What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-13 compared with 2023-03-08 · 151 added, 165 removed, 904 unchanged (26% of the section changed)

18 unchanged sentences

Other Noncurrent Assets

S upplier Finance Programs

Accrued and Other Current Liabilities

2 unchanged sentences

Derivative Financial Instruments

Incomes Taxes

Other Noncurrent Liabilities

3 unchanged sentences

Pension Plans

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Loss

TARGET CORPORATION

13 unchanged sentences

Chair of the Board and Chief Executive Officer

March 8, 2023 Michael J.

March 13, 2024

Executive Vice President and

Chief Financial Officer

and Chief Operating Officer and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

2 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Target Corporation (the Corporation) as of January 28, 2023 and January 29, 2022, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended January 28, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation at January 28, 2023 and January 29, 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 28, 2023, in conformity with U.S.

We have audited the accompanying consolidated statements of financial position of Target Corporation (the Corporation) as of February 3, 2024 and January 28, 2023, the related consolidated statements of operations, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended February 3, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation at February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the three years in the period ended February 3, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation's internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 8, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation's internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 13, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

TARGET CORPORATION

2 unchanged sentences

REPORTS Index to Financial Statements

Valuation of Inventory and related Cost of Sales

Description of the Matter

At January 28, 2023, the Corporation’s inventory was $13,499 million.

As described in Note 9 to the consolidated financial statements, the Corporation accounts for the vast majority of its inventory under the retail inventory accounting method (RIM) using the last-in, first-out (LIFO) method.

RIM is an averaging method that has been widely used in the retail industry due to its practicality.

Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the inventory retail value.

Auditing inventory requires extensive audit effort including significant involvement of more experienced audit team members, including the involvement of our information technology (IT) professionals, given the relatively higher level of automation impacting the inventory process including the involvement of multiple information systems used to capture the high volume of transactions processed by the Corporation.

Further, the inventory process is supported by a number of automated and IT dependent controls that elevate the importance of the IT general controls that support the underlying information systems utilized to process transactions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Corporation’s inventory process, including the underlying IT general controls.

For example, we tested automated controls performed by the Corporation’s information systems and controls over the completeness of data transfers between information systems used in performing the Corporation’s RIM calculation.

Our audit procedures included, among others, testing the processing scenarios of the automated controls by evaluating configuration settings and performing a transaction walkthrough for each scenario.

Our audit procedures also included, among others, testing the key inputs into the RIM calculation, including purchases, sales, shortage, and price changes (markdowns) by comparing the key inputs back to source information such as third-party vendor invoices, third-party inventory count information and cash receipts.

We also performed analytical procedures.

For example, we performed predictive markdown analytics based on inquiries held with members of the merchant organization to assess the level of price changes within each category.

In addition, we tested the existence of inventories by observing physical inventory counts for a sample of stores and distribution centers.

Valuation of Vendor Income Receivable

Description of the Matter

At January 28, 2023, the Corporation’s vendor income receivable totaled $526 million.

Description of the Matter At February 3, 2024, the Corporation’s vendor income receivable totaled $513 million.

As discussed in Note 5 of the consolidated financial statements, the Corporation receives consideration for a variety of vendor-sponsored programs, which are primarily recorded as a reduction of cost of sales when earned.

The Corporation records a receivable for amounts earned but not yet received.

Auditing the Corporation's vendor income receivable was complex due to the estimation required in measuring the receivable.

The estimate was sensitive to significant assumptions, such as forecasted vendor income collections, and estimating the time period over which the collections have been earned, which is primarily based on historical trending and data.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Corporation’s vendor income receivable process, including controls over management’s review of the significant assumptions described above.

To test the estimated vendor income receivable, we performed audit procedures that included, among others, assessing the estimation methodology used by management and evaluating the forecasted vendor income collections and the time period over which collections have been earned as used in the receivable estimation model.

For a sample of the vendor rebates and concessions, we evaluated the nature and source of the inputs used and the terms of the contractual agreements.

We recalculated the amount of the vendor income earned based on the inputs and the terms of the agreements.

In addition, we recalculated the time period over which the vendor income collection had been earned to assess the accuracy of management’s estimates.

We also performed sensitivity analyses of significant assumptions to evaluate the significance of changes in the receivable that would result from changes in assumptions.

Auditing the Corporation's calculation of vendor income receivable was especially challenging due to the inputs required in the vendor receivable model, which include, among others, forecasted vendor income collections and the time period over which the collections have been earned.

