What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-11 compared with 2025-03-12 · 161 added, 146 removed, 268 unchanged (53% of the section changed)

1 unchanged sentence

Executive Overview

In 2024, we drove our strategy (as described on page 2 ) by investing in core strengths that deepened connection with existing guests, while introducing innovations that further differentiated Target, unlocked new channels of growth, and gave consumers more reasons to become loyal Target guests.

In 2025, we operated in a dynamic and uncertain environment characterized by cautious consumers who remained value-focused and selective in discretionary spending along with unprecedented tariff volatility.

Against this backdrop, we took decisive actions to strengthen our business and position Target for long-term growth with a clear strategic focus around four priorities:

leading with merchandising authority;

elevating the guest experience;

accelerating technology;

and strengthening team and communities.

During 2025, we:

• Continued to emphasize newness and differentiation across our assortment, including a steady flow of exclusive products and designer collaborations, such as:

◦ 2,000 new wellness products introduced in January of 2025—600 of which were exclusive to Target;

◦ our exclusive official "Taylor Swift | The Eras Tour Book";

◦ our large assortment of exclusive Wicked products including Wicked Quenchers from Stanley;

◦ partnerships with celebrities such as Dwayne “The Rock” Johnson, Tom Holland, Jennifer Aniston, Ashley Tisdale and more;

◦ the Diane von Furstenberg for Target collection;

◦ The Cuddle Collab limited-edition collection for pets and pet lovers;

◦ a limited-time pickleball collection with tennis and lifestyle brand Prince;

• Launched or expanded several owned brands, including dealworthy TM — our new low-price line of essentials — and Auden TM , Cat & Jack TM , Gigglescape TM , and up&up TM , with 11 of our owned brands exceeding $1 billion in annual sales;

• Expanded the selection of products available on our Target Plus digital marketplace;

• Launched our reimagined Target Circle loyalty program to deliver an easier and more personalized shopping and saving experience, including a free-to-join option and a paid membership for same-day delivery, as well as the integration of Target Circle Card (formerly RedCard);

• Continued to enhance our Roundel digital media products and services, including through a new self-service buying tool, Roundel Media Studio, and experiential events integrated with marketing activities;

• Invested in new artificial intelligence (AI) technology, including modernized AI-powered inventory management systems and Store Companion, an AI-powered chatbot designed to make team members' jobs easier and enhance the shopping experience;

• Opened 23 new stores, many of which are full-size stores, reflecting our large-format focus and stores as hubs strategy;

• Fulfilled over 65 percent of our digital sales through our same-day fulfillment options (Order Pickup, Drive Up, and Same Day Delivery), which grew 7.7 percent compared to 2023, including double-digit percentage growth in both Same Day Delivery and Drive Up.

Financial Summary

Fiscal 2024 included the following notable items:

• GAAP and Adjusted diluted earnings per share were $8.86.

• Net Sales were $106.6 billion, a decrease of $0.8 billion, or 0.8 percent, from the prior year, driven by one less week in the current year.

• Comparable sales increased 0.1 percent, driven by a 1.4 percent increase in traffic and partially offset by a 1.3 percent decrease in average transaction amount.

• Operating income of $5.6 billion was 2.5 percent lower than the 53-week prior-year period.

• Took action on our initiative to transform various aspects of our business, including organizational simplification to streamline decision-making, reduce complexity, and drive efficiency;

• Advanced the multi-year transformation of our Hardlines business into "Fun 101", an evolution in bringing greater cultural relevance and style authority to the assortment;

• Continued innovation within our owned brands portfolio, including design partnerships and collaborations across multiple categories, such as our new fresh floral owned brand, Good Little Garden, the kate spade new york x Target collection, and partnerships with celebrities including Taylor Swift and Tom Holland;

• Launched Precision Plus by Roundel™, a retail media capability that improves advertising outcomes by leveraging data and AI-learning, and expanded our Target Plus third-party digital marketplace;

• Leveraged our nearly 2,000-store network (including 18 new stores opened in 2025) to fulfill the vast majority of sales through stores, supporting speed and cost efficiency, with two-thirds of digital sales fulfilled through our same-day fulfillment options;

• Realized significant improvements in inventory shrink throughout the year, with shrink rates reaching pre-pandemic levels;

• Enhanced artificial intelligence capabilities across merchandising, planning, inventory management, and personalization, and expanded the use of AI-powered tools to simplify work for store and headquarters teams;

• Continued our longstanding commitment to community engagement and giving, including giving 5 percent of profit to communities, as well as over 1 million team member volunteer hours annually.

