TARGET CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Financial Summary Second quarter 2021 included the following notable items: • GAAP diluted earnings per share was $3.65. • Adjusted diluted earnings per share was $3.64. • Total revenue increased 9.5 percent, driven by an increase in comparable sales. • Comparable sales increased 8.9 percent, driven by a 12.7 percent increase in traffic. ◦ Comparable stores originated sales grew 8.7 percent. ◦ Comparable digitally originated sales increased 9.9 percent. • Operating income of $2.5 billion was 7.2 percent higher than the comparable prior-year period. Sales were $24.8 billion for the three months ended July 31, 2021, an increase of $2.1 billion, or 9.4 percent, from the comparable prior-year period. Cash flow provided by operating activities was $3.4 billion for the six months ended July 31, 2021, a decrease of $1.7 billion, or (33.1) percent, from $5.1 billion for the six months ended August 1, 2020. The drivers of the operating cash flow decrease are described on page 22 . Earnings Per Share Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 Change July 31, 2021 August 1, 2020 Change GAAP diluted earnings per share $ 3.65 $ 3.35 8.9 % $ 7.82 $ 3.91 100.1 % Adjustments (0.01) 0.03 (0.48) 0.06 Adjusted diluted earnings per share $ 3.64 $ 3.38 7.9 % $ 7.34 $ 3.96 85.1 % Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provid ed on page 19 . We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital allocation effectiveness over time. For the trailing twelve months ended July 31, 2021, after-tax ROIC was 31.7 percent , compared with 17.2 percent for the trailing twelve months ended August 1, 2020. The calculation of ROIC is provided on page 21 . COVID-19 Since the onset of the COVID-19 pandemic, we have experienced strong comparable sales growth and significant volatility in our sales category and channel mix, including same-day fulfillment options. TARGET CORPORATION Q2 2021 Form 10-Q 13 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Notes Analysis of Results of Operations Summary of Operating Income Three Months Ended Six Months Ended (dollars in millions) July 31, 2021 August 1, 2020 Change July 31, 2021 August 1, 2020 Change Sales $ 24,826 $ 22,696 9.4 % $ 48,705 $ 42,067 15.8 % Other revenue 334 279 20.0 652 523 24.8 Total revenue 25,160 22,975 9.5 49,357 42,590 15.9 Cost of sales 17,280 15,673 10.3 33,996 30,183 12.6 Selling, general and administrative expenses 4,849 4,460 8.8 9,358 8,520 9.8 Depreciation and amortization (exclusive of depreciation included in cost of sales) 564 542 4.0 1,162 1,119 3.9 Operating income $ 2,467 $ 2,300 7.2 % $ 4,841 $ 2,768 74.9 % Rate Analysis Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Gross margin rate 30.4 % 30.9 % 30.2 % 28.3 % SG&A expense rate 19.3 19.4 19.0 20.0 Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales) 2.2 2.4 2.4 2.6 Operating income margin rate 9.8 10.0 9.8 6.5 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 our wholly owned subsidiary, 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 (traffic) and the amount spent each visit (average transaction amount). TARGET CORPORATION Q2 2021 Form 10-Q 14 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Notes The increase in sales during the three and six months ended July 31, 2021, is due to a comparable sales increase of 8.9 percent and 15.3 percent, respectively, and the contribution from new stores. The COVID-19 pandemic has affected the amount and mix of sales across channels and categories. Comparable Sales Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Comparable sales change 8.9 % 24.3 % 15.3 % 17.7 % Drivers of change in comparable sales Number of transactions 12.7 4.6 14.8 1.6 Average transaction amount (3.4) 18.8 0.5 15.8 Comparable Sales by Channel Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Stores originated comparable sales change 8.7 % 10.9 % 13.0 % 6.0 % Digitally originated comparable sales change 9.9 195.4 27.3 168.9 Sales by Channel Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Stores originated 83.0 % 82.8 % 82.3 % 83.7 % Digitally originated 17.0 17.2 17.7 16.3 Total 100 % 100 % 100 % 100 % Sales by Fulfillment Channel Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Stores 96.6 % 96.0 % 96.4 % 96.3 % Other 3.4 4.0 3.6 3.7 Total 100 % 100 % 100 % 100 % Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Shipt. Sales by Product Category Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Apparel and accessories 19 % 18 % 18 % 16 % Beauty and household essentials 27 27 27 29 Food and beverage 19 19 20 21 Hardlines 16 16 16 15 Home furnishings and décor 19 20 19 19 Total 100 % 100 % 100 % 100 % The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix and the transfer of sales to new stores, makes further analysis of sales metrics infeasible. TARGET CORPORATION Q2 2021 Form 10-Q 15 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Notes We monitor the percentage of purchases that are paid for using RedCards (RedCard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on RedCards are also incremental sales for Target. Guests receive a 5 percent discount on virtually all purchases when they use a RedCard at Target. RedCard sales increased for the three and six months ended July 31, 2021, and August 1, 2020; however, RedCard penetration declined as total Sales increased at a faster pace. RedCard Penetration Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Target Debit Card 11.6 % 11.8 % 11.9 % 12.2 % Target Credit Cards 8.7 8.7 8.6 9.2 Total RedCard Penetration 20.3 % 20.5 % 20.4 % 21.4 % Note: Amounts may not foot due to rounding. TARGET CORPORATION Q2 2021 Form 10-Q 16 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Notes Gross Margin Rate For the three months ended July 31, 2021, our gross margin rate was 30.4 percent compared with 30.9 percent in the comparable prior-year pe riod. This decrease reflected the net impact of • pressure from higher merchandise and freight costs, partially offset by the benefit of low promotional and clearance markdown rates; • the prior-year rate benefit from a second quarter 2020 change in our returns estimate for sales during the temporary returns suspension period; • favorable category mix, reflecting strength in our higher-margin categories relative to our lower-margin categories; and • the benefit of a higher percentage of digital sales fulfilled through our lower-cost same-day fulfillment options. For the six months ended July 31, 2021, our gross margin rate was 30.2 percent compared with 28.3 percent in the comparable prior-year pe riod. This increase reflected • merchandising benefits, including exceptionally low promotional and clearance markdown rates, partially offset by higher merchandise and freight costs; • favorable category mix, reflecting strength in our higher-margin categories relative to our lower-margin categories; and • the benefit of a higher percentage of digital sales fulfilled through our lower-cost same-day fulfillment options. TARGET CORPORATION Q2 2021 Form 10-Q 17 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Notes Selling, General, and Administrative Expense Rate For the three months ended July 31, 2021, our SG&A expense rate was 19.3 percent compared with 19.4 percent for the three months ended August 1, 2020. For the six months ended July 31, 2021, our SG&A expense rate was 19.0 percent compared with 20.0 percent for the six months ended August 1, 2020. The decreases reflect the continued leverage benefit from strong revenue growth, offset by pressure from increases in some expense categories—such as marketing—from lower-than-normal levels in 2020. Store Data Change in Number of Stores Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Beginning store count 1,909 1,871 1,897 1,868 Opened 2 — 14 3 Closed (2) — (2) — Ending store count 1,909 1,871 1,909 1,871 Number of Stores and Retail Square Feet Number of Stores Retail Square Feet (a) July 31, 2021 January 30, 2021 August 1, 2020 July 31, 2021 January 30, 2021 August 1, 2020 170,000 or more sq. ft. 273 273 272 48,798 48,798 48,613 50,000 to 169,999 sq. ft. 1,510 1,509 1,505 189,624 189,508 189,224 49,999 or less sq. ft. 126 115 94 3,709 3,342 2,745 Total 1,909 1,897 1,871 242,131 241,648 240,582 (a) In thousands, reflects total square feet less office, distribution center, and vacant space. Other Performance Factors Net Interest Expense Net interest expense was $104 million and $212 million for the three and six months ended July 31, 2021, respectively, compared with $122 million and $239 million, respectively, in the comparable prior-year period. The decrease in net interest expense was primarily due to lower average debt balances for the three and six months ended July 31, 2021, compared with the prior-year periods. Net Other (Income) / Expense Net Other (Income) / Expense was $(7) million and $(350) million for the three and six months ended July 31, 2021, respectively, compared with $(11) million and $11 million, respectively, in the comparable prior-year periods. The increase for the six months ended July 31, 2021, was due to the $335 million gain on the February 2021 sale of Dermstore. Note 3 to the Financial Statements provides additional information. Provision for Income Taxes Our effective income tax rate for the three and six months ended July 31, 2021, was 23.4 percent and 21.4 percent, respectively, compared