Item 1. Business
Item 1. Business
General
Target Corporation (Target, the Corporation or the Company) was incorporated in Minnesota in 1902. We offer to our customers, referred to as "guests," everyday essentials and fashionable, differentiated merchandise at discounted prices. Our ability to deliver a preferred shopping experience to our guests is supported by our supply chain and technology, our devotion to innovation, our loyalty offerings and suite of fulfillment options, and our disciplined approach to managing our business and investing in future growth. We operate as a single segment designed to enable guests to purchase products seamlessly in stores or through our digital channels. Since 1946, we have given 5 percent of our profit to communities.
Financial Highlights
For information on key financial highlights, see Part II , Item 7 , Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
Seasonality
A larger share of annual revenues and earnings traditionally occurs in the fourth quarter because it includes the November and December holiday sales period.
Merchandise
We sell a wide assortment of general merchandise and food. The majority of our general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy, and frozen items. Nearly all of our stores larger than 170,000 square feet offer a full line of food items comparable to traditional supermarkets. Our small format stores, generally smaller than 50,000 square feet, offer curated general merchandise and food assortments. Our digital channels include a wide merchandise assortment, including many items found in our stores, along with a complementary assortment.
A significant portion of our sales is from national brand merchandise. Approximately one-third of 2020 sales was related to our owned and exclusive brands, including but not limited to the following:
Owned Brands
A New Day™ Hearth & Hand™ with Magnolia Shade & Shore™
All in Motion™ heyday™ Simply Balanced™
Archer Farms™ Hyde & EEK! Boutique™ Smartly™
Art Class™ JoyLab™ Smith & Hawken™
Auden™ Knox Rose™ Sonia Kashuk™
Ava & Viv™ Kona Sol™ Spritz™
Boots & Barkley™ Made By Design™ Stars Above™
Bullseye's Playground™ Market Pantry™ Sun Squad™
Casaluna™ More Than Magic™ Threshold™
Cat & Jack™ Opalhouse™ Universal Thread™
Cloud Island™ Open Story™ up & up™
Colsie™ Original Use™ Wild Fable™
Embark™ Pillowfort™ Wondershop™
Everspring™ Project 62™ Xhilaration™
Good & Gather™ Prologue™
Goodfellow & Co™ Room Essentials™
Exclusive Adult Beverage Brands
California Roots™ Rosé Bae™ Wine Cube™
Mystic Reef™ The Collection™
TARGET CORPORATION
2020 Form 10-K 2
BUSINESS Table of Contents
Index to Financial Statements
We also sell merchandise through periodic exclusive design and creative partnerships and generate revenue from in-store amenities such as Target Café and leased or licensed departments such as Target Optical, Starbucks, and other food service offerings. CVS Pharmacy, Inc. (CVS) operates pharmacies and clinics in our stores under a perpetual operating agreement from which we generate annual occupancy income. In 2020, we announced a partnership with Ulta Beauty under which we will operate Ulta Beauty at Target , a shop-in-shop experience debuting on Target.com and in more than 100 Target locations beginning in 2021, with plans to scale to hundreds more over time.
Customer Loyalty Programs
Our guests receive a 5 percent discount on nearly all purchases and receive free shipping at Target.com when they use their Target Debit Card, Target Credit Card, or Target™ MasterCard ® (collectively, RedCards™). We also seek to drive customer loyalty and trip frequency through our Target Circle program, where members earn 1 percent rewards on nearly all non-RedCard purchases, among other benefits.
Distribution
The vast majority of merchandise is distributed to our stores through our network of distribution centers. Common carriers ship merchandise to and from our distribution centers. Vendors or third-party distributors ship certain food items and other merchandise directly to our stores. Merchandise sold through our digital channels is distributed to our guests via common carriers (from stores, distribution centers, vendors, and third-party distributors), delivery via our wholly owned subsidiary, Shipt, Inc. (Shipt), and through guest pick-up at our stores. Our stores fulfill the majority of the digitally originated sales, which allows improved product availability, faster fulfillment times, reduced shipping costs, and allows us to offer guests a suite of same-day fulfillment options such as Order Pickup, Drive Up, and Shipt.
Human Capital Management
At Target, our purpose is to help all families discover the joy of everyday life. In support of this purpose we invest in our team, our most important asset, by giving them opportunities to grow professionally, take care of themselves, each other and their families, and to make a difference for our guests and our communities. We are among the largest private employers in the U.S., and our workforce has varying goals and expectations of their employment relationship, from team members looking to build a career to students, retirees and others who are seeking to supplement their income in an enjoyable atmosphere. We seek to be an employer of choice to attract and retain top talent no matter their objectives in seeking employment. To that end, we strive to foster an engaged, diverse, inclusive, safe, purpose-driven culture where employees, referred to as "team members," have equitable opportunities for success.
