational efficiency, and could negatively impact guest experience and guest confidence.

For example, during the past year we experienced disruptions in our point-of-sale system that prevented our ability to process debit or credit transactions, negatively impacted some guests’ experiences, and generated negative publicity.

For example, in the past we have experienced disruptions in our point-of-sale system that prevented our ability to process debit or credit transactions, negatively impacted some guests’ experiences, and generated negative publicity.

Information Security, Cybersecurity, and Data Privacy Risks

13 unchanged sentences

The legal and regulatory environment regarding information security, cybersecurity, and data privacy is increasingly demanding and has enhanced requirements for using and treating personal data.

Complying with new data protection requirements, such as those imposed by the recently effective California data privacy laws, may cause us to incur substantial costs, require changes to our business practices, limit our ability to obtain data used to provide a differentiated guest experience, and expose us to further litigation and regulatory risks, each of which could adversely affect our results of operations.

Complying with data protection requirements, such as those imposed by a variety of state laws, may cause us to incur substantial costs, require changes to our business practices, limit our ability to obtain data used to provide a differentiated guest experience, and expose us to further litigation and regulatory risks, each of which could adversely affect our results of operations.

TARGET CORPORATION

3 unchanged sentences

Supply Chain and Third-Party Risks

Changes in our relationships with our vendors, changes in tax or trade policy, interruptions in our supply chain or increased commodity or supply chain costs could adversely affect our results of operations.

We are dependent on our vendors to supply merchandise to our distribution centers, stores, and guests.

Changes in our relationships with our vendors, changes in tax or trade policy, interruptions in our operations or supply chain or increased commodity or supply chain costs could adversely affect our results of operations.

We are dependent on our vendors, including common carriers, to supply merchandise to our distribution centers, stores, and guests.

As we continue to add capabilities to quickly move the appropriate amount of inventory at optimal operational costs through our entire supply chain, operating our fulfillment network becomes more complex and challenging.

If our fulfillment network does not operate properly or if a vendor fails to deliver on its commitments, we could experience merchandise out-of-stocks, delivery delays or increased delivery costs, which could lead to lost sales and decreased guest confidence, and adversely affect our results of operations.

A large portion of our merchandise is sourced, directly or indirectly, from outside the U.S., with China as our single largest source, so any major changes in tax or trade policy, such as the imposition of additional tariffs or duties on imported products, between the U.S.

If our fulfillment network does not operate properly, if a vendor fails to deliver on its commitments, or if common carriers have difficulty providing capacity to meet demands for their services like they experienced at times during 2020, we could experience merchandise out-of-stocks, delivery delays or increased delivery costs, which could lead to lost sales and decreased guest confidence, and adversely affect our results of operations.

A large portion of our merchandise is sourced, directly or indirectly, from outside the U.S., with China as our single largest source.

Any major changes in tax or trade policy, such as the imposition of additional tariffs or duties on imported products, between the U.S.

and countries from which we source merchandise could require us to take certain actions, including for example raising prices on products we sell and seeking alternative sources of supply from vendors in other countries with whom we have less familiarity, which could adversely affect our reputation, sales, and our results of operations.

Political or financial instability, currency fluctuations, the outbreak of pandemics or other illnesses (such as the recent coronavirus), labor unrest, transport capacity and costs, port security, weather conditions, natural disasters or other events that could slow or disrupt port activities and affect foreign trade are beyond our control and could materially disrupt our supply of merchandise, increase our costs, and/or adversely affect our results of operations.

Political or financial instability, currency fluctuations, the outbreak of pandemics or other illnesses (such as the COVID-19 pandemic), labor unrest, transport capacity and costs, port security, weather conditions, natural disasters, or other events that could alter or suspend our operations, slow or disrupt port activities, or affect foreign trade are beyond our control and could materially disrupt our supply of merchandise, increase our costs, and/or adversely affect our results of operations.

There have been periodic labor disputes impacting the U.S.

6 unchanged sentences

Legal, Regulatory, Global and Other External Risks

The COVID-19 pandemic has affected our business in many different ways, and may continue to amplify the risks and uncertainties facing our business and their potential impact on our financial position, results of operations, and cash flows.

The COVID-19 pandemic has significantly affected U.S.

consumer shopping patterns and caused the overall health of the U.S.

economy to deteriorate.

In 2020, our sales growth was most pronounced in lower margin categories with an increased percentage originated through our digital channels.

While some of the changes in guest shopping patterns in connection with the COVID-19 pandemic may be temporary, others could become long-lasting.

If the shifts in our category sales mix to lower-margin merchandise and fulfilling a significantly larger percentage of our sales through digital channels become long-lasting and we are unable to offset the lower margin and increased costs of fulfilling orders outside of our traditional in-store channel with efficiencies, cost-savings, or expense reductions, our results of operations could be adversely affected.

TARGET CORPORATION

2020 Form 10-K 8

RISK FACTORS Table of Contents

Index to Financial Statements

Shifts in shopping patterns during the COVID-19 pandemic have also significantly affected our inventory position and disrupted our supply chain.

At times we have been unable to procure certain merchandise items in the quantities our guests seek, including those most in demand due to the COVID-19 pandemic.

If we have additional times where we are unable to re-stock those products for an extended period, it may lead to lost sales and negatively affect our results of operations.

For other products with demand below historic levels, many of which are in higher-margin categories such as Apparel and Accessories, we took actions to help manage that inventory, such as slowing or cancelling purchase orders and paying related cancellation fees, asking vendors to store excess inventory on their premises, and accelerating markdowns of inventory.

Those increased costs, along with lost sales for those higher-margin products, have at times negatively affected, and may continue to negatively affect, our profitability.