Business Environment

Beginning in 2025, the U.S.

imposed a variety of additional tariffs on a wide range of imported products using various legal authorities, including IEEPA.

Those additional tariffs were subsequently modified through incremental increases, decreases, pauses, and limited exemptions.

Approximately one-half of the merchandise we offer is sourced from outside the U.S., either directly or through our vendors, with China as the single largest source of merchandise we import.

On February 20, 2026, the U.S.

Supreme Court ruled that tariffs imposed under IEEPA were not authorized by the statute.

The ruling does not establish a refund process, and significant uncertainty remains regarding how and when any amounts may be recovered.

We are evaluating the ruling and potential actions available to us.

Because the process, timing, and amount of any recovery are uncertain, we are unable to estimate the financial effects, if any, at this time.

The ultimate resolution of this matter could materially affect our consolidated financial position, results of operations, and cash flows.

We are closely monitoring the evolving consumer and regulatory landscape, including new tariffs announced in February 2026 in response to the U.S.

Supreme Court ruling on IEEPA tariffs, and adjusting plans as needed.

The collective interaction of tariffs, sourcing strategies, pricing actions, consumer response and behaviors, and other factors, could materially impact our sales and results of operations in future periods.

TARGET CORPORATION

1 unchanged sentence

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

FINANCIAL SUMMARY Index to Financial Statements

EXECUTIVE OVERVIEW & FINANCIAL SUMMARY Index to Financial Statements

Business Transformation Initiatives

In 2025, we announced a multi-year initiative to transform various aspects of our business—including our organizational structure, processes, and technology—to enable greater agility and optimize the use of the Company's assets.

We incurred costs and charges related to our business transformation initiatives in 2025, including a reduction in our headquarters workforce.

Note 7 to the Financial Statements provides additional information.

We may incur additional business transformation costs and charges in future periods, which may adversely affect our results of operations and financial condition;

however, we cannot reasonably estimate the amount of such costs and charges at this time.

Financial Summary

Fiscal 2025 included the following notable items:

• GAAP diluted earnings per share were $8.13 and Adjusted EPS 1 were $7.57.

• Net Sales were $104.8 billion, a decrease of $1.8 billion, or 1.7 percent, from the prior year.

• Comparable sales decreased 2.6 percent, driven by a 2.2 percent decrease in traffic and a 0.4 percent decrease in average transaction amount.

• Operating income of $5.1 billion and Adjusted operating income 1 of $4.8 billion were 8.1 percent and 14.2 percent lower, respectively, than the prior-year.

• We recognized $593 million of net gains related to settlements of credit card interchange fee litigation matters.

• We incurred $250 million of costs related to business transformation initiatives.

Earnings Per Share

3 unchanged sentences

GAAP diluted earnings per share $ 8.13 $ 8.86 $ 8.94 (8.2) % (0.9) %

Adjustments — — 0.03

Total adjustments

Adjusted diluted earnings per share 1

$ 7.57 $ 8.86 $ 8.94 (14.5) % (0.9) %

Amounts may not foot due to rounding.

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

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

1 Adjusted diluted earnings per share (Adjusted EPS) and Adjusted operating income, non-GAAP metrics, exclude the impact of certain items.

Management believes that Adjusted EPS and Adjusted operating income are useful in providing period-to-period comparisons of the results of our operations.

A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 32 .

1 unchanged sentence

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 February 1, 2025, after-tax ROIC was 15.4 percent, compared to 16.1 percent for the trailing twelve months ended February 3, 2024.

For the trailing twelve months ended January 31, 2026, after-tax ROIC was 13.8 percent, compared to 15.4 percent for the trailing twelve months ended February 1, 2025.

The calculation of ROIC is provided on page 34 .

TARGET CORPORATION

2025 Form 10-K 28

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF OPERATIONS Index to Financial Statements

Analysis of Results of Operations

Summary of Operating Income Percent Change

(dollars in millions) 2024 2023 (c)

(dollars in millions) 2025 2024 2023 (a)

2025/2024 2024/2023

Net sales (a)

$ 104,780 $ 106,566 $ 107,412 (1.7) % (0.8) %

Cost of sales (b)

Cost of sales

75,511 76,502 77,828 (1.3) (1.7)

SG&A expenses (b)

SG&A expenses

21,535 21,969 21,462 (2.0) 2.4

2 unchanged sentences

Operating income $ 5,117 $ 5,566 $ 5,707 (8.1) % (2.5) %

(a) In 2024, we changed the presentation of revenue in our Consolidated Statements of Operations, consolidating the previous three-line format (Sales, Other Revenue, and Total Revenue) to a single line labeled "Net Sales", which reflects all revenues (formerly Total Revenue).

