What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-29 compared with 2025-11-26 · 150 added, 179 removed, 161 unchanged (67% of the section changed)

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Financial Summary

Third quarter 2025 included the following notable items:

• GAAP diluted earnings per share were $1.51 and Adjusted EPS 1 were $1.78.

• Net Sales were $25.3 billion, a decrease of 1.5 percent from the comparable prior-year period.

• Comparable sales decreased 2.7 percent, reflecting a 2.2 percent decrease in traffic and a 0.5 percent decrease in average transaction amount.

◦ Comparable stores-originated sales declined 3.8 percent.

◦ Comparable digitally-originated sales increased 2.4 percent.

• Operating income of $0.9 billion was 18.9 percent lower than the comparable prior-year period.

Earnings Per Share Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 Change November 1, 2025 November 2, 2024 Change

First quarter 2026 included the following:

• Net Sales of $25.4 billion, an increase of 6.7 percent from the comparable prior-year period, driven by:

• A comparable sales increase of 5.6 percent, reflecting a 4.4 percent increase in traffic and a 1.1 percent increase in average transaction amount;

• The sales contribution from new stores;

• Non-merchandise sales growth of 24.6 percent, primarily driven by growth in our Roundel digital advertising business offering.

• GAAP and Adjusted operating income 1 of $1.1 billion was 22.9 percent lower than prior year GAAP operating income, which included $593 million of pretax net gains on interchange fee settlements.

Excluding the settlement gains, Adjusted operating income was 29.1 percent higher than $0.9 billion in the prior-year.

Earnings Per Share Three Months Ended

May 2, 2026 May 3, 2025 Change

GAAP diluted earnings per share $ 1.71 $ 2.27 (24.5) %

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Adjusted diluted earnings per share 1

$ 1.71 $ 1.30 31.6 %

Amounts may not foot due to rounding.

1 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 provid ed on page 20 .

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 November 1, 2025, after-tax ROIC was 13.4 percent , compared with 15.9 percent for the trailing twelve months ended November 2, 2024.

For the trailing twelve months ended May 2, 2026, after-tax ROIC was 12.4 percent , compared with 15.1 percent for the trailing twelve months ended May 3, 2025.

The calculation of ROIC is provided on page 21 .

Business Environment

In April 2025, the U.S.

imposed a range of tariffs on the vast majority of products manufactured in foreign countries and jurisdictions, and subsequently imposed incremental tariffs, paused, modified, or issued specific exceptions to recently imposed tariffs.

has indicated that it is actively negotiating or expects to negotiate country-specific agreements that it expects will result in changes to imposed tariff rates.

Beginning in 2025, the U.S.

imposed additional tariffs on a wide range of imported products using various legal authorities, including the International Emergency Economic Powers Act (IEEPA).

These 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.

We are closely monitoring the evolving consumer and regulatory landscape 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.

Business Transformation Initiatives

In May 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.

The three months ended November 1, 2025, included costs and charges related to our business transformation initiatives, including a reduction in our headquarters workforce.

Note 4 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.

On February 20, 2026, the U.S.

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

While the ruling did not establish a refund process, the U.S.

Court of International Trade (CIT) subsequently ordered U.S.

Customs and Border Protection (CBP) to implement a process to administer refunds, which CBP began executing with the April 20, 2026 deployment of the Consolidated Administration and Processing of Entries (CAPE) system for certain IEEPA refund claims.

We incurred tariffs under IEEPA, and are following the established refund filing and validation process through the CAPE system, along with other importers seeking IEEPA refunds.

As of May 2, 2026, no refunds had been received and no receivable was r ecorded.

Subsequent to quarter-end, we began receiving refunds, which to date have not been material.

Due to the remaining uncertainties related to the process, timing, and amount of potential refunds, as well as a potential appeal of the CIT's order to issue refunds, we are unable to estimate the ultimate financial effects of IEEPA refunds.