w ith 22.8 percent and 21.6 percent, respectively, in the comparable prior-year periods, reflecting significantly higher earnings during the current-year periods which diluted the tax rate impact of fixed deductions and discrete items. The effective tax rate impact of higher earnings for the six months ended July 31, 2021, was offset by the resolution of certain income tax matters during the first quarter. TARGET CORPORATION Q2 2021 Form 10-Q 18 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Notes Reconciliation of Non-GAAP Financial Measures to GAAP Measures To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. This measure is not in accordance with, or an alternative to, U.S. GAAP. The most comparable GAAP measure is diluted earnings per share. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies. Reconciliation of Non-GAAP Adjusted EPS Three Months Ended July 31, 2021 August 1, 2020 (millions, except per share data) Pretax Net of Tax Per Share Amounts Pretax Net of Tax Per Share Amounts GAAP diluted earnings per share $ 3.65 $ 3.35 Adjustments Gain on investment (a) $ — $ — $ — $ (9) $ (6) $ (0.01) Other (b) (5) (4) (0.01) 25 18 0.04 Adjusted diluted earnings per share $ 3.64 $ 3.38 Reconciliation of Non-GAAP Adjusted EPS Six Months Ended July 31, 2021 August 1, 2020 (millions, except per share data) Pretax Net of Tax Per Share Amounts Pretax Net of Tax Per Share Amounts GAAP diluted earnings per share $ 7.82 $ 3.91 Adjustments Gain on Dermstore sale $ (335) $ (269) $ (0.54) $ — $ — $ — Loss on investment (a) — — — 12 9 0.02 Other (b) 36 27 0.05 25 18 0.04 Adjusted diluted earnings per share $ 7.34 $ 3.96 Note: Amounts may not foot due to rounding. (a) Represented a (gain) / loss on our investment in Casper Sleep Inc., which was not core to our operations. We sold this investment during the fourth quarter of 2020. (b) Includes civil unrest-related losses, net of associated insurance recoveries, and headquarters office space impairments, none of which were individually significant. TARGET CORPORATION Q2 2021 Form 10-Q 19 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Notes Earnings before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation, and amortization (EBITDA) are non-GAAP financial measures. We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies. EBIT and EBITDA Three Months Ended Six Months Ended (dollars in millions) July 31, 2021 August 1, 2020 Change July 31, 2021 August 1, 2020 Change Net earnings $ 1,817 $ 1,690 7.4 % $ 3,914 $ 1,974 98.2 % + Provision for income taxes 553 499 11.3 1,065 544 95.9 + Net interest expense 104 122 (15.5) 212 239 (11.7) EBIT $ 2,474 $ 2,311 7.1 % $ 5,191 $ 2,757 88.2 % + Total depreciation and amortization (a) 633 604 4.9 1,300 1,245 4.5 EBITDA $ 3,107 $ 2,915 6.6 % $ 6,491 $ 4,002 62.2 % (a) Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales. TARGET CORPORATION Q2 2021 Form 10-Q 20 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Notes We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies. After-Tax Return on Invested Capital (dollars in millions) Trailing Twelve Months Numerator July 31, 2021 August 1, 2020 Operating income $ 8,611 $ 4,968 + Net other income / (expense) 346 (28) EBIT 8,957 4,940 + Operating lease interest (a) 84 87 - Income taxes (b) 1,918 1,076 Net operating profit after taxes $ 7,123 $ 3,951 Denominator July 31, 2021 August 1, 2020 August 3, 2019 Current portion of long-term debt and other borrowings $ 1,190 $ 109 $ 1,153 + Noncurrent portion of long-term debt 11,589 14,188 10,365 + Shareholders' investment 14,860 12,578 11,836 + Operating lease liabilities (c) 2,695 2,448 2,285 - Cash and cash equivalents 7,368 7,284 1,656 Invested capital $ 22,966 $ 22,039 $ 23,983 Average invested capital (d) $ 22,502 $ 23,011 After-tax return on invested capital 31.7 % 17.2 % (a) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A. Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors. (b) Calculated using the effective tax rates, which were 21.2 percent and 21.4 percent for the trailing twelve months ended July 31, 2021, and August 1, 2020, respectively. For the trailing twelve months ended July 31, 2021, and August 1, 2020, includes tax effect of $1.9 billion and $1.1 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 Q2 2021 Form 10-Q 21 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Notes Analysis of Financial Condition Liquidity and Capital Resources Capital Allocation We follow a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to profitably grow our business, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals. Our cash and cash equivalents balance was $7.4 billion, $8.5 billion, and $7.3 billion as of July 