|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
ANALYSIS OF OPERATIONS
|
|
Analysis of Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Operating Income
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions)
|
May 2,
2020
|
|
May 4,
2019
|
|
Change
|
|
|
|
|
|
|
Sales
|
$
|
19,371
|
|
|
$
|
17,401
|
|
|
11.3
|
%
|
|
|
|
|
|
|
Other revenue
|
244
|
|
|
226
|
|
|
7.7
|
|
|
|
|
|
|
|
Total revenue
|
19,615
|
|
|
17,627
|
|
|
11.3
|
|
|
|
|
|
|
|
Cost of sales
|
14,510
|
|
|
12,248
|
|
|
18.5
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
4,060
|
|
|
3,663
|
|
|
10.9
|
|
|
|
|
|
|
|
Depreciation and amortization (exclusive of depreciation included in cost of sales)
|
577
|
|
|
581
|
|
|
(0.8)
|
|
|
|
|
|
|
|
Operating income
|
$
|
468
|
|
|
$
|
1,135
|
|
|
(58.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Analysis
|
Three Months Ended
|
|
|
|
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
|
|
|
|
Gross margin rate
|
25.1
|
%
|
|
29.6
|
%
|
|
|
|
|
SG&A expense rate
|
20.7
|
|
|
20.8
|
|
|
|
|
|
Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate
|
2.9
|
|
|
3.3
|
|
|
|
|
|
Operating income margin rate
|
2.4
|
|
|
6.4
|
|
|
|
|
|
Note: Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue.
Sales
Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage. We use comparable sales to evaluate the performance of our stores and digital channel sales by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months, digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies. Digitally originated sales include all sales initiated through mobile applications and our websites. Our stores fulfill the majority of digitally originated sales, including shipment from stores to guests, store Order Pick Up or Drive Up, and delivery via our wholly owned subsidiary, Shipt. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.
Sales growth – from both comparable sales and new stores – represents an important driver of our long-term profitability. We expect that comparable sales growth will drive the majority of our total sales growth. 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 (traffic) and the amount spent each visit (average transaction amount).
The increase in sales during the three months ended May 2, 2020, is due to a comparable sales increase of 10.8 percent and the contribution from new stores.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable Sales
|
Three Months Ended
|
|
|
|
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
|
|
|
|
Comparable sales change
|
10.8
|
%
|
|
4.8
|
%
|
|
|
|
|
Drivers of change in comparable sales
|
|
|
|
|
|
|
|
Number of transactions
|
(1.5)
|
|
|
4.3
|
|
|
|
|
|
Average transaction amount
|
12.5
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Amounts may not foot due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION
|
|
Q1 2020 Form 10-Q
|
15
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
ANALYSIS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to Comparable Sales Change
|
Three Months Ended
|
|
|
|
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
|
|
|
|
Stores originated channel comparable sales change
|
0.9
|
%
|
|
2.7
|
%
|
|
|
|
|
Contribution from digitally originated sales to comparable sales change
|
9.9
|
|
|
2.1
|
|
|
|
|
|
Total comparable sales change
|
10.8
|
%
|
|
4.8
|
%
|
|
|
|
|
Note: Amounts may not foot due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Channel
|
Three Months Ended
|
|
|
|
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
|
|
|
|
Stores originated
|
84.7
|
%
|
|
92.9
|
%
|
|
|
|
|
Digitally originated
|
15.3
|
|
|
7.1
|
|
|
|
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Product Category
|
Three Months Ended
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
Apparel and accessories
|
14
|
%
|
|
19
|
%
|
Beauty and household essentials
|
30
|
|
|
29
|
|
Food and beverage
|
24
|
|
|
21
|
|
Hardlines
|
15
|
|
|
14
|
|
Home furnishings and décor
|
17
|
|
|
17
|
|
Total
|
100
|
%
|
|
100
|
%
|
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. As previously discussed, we believe that COVID-19 has had a significant impact on the mix of sales amongst our sales channels and categories.
We monitor the percentage of purchases that are paid for using RedCards (RedCard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on RedCards are also incremental sales for Target. Guests receive a 5 percent discount on virtually all purchases when they use a RedCard at Target.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RedCard Penetration
|
Three Months Ended
|
|
|
|
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
|
|
|
|
Target Debit Card
|
12.7
|
%
|
|
13.1
|
%
|
|
|
|
|
Target Credit Cards
|
9.7
|
|
|
10.4
|
|
|
|
|
|
Total RedCard Penetration
|
22.4
|
%
|
|
23.5
|
%
|
|
|
|
|
Note: Amounts may not foot due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION
|
|
Q1 2020 Form 10-Q
|
16
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
ANALYSIS OF OPERATIONS
|
|
Gross Margin Rate
For the three months ended May 2, 2020, our gross margin rate was 25.1 percent compared with 29.6 percent in the comparable period last year. This decrease reflected:
•The net impact of merchandising actions, including purchase order cancellation fees and inventory impairments related to a rapid slowdown in Apparel and Accessories sales, partially offset by favorability in clearance and promotional markdowns;
•Unfavorable category sales mix, as sales growth was strongest in lower-margin categories; and
•Digital fulfillment and supply chain costs, driven by unusually strong growth in digital volume combined with the impact of higher pay and benefit costs classified within Cost of Sales, including incremental team member pay and benefits investments due to COVID-19.
Selling, General, and Administrative Expense Rate
For the three months ended May 2, 2020, our SG&A expense rate was 20.7 percent compared with 20.8 percent in the comparable period last year. For the current quarter, SG&A expenses increased $397 million, including approximately $200 million of incremental team member pay and benefits classified within SG&A Expenses, and investments to protect the health and safety of guests. From a rate perspective, these increased costs were more than offset by leverage resulting from strong revenue growth.
Store Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Number of Stores
|
Three Months Ended
|
|
|
|
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
|
|
|
|
Beginning store count
|
1,868
|
|
|
1,844
|
|
|
|
|
|
Opened
|
3
|
|
|
7
|
|
|
|
|
|
Closed
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending store count
|
1,871
|
|
|
1,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stores and
Retail Square Feet
|
Number of Stores
|
|
|
|
Retail Square Feet (a)
|
|
|
|
May 2,
2020
|
February 1,
2020
|
May 4,
2019
|
|
May 2,
2020
|
February 1,
2020
|
May 4,
2019
|
170,000 or more sq. ft.
|
272
|
|
272
|
|
272
|
|
|
48,613
|
|
48,619
|
|
48,603
|
|
50,000 to 169,999 sq. ft.
|
1,505
|
|
1,505
|
|
1,501
|
|
|
189,226
|
|
189,227
|
|
188,918
|
|
49,999 or less sq. ft.
|
94
|
|
91
|
|
78
|
|
|
2,745
|
|
2,670
|
|
2,276
|
|
Total
|
1,871
|
|
1,868
|
|
1,851
|
|
|
240,584
|
|
240,516
|
|
239,797
|
|
(a)In thousands, reflects total square feet less office, distribution center, and vacant space.
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION
|
|
Q1 2020 Form 10-Q
|
17
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
OTHER PERFORMANCE FACTORS
|
|
Other Performance Factors
Net Interest Expense
Net interest expense was $117 million and $126 million for the three months ended May 2, 2020 and May 4, 2019, respectively. The decrease is primarily due to the lower floating benchmark interest rate associated with our interest rate swaps during the three months ended May 2, 2020.
Provision for Income Taxes
Our effective income tax rate from continuing operations for the three months ended May 2, 2020, was 13.9 percent compared with 22.4 percent for the comparable periods last year. For the three months ended May 2, 2020, lower pretax earnings resulted in a larger rate benefit from discrete items, primarily related to share-based payments, compared with the prior year. Our effective tax rate is generally more volatile at lower amounts of pretax income because the impact of discrete and nondeductible items is greater.
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION
|
|
Q1 2020 Form 10-Q
|
18
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
|
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing operations (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measure is diluted earnings per share from continuing operations. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Adjusted EPS
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2, 2020
|
|
|
|
|
|
May 4, 2019
|
|
|
|
|
(millions, except per share data)
|
|
Pretax
|
|
Net of Tax
|
|
Per Share Amounts
|
|
Pretax
|
|
Net of Tax
|
|
Per Share Amounts
|
GAAP diluted earnings per share from continuing operations
|
|
|
|
|
|
$
|
0.56
|
|
|
|
|
|
|
$
|
1.53
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on investment (a)
|
|
$
|
21
|
|
|
$
|
15
|
|
|
$
|
0.03
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Adjusted diluted earnings per share from continuing operations
|
|
|
|
|
|
$
|
0.59
|
|
|
|
|
|
|
$
|
1.53
|
|
Note: Amounts may not foot due to rounding.
(a)Includes an unrealized loss on our investment in Casper Sleep Inc., which is not core to our continuing operations.
Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings from continuing operations 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 from continuing operations. 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
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) (unaudited)
|
|
May 2,
2020
|
|
May 4,
2019
|
|
Change
|
|
|
|
|
|
|
Net earnings from continuing operations
|
|
$
|
284
|
|
|
$
|
792
|
|
|
(64.2)
|
%
|
|
|
|
|
|
|
+ Provision for income taxes
|
|
45
|
|
|
229
|
|
|
(80.0)
|
|
|
|
|
|
|
|
+ Net interest expense
|
|
117
|
|
|
126
|
|
|
(6.8)
|
|
|
|
|
|
|
|
EBIT
|
|
$
|
446
|
|
|
$
|
1,147
|
|
|
(61.1)
|
%
|
|
|
|
|
|
|
+ Total depreciation and amortization (a)
|
|
641
|
|
|
644
|
|
|
(0.6)
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
1,087
|
|
|
$
|
1,791
|
|
|
(39.3)
|
%
|
|
|
|
|
|
|
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.
|
|
|
|
|
|
|
|
|
|
|
|
TARGET CORPORATION
|
|
Q1 2020 Form 10-Q
|
19
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
|
We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-Tax Return on Invested Capital
|
|
|
|
|
|
|
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Trailing Twelve Months
|
|
|
|
|
Numerator
|
|
|
|
May 2,
2020
|
|
May 4,
2019
|
|
|
Operating income
|
|
|
|
$
|
3,992
|
|
|
$
|
4,204
|
|
|
|
+ Net other income / (expense)
|
|
|
|
(26)
|
|
|
33
|
|
|
|
EBIT
|
|
|
|
3,966
|
|
|
4,237
|
|
|
|
+ Operating lease interest (a)
|
|
|
|
87
|
|
|
84
|
|
|
|
- Income taxes (b)
|
|
|
|
855
|
|
|
878
|
|
|
|
Net operating profit after taxes
|
|
|
|
$
|
3,198
|
|
|
$
|
3,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
May 2,
2020
|
|
May 4,
2019
|
|
May 5,
2018
|
Current portion of long-term debt and other borrowings
|
|
$
|
168
|
|
|
$
|
1,056
|
|
|
$
|
283
|
|
+ Noncurrent portion of long-term debt
|
|
14,073
|
|
|
11,357
|
|
|
11,107
|
|
+ Shareholders' investment
|
|
11,169
|
|
|
11,117
|
|
|
11,158
|
|
+ Operating lease liabilities (c)
|
|
2,448
|
|
|
2,231
|
|
|
2,157
|
|
- Cash and cash equivalents
|
|
4,566
|
|
|
1,173
|
|
|
1,060
|
|
Invested capital
|
|
$
|
23,292
|
|
|
$
|
24,588
|
|
|
$
|
23,645
|
|
Average invested capital (d)
|
|
$
|
23,940
|
|
|
$
|
24,116
|
|
|
|
|
|
|
|
|
|
|
After-tax return on invested capital
|
|
13.4
|
%
|
|
14.3
|
%
|
|
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(a)Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A Expenses. Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors.
(b)Calculated using the effective tax rates for continuing operations, which were 21.1 percent and 20.3 percent for the trailing twelve months ended May 2, 2020, and May 4, 2019, respectively. For the trailing twelve months ended May 2, 2020, and May 4, 2019, includes tax effect of $837 million and $861 million, respectively, related to EBIT, and $18 million and $17 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.