After the Supreme Court ruling in February, the U.S.

administration instituted new tariffs against most major trading partners, and has previewed future actions that could restore or exceed the level of the IEEPA tariffs.

We continue to assess and respond to the evolving consumer, legal and regulatory environment.

TARGET CORPORATION

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

FINANCIAL SUMMARY Index to Notes

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

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.

Refer to Note 7 to the Financial Statements in our Form 10-K for the fiscal year ended January 31, 2026, for additional information.

We did not incur any costs or charges related to these initiatives during the three months ended May 2, 2026, or the comparable prior-year period.

We may incur additional costs and charges related to these initiatives in future periods, which may adversely affect our results of operations and financial condition;

however, we cannot reasonably estimate the amount or timing of such costs and charges.

Analysis of Results of Operations

Summary of Operating Income Three Months Ended Nine Months Ended

(dollars in millions) November 1, 2025 November 2, 2024 Change November 1, 2025 November 2, 2024 Change

Summary of Operating Income Three Months Ended

(dollars in millions) May 2, 2026 May 3, 2025 Change

Net sales $ 25,443 $ 23,846 6.7 %

Cost of sales (a)

18,137 18,402 (1.4) 53,168 53,700 (1.0)

SG&A expenses (a)(b)

5,536 5,459 1.4 15,486 15,969 (3.0)

Cost of sales 18,061 17,128 5.4

SG&A expenses 5,562 4,591 21.1

Depreciation and amortization (exclusive of depreciation included in cost of sales) 685 655 4.6

Operating income (b)

$ 948 $ 1,168 (18.9) % $ 3,737 $ 4,099 (8.8) %

Rate Analysis Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Gross margin rate (a)

Operating income $ 1,135 $ 1,472 (22.9) %

Adjusted SG&A expenses (a)

$ 5,562 $ 5,183 7.3 %

SG&A expense rate (a)(b)

Adjusted operating income (a)

1,135 879 29.1

Rate Analysis Three Months Ended

May 2, 2026 May 3, 2025

Gross margin rate 29.0 % 28.2 %

SG&A expense rate 21.9 19.3

Adjusted SG&A expense rate (a)

Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales) 2.7 2.7

Operating income margin rate (b)

3.8 4.6 5.0 5.4

(a) Reflects the impact of a reclassification of prior year amounts, which were not material, to conform with current year presentation.

(b) SG&A Expenses and Operating Income for the three and nine months ended November 1, 2025, include certain business transformation costs described in Note 4 to the Financial Statements.

For the nine months ended November 1, 2025, SG&A Expenses and Operating Income also include gains related to interchange fee settlements described in Note 3 .

These discretely managed items resulted in a net impact to the SG&A Expense Rate of 0.6 and (0.6) percentage points for the three and nine months ended November 1, 2025, respectively, with an inverse impact on the Operating Income Margin Rate in the respective periods.

The Reconciliation of Non-GAAP Adjusted EPS tables provide additional information.

Operating income margin rate 4.5 6.2

Adjusted operating income margin rate (a)

Gross margin (GM) is calculated as Net Sales less Cost of Sales.

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

We updated the prior period gross margin rate to conform to the current year calculation, which resulted in an approximate 1 percentage point increase in our gross margin rate for the 2024 periods presented.

(a) 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 20 .

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

TARGET CORPORATION

Q1 2026 Form 10-Q 15

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Merchandise Sales are net of expected returns, and our estimate of gift card breakage.

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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.

Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.

TARGET CORPORATION

Q3 2025 Form 10-Q 16

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Merchandise Sales growth—from both comparable sales and new stores—represents an important driver of our long-term profitability.

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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).

