What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-31 compared with 2023-11-22 · 97 added, 147 removed, 175 unchanged (58% of the section changed)

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Financial Summary

Third quarter 2023 included the following notable items:

First quarter 2024 included the following notable items:

• GAAP and adjusted diluted earnings per share were $2.03.

• Total revenue was $25.4 billion, a decrease of 4.2 percent, reflecting a total sales decrease of 4.3 percent and a 0.6 percent decrease in other revenue.

• Comparable sales decreased 4.9 percent, reflecting a 4.1 percent decrease in traffic and a 0.8 percent decrease in average transaction amount.

• Total revenue was $24.5 billion, a decrease of 3.1 percent from the comparable prior-year period, reflecting a total sales decrease of 3.2 percent and a 3.9 percent increase in other revenue.

• Comparable sales decreased 3.7 percent, reflecting a 1.9 percent decrease in both traffic and average transaction amount.

◦ Comparable stores-originated sales declined 4.8 percent.

◦ Comparable digitally-originated sales declined 6.0 percent.

• Operating income of $1.3 billion was 28.9 percent higher than the comparable prior-year period.

See Business Environment below for additional information.

Cash flow provided by operating activities was $5.3 billion for the nine months ended October 28, 2023, compared with $552 million for the nine months ended October 29, 2022.

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

Earnings Per Share Three Months Ended Nine Months Ended

October 28, 2023 October 29, 2022 Change October 28, 2023 October 29, 2022 Change

GAAP diluted earnings per share $ 2.10 $ 1.54 36.3 % $ 5.96 $ 4.09 45.6 %

Adjustments — — — 0.03

Adjusted diluted earnings per share $ 2.10 $ 1.54 36.3 % $ 5.96 $ 4.12 44.4 %

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

◦ Comparable digitally-originated sales increased 1.4 percent.

• Operating income of $1.3 billion was 2.4 percent lower than the comparable prior-year period.

Cash flow provided by operating activities was $1.1 billion for the three months ended May 4, 2024, compared with $1.3 billion for the three months ended April 29, 2023.

The drivers of the operating cash flow decrease are described on page 20 .

Earnings Per Share Three Months Ended

May 4, 2024 April 29, 2023 Change

GAAP and adjusted diluted earnings per share

$ 2.03 $ 2.05 (1.0) %

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

However, there are no adjustments in either period presented.

Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations.

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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 28, 2023, after-tax ROIC was 13.9 percent , compared with 14.6 percent for the trailing twelve months ended October 29, 2022.

For the trailing twelve months ended May 4, 2024, after-tax ROIC was 15.4 percent , compared with 11.4 percent for the trailing twelve months ended April 29, 2023.

The calculation of ROIC is provided on page 19 .

Business Environment

During the third quarter of 2023, we experienced sales declines across our business, primarily in each of our Discretionary categories (Apparel & Accessories, Hardlines, and Home Furnishings & Décor), partially offset by net growth in Frequency categories (Beauty & Household Essentials and Food & Beverage).

The trend of decreased Discretionary category sales began in 2022.

In response, during 2022, we took actions and employed strategies to align inventories with sales trends.

These actions, as well as improvements in the supply chain, have resulted in decreased inventory as of October 28, 2023 compared with October 29, 2022.

These actions and improvements have also resulted in a reduction in costs related to managing elevated inventory levels and reduced our working capital investment.

Along with supply chain improvements, we have experienced a significant decrease in freight costs due to a decline in freight rates compared to 2022.

We have also experienced lower digital fulfillment costs due to a decrease in digital sales and an increased mix of digital sales fulfilled through lower-cost same-day services.

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 impairment of our long-lived assets.

Note 5 to the Financial Statements provides more information on impairment charges, including those related to store closures.

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

TARGET CORPORATION

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

FINANCIAL SUMMARY Index to Notes

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Analysis of Results of Operations

Summary of Operating Income Three Months Ended Nine Months Ended

(dollars in millions) October 28, 2023 October 29, 2022 Change October 28, 2023 October 29, 2022 Change

Summary of Operating Income Three Months Ended

(dollars in millions) May 4, 2024 April 29, 2023 Change

Sales $ 24,143 $ 24,948 (3.2) %

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Cost of sales 17,449 18,386 (5.1)

Selling, general and administrative expenses 5,316 5,219 1.8 15,525 14,983 3.6

SG&A expenses 5,168 5,025 2.8

Depreciation and amortization (exclusive of depreciation included in cost of sales) 618 583 6.2

Operating income $ 1,296 $ 1,328 (2.4) %

Rate Analysis Three Months Ended Nine Months Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Rate Analysis Three Months Ended

May 4, 2024 April 29, 2023

Gross margin rate 27.7 % 26.3 %

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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).

TARGET CORPORATION

Q3 2023 Form 10-Q 15

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

Comparable Sales Three Months Ended Nine Months Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Comparable Sales Three Months Ended

May 4, 2024 April 29, 2023

Comparable sales change (3.7) % 0.0 %

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Average transaction amount (1.9) (0.9)

Comparable Sales by Channel Three Months Ended Nine Months Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

TARGET CORPORATION

Q1 2024 Form 10-Q 14

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Comparable Sales by Channel Three Months Ended

May 4, 2024 April 29, 2023

Stores originated comparable sales change (4.8) % 0.7 %

Digitally originated comparable sales change 1.4 (3.4)

Sales by Channel Three Months Ended Nine Months Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Sales by Channel Three Months Ended

May 4, 2024 April 29, 2023

Stores originated 81.7 % 82.5 %

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Total 100 % 100 %

Sales by Fulfillment Channel Three Months Ended Nine Months Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Sales by Fulfillment Channel Three Months Ended

May 4, 2024 April 29, 2023

Stores 97.7 % 97.2 %

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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 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

Sales by Product Category Three Months Ended

May 4, 2024 April 29, 2023

Apparel & accessories 16 % 16 %

Beauty & household essentials 30 29 31 28

Food & beverage 24 24

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Home furnishings & décor 15 15

Household essentials 19 19

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.

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.

For the three months ended October 28, 2023 and October 29, 2022, total RedCard Penetration was 18.3 percent and 19.6 percent, respectively.

For the nine months ended October 28, 2023 and October 29, 2022, total RedCard Penetration was 18.6 percent and 20.0 percent, respectively.

We monitor the percentage of purchases that are paid for using Target Circle Cards™ (Target Circle Card Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on Target Circle Cards are also incremental sales for Target.

Target Circle Cards were formerly branded as RedCards and their sales penetration was referred to as RedCard Penetration.

Guests receive a 5 percent discount on virtually all purchases when they use a Target Circle Card at Target.

For the three months ended May 4, 2024 and April 29, 2023, total Target Circle Card Penetration was 18.0 percent and 19.0 percent, respectively.

TARGET CORPORATION

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Gross Margin Rate

Quarter-to-Date

For the three months ended October 28, 2023, our gross margin rate was 27.4 percent compared with 24.7 percent in the comparable prior-year period.

The increase reflected the net impact of

• merchandising benefit, including

◦ lower freight costs;

◦ lower clearance and promotional markdown rates and other costs compared with the prior-year, which included the impact of inventory impairments and other actions;

• lower digital fulfillment and supply chain costs due to

◦ a decrease in digital volume;

◦ an increased mix of digital sales fulfilled through lower-cost same-day services;

◦ lower inventory levels;

• favorable category mix;

• higher inventory shrink.

For the nine months ended October 28, 2023, our gross margin rate was 26.9 percent compared with 23.9 percent in the comparable prior-year period.

The increase reflected the net impact of

• merchandising benefit, including

◦ lower freight costs;

◦ lower clearance and promotional markdown rates and other costs compared with the prior-year, which included the impact of inventory impairments and other actions;

TARGET CORPORATION

Q3 2023 Form 10-Q 17

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

◦ retail price increases;

• lower digital fulfillment and supply chain costs due to

◦ a decrease in digital volume;

◦ an increased mix of digital sales fulfilled through lower-cost same-day services;

◦ lower inventory levels;

• favorable category mix;

• higher inventory shrink.

Business Environment on page 14 provides additional information.

For the three months ended May 4, 2024, our gross margin rate was 27.7 percent compared with 26.3 percent in the comparable prior-year period.

The increase reflected the net impact of merchandising activities, including cost improvements which more than offset higher promotional markdown rates.

Our gross margin rate also benefited from favorable category mix and lower book to physical inventory adjustments compared to the prior-year period.

Selling, General, and Administrative Expense Rate

For the three months ended October 28, 2023, our SG&A expense rate was 20.9 percent compared with 19.7 percent for the comparable prior-year period.

For the nine months ended October 28, 2023, our SG&A expense rate was 20.6 percent compared with 19.3 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, and the deleveraging impact of lower sales.

Change in Number of Stores Three Months Ended Nine Months Ended

October 28, 2023 October 29, 2022 October 28, 2023 October 29, 2022

For the three months ended May 4, 2024, our SG&A expense rate was 21.1 percent compared with 19.8 percent for the comparable prior-year period.

The increase reflected the combined impact of lower sales and the net impact of cost increases across our business, including investments in team member pay and benefits and increased marketing activities.

Change in Number of Stores Three Months Ended

May 4, 2024 April 29, 2023

Beginning store count 1,956 1,948

Opened 10 4 21 16

Closed (9) — (13) (1)

Ending store count 1,963 1,954

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

Retail Square Feet October 28, 2023 January 28, 2023 October 29, 2022 October 28, 2023 January 28, 2023 October 29, 2022

Retail Square Feet May 4, 2024 February 3, 2024 April 29, 2023 May 4, 2024 February 3, 2024 April 29, 2023

170,000 or more sq.

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

TARGET CORPORATION

Q1 2024 Form 10-Q 16

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

OTHER PERFORMANCE FACTORS

Index to Notes

Other Performance Factors

Net Interest Expense

For the three months ended October 28, 2023 , n et interest expense was $107 million compared with $125 million in the comparable prior-year period.

The decrease in net interest expense was primarily due to an increase in interest income, partially offset by higher debt levels and the impact of higher floating interest rates on our interest rate swaps.

For the nine months ended October 28, 2023, net interest expense was $395 million compared with $349 million in the respective comparable prior-year period.

The increase in net interest expense was primarily due to higher average debt levels in addition to the net impact of higher floating interest rates.

For the three months ended May 4, 2024 , n et interest expense was $106 million compared with $147 million in the comparable prior-year period.

The decrease in net interest expense was primarily due to an increase in interest income.

Provision for Income Taxes

Our effective income tax rate for the three months ended October 28, 2023 was 21.3 percent, consistent with 21.6 percent for the comparable prior-year period.

Our effective tax rate for the nine months ended October 28, 2023 was 21.5 percent, compared with 19.8 percent in the comparable prior-year period.

For the nine month period, the increase reflects higher pretax earnings in the current year, resulting in a smaller tax rate benefit from ongoing and discrete tax items.

Our effective tax rate for the three months ended May 4, 2024 was 22.7 percent, compared with 21.1 percent in the comparable prior-year period.

The increase reflects higher discrete tax benefits in the prior-year period.

TARGET CORPORATION

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Reconciliation of Non-GAAP Financial Measures to GAAP Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS).

This metric excludes certain items presented below.

To provide additional transparency, we disclose non-GAAP adjusted diluted earnings per share (Adjusted EPS).

When applicable, this metric excludes certain discretely managed items.

We believe this information is useful in providing period-to-period comparisons of the results of our operations.

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Reconciliation of Non-GAAP Adjusted EPS Three Months Ended

October 28, 2023 October 29, 2022

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

May 4, 2024 April 29, 2023

GAAP and adjusted diluted earnings per share

Reconciliation of Non-GAAP Adjusted EPS Nine Months Ended

October 28, 2023 October 29, 2022

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

GAAP diluted earnings per share $ 5.96 $ 4.09

$ 2.03 $ 2.05

Adjusted diluted earnings per share $ 5.96 $ 4.12

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

Earnings before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation, and amortization (EBITDA) are non-GAAP financial measures.

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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 28, 2023 October 29, 2022 Change October 28, 2023 October 29, 2022 Change

EBIT and EBITDA Three Months Ended

(dollars in millions) May 4, 2024 April 29, 2023 Change

Net earnings $ 942 $ 950 (0.8) %

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+ Total depreciation and amortization (a)

722 674 7.1 2,072 2,004 3.4

EBITDA $ 2,043 $ 2,018 1.3 %

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Trailing Twelve Months

Numerator October 28, 2023 October 29, 2022

Numerator May 4, 2024 (a)

April 29, 2023

Operating income $ 5,675 $ 3,830

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EBIT 5,774 3,887

+ Operating lease interest (a)

- Income taxes (b)

+ Operating lease interest (b)

- Income taxes (c)

Net operating profit after taxes $ 4,593 $ 3,213

Denominator October 28, 2023 October 29, 2022 October 30, 2021

Denominator May 4, 2024 April 29, 2023 April 30, 2022

Current portion of long-term debt and other borrowings $ 2,614 $ 200 $ 1,089

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+ Shareholders' investment 13,840 11,605 10,774

+ Operating lease liabilities (c)

+ Operating lease liabilities (d)

3,723 2,921 2,854

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Invested capital $ 30,060 $ 29,415 $ 26,984

Average invested capital (d)

Average invested capital (e)

$ 29,737 $ 28,199

After-tax return on invested capital 15.4 % 11.4 %

(a) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases.

Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A.

(a) The trailing twelve months ended May 4, 2024, consisted of 53 weeks compared with 52 weeks in the prior-year period.

(b) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases.

Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A Expenses.

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 20.3 percent and 21.5 percent for the trailing twelve months ended October 28, 2023 and October 29, 2022, respectively.

For the trailing twelve months ended October 28, 2023 and October 29, 2022, includes tax effect of $1.0 billion related to EBIT and $22 million and $19 million, respectively, related to operating lease interest.

(c) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.

(d) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

(c) Calculated using the effective tax rates, which were 22.2 percent and 19.3 percent for the trailing twelve months ended May 4, 2024 and April 29, 2023, respectively.

For the trailing twelve months ended May 4, 2024 and April 29, 2023, includes tax effect of $1.3 billion and $0.8 billion, respectively, related to EBIT and $30 million and $18 million, respectively, related to operating lease interest.

(d) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.

(e) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

TARGET CORPORATION

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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 $1.9 billion, $2.2 billion, and $954 million as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively.

Our cash and cash equivalents balance includes short-term investments of $1.0 billion and $1.3 billion as of October 28, 2023 and January 28, 2023, respectively.

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

Our cash and cash equivalents balance was $3.6 billion, $3.8 billion, and $1.3 billion as of May 4, 2024, February 3, 2024, and April 29, 2023, respectively.

Our cash and cash equivalents balance includes short-term investments of $2.7 billion, $2.9 billion, and $408 million as of May 4, 2024, February 3, 2024, and April 29, 2023, 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 $5.3 billion for the nine months ended October 28, 2023, compared with $552 million for the nine months ended October 29, 2022.

For the nine months ended October 28, 2023, operating cash flows increased as a result of higher net earnings and an improvement in working capital, including lower inventory levels, compared with the nine months ended October 29, 2022.

Inventory was $14.7 billion as of October 28, 2023, compared with $13.5 billion and $17.1 billion at January 28, 2023 and October 29, 2022, respectively.

The increase from January 28, 2023, reflects the seasonal inventory build ahead of the November and December holiday sales period.

