What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-26 compared with 2022-11-23 · 100 added, 150 removed, 189 unchanged (57% of the section changed)

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Financial Summary

Third quarter 2022 included the following notable items:

• GAAP diluted earnings per share were $1.54.

• Adjusted diluted earnings per share were $1.54.

• Total revenue increased 3.4 percent, reflecting total sales growth of 3.3 percent and a 9.5 percent increase in other revenue.

• Comparable sales increased 2.7 percent, driven by a 1.4 percent increase in traffic and a 1.3 percent increase in average transaction amount.

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 increased 0.3 percent.

• Operating income of $1.0 billion was 49.2 percent lower than the comparable prior-year period, driven primarily by a decrease in gross margin, reflecting higher clearance and promotional markdown rates, inventory shrink, and higher freight and merchandise costs, partially offset by the benefit of retail price increases.

See Business Environment and Gross Margin Rate sections below for additional information.

Sales were $26.1 billion for the three months ended October 29, 2022, an increase of $832 million , or 3.3 percent, from the comparable prior-year period.

Cash flow provided by operating activities was $552 million for the nine months ended October 29, 2022, compared with $5.6 billion for the nine months ended October 30, 2021.

The drivers of the operating cash flow decrease are described on page 21 .

Earnings Per Share Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 Change October 29, 2022 October 30, 2021 Change

◦ 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 Share Three Months Ended

April 29, 2023 April 30, 2022 Change

GAAP diluted earnings per share $ 2.05 $ 2.16 (4.8) %

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Adjusted diluted earnings per share $ 2.05 $ 2.19 (6.2) %

Amounts may not foot due to rounding.

Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items.

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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 October 29, 2022, after-tax ROIC was 14.6 percent , compared with 31.3 percent for the trailing twelve months ended October 30, 2021.

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 third quarter of 2022, we have continued to see soft trends in Discretionary categories (Apparel and Accessories, Hardlines, and Home Furnishings and Décor), which accelerated in October.

We believe this is consistent with the broader industry trends.

Our overall comparable sales increase reflects growth in our Frequency categories (Beauty and Household Essentials and Food and Beverage), partially offset by sales decreases in our Discretionary categories.

Our comparable sales performance also reflects the impact of retail price increases.

Within the quarter, comparable sales grew 2.8 percent in August, 4.0 percent in September, and 0.9 percent in October.

Notably, within October, we saw a significant change in the pace of sales, with an increase in comparable sales during the first week, followed by a decrease over the last three weeks of the month, driven by steeper declines in our Discretionary categories.

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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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

FINANCIAL SUMMARY Index to Notes

Throughout the COVID-19 pandemic, the retail industry has experienced continued disruption and volatility in the global supply chain.

In response, we have ordered import merchandise (which typically has longer lead times) earlier, and added incremental holding capacity near U.S.

ports to add flexibility in the portions of the supply chain most affected by external volatility.

During the third quarter of 2022, port congestion, shipping container availability, and other supply chain pressures have improved.

This has resulted in inventory arriving earlier than anticipated, which has resulted in increased costs of managing elevated inventory levels.

These factors, net of pricing actions we have taken to address the impact of higher merchandise and freight costs, have resulted in decreased profitability in the three and nine months ended October 29, 2022, compared to the prior-year periods.

We believe that the actions we have taken reduce our risks and provide additional flexibility to focus on serving guests in a rapidly changing environment.

The Gross Margin Rate analysis on page 17 and the Inventory section on page 21 provide additional information.

ANALYSIS OF RESULTS OF OPERATIONS

Summary of Operating Income Three Months Ended Nine Months Ended

(dollars in millions) October 29, 2022 October 30, 2021 Change October 29, 2022 October 30, 2021 Change

Analysis of Results of Operations

Summary of Operating Income Three Months Ended

(dollars in millions) April 29, 2023 April 30, 2022 Change

Sales $ 24,948 $ 24,830 0.5 %

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Operating income $ 1,328 $ 1,346 (1.4) %

Rate Analysis Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Rate Analysis Three Months Ended

April 29, 2023 April 30, 2022

Gross margin rate 26.3 % 25.7 %

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Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.