Note 2 to the Financial Statements provides additional information.

We believe this presentation better reflects our strategy, which includes growing capabilities and business offerings that leverage Target's assets and competitive strengths.

(b) Refer to Note 3 to the Financial Statements for additional information about a reclassification of prior year amounts to conform with current year presentation.

Rate Analysis 2024 2023 2022

Gross margin rate (a)

Adjusted SG&A expenses (b)

$ 21,877 $ 21,969 $ 21,462 (0.4) % 2.4 %

SG&A expense rate (a)

Adjusted operating income (b)

4,775 5,566 5,707 (14.2) (2.5)

Rate Analysis 2025 2024 2023 (a)

Gross margin rate

27.9 % 28.2 % 27.5 %

SG&A expense rate

20.6 20.6 20.0

Adjusted SG&A expense rate (b)

20.9 20.6 20.0

Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate

Operating income margin rate 4.9 5.2 5.3

(a) Reflects the impact of a reclassification of prior year amounts to conform with current year presentation.

Refer to Note 3 to the Financial Statements for additional information.

Adjusted operating income margin rate (b)

Gross margin is calculated as Net Sales less Cost of Sales.

All rates are calculated by dividing the applicable amount by Net Sales.

Previously our gross margin rate was calculated based only on Merchandise Sales.

The calculation change aligns with our 2024 transition to a single-line revenue presentation on our Consolidated Statements of Operations, with prior period amounts updated to conform to the current year presentation.

We also updated prior period gross margin rates to conform to the current year calculations, which resulted in an approximate 1 percentage point increase in our gross margin rate for both 2023 and 2022.

(a) 2023 consisted of 53 weeks compared with 52 weeks in 2025 and 2024.

(b) Adjusted SG&A expenses, Adjusted SG&A expense rate, Adjusted operating income, and Adjusted operating income margin rate, which are non-GAAP measures, exclude the impact of certain items.

Management believes that these measures are useful in providing period-to-period comparisons of the results of our operations.

A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 32 .

A discussion regarding Analysis of Results of Operations and Analysis of Financial Condition for 2024, as compared to 2023, is included in Part II, Item 7, MD&A to our Annual Report on Form 10-K for the year ended February 1, 2025 .

TARGET CORPORATION

2 unchanged sentences

ANALYSIS OF OPERATIONS Index to Financial Statements

A discussion regarding Analysis of Results of Operations and Analysis of Financial Condition for 2023, as compared to 2022, is included in Part II, Item 7, MD&A to our Annual Report on Form 10-K for the year ended February 3, 2024 .

Net Sales includes Merchandise Sales and revenues from other sources, most notably advertising revenue and credit card profit-sharing income.

5 unchanged sentences

As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies.

Digitally originated sales include all Merchandise Sales initiated through mobile applications and our websites.

Digitally originated sales include all Merchandise Sales initiated through mobile/computer applications and our websites.

Our stores fulfill the majority of digitally originated sales, including shipment from stores to guests, store Order Pickup or Drive Up, and Same-Day Delivery.

23 unchanged sentences

Merchandise 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 Same-Day Delivery.

TARGET CORPORATION

2024 Form 10-K 27

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF OPERATIONS Index to Financial Statements

Part I, Item 1, Business of this Form 10-K and Note 2 to the Financial Statements provides additional product category sales information.

The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.

TD Bank Group offers credit to qualified guests through Target-branded credit cards:

the Target Credit Card and the Target MasterCard Credit Card (Target Credit Cards).

Additionally, we offer a branded proprietary Target Debit Card and Target Circle Card Reloadable Account.

Collectively, we refer to these products as Target Circle Cards.

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

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 incremental purchases on our Target Circle Cards are also incremental sales for Target.

For the years ended February 1, 2025, February 3, 2024, and January 28, 2023, total Target Circle Card Penetration was 17.8 percent, 18.6 percent, and 19.8 percent, respectively.

See the Customer Loyalty Programs section within Item 1.

Business on page 5 for information about the rebranding of RedCards.

Gross Margin (GM) Rate

Our gross margin rate was 28.2 percent in 2024 and 27.5 percent in 2023.

The increase reflected the net impact of

• merchandising activities, including cost improvements which more than offset higher promotional and clearance markdown rates, as well as growth in advertising and marketplace revenues;

• lower book to physical inventory adjustments in 2024;

• higher supply chain & digital fulfillment costs due to new supply chain facilities coming online and an increase in digital volume.

Selling, General and Administrative (SG&A) Expense Rate

Our SG&A expense rate was 20.6 percent in 2024, compared with 20.0 percent in 2023, reflecting the net impact of cost increases across our business, including higher team member pay and benefits and higher general liability expenses, partially offset by the benefit of lower store remodel-related expenses.

The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales between stores and within different channels makes further analysis of sales metrics infeasible.

TARGET CORPORATION

8 unchanged sentences

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

February 1, 2025 February 3, 2024 February 1, 2025 February 3, 2024

January 31, 2026 February 1, 2025 January 31, 2026 February 1, 2025

170,000 or more sq.

7 unchanged sentences

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

Gross Margin (GM) Rate

Our gross margin rate was 27.9 percent in 2025 and 28.2 percent in 2024.

The decrease reflected the net impact of:

• merchandising activities, including higher markdown rates and purchase order cancellation costs, partially offset by growth in advertising and other revenues;

• changes in category sales mix;

• lower inventory shrink.

Selling, General and Administrative (SG&A) Expense Rate

Our SG&A expense rate was 20.6 percent in 2025, consistent with 2024.

The 2025 rate included a 0.6 percentage point benefit from interchange fee settlements, partially offset by 0.2 percentage points of business transformation costs.

Excluding these items, our Adjusted SG&A expense rate was 20.9 percent in 2025, compared with 20.6 percent in 2024, reflecting the deleveraging impact of lower Net Sales and the net impact of other costs.

TARGET CORPORATION

2025 Form 10-K 31

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF OPERATIONS & OTHER PERFORMANCE FACTORS Index to Financial Statements

Other Performance Factors

1 unchanged sentence

Net interest expense was $445 million for 2025, compared with $411 million for 2024.

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

The increase in net interest expense was primarily due to higher average debt levels.

Provision for Income Taxes

Our 2025 effective income tax rate was 22.3 percent compared with 22.2 percent in 2024.

The increase primarily reflects lower discrete tax benefits compared to the prior year.

Numerous countries, including certain jurisdictions in which we operate, have enacted legislation to implement the model rules of the Organization for Economic Cooperation and Development Pillar Two framework (Pillar Two), which is designed to ensure large multinational enterprises are subject to a 15 percent global minimum tax on income earned in each jurisdiction in which they operate.

We do not expect the enacted rules, which will be applicable to us in 2025, to materially impact our 2025 financial results.

Under the Pillar Two framework, any existing deferred tax assets not disclosed in our financial statements will not be available for future use.

Accordingly, we are disclosing the existence of gross tax loss carryforwards of $1.1 billion in Canada and $0.2 billion in Luxembourg.

The losses are deemed to have a remote possibility of realization;

therefore, a deferred tax asset and valuation allowance are not established.

TARGET CORPORATION

2024 Form 10-K 29

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Financial Statements

The increase reflects global minimum taxes and discrete tax expense in the current year related to share-based compensation, primarily offset by benefits from tax credits.

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 have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS), adjusted SG&A expenses, adjusted SG&A expense rate, adjusted operating income, and adjusted operating income margin rate.

These measures exclude certain items presented below.

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

This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the U.S.

The most comparable GAAP measure is diluted earnings per share.

Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP.

Other companies may calculate Adjusted EPS differently than we do, limiting the usefulness of the measure for comparisons with other companies.

These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the U.S.

The most comparable GAAP measures are diluted earnings per share, SG&A expenses, SG&A expense rate, operating income, and operating income margin rate.

Adjusted EPS, adjusted SG&A expenses, adjusted SG&A expense rate, adjusted operating income, and adjusted operating income margin rate should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP.

Other companies may calculate these measures differently, or not provide similar measures, limiting the usefulness of the measures for comparisons with other companies.

