What changed in this filing

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Item 1. Financial Statements

2021-05-28 compared with 2020-11-25 · 80 added, 137 removed, 255 unchanged (46% of the section changed)

1 unchanged sentence

Consolidated Statements of Operations

Three Months Ended Nine Months Ended

(millions, except per share data) (unaudited) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Three Months Ended

(millions, except per share data) (unaudited) May 1, 2021 May 2, 2020

Sales $ 23,879 $ 19,371

4 unchanged sentences

Depreciation and amortization (exclusive of depreciation included in cost of sales) 598 577

541 575 1,660 1,717

Operating income 2,374 468

1,935 1,002 4,703 3,460

Net interest expense 108 117

Net other (income) / expense ( 343 ) 22

Earnings from continuing operations before income taxes 1,298 901 3,816 3,139

Earnings before income taxes 2,609 329

Provision for income taxes 512 45

Net earnings from continuing operations 1,014 706 2,988 2,436

Discontinued operations, net of tax — 8 — 11

Net earnings $ 2,097 $ 284

Basic earnings per share $ 4.20 $ 0.57

Continuing operations $ 2.02 $ 1.38 $ 5.97 $ 4.75

Discontinued operations — 0.02 — 0.02

Net earnings per share $ 2.02 $ 1.40 $ 5.97 $ 4.77

Diluted earnings per share $ 4.17 $ 0.56

Continuing operations $ 2.01 $ 1.37 $ 5.91 $ 4.71

Discontinued operations — 0.02 — 0.02

Net earnings per share $ 2.01 $ 1.39 $ 5.91 $ 4.74

Weighted average common shares outstanding

9 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Ended Nine Months Ended

(millions) (unaudited) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Three Months Ended

(millions) (unaudited) May 1, 2021 May 2, 2020

Net earnings $ 2,097 $ 284

Other comprehensive income

Pension, net of tax 22 10 66 30

Currency translation adjustment and cash flow hedges, net of tax 14 ( 1 ) 5 2

Other comprehensive income / (loss), net of tax

Pension benefit liabilities 22 22

Currency translation adjustment and cash flow hedges 9 ( 8 )

Other comprehensive income 31 14

6 unchanged sentences

Consolidated Statements of Financial Position

(millions, except footnotes) (unaudited) October 31, 2020 February 1, 2020 November 2, 2019

(millions, except footnotes) (unaudited) May 1,

2021 January 30,

Cash and cash equivalents $ 7,816 $ 8,511 $ 4,566

31 unchanged sentences

Common Stock Authorized 6,000,000,000 shares, $ 0.0833 par value;

500,754,729 , 504,198,962 and 506,677,740 shares issued and outstanding as of October 31, 2020, February 1, 2020, and November 2, 2019, respectively.

496,093,160 , 500,877,129 and 499,919,691 shares issued and outstanding as of May 1, 2021, January 30, 2021, and May 2, 2020, respectively.

Preferred Stock Authorized 5,000,000 shares, $ 0.01 par value;

6 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

(millions) (unaudited) October 31, 2020 November 2, 2019

Three Months Ended

(millions) (unaudited) May 1, 2021 May 2, 2020

Operating activities

Net earnings $ 2,097 $ 284

Earnings from discontinued operations, net of tax — 11

Net earnings from continuing operations 2,988 2,436

Adjustments to reconcile net earnings to cash provided by operations

Adjustments to reconcile net earnings to cash provided by operating activities:

Depreciation and amortization 667 641

1 unchanged sentence

Deferred income taxes 170 ( 4 )

Loss on debt extinguishment 512 —

Gain on Dermstore sale ( 335 ) —

Noncash losses / (gains) and other, net

4 unchanged sentences

Accrued and other liabilities ( 413 ) 170

Cash provided by operating activities—continuing operations 7,044 4,141

Cash provided by operating activities—discontinued operations

Cash provided by operations 7,044 4,159

Cash provided by operating activities 1,139 1,284

Investing activities

1 unchanged sentence

Proceeds from disposal of property and equipment 12 6

Proceeds from Dermstore sale 356 —

Other investments 7 1

5 unchanged sentences

Repurchase of stock ( 1,310 ) ( 686 )