Comparable Sales Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Comparable Sales Three Months Ended

May 2, 2026 May 3, 2025

Comparable sales change 5.6 % (3.8) %

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Average transaction amount 1.1 (1.4)

Comparable Sales by Channel Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Comparable Sales by Channel Three Months Ended

May 2, 2026 May 3, 2025

Stores originated comparable sales change 4.7 % (5.7) %

Digitally originated comparable sales change 8.9 4.7

Merchandise Sales by Channel Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Merchandise Sales by Channel Three Months Ended

May 2, 2026 May 3, 2025

Stores originated 79.7 % 80.2 %

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Total 100 % 100 %

Merchandise Sales by Fulfillment Channel Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Merchandise Sales by Fulfillment Channel Three Months Ended

May 2, 2026 May 3, 2025

Stores 97.6 % 97.6 %

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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.

Merchandise Sales by Product Category Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

TARGET CORPORATION

Q1 2026 Form 10-Q 16

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Merchandise Sales by Product Category Three Months Ended

May 2, 2026 May 3, 2025

Apparel & accessories 16 % 16 %

Beauty 13 13 13 13

Food & beverage 25 25

Hardlines 13 12 14 13

Hardlines (Fun 101) 14 13

Home furnishings & décor 13 14

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Total 100 % 100 %

TARGET CORPORATION

Q3 2025 Form 10-Q 17

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

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

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

For the three months ended November 1, 2025, and November 2, 2024, total Target Circle Card Penetration was 16.9 percent and 17.7 percent, respectively.

For the nine months ended November 1, 2025, and November 2, 2024, total Target Circle Card Penetration was 17.0 percent and 17.8 percent, respectively.

TARGET CORPORATION

Q3 2025 Form 10-Q 18

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Gross Margin Rate

Quarter-to-Date

For the three months ended November 1, 2025, our gross margin rate was 28.2 percent compared with 28.3 percent in the comparable prior-year period.

The decrease reflected the net impact of

• merchandising, primarily due to higher markdown rates partially offset by growth in advertising and other revenues;

• lower inventory shrink;

• lower supply chain and digital fulfillment costs, reflecting the comparison over costs in 2024 related to timing of receipts and elevated inventory, combined with the benefit of productivity improvements at supply chain facilities and in digital fulfillment, partially offset by the deleveraging impact of lower sales.

For the nine months ended November 1, 2025, our gross margin rate was 28.5 percent compared with 29.0 percent in the comparable prior-year period.

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;

• higher supply chain and digital fulfillment costs, partially due to the combined impact of investments in new supply chain facilities and the deleveraging impact of lower sales;

• lower inventory shrink.

TARGET CORPORATION

Q3 2025 Form 10-Q 19

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Selling, General, and Administrative Expense Rate

For the three months ended November 1, 2025, our SG&A expense rate was 21.9 percent compared with 21.3 percent for the comparable prior-year period.

The increase reflected business transformation costs of approximately 0.6 percentage points.

The deleveraging impact of lower Net Sales was offset by a reduction in other costs, including lower incentive compensation expense.

For the nine months ended November 1, 2025, our SG&A expense rate was 20.8 percent compared with 21.1 percent for the comparable prior-year period.

The decrease reflected a favorable impact of interchange fee settlements during the first quarter of 2025 of approximately 0.8 percentage points.

This rate benefit was partially offset by the deleveraging impact of lower Net Sales, and the net impact of other costs, including 0.2 percentage points related to business transformation costs.

Interchange fee settlements and business transformation costs are further described in Notes 3 and 4 , respectively, to the Financial Statements.

Change in Number of Stores Three Months Ended Nine Months Ended

November 1, 2025 November 2, 2024 November 1, 2025 November 2, 2024

Change in Number of Stores Three Months Ended

May 2, 2026 May 3, 2025

Beginning store count 1,995 1,978

Opened 14 13 18 23

Closed (1) (1) (1) (1)

Ending store count 2,002 1,981

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

Retail Square Feet November 1, 2025 February 1, 2025 November 2, 2024 November 1, 2025 February 1, 2025 November 2, 2024

Retail Square Feet May 2, 2026 January 31, 2026 May 3, 2025 May 2, 2026 January 31, 2026 May 3, 2025

170,000 or more sq.

