tgt-20240504

SEC Form 10-Q filed by Target Corporation



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 4, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number 1-6049

TARGET CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota

(State or other jurisdiction of incorporation or organization)

1000 Nicollet Mall, Minneapolis, Minnesota

(Address of principal executive offices)

41-0215170

(I.R.S. Employer Identification No.)

55403

(Zip Code)

612-304-6073

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0833 per share

TGT

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Total shares of common stock, par value $0.0833, outstanding at May 24, 2024, were 462,636,573.


						Table of Contents
						Index to Notes

TARGET CORPORATION

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Operations	1
	Consolidated Statements of Comprehensive Income	2
	Consolidated Statements of Financial Position	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Shareholders’ Investment	5
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24

Signatures		25


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


Consolidated Statements of Operations
	Three Months Ended
(millions, except per share data) (unaudited)	May 4, 2024		April 29, 2023
Sales	$	24,143	$	24,948
Other revenue	388		374
Total revenue	24,531		25,322
Cost of sales	17,449		18,386
Selling, general and administrative expenses	5,168		5,025
Depreciation and amortization (exclusive of depreciation included in cost of sales)	618		583
Operating income	1,296		1,328
Net interest expense	106		147
Net other income	(29)		(23)
Earnings before income taxes	1,219		1,204
Provision for income taxes	277		254


Net earnings	$	942	$	950



Basic earnings per share	$	2.04	$	2.06



Diluted earnings per share	$	2.03	$	2.05
Weighted average common shares outstanding
Basic	462.2		460.9
Diluted	463.9		462.9
Antidilutive shares	1.6		1.2

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 2024 Form 10-Q			1


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Comprehensive Income
	Three Months Ended
(millions) (unaudited)	May 4, 2024		April 29, 2023
Net earnings	$	942	$	950
Other comprehensive (loss) / income, net of tax
Pension benefit liabilities	—		2
Cash flow hedges and currency translation adjustment	(5)		(5)
Other comprehensive loss	(5)		(3)
Comprehensive income	$	937	$	947

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 2024 Form 10-Q			2


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited)	May 4, 2024		February 3, 2024		April 29, 2023
Assets
Cash and cash equivalents	$	3,604	$	3,805	$	1,321
Inventory	11,730		11,886		12,616
Other current assets	1,744		1,807		1,836
Total current assets	17,078		17,498		15,773
Property and equipment
Land	6,544		6,547		6,493
Buildings and improvements	37,587		37,066		35,198
Fixtures and equipment	8,341		8,765		7,473
Computer hardware and software	3,265		3,428		3,067
Construction-in-progress	1,538		1,703		2,822
Accumulated depreciation	(24,161)		(24,413)		(22,657)
Property and equipment, net	33,114		33,096		32,396
Operating lease assets	3,486		3,362		2,640
Other noncurrent assets	1,439		1,400		1,341
Total assets	$	55,117	$	55,356	$	52,150
Liabilities and shareholders’ investment
Accounts payable	$	11,561	$	12,098	$	11,935
Accrued and other current liabilities	5,684		6,090		5,732
Current portion of long-term debt and other borrowings	2,614		1,116		200
Total current liabilities	19,859		19,304		17,867
Long-term debt and other borrowings	13,487		14,922		16,010
Noncurrent operating lease liabilities	3,392		3,279		2,621
Deferred income taxes	2,543		2,480		2,289
Other noncurrent liabilities	1,996		1,939		1,758
Total noncurrent liabilities	21,418		22,620		22,678
Shareholders’ investment
Common stock	39		38		38
Additional paid-in capital	6,747		6,761		6,541
Retained earnings	7,519		7,093		5,448
Accumulated other comprehensive loss	(465)		(460)		(422)
Total shareholders’ investment	13,840		13,432		11,605
Total liabilities and shareholders’ investment	$	55,117	$	55,356	$	52,150