As a result of the high volume of transactions processed by the Corporation and used in estimating these inputs, auditing the vendor income receivable requires extensive audit effort to address the completeness and accuracy of the information used in the receivable model.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Corporation’s vendor income receivable process, including controls over management’s review of the inputs described above.

To test the estimated vendor income receivable, we performed audit procedures that included, among others, testing the completeness and accuracy of inputs used in the receivable model by verifying for a sample of the vendor-sponsored programs, the nature and source of the inputs used and the terms of the contractual agreements.

We recalculated the amount of the vendor income earned based on the inputs and the terms of the contractual agreements.

In addition, we recalculated the time period over which the vendor income collections had been earned to assess the accuracy of management’s inputs used in the model.

We also performed sensitivity analyses of inputs to evaluate the significance of changes in the receivable that would result from changes to the inputs.

Finally, we performed audit procedures over the vendor income collections subsequent to the balance sheet date to support the vendor income receivable at year end.

/s/ Ernst & Young LLP

8 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we assessed the effectiveness of our internal control over financial reporting as of January 28, 2023, based on the framework in Internal Control—Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we assessed the effectiveness of our internal control over financial reporting as of February 3, 2024, based on the framework in Internal Control—Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on our assessment, we conclude that the Corporation's internal control over financial reporting is effective based on those criteria.

Our internal control over financial reporting as of January 28, 2023, has been audited by Ernst & Young LLP, the independent registered public accounting firm who has also audited our consolidated financial statements, as stated in their report which appears on this page.

Our internal control over financial reporting as of February 3, 2024, has been audited by Ernst & Young LLP, the independent registered public accounting firm who has also audited our consolidated financial statements, as stated in their report which appears on this page.

Cornell /s/ Michael J.

Chair of the Board and Chief Executive Officer

March 8, 2023 Michael J.

March 13, 2024

Executive Vice President and

Chief Financial Officer

Chief Operating Officer and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

2 unchanged sentences

Opinion on Internal Control Over Financial Reporting

We have audited Target Corporation’s internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Target Corporation (the Corporation) maintained, in all material respects, effective internal control over financial reporting as of January 28, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Corporation as of January 28, 2023 and January 29, 2022, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended January 28, 2023, and the related notes and our report dated March 8, 2023 expressed an unqualified opinion thereon.

We have audited Target Corporation’s internal control over financial reporting as of February 3, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Target Corporation (the Corporation) maintained, in all material respects, effective internal control over financial reporting as of February 3, 2024, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Corporation as of February 3, 2024 and January 28, 2023, the related consolidated statements of operations, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended February 3, 2024, and the related notes and our report dated March 13, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

33 unchanged sentences

Net interest expense 502 478 421

Net other (income) / expense ( 48 ) ( 382 ) 16

Net other income

( 92 ) ( 48 ) ( 382 )

Earnings before income taxes 5,297 3,418 8,907

7 unchanged sentences

Antidilutive shares 2.1 1.1 —

Per share amounts may not foot due to rounding.

2023 consisted of 53 weeks compared with 52 weeks in 2022 and 2021.

See accompanying Notes to Consolidated Financial Statements .

6 unchanged sentences

Net earnings $ 4,138 $ 2,780 $ 6,946

Other comprehensive income / (loss), net of tax

Other comprehensive (loss) / income, net of tax

Pension benefit liabilities

1 unchanged sentence

Currency translation adjustment and cash flow hedges

Other comprehensive income

( 18 ) 247 51

Other comprehensive (loss) / income

( 41 ) 134 203

Comprehensive income

$ 4,097 $ 2,914 $ 7,149

2023 consisted of 53 weeks compared with 52 weeks in 2022 and 2021.

See accompanying Notes to Consolidated Financial Statements .

4 unchanged sentences

Consolidated Statements of Financial Position

(millions, except footnotes) January 28, 2023 January 29, 2022

(millions, except footnotes) February 3, 2024 January 28, 2023

Cash and cash equivalents $ 3,805 $ 2,229

32 unchanged sentences

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

460,346,947 shares issued and outstanding as of January 28, 2023;

461,675,441 shares issued and outstanding as of February 3, 2024;

460,346,947 shares issued and outstanding as of January 28, 2023.

15 unchanged sentences

Gain on Dermstore sale — — ( 335 )

Loss on debt extinguishment — — 512

Noncash losses / (gains) and other, net

16 unchanged sentences

Repurchase of stock — ( 2,646 ) ( 7,188 )

Shares withheld for taxes on share-based compensation

( 127 ) ( 180 ) ( 168 )

Stock option exercises — 4 8

Cash required for financing activities ( 2,285 ) ( 2,196 ) ( 8,071 )

Net (decrease) / increase in cash and cash equivalents

Net increase / (decrease) in cash and cash equivalents

1,576 ( 3,682 ) ( 2,600 )

6 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities 1,027 329 580

2023 consisted of 53 weeks compared with 52 weeks in 2022 and 2021.

See accompanying Notes to Consolidated Financial Statements .

10 unchanged sentences

(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 — — — 6,946 — 6,946

11 unchanged sentences

Net earnings — — — 4,138 — 4,138

Other comprehensive income — — — — 134 134

Other comprehensive loss

— — — — ( 41 ) ( 41 )

Dividends declared — — — ( 2,050 ) — ( 2,050 )

Repurchase of stock ( 12.5 ) ( 1 ) 119 ( 2,764 ) — ( 2,646 )

Stock options and awards 1.4 — 153 — — 153

January 28, 2023 460.3 $ 38 $ 6,608 $ 5,005 $ ( 419 ) $ 11,232

We declared $ 4.14 , $ 3.38 , and $ 2.70 dividends per share for the twelve months ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

February 3, 2024 461.7 $ 38 $ 6,761 $ 7,093 $ ( 460 ) $ 13,432

We declared $ 4.38 , $ 4.14 , and $ 3.38 dividends per share for the twelve months ended February 3, 2024, January 28, 2023, and January 29, 2022, respectively.

See accompanying Notes to Consolidated Financial Statements .

16 unchanged sentences

Unless otherwise stated, references to years in this report relate to fiscal years, rather than to calendar years.

Fiscal 2022, 2021, and 2020 ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively, and consisted of 52 weeks.

Fiscal 2023 ended February 3, 2024, and consisted of 53 weeks.

Fiscal 2022 and 2021 ended January 28, 2023, and January 29, 2022, respectively, and consisted of 52 weeks.

Fiscal 2024 will end February 1, 2025, and will consist of 52 weeks.

Accounting policies - Our accounting policies are disclosed in the applicable Notes to the Consolidated Financial Statements.

Certain prior-year amounts have been reclassified to conform to the current-year presentation.

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.

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.

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

32 unchanged sentences

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

As of January 28, 2023, and January 29, 2022, the liability for estimated returns was $ 174 million and $ 165 million, respectively.

As of February 3, 2024, and January 28, 2023, the liability for estimated returns was $ 170 million and $ 174 million, respectively.

We routinely enter into arrangements with vendors whereby we do not purchase or pay for merchandise until the merchandise is ultimately sold to a guest.

13 unchanged sentences

Current Period

Liability January 28, 2023

Liability February 3, 2024

Gift card liability (a)

3 unchanged sentences

Guests receive a 5 percent discount on nearly all purchases and receive free shipping at Target.com when they use their Target Debit Card, RedCard Reloadable Account, Target Credit Card, or Target MasterCard (collectively, RedCards).

Target Circle program members earn 1 percent rewards on nearly all non-RedCard purchases and rewards on various other transactions.

As of January 28, 2023, and January 29, 2022, deferred revenue of $ 112 million and $ 89 million, respectively, related to this loyalty program was included in Accrued and Other Current Liabilities.

Target Circle program members earn Target Circle Rewards on various transactions.

As of February 3, 2024, and January 28, 2023, deferred revenue of $ 117 million and $ 112 million, respectively, related to our Target Circle program was included in Accrued and Other Current Liabilities.

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

46 unchanged sentences

Advertising Costs

Advertising costs, which primarily consist of digital advertisements and media broadcast, are generally expensed at first showing or distribution of the advertisement.

Advertising costs consist primarily of digital advertisements and media broadcast.

Digital advertising costs are generally expensed as incurred when the consumer engages with the advertisement through clicks or views, while media broadcast costs are generally expensed at first showing or distribution of the advertisement.

Reimbursements from vendors that are for specific, incremental, and identifiable advertising costs are recognized as offsets of these advertising costs within Selling, General and Administrative Expenses (SG&A Expenses).

Net advertising costs were $ 1.5 billion in 2022, 2021, and 2020.

Net advertising costs were $ 1.4 billion in 2023 and $ 1.5 billion in 2022 and 2021.

Fair Value Measurements

3 unchanged sentences

and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Fair Value Measurements - Recurring Basis Fair Value as of

(millions) Classification Measurement Level January 28, 2023 January 29, 2022

Financial Instruments Measured on a Recurring Basis

Fair Value as of

(millions) Classification Measurement Level February 3, 2024 January 28, 2023

Short-term investments (a)

3 unchanged sentences

Interest rate swaps (c)

Other Current Assets Level 2 — 17

Interest rate swaps (c)

Other Noncurrent Assets Level 2 — 7

Interest rate swaps (c)

Other Current Liabilities Level 2 3 —

Interest rate swaps (c)

Other Noncurrent Liabilities Level 2 123 81

4 unchanged sentences

See Note 17 for additional information on interest rate swaps.

TARGET CORPORATION

2023 Form 10-K 48

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Significant Financial Instruments Not Measured at Fair Value (a)

As of January 28, 2023 As of January 29, 2022

As of February 3, 2024 As of January 28, 2023

(millions) Carrying

5 unchanged sentences

These amounts exclude commercial paper, unamortized swap valuation adjustments, and lease liabilities.

TARGET CORPORATION

2022 Form 10-K 45

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Cash and Cash Equivalents

3 unchanged sentences

Cash and Cash Equivalents

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

Cash $ 288 $ 286

4 unchanged sentences

(a) We have access to these funds without any significant restrictions, taxes or penalties.

As of January 28, 2023, and January 29, 2022, we reclassified book overdrafts of $ 248 million and $ 366 million, respectively, to Accounts Payable and $ 14 million and $ 19 million, respectively, to Accrued and Other Current Liabilities.

As of February 3, 2024, and January 28, 2023, we reclassified book overdrafts of $ 173 million and $ 248 million, respectively, to Accounts Payable and $ 10 million and $ 14 million, respectively, to Accrued and Other Current Liabilities.

The vast majority of our inventory is accounted for under the retail inventory accounting method (RIM) using the last-in, first-out (LIFO) method.

3 unchanged sentences

Inventory is also reduced for estimated losses related to shrink and markdowns.

The LIFO provision is calculated based on inventory levels, markup rates, and internally measured retail price indices, and was $ 132 million and $ 33 million as of January 28, 2023, and January 29, 2022, respectively.

The LIFO provision is calculated based on inventory levels, markup rates, and internally measured retail price indices, and was $ 153 million and $ 132 million as of February 3, 2024, and January 28, 2023, respectively.

Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the inventory retail value.

1 unchanged sentence

The use of RIM will result in inventory being valued at the lower of cost or market because permanent markdowns are taken as a reduction of the retail value of inventory.

TARGET CORPORATION

2023 Form 10-K 49

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Other Current Assets

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

Accounts and other receivables $ 891 $ 1,169

3 unchanged sentences

Other Current Assets $ 1,807 $ 2,118

TARGET CORPORATION

2022 Form 10-K 46

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Property and Equipment

16 unchanged sentences

Other Noncurrent Assets

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

Goodwill and intangible assets (a)

Company-owned life insurance investments, net of loans (b)

Pension asset

Other 221 160

Other Noncurrent Assets $ 1,400 $ 1,320

(a) Goodwill totaled $ 631 million as of both January 28, 2023, and January 29, 2022.

(a) Goodwill totaled $ 631 million as of both February 3, 2024, and January 28, 2023.

No impairments were recorded in 2023, 2022, or 2021 as a result of the annual goodwill impairment tests performed.

4 unchanged sentences

NOTES Index to Financial Statements

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 $ 3.4 billion as of February 3, 2024, and January 28, 2023, 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.

Accrued and Other Current Liabilities

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

Wages and benefits $ 1,535 $ 1,319

21 unchanged sentences

We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition.

Purchase obligations, which include all legally binding contracts such as merchandise royalties, equipment purchases, marketing-related contracts, software acquisition/license commitments, firm minimum commitments for inventory purchases, and service contracts, were $ 1.0 billion and $ 944 million as of January 28, 2023, and January 29, 2022, respectively.

TARGET CORPORATION

2023 Form 10-K 51

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

Purchase obligations, which include all legally binding contracts such as merchandise royalties, equipment purchases, marketing-related contracts, software acquisition/license commitments, firm minimum commitments for inventory purchases, and service contracts, were $ 0.9 billion and $ 1.0 billion as of February 3, 2024, and January 28, 2023, respectively.

These purchase obligations are primarily due within three years and recorded as liabilities when goods are received or services are rendered.

Real estate obligations, which include legally binding minimum lease payments for leases signed but not yet commenced, and commitments for the purchase, construction, or remodeling of real estate and facilities, were $ 5.3 billion and $ 2.5 billion as of January 28, 2023, and January 29, 2022, respectively.

Real estate obligations, which include legally binding minimum lease payments for leases signed but not yet commenced, and commitments for the purchase, construction, or remodeling of real estate and facilities, were $ 2.7 billion and $ 5.3 billion as of February 3, 2024, and January 28, 2023, respectively.

Approximately half of these real estate obligations are due within one year , a portion of which are recorded as liabilities.

2 unchanged sentences

If we choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable outlays incurred prior to cancellation.

TARGET CORPORATION

2022 Form 10-K 48

FINANCIAL STATEMENTS Table of Contents

NOTES Index to Financial Statements

We also issue letters of credit and surety bonds in the ordinary course of business.

Trade letters of credit totaled $ 1.6 billion and $ 2.6 billion as of January 28, 2023, and January 29, 2022, respectively, a portion of which are reflected in Accounts Payable.

Standby letters of credit and surety bonds, primarily related to insurance and regulatory requirements, totaled $ 519 million and $ 517 million as of January 28, 2023, and January 29, 2022, respectively.

Trade letters of credit totaled $ 1.6 billion as of February 3, 2024, and January 28, 2023, a portion of which are reflected in Accounts Payable.

Standby letters of credit and surety bonds, primarily related to insurance and regulatory requirements, totaled $ 529 million and $ 519 million as of February 3, 2024, and January 28, 2023, respectively.

Commercial Paper and Long-Term Debt

Debt Maturities

(dollars in millions) Weighted-Average Interest Rate at January 28, 2023 January 28, 2023 January 29, 2022

Due 2022 — % $ — $ 63

(dollars in millions) Weighted-Average Interest Rate at February 3, 2024 February 3, 2024 January 28, 2023

Due 2024-2028 2.7 4,668 4,664

20 unchanged sentences

Furthermore, we repaid $ 1.0 billion of 2.9 percent unsecured fixed rate debt at maturity.

In October 2020, we repurchased $ 1.77 billion of unsecured fixed rate 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.

In March 2020, we issued unsecured fixed rate debt of $ 1.5 billion at 2.25 percent that matures in April 2025 and $ 1.0 billion at 2.65 percent that matures in September 2030.

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

For the year ended January 28, 2023, the maximum amount outstanding was $ 2.3 billion, and the average daily amount outstanding was $ 709 million, at a weighted average annual interest rate of 2.4 percent.

As of January 28, 2023, there was no commercial paper outstanding.

No balances were outstanding under our commercial paper program at any time during 2021 or 2020.

TARGET CORPORATION

2 unchanged sentences

NOTES Index to Financial Statements

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.

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

For the years ended February 3, 2024, and January 28, 2023, the maximum amounts outstanding were $ 90 million and $ 2.3 billion, respectively, and the average daily amounts outstanding were $ 1 million and $ 709 million, respectively, at a weighted average annual interest rate of 4.8 percent and 2.4 percent, respectively.

As of February 3, 2024, and January 28, 2023, there was no commercial paper outstanding.

In October 2023, we obtained a new committed $ 1.0 billion 364 -day unsecured revolving credit facility that will expire in October 2024 and terminated our prior 364 -day credit facility.

We also exercised our option to extend our existing five-year unsecured revolving credit facility, which has a maximum committed capacity of $ 3.0 billion and now expires in October 2028.

No balances were outstanding under either facility at any time during 2023 or 2022.

7 unchanged sentences

Note 7 provides the fair value and classification of these instruments.

During 2022, we entered into interest rate swaps with a total notional amount of $ 950 million.

Under the swap agreements, we pay a floating rate equal to the daily Secured Overnight Financing Rate (SOFR) compounded over six months and receive a weighted average fixed rate of 3.1 percent.

The agreements have a weighted average remaining maturity of 7.6 years.

For other existing swap agreements, with a total notional amount of $ 1.5 billion, we pay a floating rate equal to 1-month LIBOR and receive a weighted average fixed rate of 2.6 percent.

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.

Under our swap agreements, we pay a floating rate equal to the daily SOFR compounded over six months and receive a weighted average fixed rate of 2.8 percent.

The agreements have a weighted average remaining maturity of 4.9 years.