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS Index to Notes

Gross Margin Rate

Quarter-to-Date

For the three months ended May 2, 2026, our gross margin rate was 29.0 percent compared with 28.2 percent in the comparable prior-year period.

The increase reflected net benefits from:

• merchandising, primarily due to lower markdown rates and growth in advertising and other revenues, partially offset by higher product costs;

• supply chain and digital fulfillment, including productivity improvements in supply chain facilities, and the leveraging impact of higher sales.

Selling, General, and Administrative Expense Rate

For the three months ended May 2, 2026, our SG&A expense rate was 21.9 percent compared with 19.3 percent for the comparable prior-year period.

Our comparable prior-period rate included a 2.5 percentage point benefit from interchange fee settlements, which are further described in Note 3 to the Financial Statements.

Excluding this item, our Adjusted SG&A expense rate was 21.7 percent.

The remaining 0.2 percentage point increase in 2026 reflected higher compensation expense, including stores payroll and incentive compensation, new store and remodel-related expenses, and the net impact of other cost increases.

These cost increases more than offset the leverage benefit of higher sales.

TARGET CORPORATION

Q1 2026 Form 10-Q 18

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

OTHER PERFORMANCE FACTORS

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Net Interest Expense

Net interest expense was $115 million and $346 million f or the three and nine months ended November 1, 2025, respectively, compared with $105 million and $321 million in the comparable prior-year periods.

The increase was primarily due to higher average debt levels.

For the three months ended May 2, 2026, n et interest expense was $117 million compared with $116 million in the comparable prior-year period.

Provision for Income Taxes

Our effective income tax rates for the three and nine months ended November 1, 2025, were 19.8 percent and 23.1 percent, respectively, compared with 21.7 percent and 22.5 percent in the comparable prior-year periods.

For the three month period, the decrease primarily reflects benefits from tax credits in the current year.

For the nine month period, the increase reflects discrete tax expense in the current year related to share-based compensation and global minimum taxes, partially offset by benefits from tax credits.

Our effective income tax rate for the three months ended May 2, 2026, was 24.4 percent compared with 25.0 percent in the comparable prior-year period.

The decrease reflects lower discrete tax expense in the current year, primarily related to share-based compensation.

TARGET CORPORATION

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Reconciliation of Non-GAAP Financial Measures to GAAP Measures

To provide additional transparency, we disclose 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, 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 Adjusted EPS Three Months Ended

November 1, 2025 November 2, 2024

May 2, 2026 May 3, 2025

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

GAAP diluted earnings per share $ 1.71 $ 2.27

Business transformation costs (a)

Interchange fee settlements (a)

$ — $ — $ — $ (593) $ (441) $ (0.97)

Adjusted EPS $ 1.71 $ 1.30

Reconciliation of Non-GAAP Adjusted EPS Nine Months Ended

November 1, 2025 November 2, 2024

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

GAAP diluted earnings per share $ 5.84 $ 6.45

Business transformation costs (a)

$ 161 $ 120 $ 0.26 $ — $ — $ —

Interchange fee settlements (b)

Reconciliation of Non-GAAP Adjusted SG&A Expenses and Adjusted Operating Income Three Months Ended

May 2, 2026 May 3, 2025

SG&A Expenses Operating Income SG&A Expenses Operating Income

(dollars in millions) Dollars Rate Dollars Rate Dollars Rate Dollars Rate

Reported, GAAP measure $ 5,562 21.9 % $ 1,135 4.5 % $ 4,591 19.3 % $ 1,472 6.2 %

Interchange fee settlements (a)

— — — — 593 2.5 % (593) (2.5) %

Adjusted EPS $ 5.13 $ 6.45

Adjusted, Non-GAAP measure $ 5,562 21.9 % $ 1,135 4.5 % $ 5,183 21.7 % $ 879 3.7 %

Amounts may not foot due to rounding.

(a) Note 4 to the Financial Statements provides additional information.