Our vendors have been and may be affected by the COVID-19 pandemic in differing ways.

Some financially distressed vendors may be unable to survive the COVID-19 pandemic, which would require us to seek alternative vendors, while others are having difficulty supplying us products in the quantities our guests seek, which could negatively affect our results of operations.

Nearly all of our stores, digital channels, and distribution centers have remained open during the COVID-19 pandemic.

We have incurred significant SG&A expenses related to efforts to protect the health and well-being of our guests and team members.

Most of our headquarters operations have transitioned to remote working arrangements, which has amplified our already extensive reliance on computer systems and on our continued and unimpeded access to the Internet to use those systems.

During parts of the COVID-19 pandemic, we have had to temporarily alter other parts of our operations, including adjusting our in-store returns process, suspending physical inventory counts at our stores, metering guest traffic, reducing store hours, and, in some locations, restricting access to “non-essential” sections of our stores due to emergency state or local operating restrictions.

Those temporary alterations to our operations have at times negatively affected, and in the future could negatively affect, the guest experience, sales, and our results of operations.

In addition, if guests or team members have negative perceptions about the cleanliness and safety of our stores in light of the COVID-19 pandemic, our reputation, the guest experience, sales, and our results of operations could be adversely affected.

During the COVID-19 pandemic some of our competitors were forced to temporarily suspend or limit their operations.

In addition, many guests significantly reduced their spending on dining, travel, lodging, and other leisure activities outside their homes.

Both of those factors may have contributed to our increased sales during the COVID-19 pandemic.

As our competitors return to full operations and guests return to spending on those other categories, it could lead to lower sales than we experienced during the COVID-19 pandemic, which could negatively affect our results of operations.

A continued and prolonged deterioration in the health in the U.S.

economy could lead to a reduction in our sales in the future, which could magnify any negative effects of the COVID-19 pandemic on our results of operations and negatively and materially affect additional areas of our business, such as asset impairment evaluations and the amount of credit card profit-sharing revenue payments we receive from TD Bank Group (TD).

The full extent of the impact of the COVID-19 pandemic on our business, financial position, and results of operations may not be known for an extended period and will depend on future developments, many of which are outside of our control, including the duration and spread of the COVID-19 pandemic, the availability and effectiveness of the COVID-19 vaccines, and related actions taken by the U.S., state, local, and international governments, which are uncertain and cannot be predicted.

If the COVID-19 pandemic continues without improvement or worsens, its impacts could be more prolonged and may become more severe.

The fluidity of this situation limits our ability to predict the ultimate impact of COVID-19 on our business, financial condition, and financial performance, which could be material.

Our earnings depend on the state of macroeconomic conditions and consumer confidence in the U.S.

1 unchanged sentence

consumer confidence and the health of the U.S.

In addition, a significant portion of our total sales is derived from stores located in five states:

California, Texas, Florida, Minnesota and Illinois, resulting in further dependence on local economic conditions in these states.

Deterioration in macroeconomic conditions or consumer confidence could negatively affect our business in many ways, including slowing sales growth, reducing overall sales, and reducing gross margins.

These same considerations impact the success of our credit card program.

We share in the profits generated by the credit card program with TD Bank Group (TD), which owns the receivables generated by our proprietary credit cards.

Deterioration in macroeconomic conditions or changes in consumer preferences concerning our credit card program could adversely affect the volume of new credit accounts, the amount of credit card program balances, and the ability of credit card holders to pay their balances.

These conditions could result in us receiving lower profit-sharing payments.

TARGET CORPORATION

2 unchanged sentences

Index to Financial Statements

These same considerations impact the success of our credit card program.

We share in the profits generated by the credit card program with TD, which owns the receivables generated by our proprietary credit cards.

These conditions could result in us receiving lower profit-sharing payments.

Uncharacteristic or significant weather conditions, natural disasters, and other catastrophic events could adversely affect our results of operations.

Uncharacteristic or significant weather conditions can affect consumer shopping patterns, particularly in apparel and seasonal items, which could lead to lost sales or greater than expected markdowns and adversely affect our short-term results of operations.

In addition, our three largest states by total sales are California, Texas and Florida, areas where natural disasters are more prevalent.

In addition, three of our largest states by total sales are California, Texas and Florida, areas where natural disasters are more prevalent.

Natural disasters in those states or in other areas where our sales or operations are concentrated could result in significant physical damage to or closure of one or more of our stores, distribution centers, facilities, or key vendors.

In addition, natural disasters and other catastrophic events, such as the recent coronavirus outbreak, in areas where we or our vendors have operations, could cause delays in the distribution of merchandise from our vendors to our distribution centers, stores, and guests, affect consumer purchasing power, or reduce consumer demand, which could adversely affect our results of operations by increasing our costs and lowering our sales.

In addition, natural disasters and other catastrophic events, such as the COVID-19 pandemic, in areas where we or our vendors have operations, could cause delays in the distribution of merchandise from our vendors to our distribution centers, stores, and guests, affect consumer purchasing power, or reduce consumer demand, which could adversely affect our results of operations by increasing our costs and lowering our sales.

We rely on a large, global, and changing workforce of team members, contractors, and temporary staffing.

6 unchanged sentences

If we become subject to one or more collective bargaining agreements in the future, it could adversely affect our labor costs and how we operate our business.

We also have support offices in India and China, and any extended disruption of our operations in those locations, whether due to labor difficulties or otherwise, could adversely affect our operations and financial results.

In addition to our United States operations, we have support offices in India and China, and any extended disruption of our operations in our different locations, whether due to labor difficulties or otherwise, could adversely affect our operations and financial results.

Failure to address product safety and sourcing concerns could adversely affect our sales and results of operations.

37 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors