TARGET CORP 10-Q

Item 1. Financial Statements Consolidated Statements of Operations Three Months Ended Nine Months Ended (millions, except per share data) (unaudited) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Sales $ 25,228 $ 25,004 $ 74,392 $ 74,336 Other revenue 440 394 1,259 1,157 Total revenue 25,668 25,398 75,651 75,493 Cost of sales 18,375 18,149 53,623 54,333 Selling, general and administrative expenses 5,486 5,316 16,046 15,525 Depreciation and amortization (exclusive of depreciation included in cost of sales) 639 616 1,883 1,793 Operating income 1,168 1,317 4,099 3,842 Net interest expense 105 107 321 395 Net other income ( 28 ) ( 25 ) ( 77 ) ( 64 ) Earnings before income taxes 1,091 1,235 3,855 3,511 Provision for income taxes 237 264 867 755 Net earnings $ 854 $ 971 $ 2,988 $ 2,756 Basic earnings per share $ 1.86 $ 2.10 $ 6.47 $ 5.97 Diluted earnings per share $ 1.85 $ 2.10 $ 6.45 $ 5.96 Weighted average common shares outstanding Basic 460.1 461.6 461.6 461.4 Diluted 461.5 462.6 462.9 462.7 Antidilutive shares 0.5 3.0 0.5 2.6 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q3 2024 Form 10-Q 1 FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Comprehensive Income Three Months Ended Nine Months Ended (millions) (unaudited) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Net earnings $ 854 $ 971 $ 2,988 $ 2,756 Other comprehensive (loss) / income, net of tax Pension benefit liabilities — — — 3 Cash flow hedges and currency translation adjustment ( 4 ) ( 5 ) ( 14 ) ( 14 ) Other comprehensive loss ( 4 ) ( 5 ) ( 14 ) ( 11 ) Comprehensive income $ 850 $ 966 $ 2,974 $ 2,745 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q3 2024 Form 10-Q 2 FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Financial Position (millions, except footnotes) (unaudited) November 2, 2024 February 3, 2024 October 28, 2023 Assets Cash and cash equivalents $ 3,433 $ 3,805 $ 1,910 Inventory 15,165 11,886 14,731 Other current assets 1,956 1,807 1,958 Total current assets 20,554 17,498 18,599 Property and equipment Land 6,666 6,547 6,520 Buildings and improvements 38,666 37,066 36,627 Fixtures and equipment 8,840 8,765 8,490 Computer hardware and software 3,549 3,428 3,312 Construction-in-progress 758 1,703 2,000 Accumulated depreciation ( 25,548 ) ( 24,413 ) ( 23,781 ) Property and equipment, net 32,931 33,096 33,168 Operating lease assets 3,513 3,362 3,086 Other noncurrent assets 1,533 1,400 1,376 Total assets $ 58,531 $ 55,356 $ 56,229 Liabilities and shareholders’ investment Accounts payable $ 14,419 $ 12,098 $ 14,291 Accrued and other current liabilities 5,738 6,090 6,099 Current portion of long-term debt and other borrowings 1,635 1,116 1,112 Total current liabilities 21,792 19,304 21,502 Long-term debt and other borrowings 14,346 14,922 14,883 Noncurrent operating lease liabilities 3,418 3,279 3,031 Deferred income taxes 2,419 2,480 2,447 Other noncurrent liabilities 2,067 1,939 1,852 Total noncurrent liabilities 22,250 22,620 22,213 Shareholders’ investment Common stock 38 38 38 Additional paid-in capital 6,916 6,761 6,681 Retained earnings 8,009 7,093 6,225 Accumulated other comprehensive loss ( 474 ) ( 460 ) ( 430 ) Total shareholders’ investment 14,489 13,432 12,514 Total liabilities and shareholders’ investment $ 58,531 $ 55,356 $ 56,229 Common Stock Authorized 6,000,000,000 shares, $ 0.0833 par value; 459,244,995 , 461,675,441 , and 461,651,176 shares issued and outstanding as of November 2, 2024, February 3, 2024, and October 28, 2023, 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 Q3 2024 Form 10-Q 3 FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Cash Flows Nine Months Ended (millions) (unaudited) November 2, 2024 October 28, 2023 Operating activities Net earnings $ 2,988 $ 2,756 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 2,215 2,072 Share-based compensation expense 229 176 Deferred income taxes ( 58 ) 252 Noncash (gains) / losses and other, net ( 1 ) 101 Changes in operating accounts: Inventory ( 3,279 ) ( 1,232 ) Other assets ( 265 ) ( 208 ) Accounts payable 2,362 887 Accrued and other liabilities ( 113 ) 528 Cash provided by operating activities 4,078 5,332 Investing activities Expenditures for property and equipment ( 1,968 ) ( 3,952 ) Proceeds from disposal of property and equipment 2 24 Other investments 24 18 Cash required for investing activities ( 1,942 ) ( 3,910 ) Financing activities Additions to long-term debt 741 — Reductions of long-term debt ( 1,112 ) ( 114 ) Dividends paid ( 1,533 ) ( 1,503 ) Repurchase of stock ( 506 ) — Shares withheld for taxes on share-based compensation ( 98 ) ( 124 ) Cash required for financing activities ( 2,508 ) ( 1,741 ) Net decrease in cash and cash equivalents ( 372 ) ( 319 ) Cash and