(b) Note 3 to the Financial Statements provides additional information.

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 Three Months Ended Nine Months Ended

(dollars in millions) November 1, 2025 November 2, 2024 Change November 1, 2025 November 2, 2024 Change

Net earnings $ 689 $ 854 (19.3) % $ 2,660 $ 2,988 (11.0) %

+ Provision for income taxes 170 237 (28.4) 799 867 (7.9)

+ Net interest expense 115 105 8.5 346 321 7.8

EBIT $ 974 $ 1,196 (18.7) % $ 3,805 $ 4,176 (8.9) %

+ Total depreciation and amortization (a)

773 754 2.6 2,331 2,215 5.2

EBITDA $ 1,747 $ 1,950 (10.5) % $ 6,136 $ 6,391 (4.0) %

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

Rates are calculated by dividing the applicable amount by Net Sales.

(a) The adjustment removes the favorable impact of the settlement gains from prior-year SG&A Expenses and Operating Income.

Note 3 to the Financial Statements provides additional information.

TARGET CORPORATION

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Trailing Twelve Months

Numerator November 1, 2025 November 2, 2024 (a)

Numerator May 2, 2026 May 3, 2025

Operating income $ 4,781 $ 5,742

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EBIT 4,865 5,844

+ Operating lease interest (b)

- Income taxes (c)

+ Operating lease interest (a)

- Income taxes (b)

Net operating profit after taxes $ 3,935 $ 4,636

Denominator November 1, 2025 November 2, 2024 October 28, 2023

Denominator May 2, 2026 May 3, 2025 May 4, 2024

Current portion of long-term debt and other borrowings $ 1,133 $ 1,139 $ 2,614

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+ Shareholders' investment 16,395 14,947 13,840

+ Operating lease liabilities (d)

+ Operating lease liabilities (c)

3,792 3,922 3,723

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Invested capital $ 32,068 $ 31,455 $ 30,060

Average invested capital (e)

Average invested capital (d)

$ 31,761 $ 30,757

After-tax return on invested capital (f)

After-tax return on invested capital (e)

12.4 % 15.1 %

(a) The trailing twelve months ended November 2, 2024, consisted of 53 weeks compared with 52 weeks in the current-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 was owned or accounted for under finance leases.

(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 22.6 percent and 22.5 percent for the trailing twelve months ended November 1, 2025, and November 2, 2024, respectively.

For the trailing twelve months ended November 1, 2025, and November 2, 2024, includes tax effect of $1.2 billion and $1.4 billion, respectively, related to EBIT and $38 million and $35 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.

(f) For the trailing twelve months ended November 1, 2025, includes the impact of after-tax net gains on interchange fee settlements and business transformation costs, which had a net impact on after-tax ROIC of 1.0 percentage point.

Notes 3 and 4 to the Financial Statements provide additional information.

(b) Calculated using the effective tax rates, which were 21.9 percent and 22.8 percent for the trailing twelve months ended May 2, 2026, and May 3, 2025, respectively.

For the trailing twelve months ended May 2, 2026, and May 3, 2025, includes tax effect of $1.1 billion and $1.3 billion, respectively, related to EBIT, and $38 million 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.

(e) For the trailing twelve months ended May 2, 2026, includes the impact of business transformation costs incurred within the trailing twelve-month period, which decreased after-tax ROIC by 0.6 percentage points.

For the trailing twelve months ended May 3, 2025, includes the impact of after-tax net gains on interchange fee settlements, which increased after-tax ROIC by 1.4 percentage points.

Note 3 to the Financial Statements provides additional information.

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 $3.8 billion, $4.8 billion, and $3.4 billion as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively.

Our cash and cash equivalents balance includes short-term investments of $2.9 billion, $3.9 billion, and $2.5 billion as of November 1, 2025, February 1, 2025, and November 2, 2024, respectively.