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TARGET CORPORATION
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Q1 2020 Form 10-Q
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20
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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ANALYSIS OF FINANCIAL CONDITION
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Analysis of Financial Condition
Liquidity and Capital Resources
Capital Allocation
We follow a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to profitably grow our business, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.
We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion and strategic initiatives, fund debt maturities, and pay dividends. In response to COVID-19, we have suspended our share repurchase program. We continue to anticipate ample access to commercial paper and long-term financing.
Our cash and cash equivalents balance was $4.6 billion, $2.6 billion, and $1.2 billion at May 2, 2020, February 1, 2020, and May 4, 2019, respectively. Our cash and cash equivalents balance includes short-term investments of $3.6 billion, $1.8 billion, and $419 million as of May 2, 2020, February 1, 2020, and May 4, 2019, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place dollar limits on our investments in individual funds or instruments.
Operating Cash Flows
Operating cash flow provided by continuing operations was $1.3 billion for the three months ended May 2, 2020, compared with $323 million for the three months ended May 4, 2019. The increase reflects higher payables leverage during the three months ended May 2, 2020, due to increased inventory turnover in high-demand categories, compared with higher net settlement of accounts payable during the three months ended May 4, 2019, driven by elevated inventory and accounts payable levels as of February 2, 2019. The operating cash flow increase is also partially due to the year-over-year increase in the returns reserve resulting from the temporary suspension of in-store merchandise returns during the three months ended May 2, 2020.
Inventory
Inventory was $8.6 billion as of May 2, 2020, compared with $9.0 billion and $9.1 billion at February 1, 2020, and May 4, 2019, respectively. The decrease reflects elevated sell-through rates in high-demand merchandise categories and efforts to reduce inventory levels in certain discretionary categories to align with sales trends.
Investing Cash Flows
Cash flow for investing activities included capital expenditures of $751 million for the three months ended May 2, 2020, compared with $655 million for the three months ended May 4, 2019. Capital expenditures increased for the three months ended May 2, 2020, compared with the three months ended May 4, 2019, as we completed new store and remodel projects that were in process as the COVID-19 crisis developed. However, in response to COVID-19, we have modified plans for some of our strategic initiatives including store remodels and new store openings. We expect full year 2020 capital expenditures to be at a lower level than in 2019.
Dividends
We paid dividends totaling $332 million ($0.66 per share) and $330 million ($0.64 per share) for the three months ended May 2, 2020, and May 4, 2019, respectively, a per share increase of 3.1 percent. We declared dividends totaling $333 million ($0.66 per share) during the first quarter of 2020, a per share increase of 3.1 percent over the $330 million ($0.64 per share) of declared dividends during the first quarter of 2019. 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
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TARGET CORPORATION
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Q1 2020 Form 10-Q
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21
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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ANALYSIS OF FINANCIAL CONDITION
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Financing
Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. 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 May 2, 2020, our credit ratings were as follows:
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Credit Ratings
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Moody’s
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Standard and Poor’s
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Fitch
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Long-term debt
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A2
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A
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A-
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Commercial paper
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P-1
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A-1
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F1
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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.
In March 2020, we issued $2.5 billion of debt. Notes 6 and 7 to the Consolidated Financial Statements provide additional information.
We have additional liquidity through a committed $900 million 364-day revolving credit facility obtained through a group of banks in April 2020, which expires in April 2021, and an existing $2.5 billion revolving credit facility obtained through a group of banks, which expires in October 2023. No balances were outstanding under either credit facility at any time during 2020 or 2019.
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facilities also contain a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of May 2, 2020, 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.
Contractual Obligations and Commitments
As of the date of this report, other than the new borrowings discussed in Note 6 to the Consolidated Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since February 1, 2020, as reported in our 2019 Form 10-K.
New Accounting Pronouncements
We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements.
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TARGET CORPORATION
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Q1 2020 Form 10-Q
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22
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MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL INFORMATION
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FORWARD LOOKING STATEMENTS & CONTROLS AND PROCEDURES
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Forward-Looking Statements
This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or similar words. The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the continued 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, the expected impact of changes in information technology systems, future responses to and effects of the COVID-19 pandemic, 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 on 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, 2020, as updated in Part II, Item 1A, Risk Factors, in this report, 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.