cash equivalents at beginning of period 3,805 2,229 Cash and cash equivalents at end of period $ 3,433 $ 1,910 Supplemental information Leased assets obtained in exchange for new finance lease liabilities $ 312 $ 86 Leased assets obtained in exchange for new operating lease liabilities 416 679 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q3 2024 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 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 Net earnings — — — 971 — 971 Other comprehensive loss — — — — ( 5 ) ( 5 ) Dividends declared — — — ( 513 ) — ( 513 ) Stock options and awards 0.1 — 71 — — 71 October 28, 2023 461.7 $ 38 $ 6,681 $ 6,225 $ ( 430 ) $ 12,514 Net earnings — — — 1,382 — 1,382 Other comprehensive loss — — — — ( 30 ) ( 30 ) Dividends declared — — — ( 514 ) — ( 514 ) Stock options and awards — — 80 — — 80 February 3, 2024 461.7 $ 38 $ 6,761 $ 7,093 $ ( 460 ) $ 13,432 TARGET CORPORATION Q3 2024 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 February 3, 2024 461.7 $ 38 $ 6,761 $ 7,093 $ ( 460 ) $ 13,432 Net earnings — — — 942 — 942 Other comprehensive loss — — — — ( 5 ) ( 5 ) Dividends declared — — — ( 516 ) — ( 516 ) Stock options and awards 0.9 1 ( 14 ) — — ( 13 ) May 4, 2024 462.6 $ 39 $ 6,747 $ 7,519 $ ( 465 ) $ 13,840 Net earnings — — — 1,192 — 1,192 Other comprehensive loss — — — — ( 5 ) ( 5 ) Dividends declared — — — ( 527 ) — ( 527 ) Repurchase of stock ( 1.1 ) ( 1 ) — ( 154 ) — ( 155 ) Stock options and awards 0.1 — 84 — — 84 August 3, 2024 461.6 $ 38 $ 6,831 $ 8,030 $ ( 470 ) $ 14,429 Net earnings — — — 854 — 854 Other comprehensive loss — — — — ( 4 ) ( 4 ) Dividends declared — — — ( 521 ) — ( 521 ) Repurchase of stock ( 2.4 ) — — ( 354 ) — ( 354 ) Stock options and awards — — 85 — — 85 November 2, 2024 459.2 $ 38 $ 6,916 $ 8,009 $ ( 474 ) $ 14,489 We declared $ 1.12 and $ 1.10 dividends per share for the three months ended November 2, 2024, and October 28, 2023, respectively, and $ 4.38 per share for the fiscal year ended February 3, 2024. See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q3 2024 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 Property and Equipment 11 Note 5 Supplier Finance Programs 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 Q3 2024 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 Q3 2024 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 Nine Months Ended (millions) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Apparel & accessories (a) $ 4,003 $ 4,007 $ 12,161 $ 12,075 Beauty (b) 3,226 3,013 9,729 9,114 Food & beverage (c) 5,917 5,736 17,308 17,125 Hardlines (d) 3,152 3,192 9,634 9,966 Home furnishings & décor (e) 4,185 4,420 11,612 12,230 Household essentials (f) 4,715 4,606 13,828 13,700 Other 30 30 120 126 Sales 25,228 25,004 74,392 74,336 Credit card profit sharing 148 165 433 508 Other 292 229 826 649 Other revenue 440 394 1,259 1,157 Total revenue $ 25,668 $ 25,398 $ 75,651 $ 75,493 (a) Includes apparel for women, men, young adults, kids, toddlers, and babies, as well as jewelry, accessories, and shoes. (b) Includes skin and bath care, cosmetics, hair care, oral care, deodorant, and shaving products. (c) Includes dry and perishable grocery, including snacks, candy, beverages, deli, bakery, meat, produce and food service (primarily Starbucks) in our stores. (d) Includes electronics, including video games and consoles, toys, sporting goods, entertainment, and luggage. (e) Includes bed and bath, home décor, school/office supplies, storage, small appliances, kitchenware, greeting cards, party supplies, furniture, lighting, home improvement, and seasonal merchandise. (f) Includes household cleaning, paper products, over-the-counter healthcare, vitamins and supplements, baby gear, and pet supplies. 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 November 2, 2024, February 3, 2024, and October 28, 2023, the accrual for estimated returns was $ 204 million, $ 170 million, and $ 207 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 February 3, 2024 Gift Cards Issued During Current Period But Not Redeemed (b) Revenue Recognized From Beginning Liability November 2, 2024 (millions) Gift card liability (a) $ 1,162 $ 493 $ ( 711 ) $ 944 (a) Included in Accrued and Other Current Liabilities. (b) Net of estimated breakage. TARGET CORPORATION Q3 2024 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 Circle credit card receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Circle credit card receivables, controls risk management policies, and oversees regulatory compliance. Other — Includes advertising revenue, commissions earned on third-party sales through Target.com, Shipt membership and service revenues, 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 November 