TARGET CORPORATION

Q3 2022 Form 10-Q 14

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

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).

Comparable Sales Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

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 Sales Three Months Ended

April 29, 2023 April 30, 2022

Comparable sales change 0.0 % 3.3 %

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Average transaction amount (0.9) (0.6)

Comparable Sales by Channel Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

TARGET CORPORATION

Q1 2023 Form 10-Q 14

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

Comparable Sales by Channel Three Months Ended

April 29, 2023 April 30, 2022

Stores originated comparable sales change 0.7 % 3.4 %

Digitally originated comparable sales change (3.4) 3.2

Sales by Channel Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Sales by Channel Three Months Ended

April 29, 2023 April 30, 2022

Stores originated 82.5 % 81.8 %

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Total 100 % 100 %

Sales by Fulfillment Channel Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Sales by Fulfillment Channel Three Months Ended

April 29, 2023 April 30, 2022

Stores 97.2 % 96.5 %

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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 Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Apparel and accessories 17 % 17 % 17 % 18 %

Beauty and household essentials 29 28 28 27

Food and beverage 22 20 22 20

Sales by Product Category Three Months Ended

April 29, 2023 April 30, 2022

Apparel & accessories 16 % 17 %

Beauty & household essentials 31 29

Food & beverage 24 22

Hardlines 14 15

Home furnishings and décor 18 20 18 19

Home furnishings & décor 15 17

Total 100 % 100 %

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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

Q3 2022 Form 10-Q 15

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

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 Penetration Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

Target Debit Card 10.8 % 11.7 % 11.2 % 11.8 %

Target Credit Cards 8.8 8.9 8.8 8.7

Total RedCard Penetration 19.6 % 20.7 % 20.0 % 20.5 %

Amounts may not foot due to rounding.

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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Gross Margin Rate

For the three months ended October 29, 2022, our gross margin rate was 24.7 percent compared with 28.0 percent in the comparable prior-year period.

The decrease reflected the net impact of

• merchandising pressure, including

◦ higher clearance and promotional markdown rates, which were primarily in our Discretionary categories;

◦ higher merchandise and freight costs, partially offset by the benefit of retail price increases;

◦ higher inventory shrink;

• supply chain pressure related to increased compensation and headcount in our distribution centers and costs of managing elevated inventory levels, including the impact of early receipts;

• favorable mix in the relative growth rates of higher and lower margin categories.

For the nine months ended October 29, 2022, our gross margin rate was 23.9 percent compared with 29.5 percent in the comparable prior-year period.

The decrease reflected the net impact of

• merchandising pressure, including

◦ higher clearance and promotional markdown rates, which were primarily the result of inventory impairments and other actions taken in our Discretionary categories;

◦ higher merchandise and freight costs, partially offset by the benefit of retail price increases;

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;

◦ 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;

• higher inventory shrink.

• supply chain pressure related to increased compensation and headcount in our distribution centers and costs of managing elevated inventory levels, including the impact of early receipts.

Business Environment on page 13 provides additional information.

TARGET CORPORATION

Q3 2022 Form 10-Q 17

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

Selling, General, and Administrative Expense Rate

For the three months ended October 29, 2022, our SG&A expense rate was 19.7 percent compared with 18.9 percent for the comparable prior-year period.

For the nine months ended October 29, 2022, our SG&A expense rate was 19.3 percent compared with 19.0 percent for the comparable prior-year period.

For both the three and nine months ended October 29, 2022, the rates reflected the net impact of cost increases across our business, including investments in hourly team member wages, partially offset by lower incentive compensation expense, compared to the comparable prior-year periods.

Change in Number of Stores Three Months Ended Nine Months Ended

October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021

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.