Our cash and cash equivalents balance was $3.5 billion, $5.5 billion, and $2.9 billion as of May 2, 2026, January 31, 2026, and May 3, 2025, respectively.

Our cash and cash equivalents balance includes short-term investments of $2.5 billion, $4.6 billion, and $2.0 billion as of May 2, 2026, January 31, 2026, and May 3, 2025, 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 $3.5 billion and $4.1 billion for the nine months ended November 1, 2025, and November 2, 2024, respectively.

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

Inventory was $14.9 billion as of November 1, 2025, compared with $12.7 billion and $15.2 billion as of February 1, 2025, and November 2, 2024, respectively.

The increase from February 1, 2025, primarily reflects the seasonal inventory build ahead of the November and December holiday sales period.

The decrease compared to November 2, 2024, reflects alignment of inventory with sales trends, partially offset by higher merchandise costs.

Cash flows provided by operating activities were $0.7 billion and $0.3 billion for the three months ended May 2, 2026, and May 3, 2025, respectively.

The increase was primarily due to higher accounts payable leverage and lower inventory levels.

These benefits were partially offset by lower net earnings, reflecting the prior-year benefit from gains on interchange fee settlements, and higher income tax payments in the current year, reflecting timing.

Inventory was $12.3 billion as of May 2, 2026 and January 31, 2026, and $13.0 billion as of May 3, 2025.

The year-over-year decrease reflects higher than expected sales in the current year and the timing of inventory receipts.

Investing Cash Flows

Cash required for investing activities increased to $2.8 billion for the nine months ended November 1, 2025, compared to $1.9 billion for the nine months ended November 2, 2024, due to higher capital expenditures.

We paid dividends totaling $518 million ($1.14 per share) and $1.5 billion ($3.38 per share) for the three and nine months ended November 1, 2025, respectively, and $516 million ($1.12 per share) and $1.5 billion ($3.32 per share) for the three and nine months ended November 2, 2024, respectively, a per share increase of 1.8 percent.

We declared dividends totaling $526 million ($1.14 per share) during the third quarter of 2025 and $521 million ($1.12 per share) during the third quarter of 2024, a per share increase of 1.8 percent.

Cash required for investing activities increased to $1.0 billion for the three months ended May 2, 2026, compared to $0.8 billion for the three months ended May 3, 2025, due to higher capital expenditures.

We paid dividends totaling $516 million ($1.14 per share) for the three months ended May 2, 2026, and $510 million ($1.12 per share) for the three months ended May 3, 2025, a per share increase of 1.8 percent.

We declared dividends totaling $526 million ($1.14 per share) during the first quarter of 2026 and $515 million ($1.12 per share) during the first quarter of 2025, a per share increase of 1.8 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 deployed $403 million to repurchase shares during the nine months ended November 1, 2025.

We did not repurchase any shares during the three months ended May 2, 2026.

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.

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

As of May 2, 2026, our credit ratings were as follows:

Credit Ratings Moody’s S&P

Long-term debt A2 A A

Commercial paper P-1 A-1 F1

Long-term debt A2 A

Commercial paper P-1 A-1

If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted.

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.

We repaid $1.0 billion of unsecured debt in April 2026.

Note 6 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.

In October 2025, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2026 and terminated our prior 364-day credit facility.

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 2025 or 2024.

There was no commercial paper outstanding as of either November 1, 2025, or November 2, 2024.

Our committed $1.0 billion 364-day and $3.0 billion unsecured revolving credit facilities that will expire in October 2026 and October 2028, respectively, provide a liquidity backstop to our commercial paper program.

No balances were outstanding under either credit facility or our commercial paper program at any time during 2026 or 2025.

Note 6 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 November 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 May 2, 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.

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

our future financial and operational performance, 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 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.

our future financial and operational performance, changes in the consumer landscape, evolution in tariffs and global trade policy, the availability, timing, and amount of any tariff refunds, 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 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 February 1, 2025, 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 January 31, 2026, 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 February 1, 2025.

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