Accelerated share repurchase pending final settlement — ( 450 )

Stock option exercises 2 4

Cash required for financing activities ( 1,640 ) ( 2,386 )

Net increase in cash and cash equivalents 3,419 ( 587 )

Cash (required for) / provided by financing activities ( 1,669 ) 1,449

Net (decrease) / increase in cash and cash equivalents ( 695 ) 1,989

Cash and cash equivalents at beginning of period 8,511 2,577

17 unchanged sentences

Repurchase of stock ( 5.7 ) — — ( 609 ) — ( 609 )

Accelerated share repurchase pending final settlement

( 3.0 ) — ( 153 ) ( 247 ) — ( 400 )

Stock options and awards 1.4 — ( 20 ) — — ( 20 )

3 unchanged sentences

Dividends declared — — — ( 344 ) — ( 344 )

Repurchase of stock ( 1.3 ) — 153 ( 94 ) — 59

Stock options and awards 0.4 — 42 — — 42

3 unchanged sentences

Dividends declared — — — ( 346 ) — ( 346 )

Repurchase of stock ( 3.0 ) ( 1 ) — ( 295 ) — ( 296 )

Accelerated share repurchase pending final settlement

( 2.5 ) — ( 178 ) ( 272 ) — ( 450 )

Stock options and awards 0.5 — 37 — — 37

November 2, 2019 506.7 $ 42 $ 6,006 $ 6,270 $ ( 773 ) $ 11,545

October 31, 2020 500.8 $ 42 $ 6,285 $ 7,789 $ ( 797 ) $ 13,319

Net earnings — — — 1,380 — 1,380

Other comprehensive loss — — — — ( 95 ) ( 95 )

Other comprehensive income — — — — 41 41

Dividends declared — — — ( 344 ) — ( 344 )

Repurchase of stock ( 2.6 ) — 178 ( 335 ) — ( 157 )

Stock options and awards 0.1 — 44 — — 44

February 1, 2020 504.2 $ 42 $ 6,226 $ 6,433 $ ( 868 ) $ 11,833

January 30, 2021 500.9 $ 42 $ 6,329 $ 8,825 $ ( 756 ) $ 14,440

TARGET CORPORATION

6 unchanged sentences

(millions) (unaudited) Shares Value Capital Earnings (Loss) / Income

February 1, 2020 504.2 $ 42 $ 6,226 $ 6,433 $ ( 868 ) $ 11,833

January 30, 2021 500.9 $ 42 $ 6,329 $ 8,825 $ ( 756 ) $ 14,440

Net earnings — — — 2,097 — 2,097

4 unchanged sentences

May 1, 2021 496.1 $ 41 $ 6,271 $ 9,372 $ ( 725 ) $ 14,959

Net earnings — — — 1,690 — 1,690

Other comprehensive income — — — — 21 21

Dividends declared — — — ( 344 ) — ( 344 )

Stock options and awards 0.4 — 42 — — 42

August 1, 2020 500.3 $ 42 $ 6,248 $ 7,121 $ ( 833 ) $ 12,578

Net earnings — — — 1,014 — 1,014

Other comprehensive income — — — — 36 36

Dividends declared — — — ( 346 ) — ( 346 )

Stock options and awards 0.5 — 37 — — 37

October 31, 2020 500.8 $ 42 $ 6,285 $ 7,789 $ ( 797 ) $ 13,319

We declared $ 0.68 and $ 0.66 dividends per share for the three months ended October 31, 2020, and November 2, 2019, respectively, and $ 2.62 per share for the fiscal year ended February 1, 2020.

We declared $ 0.68 and $ 0.66 dividends per share for the three months ended May 1, 2021, and May 2, 2020, respectively, and $ 2.70 per share for the fiscal year ended January 30, 2021.

See accompanying Notes to Consolidated Financial Statements .

7 unchanged sentences

Coronavirus (COVID-19)

Dermstore Sale

Fair Value Measurements

Property and Equipment

Commercial Paper and Long-Term Debt

Derivative Financial Instruments

8 unchanged sentences

Accounting Policies

These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) 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 (U.S.) generally accepted accounting principles (U.S.

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.

GAAP) for complete financial statements.