The decrease from the balance as of October 29, 2022, primarily reflects actions taken to align inventory levels with sales trends and improvements in the supply chain, including reduced in-transit inventory, as well as cost decreases, primarily due to lower freight rates in 2023 compared to 2022.

The Business Environment section on page 14 provides additional information.

Cash flows provided by operating activities were $1.1 billion for the three months ended May 4, 2024, compared with $1.3 billion for the three months ended April 29, 2023.

The operating cash flow decrease is primarily due to higher incentive compensation and other payments, partially offset by the net impact of inventory and accounts payable activity.

Inventory was $11.7 billion as of May 4, 2024, compared with $11.9 billion and $12.6 billion at February 3, 2024 and April 29, 2023, respectively.

The balance as of May 4, 2024, reflects cost improvement, including lower freight rates, and the impact of changes in merchandise mix.

We have also increased our inventory turnover rate, allowing us to support sales with a lower inventory investment.

Investing Cash Flows

Cash required for investing activities decreased to $3.9 billion for the nine months ended October 28, 2023, compared to $4.3 billion for the nine months ended October 29, 2022, due to capital investments.

We paid dividends totaling $507 million ($1.10 per share) and $1.5 billion ($3.26 per share) for the three and nine months ended October 28, 2023, respectively, and $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, a per share increase of 1.9 percent for the three month period and 13.2 percent for the nine month period.

We declared dividends totaling $513 million ($1.10 per share) during the third quarter of 2023 and $502 million ($1.08 per share) during the third quarter of 2022, a per share increase of 1.9 percent.

Cash required for investing activities decreased to $0.7 billion for the three months ended May 4, 2024, compared to $1.6 billion for the three months ended April 29, 2023, due to lower capital investments.

We paid dividends totaling $508 million ($1.10 per share) for the three months ended May 4, 2024, and $497 million ($1.08 per share) for the three months ended April 29, 2023, a per share increase of 1.9 percent.

We declared dividends totaling $516 million ($1.10 per share) during the first quarter of 2024 and $507 million ($1.08 per share) during the first quarter of 2023, a per share increase of 1.9 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 nine months ended October 28, 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 8 to the Financial Statements for more information.

We did not repurchase any shares during the three months ended May 4, 2024.

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

TARGET CORPORATION

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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 28, 2023, our credit ratings were as follows:

As of May 4, 2024, our credit ratings were as follows:

Credit Ratings Moody’s Standard and Poor’s Fitch

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We have the ability to obtain short-term financing from time to time under our commercial paper program and credit facilities.

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.

Both credit facilities backstop our commercial paper program.

Our committed $1.0 billion 364-day and $3.0 billion unsecured revolving credit facilities that will expire in October 2024 and October 2028, respectively, backstop our commercial paper program.

No balances were outstanding under either credit facility at any time during 2024 or 2023.

We did not have any balances outstanding under our commercial paper program as of October 28, 2023, and we had $2.1 billion outstanding as of October 29, 2022.

There was no commercial paper outstanding as of May 4, 2024, and we had $90 million outstanding as of April 29, 2023.

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 28, 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.

Additionally, as of May 4, 2024, 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.

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This report contains forward-looking statements, which are based on our current assumptions and expectations.

These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or similar words.

The principal forward-looking statements in this report include:

our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the 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.

These statements are typically accompanied by the words "anticipate," "believe," "could," “expect,” “may,” “might,” “seek,” "will," “would,” or similar words.

The principal forward-looking statements in this report include statements regarding:

our future financial and operational performance, 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.

Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different.

The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors included in Part I, Item 1A, Risk Factors of our Form 10-K for the fiscal year ended January 28, 2023, which should be read in conjunction with the forward-looking statements in this report.

The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors included in Part I, Item 1A, Risk Factors of our Form 10-K for the fiscal year ended February 3, 2024, which should be read in conjunction with the forward-looking statements in this report.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk of our Form 10-K for the fiscal year ended January 28, 2023.

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