Change in Number of Stores Three Months Ended

April 29, 2023 April 30, 2022

Beginning store count 1,948 1,926

Opened 4 15 16 29

Closed — — (1) (2)

Ending store count 1,954 1,933

Number of Stores and Number of Stores Retail Square Feet (a)

Retail Square Feet October 29, 2022 January 29, 2022 October 30, 2021 October 29, 2022 January 29, 2022 October 30, 2021

Retail Square Feet April 29, 2023 January 28, 2023 April 30, 2022 April 29, 2023 January 28, 2023 April 30, 2022

170,000 or more sq.

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(a) In thousands;

reflects total square feet less office, distribution center, and vacant space.

reflects total square feet less office, supply chain facilities, and vacant space.

TARGET CORPORATION

Q1 2023 Form 10-Q 16

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

Other Performance Factors

Net Interest Expense

N et interest expense was $125 million and $349 million for the three and nine months ended October 29, 2022, respectively, compared with $105 million and $317 million in the comparable prior-year periods.

The increase in net interest expense was primarily due to higher average debt and commercial paper levels for the three and nine months ended October 29, 2022, compared with the prior-year periods.

Net Other (Income) / Expense

Net Other (Income) / Expense was $(12) million and $(35) million for the three and nine months ended October 29, 2022, respectively, compared with $(6) million and $(356) million in the comparable prior-year periods.

The nine months ended October 30, 2021, included the $335 million pretax gain on the February 2021 sale of Dermstore.

Note 2 to the Financial Statements provides additional information.

N et 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 and nine months ended October 29, 2022, was 21.6 percent and 19.8 percent, respectively, compared with 22.1 percent and 21.6 percent in the respective comparable prior-year periods.

For the three and nine month periods, the decrease reflects lower pretax earnings resulting in a larger tax rate benefit from ongoing and discrete tax items in the current year, partially offset by the impacts of discrete tax benefits in the prior-year.

Our effective tax rate is generally more volatile at lower amounts of pretax income because the impact of discrete, deductible, and nondeductible tax items and credits is greater.

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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Reconciliation of Non-GAAP Adjusted EPS Three Months Ended

October 29, 2022 October 30, 2021

(millions, except per share data) Pretax Net of Tax Per Share Pretax Net of Tax Per Share

GAAP diluted earnings per share $ 1.54 $ 3.04

$ — $ — $ — $ (9) $ (7) $ (0.01)

Adjusted diluted earnings per share $ 1.54 $ 3.03

Reconciliation of Non-GAAP Adjusted EPS Nine Months Ended

October 29, 2022 October 30, 2021

April 29, 2023 April 30, 2022

(millions, except per share data) Pretax Net of Tax Per Share Pretax Net of Tax Per Share

GAAP diluted earnings per share $ 2.05 $ 2.16

Gain on Dermstore sale $ — $ — $ — $ (335) $ (269) $ (0.54)

$ — $ — $ — $ 20 $ 15 $ 0.03

Adjusted diluted earnings per share $ 2.05 $ 2.19

Amounts may not foot due to rounding.

(a) Other items unrelated to current period operations, none of which were individually significant.

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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 Nine Months Ended

(dollars in millions) October 29, 2022 October 30, 2021 Change October 29, 2022 October 30, 2021 Change

EBIT and EBITDA Three Months Ended

(dollars in millions) April 29, 2023 April 30, 2022 Change

Net earnings $ 950 $ 1,009 (5.8) %

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Trailing Twelve Months

Numerator October 29, 2022 October 30, 2021

Numerator April 29, 2023 April 30, 2022

Operating income $ 3,830 $ 7,918

+ Net other income / (expense) 61 358

+ Net other income 57 55

EBIT 3,887 7,973

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Net operating profit after taxes $ 3,213 $ 6,256

Denominator October 29, 2022 October 30, 2021 October 31, 2020

Denominator April 29, 2023 April 30, 2022 May 1, 2021

Current portion of long-term debt and other borrowings $ 200 $ 1,089 $ 1,173

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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 21.5 percent and 21.3 percent for the trailing twelve months ended October 29, 2022, and October 30, 2021, respectively.