2, 2024 February 3, 2024 October 28, 2023 Assets Short-term investments Cash and Cash Equivalents Level 1 $ 2,456 $ 2,897 $ 1,004 Prepaid forward contracts Other Current Assets Level 1 26 25 18 Liabilities Interest rate swaps Other Current Liabilities Level 2 — 3 7 Interest rate swaps Other Noncurrent Liabilities Level 2 105 123 190 Significant Financial Instruments Not Measured at Fair Value (a) (millions) November 2, 2024 February 3, 2024 October 28, 2023 Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value Long-term debt, including current portion (b) $ 13,901 $ 13,029 $ 14,151 $ 13,467 $ 14,149 $ 12,485 (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. TARGET CORPORATION Q3 2024 Form 10-Q 10 FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes 4. 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 $ 1 million and $ 37 million for the three and nine months ended November 2, 2024, and $ 64 million and $ 98 million for the three and nine months ended October 28, 2023. These impairment charges are included in Selling, General and Administrative (SG&A) Expenses. 5. 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 $ 4.7 billion, $ 3.4 billion, and $ 4.5 billion as of November 2, 2024, February 3, 2024, and October 28, 2023, 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 have historically been lower. 6. Commercial Paper and Long-Term Debt In September 2024, we issued $ 750 million of unsecured debt with a fixed rate of 4.5 percent that matures in September 2034. We obtain short-term financing from time to time under our commercial paper program. There was no commercial paper outstanding at any time during the three and nine months ended November 2, 2024, or during the three months ended October 28, 2023. For the nine months ended October 28, 2023, the maximum amount outstanding was $ 90 million, and the average daily amount outstanding was $ 1 million, at a weighted average annual interest rate of 4.8 percent. In October 2024, we obtained a new committed $ 1.0 billion 364-day unsecured revolving credit facility that will expire in October 2025 and terminated our prior 364-day facility. No balances were outstanding under our credit facilities at any time during 2024 or 2023. 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 $ 2.20 billion as of November 2, 2024, and $ 2.45 billion as of both February 3, 2024, and October 28, 2023. 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 nine months ended November 2, 2024, and October 28, 2023. TARGET CORPORATION Q3 2024 Form 10-Q 11 FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes Effect of Hedges on Debt (millions) November 2, 2024 February 3, 2024 October 28, 2023 Long-term debt and other borrowings Carrying amount of hedged debt $ 2,088 $ 2,316 $ 2,245 Cumulative hedging adjustments, included in carrying amount ( 105 ) ( 126 ) ( 197 ) Effect of Hedges on Net Interest Expense Three Months Ended Nine Months Ended (millions) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Gain (loss) on fair value hedges recognized in Net Interest Expense Interest rate swaps designated as fair value hedges $ ( 26 ) $ ( 60 ) $ 21 $ ( 123 ) Hedged debt 26 60 ( 21 ) 123 Gain on cash flow hedges recognized in Net Interest Expense 6 6 18 18 Total $ 6 $ 6 $ 18 $ 18 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 arrangements, and other privately negotiated transactions with financial institutions. Share Repurchase Activity Three Months Ended Nine Months Ended (millions, except per share data) November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Number of shares purchased 2.4 — 3.5 — Average price paid per share $ 147.43 $ — $ 146.97 $ — Total investment $ 354 $ — $ 509 $ — 9. Pension Benefits We provide pension plan benefits to eligible team members. Net Pension Benefits Expense Three Months Ended Nine Months Ended (millions) Classification November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Service cost benefits earned SG&A Expenses $ 19 $ 19 $ 58 $ 58 Interest cost on projected benefit obligation Net Other Income 41 42 124 125 Expected return on assets Net Other Income ( 69 ) ( 67 ) ( 209 ) ( 201 ) Amortization of losses Net Other Income — — — 1 Prior service cost Net Other Income — — 8 11 Total $ ( 9 ) $ ( 6 ) $ ( 19 ) $ ( 6 ) TARGET CORPORATION Q3 2024 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) February 3, 2024 $ 283 $ ( 24 ) $ ( 719 ) $ ( 460 ) Other comprehensive income (loss) before reclassifications, net of tax — ( 1 ) — ( 1 ) Amounts reclassified from AOCI, net of tax ( 13 ) — — ( 13 ) November 2, 2024 $ 270 $ ( 25 ) $ ( 719 ) $ ( 474 ) TARGET CORPORATION Q3 2024 Form 10-Q 13 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents FINANCIAL SUMMARY Index to Notes