Item 1. Financial Statements
Item 1. Financial Statements
Consolidated Statements of Operations
Three Months Ended Six Months Ended
(millions, except per share data) (unaudited) July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Sales $ 24,384 $ 25,653 $ 49,332 $ 50,483
Other revenue 389 384 763 724
Total revenue 24,773 26,037 50,095 51,207
Cost of sales 17,798 20,142 36,184 38,603
Selling, general and administrative expenses 5,184 5,002 10,209 9,764
Depreciation and amortization (exclusive of depreciation included in cost of sales) 594 572 1,177 1,173
Operating income 1,197 321 2,525 1,667
Net interest expense 141 112 288 224
Net other income ( 16 ) ( 8 ) ( 39 ) ( 23 )
Earnings before income taxes 1,072 217 2,276 1,466
Provision for income taxes 237 34 491 274
Net earnings $ 835 $ 183 $ 1,785 $ 1,192
Basic earnings per share $ 1.81 $ 0.40 $ 3.87 $ 2.57
Diluted earnings per share $ 1.80 $ 0.39 $ 3.86 $ 2.55
Weighted average common shares outstanding
Basic 461.6 461.5 461.3 463.8
Diluted 462.5 463.6 462.7 466.8
Antidilutive shares 2.9 1.3 2.4 1.0
See accompanying Notes to Consolidated Financial Statements .
TARGET CORPORATION
Q2 2023 Form 10-Q 1
FINANCIAL STATEMENTS Table of Contents
Index to Notes
Consolidated Statements of Comprehensive Income
Three Months Ended Six Months Ended
(millions) (unaudited) July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Net earnings $ 835 $ 183 $ 1,785 $ 1,192
Other comprehensive income, net of tax
Pension benefit liabilities 1 11 3 22
Cash flow hedges and currency translation adjustment ( 4 ) ( 28 ) ( 9 ) 162
Other comprehensive income (loss) ( 3 ) ( 17 ) ( 6 ) 184
Comprehensive income $ 832 $ 166 $ 1,779 $ 1,376
See accompanying Notes to Consolidated Financial Statements .
TARGET CORPORATION
Q2 2023 Form 10-Q 2
FINANCIAL STATEMENTS Table of Contents
Index to Notes
Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited) July 29,
2023 January 28,
2023 July 30,
2022
Assets
Cash and cash equivalents $ 1,617 $ 2,229 $ 1,117
Inventory 12,684 13,499 15,320
Other current assets 1,797 2,118 2,016
Total current assets 16,098 17,846 18,453
Property and equipment
Land 6,504 6,231 6,161
Buildings and improvements 35,889 34,746 33,694
Fixtures and equipment 7,936 7,439 6,744
Computer hardware and software 3,178 3,039 2,684
Construction-in-progress 2,641 2,688 2,245
Accumulated depreciation ( 23,201 ) ( 22,631 ) ( 21,708 )
Property and equipment, net 32,947 31,512 29,820
Operating lease assets 2,840 2,657 2,542
Other noncurrent assets 1,321 1,320 1,655
Total assets $ 53,206 $ 53,335 $ 52,470
Liabilities and shareholders’ investment
Accounts payable $ 12,278 $ 13,487 $ 14,891
Accrued and other current liabilities 5,948 5,883 5,905
Current portion of long-term debt and other borrowings 1,106 130 1,649
Total current liabilities 19,332 19,500 22,445
Long-term debt and other borrowings 14,926 16,009 13,453
Noncurrent operating lease liabilities 2,798 2,638 2,543
Deferred income taxes 2,334 2,196 1,862
Other noncurrent liabilities 1,826 1,760 1,575
Total noncurrent liabilities 21,884 22,603 19,433
Shareholders’ investment
Common stock 38 38 38
Additional paid-in capital 6,610 6,608 6,502
Retained earnings 5,767 5,005 4,421
Accumulated other comprehensive loss ( 425 ) ( 419 ) ( 369 )
Total shareholders’ investment 11,990 11,232 10,592
Total liabilities and shareholders’ investment $ 53,206 $ 53,335 $ 52,470
Common Stock Authorized 6,000,000,000 shares, $ 0.0833 par value; 461,600,640 , 460,346,947 , and 460,236,393 shares issued and outstanding as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively.