As of January 28, 2023, and January 29, 2022, interest rate swaps with notional amounts totaling $ 2.45 billion and $ 1.5 billion were designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during 2022 and 2021.

During 2022, we were party to forward-starting interest rate swaps to hedge the interest rate exposure of anticipated future debt issuances.

We designated these derivative financial instruments as cash flow hedges.

In January 2023, we terminated forward-starting interest rate swap agreements that hedged $ 1.45 billion of the $ 1.65 billion debt issuance described in Note 15 .

In September 2022, we terminated forward-starting interest rate swap agreements that hedged $ 700 million of the $ 1 billion debt issuance described in Note 15 .

The resulting gains upon termination of these swap agreements in January 2023 and September 2022 were $ 310 million and $ 109 million, respectively, which were recorded in Accumulated Comprehensive Loss (AOCI) and will be recognized as a reduction to Net Interest Expense over the respective term of the debt.

As of February 3, 2024, and January 28, 2023, interest rate swaps with notional amounts totaling $ 2.45 billion were designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during 2023 and 2022.

During 2022, we terminated forward-starting interest rate swap agreements designated as cash flow hedges that hedged $ 2.15 billion of the $ 2.65 billion 2022 debt issuances described in Note 16 .

The resulting gains upon termination of these swap agreements totaling $ 419 million were recorded in Accumulated Comprehensive Loss (AOCI) and are recognized as a reduction to Net Interest Expense over the respective term of the debt.

The cash flows related to forward-starting interest rate swaps are included within operating activities in the Consolidated Statements of Cash Flows.

Effect of Hedges on Debt

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

Long-term debt and other borrowings

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

Interest rate swap designated as fair value hedges $ ( 151 ) $ ( 106 ) $ 46

Interest rate swaps designated as fair value hedges

$ ( 52 ) $ ( 151 ) $ ( 106 )

Hedged debt 52 151 106

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NOTES Index to Financial Statements

We lease certain retail stores, warehouses, distribution centers, office space, land, and equipment.

We lease certain retail stores, supply chain facilities, office space, land, and equipment.

Leases with an initial term of 12 months or less are not recorded on the balance sheet;

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(CVS) for space within our stores.

Classification January 28, 2023 January 29, 2022

Classification February 3, 2024 January 28, 2023

Operating Operating Lease Assets $ 3,362 $ 2,657

Finance Buildings and Improvements, net of Accumulated Depreciation (a)

Finance Property and Equipment, Net (a)

Total leased assets $ 4,832 $ 4,330

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Total lease liabilities $ 5,621 $ 5,006

(a) Finance lease assets are recorded net of accumulated amortization of $ 623 million and $ 670 million as of January 28, 2023, and January 29, 2022, respectively.

(a) Finance lease assets are recorded net of accumulated amortization of $ 743 million and $ 623 million as of February 3, 2024, and January 28, 2023, respectively.

Classification 2023 2022 2021

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(b) Supply chain-related amounts are included in Cost of Sales.

(c) Sublease income excludes rental income from owned properties of $ 49 million for 2022, and $ 48 million for each of 2021 and 2020, which is included in Other Revenue.

(c) Sublease income excludes rental income from owned properties of $ 49 million for each of 2023 and 2022, and $ 48 million in 2021, which is included in Other Revenue.

TARGET CORPORATION

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$ 3,608 $ 2,013

(a) Operating lease payments include $ 878 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 1.8 billion of legally binding minimum lease payments for leases signed but not yet commenced.

(a) Operating lease payments include $ 782 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 879 million of legally binding minimum lease payments for leases signed but not yet commenced.

(b) Finance lease payments include $ 226 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $ 449 million of legally binding minimum lease payments for leases signed but not yet commenced.

Lease Term and Discount Rate January 28, 2023 January 29, 2022

Lease Term and Discount Rate February 3, 2024 January 28, 2023

Weighted average remaining lease term (years)

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NOTES Index to Financial Statements

Earnings before income taxes were $ 3.4 billion, $ 8.9 billion, and $ 5.5 billion during 2022, 2021, and 2020, respectively, including $ 1.3 billion, $ 896 million, and $ 764 million earned by our foreign entities subject to tax outside of the U.S.

Earnings before income taxes were $ 5.3 billion, $ 3.4 billion, and $ 8.9 billion during 2023, 2022, and 2021, respectively, including $ 1.2 billion, $ 1.3 billion, and $ 896 million earned by our foreign entities subject to tax outside of the U.S.