Reconciliation of Non-GAAP

3 unchanged sentences

$ 8.13 $ 8.86 $ 8.94

Business transformation costs (b)

$ 250 $ 187 $ 0.41 $ — $ — $ — $ — $ — $ —

Interchange fee settlements (c)

(593) (441) (0.97) — — — — — —

Adjusted diluted earnings per share

2 unchanged sentences

(a) 2023 consisted of 53 weeks compared with 52 weeks in 2025 and 2024.

(b) 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.

We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and for EBITDA, capital investment.

These measures are not in accordance with, or an alternative to, GAAP.

The most comparable GAAP measure is net earnings.

EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP.

Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.

EBIT and EBITDA Percent Change

(dollars in millions) 2024 2023 (a)

2022 2024/2023 2023/2022

Net earnings $ 4,091 $ 4,138 $ 2,780 (1.1) % 48.8 %

+ Provision for income taxes 1,170 1,159 638 0.9 81.7

+ Net interest expense 411 502 478 (18.1) 5.0

$ 5,672 $ 5,799 $ 3,896 (2.2) % 48.8 %

+ Total depreciation and amortization (b)

(b) Note 7 to the Financial Statements provides additional information.

TARGET CORPORATION

2025 Form 10-K 32

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Financial Statements

Adjustments Affecting Comparability

SG&A Expenses Operating Income

(dollars in millions) Dollars

Reported, GAAP measure $ 21,535 20.6 % $ 5,117 4.9 % $21,969 20.6 % $5,566 5.2 % $21,462 20.0 % $5,707 5.3 %

Adjustments affecting comparability

Business transformation costs (b)

$ (250) (0.2) % $ 250 0.2 % $ — — % $ — — % $ — — % $ — — %

Interchange fee settlements (c)

593 0.6 (593) (0.6) — — — — — — — —

(a) 2023 consisted of 53 weeks compared with 52 weeks in 2024 and 2022.

(b) Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

Adjusted, Non-GAAP measure $ 21,877 20.9 % $ 4,775 4.6 % $21,969 20.6 % $5,566 5.2 % $21,462 20.0 % $5,707 5.3 %

Amounts may not foot due to rounding.

(a) Rates are calculated by dividing the applicable amount by Net Sales.

(b) Note 7 provides additional information.

TARGET CORPORATION

8 unchanged sentences

Trailing Twelve Months

February 1, 2025 February 3, 2024 (a)

January 31, 2026 February 1, 2025

Operating income

2 unchanged sentences

EBIT 5,212 5,672

+ Operating lease interest (b)

- Income taxes (c)

+ Operating lease interest (a)

- Income taxes (b)

Net operating profit after taxes $ 4,185 $ 4,534

February 1, 2025 February 3, 2024 January 28, 2023

January 31, 2026 February 1, 2025 February 3, 2024

Current portion of long-term debt and other borrowings $ 2,130 $ 1,636 $ 1,116

1 unchanged sentence

+ Shareholders' investment 16,165 14,666 13,432

+ Operating lease liabilities (d)

+ Operating lease liabilities (c)

3,834 3,935 3,608

1 unchanged sentence

Invested capital $ 30,967 $ 29,779 $ 29,273

Average invested capital (e)

Average invested capital (d)

$ 30,373 $ 29,526

After-tax return on invested capital 15.4 % 16.1 %

(a) Consisted of 53 weeks.

(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.

After-tax return on invested capital (e)

13.8 % 15.4 %

(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 Operating Income.

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.

(c) Calculated using the effective tax rates, which were 22.2 percent and 21.9 percent for the trailing twelve months ended February 1, 2025, and February 3, 2024, respectively.

Includes tax effect of $1.3 billion related to EBIT for each of the trailing twelve month periods ended February 1, 2025, and February 3, 2024, and $35 million and $26 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.

(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.

(b) Calculated using the effective tax rates, which were 22.3 percent and 22.2 percent for the trailing twelve months ended January 31, 2026, and February 1, 2025, respectively.

For the trailing twelve months ended January 31, 2026, and February 1, 2025, includes tax effect of $1.2 billion and $1.3 billion, respectively, related to EBIT, and $38 million and $35 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.

(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.

(e) For the trailing twelve months ended January 31, 2026, includes the impact of after-tax net gains on interchange fee settlements and business transformation costs, which had a net favorable impact on after-tax ROIC of 0.8 percentage points.

Notes 6 and 7 to the Financial Statements provide additional information.

TARGET CORPORATION

10 unchanged sentences

Our year-end cash and cash equivalents balance increased to $5.5 billion from $4.8 billion in 2024.