1 unchanged sentence

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

Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.

We operate as a single segment that includes all of our continuing operations, which are designed to enable guests to purchase products seamlessly in stores or through our digital channels.

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.

2 unchanged sentences

Coronavirus (COVID-19)

On March 11, 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) a pandemic, and on March 13, 2020, the United States declared a national emergency.

States and cities have taken various measures in response to COVID-19, including mandating the closure of certain businesses and encouraging or requiring citizens to avoid large gatherings.

The novel coronavirus (COVID-19) pandemic continues to evolve.

In 2020, states and cities took various measures in response to COVID-19, including mandating the closure of certain businesses and encouraging or requiring citizens to avoid large gatherings.

To date, virtually all of our stores, digital channels, and distribution centers have remained open.

Throughout the nine months ended October 31, 2020, guest shopping patterns changed significantly and unpredictably in reaction to the COVID-19 pandemic.

Four of our five core merchandise categories have experienced significant sales growth throughout the year;

however, sales of Apparel and Accessories declined significantly in the first quarter before rebounding in the second and third quarters.

Note 3 pr ovides sales by category.

In response to these changes, we have taken many actions, including accelerating purchases of certain merchandise in our core categories and slowing or canceling certain purchase orders, primarily for Apparel and Accessories.

As a result of these actions, during the first quarter of 2020, we recorded $ 216 million of purchase order cancellation fees in Cost of Sales.

As the COVID-19 pandemic has evolved, we have experienced significant volatility in our sales category mix.

Note 4 presents sales by category.

Since the pandemic started in March 2020, we took various actions, including accelerating purchases of certain merchandise in our core categories and slowing or canceling purchase orders, primarily for Apparel and Accessories.

As a result, during the quarter ended May 2, 2020, we recorded $ 216 million of purchase order cancellation fees in Cost of Sales.

Dermstore Sale

In February 2021, we sold our wholly owned subsidiary Dermstore LLC (Dermstore) for $ 356 million in cash and recognized a $ 335 million pretax gain, which is included in Net Other (Income) / Expense.

Dermstore has historically represented less than 1 percent of our consolidated revenues, operating income and net assets.

TARGET CORPORATION

4 unchanged sentences

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 Three Months Ended Nine Months Ended

(millions) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Revenues Three Months Ended

(millions) May 1, 2021 May 2, 2020

Apparel and accessories (a)

1 unchanged sentence

Beauty and household essentials (b)

6,103 5,125 18,172 15,172

Food and beverage (c)

4,397 3,717 13,158 10,899

Hardlines (d)

3,377 2,460 9,959 7,348

Home furnishings and décor (e)

4,506 3,527 12,395 9,985

Other 26 21 89 83

Sales 23,879 19,371

Credit card profit sharing 171 166

Other 132 74 331 211

Other revenue 318 244

4 unchanged sentences

(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.

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

Merchandise sales — We record almost all retail store revenues at the point of sale.

Digitally originated sales may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store.

Sales are recognized net of expected returns, which we estimate using historical return patterns and our expectation of future returns.

As of October 31, 2020, February 1, 2020, and November 2, 2019, the accrual for estimated returns was $ 182 million, $ 117 million, and $ 137 million, respectively.

Sales are recognized net of expected returns, which we estimate using historical return patterns.

As of May 1, 2021, January 30, 2021, and May 2, 2020, the accrual for estimated returns was $ 196 million, $ 139 million, and $ 398 million, respectively.

The accrual as of May 2, 2020, reflects the impact of the suspension of in-store merchandise returns and exchanges from March 26, 2020, to April 26, 2020, due to the COVID-19 pandemic.

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

Gift Card Liability Activity February 1, 2020 Gift Cards Issued During Current Period But Not Redeemed (b)

Revenue Recognized From Beginning Liability October 31, 2020

Gift Card Liability Activity January 30,

2021 Gift Cards Issued During Current Period But Not Redeemed (b)

Revenue Recognized From Beginning Liability May 1,

Gift card liability (a)

2 unchanged sentences

(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

2 unchanged sentences

NOTES Index to Notes

Credit card profit sharing — We receive payments under a credit card program agreement with TD.

TD underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance.