Preferred Stock Authorized 5,000,000 shares, $ 0.01 par value; no shares were issued or outstanding during any period presented.
See accompanying Notes to Consolidated Financial Statements .
TARGET CORPORATION
Q2 2023 Form 10-Q 3
FINANCIAL STATEMENTS Table of Contents
Index to Notes
Consolidated Statements of Cash Flows
Six Months Ended
(millions) (unaudited) July 29, 2023 July 30, 2022
Operating activities
Net earnings $ 1,785 $ 1,192
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization 1,350 1,329
Share-based compensation expense 107 122
Deferred income taxes 141 227
Noncash losses / (gains) and other, net
11 108
Changes in operating accounts:
Inventory 815 ( 1,418 )
Other assets 62 ( 179 )
Accounts payable ( 1,137 ) ( 784 )
Accrued and other liabilities 264 ( 644 )
Cash provided by (required for) operating activities 3,398 ( 47 )
Investing activities
Expenditures for property and equipment ( 2,825 ) ( 2,523 )
Proceeds from disposal of property and equipment 6 4
Other investments ( 2 ) 1
Cash required for investing activities ( 2,821 ) ( 2,518 )
Financing activities
Change in commercial paper, net — 1,545
Reductions of long-term debt ( 72 ) ( 113 )
Dividends paid ( 996 ) ( 842 )
Repurchase of stock — ( 2,646 )
Shares withheld for taxes on share-based compensation ( 121 ) ( 175 )
Stock option exercises — 2
Cash required for financing activities ( 1,189 ) ( 2,229 )
Net decrease in cash and cash equivalents ( 612 ) ( 4,794 )
Cash and cash equivalents at beginning of period 2,229 5,911
Cash and cash equivalents at end of period $ 1,617 $ 1,117
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities $ 20 $ 107
Leased assets obtained in exchange for new operating lease liabilities 337 97
See accompanying Notes to Consolidated Financial Statements .
TARGET CORPORATION
Q2 2023 Form 10-Q 4
FINANCIAL STATEMENTS Table of Contents
Index to Notes
Consolidated Statements of Shareholders’ Investment
Common Stock Additional Accumulated Other
Stock Par Paid-in Retained Comprehensive
(millions) (unaudited) Shares Value Capital Earnings (Loss) / Income
Total
January 29, 2022 471.3 $ 39 $ 6,421 $ 6,920 $ ( 553 ) $ 12,827
Net earnings — — — 1,009 — 1,009
Other comprehensive income — — — — 201 201
Dividends declared — — — ( 426 ) — ( 426 )
Repurchase of stock ( 0.1 ) — — ( 10 ) — ( 10 )
Accelerated share repurchase pending final settlement ( 8.9 ) ( 1 ) ( 751 ) ( 1,998 ) — ( 2,750 )
Stock options and awards 1.4 1 ( 78 ) — — ( 77 )
April 30, 2022 463.7 $ 39 $ 5,592 $ 5,495 $ ( 352 ) $ 10,774
Net earnings — — — 183 — 183
Other comprehensive loss — — — — ( 17 ) ( 17 )
Dividends declared — — — ( 502 ) — ( 502 )
Repurchase of stock ( 3.6 ) ( 1 ) 870 ( 755 ) — 114
Stock options and awards 0.1 — 40 — — 40
July 30, 2022 460.2 $ 38 $ 6,502 $ 4,421 $ ( 369 ) $ 10,592
Net earnings — — — 712 — 712
Other comprehensive income — — — — 161 161
Dividends declared — — — ( 502 ) — ( 502 )
Stock options and awards 0.1 — 56 — — 56
October 29, 2022 460.3 $ 38 $ 6,558 $ 4,631 $ ( 208 ) $ 11,019
Net earnings — — — 876 — 876
Other comprehensive loss — — — — ( 211 ) ( 211 )
Dividends declared — — — ( 502 ) — ( 502 )
Stock options and awards — — 50 — — 50
January 28, 2023 460.3 $ 38 $ 6,608 $ 5,005 $ ( 419 ) $ 11,232
TARGET CORPORATION
Q2 2023 Form 10-Q 5
FINANCIAL STATEMENTS Table of Contents
Index to Notes