Tax Rate Reconciliation 2023 2022 2021

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Net Deferred Tax Asset / (Liability)

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

Gross deferred tax assets:

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$ ( 2,472 ) $ ( 2,190 )

(a) $ 6 million of the balance as of January 28, 2023, and January 29, 2022, is included in Other Noncurrent Assets.

(a) $ 8 million and $ 6 million of the balances as of February 3, 2024, and January 28, 2023, respectively, is included in Other Noncurrent Assets.

We file a U.S.

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Balance at end of period $ 352 $ 233 $ 125

If we were to prevail on all unrecognized tax benefits recorded, the amount that would benefit the effective tax rate was $ 107 million, $ 67 million, and $ 99 million as of January 28, 2023, January 29, 2022, and January 30, 2021, respectively.

If we were to prevail on all unrecognized tax benefits recorded, the amount that would benefit the effective tax rate was $ 161 million, $ 107 million, and $ 67 million as of February 3, 2024, January 28, 2023, and January 29, 2022, respectively.

In addition, the reversal of accrued interest and penalties would also benefit the effective tax rate.

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During 2023, 2022, and 2021, we recorded an expense / (benefit) from accrued interest and penalties of $ 6 million, $( 4 ) million, and $ 1 million, respectively.

As of January 28, 2023, January 29, 2022, and January 30, 2021, total accrued interest and penalties were $ 7 million, $ 13 million, and $ 12 million, respectively.

As of February 3, 2024, January 28, 2023, and January 29, 2022, total accrued interest and penalties were $ 14 million, $ 7 million, and $ 13 million, respectively.

It is reasonably possible that the amount of the unrecognized tax benefits with respect to our other unrecognized tax positions will increase or decrease during the next twelve months;

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Other Noncurrent Liabilities

January 28, 2023 January 29, 2022

February 3, 2024 January 28, 2023

Deferred compensation $ 576 $ 550

Deferred occupancy income (a)

Workers' compensation and general liability 458 387

Deferred occupancy income (a)

Income and other taxes payable 272 168

Pension benefits 33 37

Other 181 169

Other Noncurrent Liabilities $ 1,939 $ 1,760

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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.

We did no t repurchase any of our shares during 2023.

Share Repurchase Activity

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This plan allows us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively, share-based awards).

The number of unissued common shares reserved for future grants under this plan was 32.5 million as of January 28, 2023.

The number of unissued common shares reserved for future grants under this plan was 29.4 million as of February 3, 2024.

Compensation expense associated with share-based awards is recognized on a straight-line basis over the required service period and reflects estimated forfeitures.

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Vested ( 1,359 ) 144.37

January 28, 2023 3,321 $ 167.25

February 3, 2024 3,796 $ 171.61

(a) Represents the number of shares of restricted stock units, in thousands.

For performance-based restricted stock units, assumes attainment of maximum payout rates as set forth in the performance criteria.

Applying actual or expected payout rates, the number of outstanding restricted stock units and performance-based restricted stock units as of January 28, 2023 was 3.25 million.

Applying actual or expected payout rates, the number of outstanding restricted stock units and performance-based restricted stock units as of February 3, 2024 was 3.68 million.

(b) Weighted average per unit .

The expense recognized each period is partially dependent upon our estimate of the number of shares that will ultimately be issued.

As of January 28, 2023, there was $ 267 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted average period of 2.6 years.

As of February 3, 2024, there was $ 362 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted average period of 2.5 years.

The fair value of restricted stock units vested and converted to shares of Target common stock was $ 213 million, $ 321 million, and $ 323 million in 2023, 2022, and 2021, respectively.

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Vested ( 770 ) 109.78

January 28, 2023 1,887 $ 152.26

February 3, 2024 1,494 $ 182.98

(a) Represents the number of performance share units, in thousands.

Assumes attainment of maximum payout rates as set forth in the performance criteria.

Applying actual or expected payout rates, the number of outstanding performance share units as of January 28, 2023 was 1.26 million.

Applying actual or expected payout rates, the number of outstanding performance share units as of February 3, 2024 was 0.75 million.

(b) Weighted average per unit.

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January 28, 2023 122 $ 56.07 $ 14

Exercised / issued

January 28, 2023 122 $ 56.07 $ 14

February 3, 2024 55 $ 55.60 $ 5

(a) In thousands.

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Income tax benefit 1 2 11

As of January 28, 2023, there was no unrecognized compensation expense related to stock options.