Fair Value Measurements

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

Fair Value Measurements - Recurring Basis Fair Value at

(millions) Classification Pricing Category October 31, 2020 February 1, 2020 November 2, 2019

Financial Instruments Measured On a Recurring Basis Fair Value

(millions) Classification Pricing Category May 1, 2021 January 30, 2021 May 2, 2020

Short-term investments Cash and Cash Equivalents Level 1 $ 6,895 $ 7,644 $ 3,605

Prepaid forward contracts Other Current Assets Level 1 37 38 23

Equity securities (a)

Other Current Assets Level 1 19 39 80

Equity securities Other Current Assets Level 1 — — 18

Interest rate swaps Other Noncurrent Assets Level 2 149 188 228

Interest rate swaps Other Noncurrent Liabilities Level 2 — — 10

(a) Represents our investment in Casper Sleep Inc.

common stock .

Significant Financial Instruments Not Measured at Fair Value (a)

October 31, 2020 February 1, 2020 November 2, 2019

May 1, 2021 January 30, 2021 May 2, 2020

Value Carrying

6 unchanged sentences

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 or distribution center, discontinue projects, or make significant software changes—indicate that the asset’s carrying value may not be recoverable.

We recognized impairment charges of $ 2 million and $ 62 million during the three and nine months ended October 31, 2020, respectively.

We recognized impairment charges of $ 7 million and $ 21 million during the three and nine months ended November 2, 2019, respectively.

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 $ 41 million and $ 35 million during the three months ended May 1, 2021, and May 2, 2020, respectively.

These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

Commercial Paper and Long-Term Debt

In March 2020, we issued unsecured fixed rate debt of $ 1.5 billion at 2.250 percent that matures in April 2025 and $ 1.0 billion at 2.650 percent that matures in September 2030.

In October 2020, we repurchased $ 1.77 billion of debt before its maturity at a market value of $ 2.25 billion.

We recognized a loss on early retirement of $ 512 million, which was recorded in Net Interest Expense.

We obtain short-term financing from time to time under our commercial paper program.

No balances were outstanding at any time during the nine months ended October 31, 2020.

For the nine months ended November 2, 2019, the maximum amount outstanding was $ 744 million, and the average daily amount outstanding was $ 55 million at a weighted average annual interest rate of 2.4 percent, with no balance outstanding as of November 2, 2019.

In April 2020, we obtained a committed $ 900 million 364 -day unsecured revolving credit facility.

This new facility was in addition to our $ 2.5 billion unsecured revolving credit facility that expires in October 2023.

We terminated the 364 -day facility in November 2020.

No balances were outstanding under either credit facility at any time during 2020 or 2019.

TARGET CORPORATION

Q3 2020 Form 10-Q 10

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Notes

Derivative Financial Instruments

2 unchanged sentences

Note 5 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

As of October 31, 2020, and November 2, 2019, we were party to interest rate swaps with notional amounts totaling $ 1.5 billion.

We pay a variable rate and receive a fixed rate under each of these agreements.

All of the agreements are designated as fair value hedges, and all were perfectly effective during the three and nine months ended October 31, 2020, and November 2, 2019.

As of October 31, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $ 250 million to hedge the interest rate exposure of anticipated future debt issuances.

We designated these derivative financial instruments as cash flow hedges.

We assess, both at inception and on an ongoing basis, whether the derivative financial instrument is highly effective in offsetting changes in cash flows of the hedged item and whether it is probable that the hedged forecasted transaction will occur.

As of October 31, 2020, a $ 1 million loss was recorded in Accumulated Other Comprehensive Loss and will be reclassified to Net Interest Expense when the forecasted transaction affects earnings.

As of May 1, 2021, January 30, 2021, and May 2, 2020, we were party to interest rate swaps with notional amounts totaling $ 1.5 billion.

We pay a floating rate and receive a fixed rate under each of these agreements.

All of the agreements are designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during the three months ended May 1, 2021, and May 2, 2020.

TARGET CORPORATION

Q1 2021 Form 10-Q 10

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Notes

As of May 1, 2021, January 30, 2021, and May 2, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $ 250 million.

We use these derivative financial instruments, which have been designated as cash flow hedges, to hedge the interest rate exposure of anticipated future debt issuances.