Consolidated Statements of Shareholders’ Investment
Common Stock Additional Accumulated Other
Stock Par Paid-in Retained Comprehensive
(millions) (unaudited) Shares Value Capital Earnings (Loss) / Income
Total
January 28, 2023 460.3 $ 38 $ 6,608 $ 5,005 $ ( 419 ) $ 11,232
Net earnings — — — 950 — 950
Other comprehensive loss — — — — ( 3 ) ( 3 )
Dividends declared — — — ( 507 ) — ( 507 )
Stock options and awards 1.3 — ( 67 ) — — ( 67 )
April 29, 2023 461.6 $ 38 $ 6,541 $ 5,448 $ ( 422 ) $ 11,605
Net earnings — — — 835 — 835
Other comprehensive loss — — — — ( 3 ) ( 3 )
Dividends declared — — — ( 516 ) — ( 516 )
Stock options and awards — — 69 — — 69
July 29, 2023 461.6 $ 38 $ 6,610 $ 5,767 $ ( 425 ) $ 11,990
We declared $ 1.10 and $ 1.08 dividends per share for the three months ended July 29, 2023 and July 30, 2022, respectively, and $ 4.14 per share for the fiscal year ended January 28, 2023.
See accompanying Notes to Consolidated Financial Statements .
TARGET CORPORATION
Q2 2023 Form 10-Q 6
FINANCIAL STATEMENTS Table of Contents
INDEX Index to Notes
INDEX TO NOTES
Notes to Consolidated Financial Statements
8
Note 1
Accounting Policies
8
Note 2
Revenue
9
Note 3
Fair Value Measurements
10
Note 4
Supplier Finance Programs
10
Note 5
Property and Equipment
11
Note 6
Commercial Paper and Long-Term Debt
11
Note 7
Derivative Financial Instruments
11
Note 8
Share Repurchase
12
Note 9
Pension Benefits
12
Note 10
Accumulated Other Comprehensive Income (Loss)
13
TARGET CORPORATION
Q2 2023 Form 10-Q 7
FINANCIAL STATEMENTS Table of Contents
NOTES Index to Notes
Notes to Consolidated Financial Statements (unaudited)
1. Accounting Policies
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. 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 generally accepted accounting principles (U.S. GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in our most recent Form 10-K.
We use the same accounting policies in preparing quarterly and annual financial statements.
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. The vast majority of our long-lived assets are located within the U.S.
Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year.
TARGET CORPORATION
Q2 2023 Form 10-Q 8
FINANCIAL STATEMENTS Table of Contents
NOTES Index to Notes
2. Revenue
Merchandise sales represent the vast majority of our revenues. 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).
Revenue Three Months Ended Six Months Ended
(millions) July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Apparel & accessories (a)
$ 4,101 $ 4,617 $ 8,068 $ 8,856
Beauty & household essentials (b)
7,513 7,208 15,195 14,261
Food & beverage (c)
5,392 5,268 11,389 10,773
Hardlines (d)
3,383 3,866 6,774 7,579
Home furnishings & décor (e)
3,955 4,647 7,810 8,918
Other 40 47 96 96
Sales 24,384 25,653 49,332 50,483
Credit card profit sharing 169 181 343 366
Other 220 203 420 358
Other revenue 389 384 763 724
Total revenue $ 24,773 $ 26,037 $ 50,095 $ 51,207
(a) Includes apparel for women, men, boys, girls, toddlers, infants and newborns, as well as jewelry, accessories, and shoes.
(b) Includes beauty and personal care, baby gear, cleaning, paper products, and pet supplies.
(c) Includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and food service in our stores.
(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.