For the trailing twelve months ended October 29, 2022, and October 30, 2021, includes tax effect of $1.0 billion and $1.9 billion related to EBIT, and $19 million and $18 million, respectively, related to operating lease interest.

(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.

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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 $954 million, $5.9 billion, and $5.8 billion as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

Our cash and cash equivalents balance includes short-term investments of $5.0 billion and $4.8 billion as of January 29, 2022 and October 30, 2021, respectively.

We had no short-term investments as of October 29, 2022.

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.

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Operating Cash Flows

Cash flows provided by operating activities were $552 million for the nine months ended October 29, 2022, compared with $5.6 billion of cash flows provided by operating activities for the nine months ended October 30, 2021.

For the nine months ended October 29, 2022, operating cash flows decreased as a result of lower earnings, increased inventory levels, and lower accounts payable leverage, compared with the nine months ended October 30, 2021.

Inventory was $17.1 billion as of October 29, 2022, compared with $13.9 billion and $15.0 billion at January 29, 2022, and October 30, 2021, respectively.

The increase over the balance as of October 30, 2021, primarily reflects the following:

• our decision to move import merchandise receipt timing earlier due to expected supply chain volatility, coupled with recent decreases in shipping times, resulting in earlier-than-expected inventory receipts,

• investments in our inventory position in our frequency categories (Food and Beverage and Beauty and Household Essentials),

• lower-than-expected sales in our discretionary categories, partially offset by actions taken during the current year to reduce excess inventory in these categories, and

• increases in unit costs across all of our categories.

The increase was amplified by unintentionally low inventory levels last year resulting from supply chain disruptions and high sell-through rates.

The Business Environmen t section on page 13 provides additional information.

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 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 $4.3 billion and $2.5 billion for the nine months ended October 29, 2022, and October 30, 2021, respectively.

The increase primarily reflects an increase in store remodel activity, investment in supply chain, and the impact of inflation on these projects.

For the nine months ended October 30, 2021, investing cash flows included $356 million of proceeds from the sale of Dermstore.

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.

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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ANALYSIS OF FINANCIAL CONDITION Index to Notes

We paid dividends totaling $497 million ($1.08 per share) and $1.3 billion ($2.88 per share) for the three and nine months ended October 29, 2022, respectively, and $440 million ($0.90 per share) and $1.1 billion ($2.26 per share) for the three and nine months ended October 30, 2021, respectively, a per share increase of 20.0 percent for the three month period and 27.4 percent for the nine month period.

We declared dividends totaling $502 million ($1.08 per share) during the third quarter of 2022 and $439 million ($0.90 per share) during the third quarter of 2021, 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 returned $2.6 billion to shareholders through share repurchase during the nine months ended October 29, 2022.

See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 8 to the Financial Statements for more information.

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.

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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 October 29, 2022, our credit ratings were as follows:

As of April 29, 2023, our credit ratings were as follows:

Credit Ratings Moody’s Standard and Poor’s Fitch

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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 facility.

In October 2022, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2023.

We also extended our existing committed $3.0 billion unsecured revolving credit facility, which now expires in October 2027.

Both credit facilities backstop our commercial paper program.

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.

As of October 29, 2022, we had $2.1 billion outstanding under our commercial paper program.

We did not have any balances outstanding under our commercial paper program as of October 30, 2021.

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.

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We are, and expect to remain, in compliance with these covenants.

Additionally, as of October 29, 2022, 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.

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.

TARGET CORPORATION

Q3 2022 Form 10-Q 22

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF FINANCIAL CONDITION Index to Notes

New Accounting Pronouncements

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

TARGET CORPORATION

Q1 2023 Form 10-Q 21

MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL INFORMATION Table of Contents

FORWARD LOOKING STATEMENTS & CONTROLS AND PROCEDURES Index to Notes

Forward-Looking Statements

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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, and changes in our assumptions and expectations.

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.

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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 2. Management’s Discussion and Analysis