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 462,635,539, 461,675,441, and 461,552,843 shares issued and outstanding as of May 4, 2024, February 3, 2024, and April 29, 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						Q1 2024 Form 10-Q			3


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Cash Flows
	Three Months Ended
(millions) (unaudited)	May 4, 2024		April 29, 2023
Operating activities
Net earnings	$	942	$	950


Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization	718		667
Share-based compensation expense	72		43
Deferred income taxes	64		95

Noncash (gains) / losses and other, net	(31)		(11)
Changes in operating accounts:
Inventory	156		883
Other assets	43		34
Accounts payable	(524)		(1,463)
Accrued and other liabilities	(339)		67


Cash provided by operating activities	1,101		1,265
Investing activities
Expenditures for property and equipment	(674)		(1,605)
Proceeds from disposal of property and equipment	1		2
Other investments	2		1
Cash required for investing activities	(671)		(1,602)
Financing activities
Change in commercial paper, net	—		90

Reductions of long-term debt	(32)		(46)
Dividends paid	(508)		(497)


Shares withheld for taxes on share-based compensation	(91)		(118)

Cash required for financing activities	(631)		(571)
Net decrease in cash and cash equivalents	(201)		(908)
Cash and cash equivalents at beginning of period	3,805		2,229
Cash and cash equivalents at end of period	$	3,604	$	1,321
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities	$	122	$	15
Leased assets obtained in exchange for new operating lease liabilities	214		54

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 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						Q1 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

We declared $1.10 and $1.08 dividends per share for the three months ended May 4, 2024, and April 29, 2023, respectively, and $4.38 per share for the fiscal year ended February 3, 2024.

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 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	Supplier Finance Programs	10

Note 5	Commercial Paper and Long-Term Debt	11
Note 6	Derivative Financial Instruments	11

Note 7	Pension Benefits	11
Note 8	Accumulated Other Comprehensive Income (Loss)	12


TARGET CORPORATION						Q1 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						Q1 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
(millions)	May 4, 2024		April 29, 2023
Apparel & accessories (a)	$	3,897	$	3,967
Beauty (b)	3,119		3,016
Food & beverage (c)	5,853		5,997
Hardlines (d)	3,160		3,391
Home furnishings & décor (e)	3,519		3,855
Household essentials (f)	4,549		4,666
Other	46		56
Sales	24,143		24,948

Credit card profit sharing	142		174
Other	246		200
Other revenue	388		374

Total revenue	$	24,531	$	25,322

(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 May 4, 2024, February 3, 2024, and April 29, 2023, the accrual for estimated returns was $198 million, $170 million, and $206 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		May 4, 2024
(millions)
Gift card liability (a)	$	1,162	$	318	$	(413)	$	1,067

(a)Included in Accrued and Other Current Liabilities.

(b)Net of estimated breakage.


TARGET CORPORATION						Q1 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 Credit Card and Target MasterCard receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Credit Card and Target MasterCard 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	May 4, 2024		February 3, 2024		April 29, 2023
Assets
Short-term investments	Cash and Cash Equivalents	Level 1	$	2,726	$	2,897	$	408
Prepaid forward contracts	Other Current Assets	Level 1	27		25		25


Interest rate swaps	Other Noncurrent Assets	Level 2	—		—		7
Liabilities
Interest rate swaps	Other Current Liabilities	Level 2	3		3		—
Interest rate swaps	Other Noncurrent Liabilities	Level 2	154		123		72


Significant Financial Instruments Not Measured at Fair Value (a) (millions)	May 4, 2024				February 3, 2024				April 29, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion (b)	$	14,155	$	13,123	$	14,151	$	13,467	$	14,144	$	13,672

(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.

4. Supplier Finance Programs

We have arrangements with several financial institutions to act as our paying agents to certain vendors. The arrangements also permit the financial institutions to provide vendors with an option, at our vendors' sole discretion, to sell their receivables from Target to the financial institutions. A vendor’s election to receive early payment at a discounted amount from the financial institutions does not change the amount that we must remit to the financial institutions or our payment date, which is up to 120 days from the invoice date.

We do not pay any fees or pledge any security to these financial institutions under these arrangements. The arrangements can be terminated by either party with notice ranging up to 120 days.

Our outstanding vendor obligations eligible for early payment under these arrangements totaled $3.3 billion, $3.4 billion, and $3.3 billion as of May 4, 2024, February 3, 2024, and April 29, 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.


TARGET CORPORATION						Q1 2024 Form 10-Q			10


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

5. Commercial Paper and Long-Term Debt

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 months ended May 4, 2024, For the three months ended April 29, 2023, the maximum amount outstanding was $90 million, and the average daily amount outstanding was $2 million, at a weighted average annual interest rate of 4.8 percent. As of April 29, 2023, $90 million was outstanding and is classified within Current Portion of Long-Term Debt and Other Borrowings on our Consolidated Statements of Financial Position.

6. 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 $2.45 billion as of May 4, 2024, February 3, 2024, and April 29, 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 months ended May 4, 2024 and April 29, 2023.


Effect of Hedges on Debt (millions)	May 4, 2024		February 3, 2024		April 29, 2023



Long-term debt and other borrowings
Carrying amount of hedged debt	$	2,285	$	2,316	$	2,376
Cumulative hedging adjustments, included in carrying amount	(157)		(126)		(65)


Effect of Hedges on Net Interest Expense	Three Months Ended
(millions)	May 4, 2024		April 29, 2023


Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swaps designated as fair value hedges	$	(31)	$	9
Hedged debt	31		(9)
Gain on cash flow hedges recognized in Net Interest Expense	6		6
Total	$	6	$	6

7. Pension Benefits

We provide pension plan benefits to eligible team members.


Net Pension Benefits Expense		Three Months Ended
(millions)	Classification	May 4, 2024		April 29, 2023
Service cost benefits earned	Selling, General, and Administrative (SG&A) Expenses	$	20	$	20
Interest cost on projected benefit obligation	Net Other Income	41		41
Expected return on assets	Net Other Income	(70)		(67)

Prior service cost	Net Other Income	—		3

Total		$	(9)	$	(3)


TARGET CORPORATION						Q1 2024 Form 10-Q			11


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

8. 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)

Amounts reclassified from AOCI, net of tax	(5)		—		—		(5)
May 4, 2024	$	278	$	(24)	$	(719)	$	(465)


TARGET CORPORATION						Q1 2024 Form 10-Q			12


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			FINANCIAL SUMMARY			Index to Notes

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Summary

First quarter 2024 included the following notable items:

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

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

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

◦Comparable stores-originated sales declined 4.8 percent.

◦Comparable digitally-originated sales increased 1.4 percent.

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

Cash flow provided by operating activities was $1.1 billion for the three months ended May 4, 2024, compared with $1.3 billion for the three months ended April 29, 2023. The drivers of the operating cash flow decrease are described on page 20.

Note: Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items when applicable. However, there are no adjustments in either period presented. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 18.

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 May 4, 2024, after-tax ROIC was 15.4 percent, compared with 11.4 percent for the trailing twelve months ended April 29, 2023. The calculation of ROIC is provided on page 19.


TARGET CORPORATION						Q1 2024 Form 10-Q			13


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			ANALYSIS OF RESULTS OF OPERATIONS			Index to Notes

Analysis of Results of Operations


Summary of Operating Income	Three Months Ended
(dollars in millions)	May 4, 2024		April 29, 2023		Change
Sales	$	24,143	$	24,948	(3.2)	%
Other revenue	388		374		3.9
Total revenue	24,531		25,322		(3.1)
Cost of sales	17,449		18,386		(5.1)
SG&A expenses	5,168		5,025		2.8
Depreciation and amortization (exclusive of depreciation included in cost of sales)	618		583		6.2

Earnings Per Share

Three Months Ended

May 4, 2024

April 29, 2023

GAAP and adjusted diluted earnings per share