31, 2021, January 30, 2021, and August 1, 2020, respectively. Our cash and cash equivalents balance includes short-term investments of $6.4 billion, $7.6 billion, and $6.4 billion as of July 31, 2021, January 30, 2021, and August 1, 2020, 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 $3.4 billion for the six months ended July 31, 2021, compared with $5.1 billion for the six months ended August 1, 2020 . For the six months ended July 31, 2021, operating cash flows reflect stronger operating results, offset by increased inventory investment and higher net settlement of accounts payable, compared with the six months ended August 1, 2020. Additionally, operating cash flows for 2021 reflect a $1.2 billion increase in income tax payments. Inventory Inventory was $11.3 billion as of July 31, 2021, compared with $10.7 billion and $8.9 billion at January 30, 2021, and August 1, 2020, respectively. The increase over the balance as of August 1, 2020, reflects efforts to align inventory with sales trends. Additionally, the lower inventory balance as of August 1, 2020, reflected the impact of elevated sell-through rates in longer lead-time merchandise categories. Investing Cash Flows Investing cash flows included capital investments of $1.3 billion and $1.4 billion for the six months ended July 31, 2021, and August 1, 2020, respectively. We now expect full-year capital investments of approximately $3.5 billion compared with our previous expectation of $4 billion, reflecting the re-timing of some projects into next year. F or the six months ended July 31, 2021, investing cash flows includes $356 million of proceeds from the sale of Dermstore. Dividends We paid dividends totaling $336 million ($0.68 per share) and $676 million ($1.36 per share) for the three and six months ended July 31, 2021, respectively, and $330 million ($0.66 per share) and $662 million ($1.32 per share) for the three and six months ended August 1, 2020, respectively, a per share increase of 3.0 percent. We declared dividends totaling $445 million ($0.90 per share) during the second quarter of 2021 and $344 million ($0.68 per share) during the second quarter of 2020, a per share increase of 32.4 percent. We have paid dividends every quarter since our 1967 initial public offering, and it is our intent to continue to do so in the future. Share Repurchase We returned $2.7 billion to shareholders through share repurchase during the six months ended July 31, 2021. See Part II , Item 2 , Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 9 to the Financial Statements for more information. TARGET CORPORATION Q2 2021 Form 10-Q 22 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Notes Financing Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings. As of July 31, 2021, our credit ratings were as follows: Credit Ratings Moody’s Standard and Poor’s Fitch Long-term debt A2 A A Commercial paper P-1 A-1 F1 If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above. Fitch raised our long-term debt rating from A- to A during the three months ended July 31, 2021. We obtain short-term financing from time to time under our commercial paper program. No balances were outstanding at any time during the six months ended July 31, 2021, an d August 1, 2020. We have additional liquidity through a committed $2.5 billion revolving credit facility that expires in October 2023. No balances were outstanding at any time during 2021 or 2020. Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of July 31, 2021, 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 will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future. We continue to anticipate ample access to commercial paper and long-term financing. New Accounting Pronouncements We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements. TARGET CORPORATION Q2 2021 Form 10-Q 23 MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL INFORMATION Table of Contents FORWARD LOOKING STATEMENTS & CONTROLS AND PROCEDURES Index to Notes Forward-Looking Statements This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or similar words. The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the continued execution of our share repurchase program, our expected capital expenditures and new lease commitments, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected return on plan assets, the expected outcome of, and adequacy of our reserves for, claims, litigation and the resolution of tax matters, the expected impact of changes in information technology systems, future responses to and effects of the COVID-19 pandemic, 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 30, 2021, 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 30, 2021.