As of May 1, 2021, Accumulated Other Comprehensive Loss (AOCI) included $ 17 million that will be reclassified and reduce Net Interest Expense when the forecasted transaction affects earnings.

Effect of Hedges on Debt

October 31, 2020 February 1, 2020 November 2, 2019

May 1, 2021 January 30, 2021 May 2, 2020

Long-term debt and other borrowings

1 unchanged sentence

Cumulative hedging adjustments, included in carrying amount 132 183 228

Effect of Hedges on Net Interest Expense Three Months Ended Nine Months Ended

(millions) October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Effect of Hedges on Net Interest Expense Three Months Ended

(millions) May 1, 2021 May 2, 2020

Gain (loss) on fair value hedges recognized in Net Interest Expense

2 unchanged sentences

Total $ — $ —

For the three months ended May 1, 2021, our effective tax rate was 19.6 percent compared with 13.9 percent for the three months ended May 2, 2020, as higher pretax earnings diluted the tax-rate benefit from fixed and discrete items, such as employee share-based compensation and the sale of Dermstore.

Additionally, the favorable resolution of certain income tax matters resulted in a $ 44 million discrete tax benefit.

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.

Share Repurchase Activity Three Months Ended Nine Months Ended

(millions, except per share data) October 31, 2020 November 2, 2019 (a)

October 31, 2020 November 2, 2019 (a)

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

Share Repurchase Activity Three Months Ended

(millions, except per share data) May 1, 2021 May 2, 2020

Number of shares purchased 6.1 5.7

1 unchanged sentence

Total investment $ 1,165 $ 609

(a) This table excludes activity related to the ASR arrangement described below because final settlement had not occurred as of November 2, 2019.

During the third quarter of 2019, we entered into an ASR arrangement to repurchase $ 300 to $ 450 million of our common stock.

Under the agreement, we paid $ 450 million and received an initial delivery of 2.5 million shares, which were retired, resulting in a $ 272 million reduction to Retained Earnings.

As of November 2, 2019, $ 178 million was included as a reduction to Additional Paid-in Capital.

Upon final settlement in the fourth quarter of 2019, we received an additional 0.2 million shares, which were retired, and $ 127 million for the remaining amount not settled in shares.

In total, we repurchased 2.7 million shares under the ASR arrangement for a total cash investment of $ 323 million ($ 117.64 per share).

TARGET CORPORATION

4 unchanged sentences

We provide pension plan benefits to eligible team members.

Net Pension Benefits Expense Three Months Ended Nine Months Ended

(millions) Classification October 31, 2020 November 2, 2019 October 31, 2020 November 2, 2019

Service cost benefits earned SG&A Expenses $ 25 $ 23 $ 76 $ 69

Interest cost on projected benefit obligation

Net Other (Income) / Expense 30 37 89 111

Net Pension Benefits Expense Three Months Ended

(millions) Classification May 1, 2021 May 2, 2020

Service cost benefits earned SG&A $ 24 $ 26

Interest cost on projected benefit obligation Net Other (Income) / Expense 24 30

Expected return on assets Net Other (Income) / Expense ( 59 ) ( 61 )

1 unchanged sentence

Amortization of prior service cost Net Other (Income) / Expense — ( 3 )

Settlement charges Net Other (Income) / Expense 1 — 1 —

Total $ 18 $ 24

2 unchanged sentences

Hedges Currency Translation Adjustment Pension Total

February 1, 2020 $ ( 12 ) $ ( 19 ) $ ( 837 ) $ ( 868 )

Other comprehensive loss before reclassifications, net of tax ( 1 ) — — ( 1 )

January 30, 2021 $ ( 3 ) $ ( 18 ) $ ( 735 ) $ ( 756 )

Other comprehensive income before reclassifications, net of tax 9 — — 9

Amounts reclassified from AOCI, net of tax — — 22 22

October 31, 2020 $ ( 7 ) $ ( 19 ) $ ( 771 ) $ ( 797 )

May 1, 2021 $ 6 $ ( 18 ) $ ( 713 ) $ ( 725 )

TARGET CORPORATION

3 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-Q

Item 1. Financial Statements