As of January 30, 2021, we employed approximately 409,000 full-time, part-time, and seasonal team members. Because of the seasonal nature of the retail business, employment levels peak in the holiday season. We also engage independent contractors, most notably in our Shipt subsidiary.
Talent Development and Engagement
We offer a compelling work environment with meaningful experiences and abundant growth and career-development opportunities. This starts with the opportunity to do challenging work and learn on the job and is supplemented by programs and continuous learning that help our team build skills at all levels, including programs focused on specialized skill development, leadership opportunities, coaching, and mentoring. Our talent and succession planning process supports the development of a diverse talent pipeline for leadership and other critical roles. We monitor our team members’ perceptions of these commitments through a number of surveys and take steps to address areas needing improvement.
TARGET CORPORATION
2020 Form 10-K 3
BUSINESS Table of Contents
Index to Financial Statements
Diversity and Inclusion
We champion workplace diversity and inclusion and focus on developing, advancing, and recruiting diverse talent. We monitor the representation of women and racially or ethnically diverse team members at different levels throughout the company and disclose the composition of our team in our annual Workforce Diversity Report (which, beginning with our 2019 report, includes demographic information using the categories disclosed in our EEO-1 report). Developing teams where team members feel heard, respected, and included is a core Target value and is also fundamental to creating an inclusive guest experience.
Compensation and Benefits
Our compensation and benefits are designed to support the financial, mental, and physical well-being of our team members and their families. We believe in paying team members equitably, regardless of gender, race or ethnicity, and we regularly review the pay data of U.S. team members to confirm that we are doing so. Our compensation packages include a $15 per-hour minimum starting wage for US hourly team members (who comprise the vast majority of our team), a 401(k) plan with matching contributions up to five percent of eligible earnings, paid vacation and holidays, family leave, merchandise and other discounts, disability insurance, life insurance, healthcare and dependent care flexible spending accounts, tuition reimbursement, various team member assistance programs, an annual short-term incentive program, long-term equity awards, and health insurance benefits. Eligibility for, and the level of, benefits vary depending on team members’ full-time or part-time status, work location, compensation level, and tenure.
Workplace Health and Safety
We strive to maintain a safe and secure work environment and have specific safety programs. This includes administering a comprehensive occupational injury- and illness-prevention program and training for team members.
COVID-19
In 2020 we invested more than $1 billion in the well-being, health, and safety of our team members and guests. We extended certain benefits to our team members in light of the COVID-19 pandemic, including bonuses, fully-paid leaves for up to 30 days, free back-up dependent care, and a variety of mental, emotional, and physical wellness resources. We also enacted dozens of safety, social distancing, and cleaning measures designed to protect our team and guests during the COVID-19 pandemic.
Working Capital
Effective inventory management is key to our ongoing success, and we use various techniques including demand forecasting and planning and various forms of replenishment management. We achieve effective inventory management by staying in-stock in core product offerings, maintaining positive vendor relationships, and carefully planning inventory levels for seasonal and apparel items to minimize markdowns.
The Liquidity and Capital Resources section in MD&A provides additional details.
Competition
We compete with traditional and internet retailers, including department stores, off-price general merchandise retailers, wholesale clubs, category-specific retailers, drug stores, supermarkets, and other forms of retail commerce. Our ability to positively differentiate ourselves from other retailers and provide compelling value to our guests largely determines our competitive position within the retail industry.
Intellectual Property
Our brand image is a critical element of our business strategy. Our principal trademarks, including Target, our "Expect More. Pay Less." brand promise, and our "Bullseye Design," have been registered with the United States (U.S.) Patent and Trademark Office. We also seek to obtain and preserve intellectual property protection for our brands.
TARGET CORPORATION
2020 Form 10-K 4
BUSINESS & RISK FACTORS Table of Contents
Index to Financial Statements
Geographic Information
Nearly all of our revenues are generated within the U.S. The vast majority of our property and equipment is located within the U.S.
Available Information
Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at investors.target.com as soon as reasonably practicable after we file such material with, or furnish it to, the U.S. Securities and Exchange Commission (SEC). In addition, the SEC maintains a website (http://www.sec.gov) that contains information we electronically file with, or furnish to, the SEC. Our Corporate Governance Guidelines, Code of Ethics, Corporate Responsibility Report, and the charters for the committees of our Board of Directors are also available free of charge in print upon request or at investors.target.com. Information on our website is not part of this or any other report we file with, or furnish to, the SEC.