Our cash and cash equivalents balance includes short-term investments of $3.9 billion and $2.9 billion as of February 1, 2025, and February 3, 2024, respectively.

Our cash and cash equivalents balance includes short-term investments of $4.6 billion and $3.9 billion as of January 31, 2026, and February 1, 2025, respectively.

Our investment policy is designed to preserve principal and liquidity of our short-term investments.

3 unchanged sentences

Cash flows provided by operating activities were $6.6 billion in 2025 compared with $7.4 billion in 2024.

The operating cash flow decrease is primarily due to higher income tax payments and the combined impact of inventory and accounts payable activity.

The operating cash flow decrease reflects lower net earnings, as well as the net impact of lower accounts payable leverage and inventory purchases in the current year.

Year-end inventory was $12.3 billion in 2025, compared with $12.7 billion in 2024.

The increase in inventory levels reflects

• earlier inventory receipts compared to the prior year, including to support merchandising strategies;

• inventory investments in select merchandise categories to support sales growth and an improved in-stock position.

The decrease reflects the combined impact of timing of receipts and alignment of inventory with sales trends, partially offset by higher merchandise costs in 2025.

TARGET CORPORATION

4 unchanged sentences

Amounts may not foot due to rounding.

Capital expenditures in 2024 reflect investments in our strategic initiatives, including investments in both stores and in our supply chain, enhancing our capabilities and guest experience across stores and digital channels.

The decrease in capital expenditures in 2024 compared with 2023 primarily reflects a slowdown in store remodel activities.

We expect capital expenditures in 2025 of approximately $4 billion to $5 billion, with the majority focused on store assets, including both new stores and remodels, as well as continued investment in supply chain and technology projects.

We expect to open about 20 new stores during 2025 and to resume a faster pace of remodel activities compared with 2024.

Capital expenditures in 2025 reflect continued investment in our strategic initiatives, including investments in both stores and in our supply chain, enhancing our capabilities and guest experience across stores and digital channels.

The increase in capital expenditures in 2025 compared with 2024 primarily reflects an increased investment in both new stores and remodels.

We expect capital expenditures in 2026 of approximately $5 billion to support our store experience and remodel program, continued investment in supply chain and technology projects, and investment in new stores.

We expect to open about 30 new stores during 2026.

We paid dividends totaling $2.1 billion ($4.52 per share) in 2025 and $2.0 billion ($4.44 per share) in 2024, a per share increase of 1.8 percent.

2 unchanged sentences

Share Repurchases

During 2024, we deployed $1.0 billion to repurchase shares.

We did not repurchase any shares during 2023.

During 2025 and 2024, we deployed $0.4 billion and $1.0 billion to repurchase shares.

See Part II , Item 5 , Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of this Annual Report on Form 10-K and Note 22 to the Financial Statements for more information.

7 unchanged sentences

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 February 1, 2025, our credit ratings were as follows:

Credit Ratings Moody's Standard and Poor's Fitch

As of January 31, 2026, our credit ratings were as follows:

Credit Ratings Moody's S&P

Long-term debt A2 A A

2 unchanged sentences

Each of the credit rating agencies reviews its rating periodically, and there is no guarantee our current credit ratings will remain the same as described above.

We issued $1.0 billion of unsecured debt in both March and June 2025, and repaid $1.5 billion of unsecured debt in April 2025.

Note 17 to the Financial Statements provides additional information.

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

1 unchanged sentence

This credit facility and our $3.0 billion unsecured revolving credit facility that will expire in October 2028 provide a liquidity backstop to 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 February 1, 2025 or February 3, 2024.

No balances were outstanding under either credit facility or our commercial paper program at any time during 2025 or 2024.

Most of our long-term debt obligations contain covenants related to secured debt levels.

1 unchanged sentence

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

Additionally, as of February 1, 2025, 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 January 31, 2026, 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.

Note 17 to the Financial Statements provides additional information.

4 unchanged sentences

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 capital expenditure requirements, finance anticipated expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase program for the foreseeable future.

TARGET CORPORATION

2025 Form 10-K 37

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements

Critical Accounting Estimates

3 unchanged sentences

The following items require significant estimation or judgment:

TARGET CORPORATION

2024 Form 10-K 34

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements

Inventory and cost of sales:

9 unchanged sentences

We believe the risk of inventory obsolescence is largely mitigated because our inventory typically turns in less than three months.

Inventory was $12.7 billion and $11.9 billion as of February 1, 2025, and February 3, 2024, respectively, and is further described in Note 8 to the Financial Statements.