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 July 29, 2023, January 28, 2023, and July 30, 2022, the accrual for estimated returns was $ 177 million, $ 174 million, and $ 175 million, respectively.
Revenue from Target gift card sales is recognized upon gift card redemption, which is typically within one year of issuance.
Gift Card Liability Activity January 28,
2023 Gift Cards Issued During Current Period But Not Redeemed (b)
Revenue Recognized From Beginning Liability July 29,
2023
(millions)
Gift card liability (a)
$ 1,240 $ 399 $ ( 679 ) $ 960
(a) Included in Accrued and Other Current Liabilities.
(b) Net of estimated breakage.
TARGET CORPORATION
Q2 2023 Form 10-Q 9
FINANCIAL STATEMENTS Table of Contents
NOTES Index to Notes
Other Revenue
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.
Other — Includes advertising revenue, Shipt membership and service revenues, commissions earned on third-party sales through Target.com, rental income, and other miscellaneous revenues.
3. Fair Value Measurements
Fair value measurements are reported in one of three levels reflecting the significant inputs used to determine fair value.
Financial Instruments Measured On a Recurring Basis Fair Value
(millions) Classification Measurement Level July 29, 2023 January 28, 2023 July 30, 2022
Assets
Short-term investments Cash and Cash Equivalents Level 1 $ 739 $ 1,343 $ 189
Prepaid forward contracts Other Current Assets Level 1 23 27 26
Interest rate swaps Other Current Assets Level 2 — — 34
Interest rate swaps Other Noncurrent Assets Level 2 — 7 290
Liabilities
Interest rate swaps Other Current Liabilities Level 2 6 — —
Interest rate swaps Other Noncurrent Liabilities Level 2 130 81 6
Significant Financial Instruments Not Measured at Fair Value (a)
(millions)
July 29, 2023 January 28, 2023 July 30, 2022
Carrying
Amount Fair
Value Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Long-term debt, including current portion (b)
$ 14,147 $ 13,344 $ 14,141 $ 13,688 $ 11,511 $ 11,529
(a) The carrying amounts of certain other current assets, commercial paper, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.
(b) The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for the same or similar types of financial instruments and would be classified as Level 2. These amounts exclude commercial paper, fair value hedge adjustments, and lease liabilities.
4. Supplier Finance Programs
We have arrangements with several financial institutions to act as our paying agents to certain vendors. The arrangements also permit the financial institutions to provide vendors with an option, at our vendors' sole discretion, to sell their receivables from Target to the financial institutions. A vendor’s election to receive early payment at a discounted amount from the financial institutions does not change the amount that we must remit to the financial institutions or our payment date, which is up to 120 days from the invoice date.
We do not pay any fees or pledge any security to these financial institutions under these arrangements. The arrangements can be terminated by either party with notice ranging up to 120 days.
Our outstanding vendor obligations eligible for early payment under these arrangements totaled $ 3.7 billion, $ 3.4 billion, and $ 4.6 billion as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively, and are included within Accounts Payable on our Consolidated Statements of Financial Position. Our outstanding vendor obligations do not represent actual receivables sold by our vendors to the financial institutions, which may be lower.
TARGET CORPORATION
Q2 2023 Form 10-Q 10
FINANCIAL STATEMENTS Table of Contents
NOTES Index to Notes
5. 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, 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 $ 33 million for the three and six months ended July 29, 2023. We recognized impairment charges of $ 27 million and $ 50 million for the three and six months ended July 30, 2022, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).
6. Commercial Paper and Long-Term Debt
We obtain short-term financing from time to time under our commercial paper program. For the six months ended July 29, 2023 and July 30, 2022, the maximum amounts outstanding were $ 90 million and $ 1.5 billion, respectively, and the average daily amounts outstanding were $ 2 million and $ 538 million, respectively, at a weighted average annual interest rate of 4.9 percent and 1.1 percent, respectively. No balances were outstanding as of July 29, 2023. As of July 30, 2022, $ 1.5 billion was outstanding and is classified within Current Portion of Long-Term Debt and Other Borrowings on our Consolidated Statements of Financial Position.