As of February 3, 2024, there was no unrecognized compensation expense related to stock options.

The weighted average remaining life of exercisable and outstanding options is 0.2 years.

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We also maintain a frozen, unfunded, nonqualified deferred compensation plan covering less than 50 participants.

Our total liability under these plans was $ 600 million and $ 632 million as of January 28, 2023, and January 29, 2022, respectively.

Our total liability under these plans was $ 627 million and $ 600 million as of February 3, 2024, and January 28, 2023, respectively.

We mitigate our risk of offering the nonqualified plans through investing in company-owned life insurance and prepaid forward contracts that substantially offset our economic exposure to the returns of these plans.

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Nonqualified deferred compensation plans

Benefits (income) / expense

Benefits expense / (income)

$ 59 $ ( 15 ) $ 59

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Our obligations to plan participants can be met over time through a combination of company contributions to these plans and earnings on plan assets.

In 2022 we made a discretionary contribution of $ 150 million to our qualified defined benefit pension plan.

In 2021 we made no contributions to our qualified defined benefit pension plan.

In 2023, we made no contributions to our qualified defined benefit pension plan, and in 2022 we made a discretionary contribution of $ 150 million.

We are not required to make any contributions to our qualified defined benefit pension plan in 2024.

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Service cost benefits earned SG&A Expenses $ 79 $ 94 $ 100

Interest cost on projected benefit obligation Net Other (Income) / Expense 117 96 118

Expected return on assets Net Other (Income) / Expense ( 234 ) ( 238 ) ( 242 )

Amortization of losses Net Other (Income) / Expense 61 113 127

Amortization of prior service cost Net Other (Income) / Expense 10 — ( 11 )

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

Interest cost on projected benefit obligation Net Other Income

Expected return on assets Net Other Income

( 269 ) ( 234 ) ( 238 )

Amortization of losses Net Other Income

Prior service cost

Net Other Income

Total $ ( 12 ) $ 48 $ 71

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Interest cost 164 116 2 2

Plan amendments

Actuarial gain (a)

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Cash and cash equivalents Level 1 $ 5 $ 13

Level 2 6 ( 9 )

Government securities (a)

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Diversified funds 825 844

Other 108 120

Total plan assets $ 3,514 $ 3,708

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Cash and cash equivalents Carrying value approximates fair value.

Derivatives Swap derivatives - Valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads).

Derivatives Valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads).

Model inputs are changed only when corroborated by market data.

A credit risk adjustment is made on each swap using observable market credit spreads.

Option derivatives - Initially valued at transaction price.

Subsequent valuations are based on observable inputs to the valuation model (e.g., underlying investments).

Government securities

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Amounts Included in Shareholders' Investment

Amounts in Accumulated Other Comprehensive Loss

(millions) 2022 2021

Net actuarial loss $ 937 $ 783

Prior service credits — —

Amounts in Accumulated Other Comprehensive Loss (a)

(a) $ 696 million and $ 583 million, net of tax, at the end of 2022 and 2021, respectively.

Actuarial gains and losses are recorded in AOCI and amortized using the corridor approach.

As of February 3, 2024, and January 28, 2023, pretax net actuarial losses recorded in AOCI totaled $ 969 million and $ 937 million, respectively.

TARGET CORPORATION

7 unchanged sentences

January 28, 2023 $ 300 $ ( 23 ) $ ( 696 ) $ ( 419 )

Other comprehensive income / (loss) before reclassifications, net of tax

Other comprehensive loss before reclassifications, net of tax

— ( 1 ) ( 26 ) ( 27 )

Amounts reclassified from AOCI, net of tax ( 17 ) (a)

January 28, 2023 $ 300 $ ( 23 ) $ ( 696 ) $ ( 419 )

(a) Represents amortization of gains and losses on cash flow hedges, net of taxes, which is recorded in Net Interest Expense.

(b) Represents amortization of pension gains and losses, net of $ 16 million of taxes, which is recorded in Net Other (Income) / Expense.

February 3, 2024 $ 283 $ ( 24 ) $ ( 719 ) $ ( 460 )

Amounts are net of tax.

(a) Represents amortization of gains and losses on cash flow hedges, net of $ 6 million of taxes, which is recorded in Net Interest Expense.

(b) Represents amortization of pension gains and losses, net of tax, which is recorded in Net Other Income.

See Note 24 for additional information.

2 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-K

Item 8. Financial Statements and Supplementary Data