Inventory was $12.3 billion and $12.7 billion as of January 31, 2026, and February 1, 2025, respectively, and is further described in Note 10 to the Financial Statements.

Vendor income:

We receive various forms of consideration from our vendors (vendor income), principally earned as a result of volume rebates, promotions, advertising allowances, and markdown allowances.

We receive various forms of consideration from our vendors (vendor income), principally earned as a result of volume rebates, promotions, certain advertising activities, and markdown allowances.

Vendor income is recorded as a reduction of cost of sales except in arrangements where the payment is a reimbursement of specific, incremental, and identifiable costs and recorded as an offset to those costs.

4 unchanged sentences

Historically, adjustments to our vendor income receivable have not been material.

Vendor income receivable was $543 million and $513 million as of February 1, 2025, and February 3, 2024, respectively.

Vendor income receivable was $542 million and $543 million as of January 31, 2026, and February 1, 2025, respectively.

Vendor income is described further in Note 4 to the Financial Statements.

12 unchanged sentences

other liabilities referred to above are not discounted.

Our workers' compensation and general liability accrual was $772 million and $650 million as of February 1, 2025, and February 3, 2024, respectively.

Our workers' compensation and general liability accrual was $881 million and $772 million as of January 31, 2026, and February 1, 2025, respectively.

We believe that the amounts accrued are appropriate;

2 unchanged sentences

Historically, adjustments to our estimates have not been material.

Refer to Part II , Item 7A , Quantitative and Qualitative Disclosures About Market Risk , for further disclosure of the market risks associated with these exposures.

We maintain insurance coverage to limit our exposure to certain events, including network security matters.

Refer to Part II , Item 7A , Quantitative and Qualitative Disclosures About Market Risk , for further disclosure of the market risks associated

TARGET CORPORATION

2 unchanged sentences

ANALYSIS OF FINANCIAL CONDITION & NEW ACCOUNTING PRONOUNCEMENTS Index to Financial Statements

with these exposures.

We maintain insurance coverage to limit our exposure to certain events, including network security matters.

Income taxes:

3 unchanged sentences

We periodically reassess these probabilities and record any changes in the financial statements as appropriate.

Gross uncertain tax positions, including interest and penalties, were $454 million and $366 million as of February 1, 2025, and February 3, 2024, respectively.

Gross uncertain tax positions, including interest and penalties, were $468 million and $454 million as of January 31, 2026, and February 1, 2025, respectively.

Although we believe our tax positions are reasonable, the resolution of these matters could be materially different from our assumptions, which would affect our consolidated results of operations and/or operating cash flows.

10 unchanged sentences

Our benefit obligation and related expense will fluctuate with changes in interest rates.

A 1 percentage point decrease in the weighted average discount rate would increase annual expense by $33 million.

A 1 percentage point decrease in the discount rate assumption for our qualified defined benefit pension plan would increase our year-end projected benefit obligation and annual expense by $360 million and $38 million, respectively.

Based on our experience, we use a graduated compensation growth schedule that assumes higher compensation growth for younger, shorter-service pension-eligible team members than it does for older, longer-service pension-eligible team members.

16 unchanged sentences

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

our future financial and operational performance, our strategy for growth, 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 contributions and payments related to our pension plan, the expected return on plan assets, the expected timing and recognition of compensation expenses, the adequacy of our reserves for general liability, workers' compensation, and property loss, the expected outcome of, and adequacy of our reserves for, claims, litigation, and the resolution of tax matters, our expectations regarding our contractual obligations, liabilities, and vendor income, the expected ability to recognize deferred tax assets and liabilities and the timing of such recognition, our expectations regarding arrangements with our partners, and changes in our assumptions and expectations.

our future financial and operational performance, our strategy for growth, changes in the consumer landscape, evolution in tariffs and global trade policy, the impacts of business transformation efforts, 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 contributions and payments related to our pension plan, the expected return on plan assets, the expected timing and recognition of compensation expenses, the adequacy of our reserves for general liability, workers' compensation, and property loss, the expected outcome of, and adequacy of our reserves for, claims, litigation, and the resolution of tax matters, our expectations regarding our contractual obligations, liabilities, and vendor income, the expected ability to recognize deferred tax assets and liabilities and the timing of such recognition, our expectations regarding arrangements with our partners, 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.

3 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 7. Management’s Discussion and Analysis