7. Derivative Financial Instruments
Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 3 to the Consolidated Financial Statements provides the fair value and classification of these instruments.
We were party to interest rate swaps with notional amounts totaling $ 2.45 billion as of July 29, 2023 and January 28, 2023, and $ 2.25 billion as of July 30, 2022. 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 and six months ended July 29, 2023 and July 30, 2022.
During 2023, we amended interest rate swaps with notional amounts totaling $ 1.5 billion to replace the London Interbank Offered Rate (LIBOR) with the daily Secured Overnight Financing Rate (SOFR) as part of our planned reference rate reform activities. These amendments did not result in any change to our application of hedge accounting or any impact to our consolidated financial statements.
We were party to forward-starting interest rate swaps with notional amounts totaling $ 2.15 billion as of July 30, 2022. During 2022, we terminated all remaining forward-starting interest rate swap agreements. The resulting gains upon termination were recorded in Accumulated Other Comprehensive Loss and will be recognized as a reduction to Net Interest Expense over the respective term of the debt.
Effect of Hedges on Debt
(millions)
July 29, 2023 January 28, 2023 July 30, 2022
Long-term debt and other borrowings
Carrying amount of hedged debt $ 2,305 $ 2,366 $ 2,263
Cumulative hedging adjustments, included in carrying amount ( 136 ) ( 74 ) 22
TARGET CORPORATION
Q2 2023 Form 10-Q 11
FINANCIAL STATEMENTS Table of Contents
NOTES Index to Notes
Effect of Hedges on Net Interest Expense Three Months Ended Six Months Ended
(millions) July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swaps designated as fair value hedges $ ( 71 ) $ 49 $ ( 62 ) $ ( 55 )
Hedged debt 71 ( 49 ) 62 55
Gain on cash flow hedges recognized in Net Interest Expense 6 — 12 —
Total $ 6 $ — $ 12 $ —
8. 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. We did no t repurchase any of our shares during the six months ended July 29, 2023.
Share Repurchase Activity Three Months Ended Six Months Ended
(millions, except per share data) July 29, 2023 July 30, 2022 (a)
July 29, 2023 July 30, 2022 (a)
Number of shares purchased — 12.5 — 12.5
Average price paid per share $ — $ 211.58 $ — $ 211.57
Total investment $ — $ 2,636 $ — $ 2,646
(a) Includes activity related to the ASR arrangement that we entered into during the first quarter of 2022 because final settlement occurred in the second quarter of 2022. Under the ASR arrangement, we repurchased 12.5 million shares for a total cash investment of $ 2.6 billion. We did not enter into an ASR arrangement during any other periods presented.
9. Pension Benefits
We provide pension plan benefits to eligible team members.
Net Pension Benefits Expense Three Months Ended Six Months Ended
(millions) Classification July 29, 2023 July 30, 2022 July 29, 2023 July 30, 2022
Service cost benefits earned SG&A $ 19 $ 23 $ 39 $ 46
Interest cost on projected benefit obligation Net Other Income 42 30 83 59
Expected return on assets Net Other Income ( 67 ) ( 58 ) ( 134 ) ( 117 )
Amortization of losses Net Other Income 1 15 1 30
Prior service cost Net Other Income 8 10 11 10
Total $ 3 $ 20 $ — $ 28
TARGET CORPORATION
Q2 2023 Form 10-Q 12
FINANCIAL STATEMENTS Table of Contents
NOTES Index to Notes
10. Accumulated Other Comprehensive Income (Loss)
Change in Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Currency Translation Adjustment Pension Total
(millions)
January 28, 2023 $ 300 $ ( 23 ) $ ( 696 ) $ ( 419 )
Amounts reclassified from AOCI, net of tax ( 9 ) — 3 ( 6 )
July 29, 2023 $ 291 $ ( 23 ) $ ( 693 ) $ ( 425 )
TARGET CORPORATION
Q2 2023 Form 10-Q 13
MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents
FINANCIAL SUMMARY Index to Notes
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.