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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 July 30, 2022
OR
☐    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
 
tgt-20220730_g1.jpg
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 August 19, 2022, were 460,262,630.


TARGET CORPORATION

TABLE OF CONTENTS
 
 
 
1
 
2
 
3
 
4
 
5
 
8
     
 
     
 



FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations        
  Three Months Ended Six Months Ended
(millions, except per share data) (unaudited) July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Sales $ 25,653  $ 24,826  $ 50,483  $ 48,705 
Other revenue 384  334  724  652 
Total revenue 26,037  25,160  51,207  49,357 
Cost of sales 20,142  17,280  38,603  33,996 
Selling, general and administrative expenses 5,002  4,849  9,764  9,358 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 572  564  1,173  1,162 
Operating income 321  2,467  1,667  4,841 
Net interest expense 112  104  224  212 
Net other (income) / expense (8) (7) (23) (350)
Earnings before income taxes 217  2,370  1,466  4,979 
Provision for income taxes 34  553  274  1,065 
Net earnings $ 183  $ 1,817  $ 1,192  $ 3,914 
Basic earnings per share $ 0.40  $ 3.68  $ 2.57  $ 7.89 
Diluted earnings per share $ 0.39  $ 3.65  $ 2.55  $ 7.82 
Weighted average common shares outstanding
Basic 461.5  493.1  463.8  495.8 
Diluted 463.6  497.5  466.8  500.4 
Antidilutive shares 1.3  —  1.0  — 

TARGET CORPORATION
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Q2 2022 Form 10-Q
1

FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income    
  Three Months Ended Six Months Ended
(millions) (unaudited) July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Net earnings $ 183  $ 1,817  $ 1,192  $ 3,914 
Other comprehensive income, net of tax        
Pension benefit liabilities 11  20  22  42 
Cash flow hedges and currency translation adjustment (28) (8) 162 
Other comprehensive income (17) 12  184  43 
Comprehensive income $ 166  $ 1,829  $ 1,376  $ 3,957 

TARGET CORPORATION
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Q2 2022 Form 10-Q
2

FINANCIAL STATEMENTS
Consolidated Statements of Financial Position      
(millions, except footnotes) (unaudited) July 30,
2022
January 29,
2022
July 31,
2021
Assets  
Cash and cash equivalents $ 1,117  $ 5,911  $ 7,368 
Inventory 15,320  13,902  11,259 
Other current assets 2,016  1,760  1,604 
Total current assets 18,453  21,573  20,231 
Property and equipment
Land 6,161  6,164  6,148 
Buildings and improvements 33,694  32,985  32,133 
Fixtures and equipment 6,744  6,407  5,892 
Computer hardware and software 2,684  2,505  2,260 
Construction-in-progress 2,245  1,257  944 
Accumulated depreciation (21,708) (21,137) (20,133)
Property and equipment, net 29,820  28,181  27,244 
Operating lease assets 2,542  2,556  2,503 
Other noncurrent assets 1,655  1,501  1,407 
Total assets $ 52,470  $ 53,811  $ 51,385 
Liabilities and shareholders’ investment
Accounts payable $ 14,891  $ 15,478  $ 12,632 
Accrued and other current liabilities 5,905  6,098  5,600 
Current portion of long-term debt and other borrowings 1,649  171  1,190 
Total current liabilities 22,445  21,747  19,422 
Long-term debt and other borrowings 13,453  13,549  11,589 
Noncurrent operating lease liabilities 2,543  2,493  2,462 
Deferred income taxes 1,862  1,566  1,146 
Other noncurrent liabilities 1,575  1,629  1,906 
Total noncurrent liabilities 19,433  19,237  17,103 
Shareholders’ investment
Common stock 38  39  41 
Additional paid-in capital 6,502  6,421  6,332 
Retained earnings 4,421  6,920  9,200 
Accumulated other comprehensive loss (369) (553) (713)
Total shareholders’ investment 10,592  12,827  14,860 
Total liabilities and shareholders’ investment $ 52,470  $ 53,811  $ 51,385 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 460,236,393, 471,274,073 and 489,651,196 shares issued and outstanding as of July 30, 2022, January 29, 2022, and July 31, 2021, respectively.

Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

TARGET CORPORATION
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Q2 2022 Form 10-Q
3

FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows    
  Six Months Ended
(millions) (unaudited) July 30, 2022 July 31, 2021
Operating activities    
Net earnings $ 1,192  $ 3,914 
Adjustments to reconcile net earnings to cash (required for) provided by operating activities:    
Depreciation and amortization 1,329  1,300 
Share-based compensation expense 122  138 
Deferred income taxes 227  143 
Gain on Dermstore sale —  (335)
Noncash losses / (gains) and other, net
108 
Changes in operating accounts:  
Inventory (1,418) (606)
Other assets (179)
Accounts payable (784) (311)
Accrued and other liabilities (644) (831)
Cash (required for) provided by operating activities (47) 3,422 
Investing activities    
Expenditures for property and equipment (2,523) (1,338)
Proceeds from disposal of property and equipment 15 
Proceeds from Dermstore sale —  356 
Other investments (5)
Cash required for investing activities (2,518) (972)
Financing activities    
Change in commercial paper, net 1,545  — 
Reductions of long-term debt (113) (72)
Dividends paid (842) (676)
Repurchase of stock (2,821) (2,850)
Stock option exercises
Cash required for financing activities (2,229) (3,593)
Net decrease in cash and cash equivalents (4,794) (1,143)
Cash and cash equivalents at beginning of period 5,911  8,511 
Cash and cash equivalents at end of period $ 1,117  $ 7,368 
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities $ 107  $ 182 
Leased assets obtained in exchange for new operating lease liabilities 97  386 
 
TARGET CORPORATION
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Q2 2022 Form 10-Q
4

FINANCIAL STATEMENTS
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 30, 2021 500.9  $ 42  $ 6,329  $ 8,825  $ (756) $ 14,440 
Net earnings —  —  —  2,097  —  2,097 
Other comprehensive income —  —  —  —  31  31 
Dividends declared —  —  —  (343) —  (343)
Repurchase of stock (6.1) (1) —  (1,207) —  (1,208)
Stock options and awards 1.3  —  (58) —  —  (58)
May 1, 2021 496.1  $ 41  $ 6,271  $ 9,372  $ (725) $ 14,959 
Net earnings —  —  —  1,817  —  1,817 
Other comprehensive income —  —  —  —  12  12 
Dividends declared —  —  —  (445) —  (445)
Repurchase of stock (6.6) —  —  (1,544) —  (1,544)
Stock options and awards 0.2  —  61  —  —  61 
July 31, 2021 489.7  $ 41  $ 6,332  $ 9,200  $ (713) $ 14,860 
Net earnings —  —  —  1,488  —  1,488 
Other comprehensive income —  —  —  —  26  26 
Dividends declared —  —  —  (439) —  (439)
Repurchase of stock (8.8) (1) —  (2,180) —  (2,181)
Stock options and awards —  —  49  —  —  49 
October 30, 2021 480.9  $ 40  $ 6,381  $ 8,069  $ (687) $ 13,803 
Net earnings —  —  —  1,544  —  1,544 
Other comprehensive income —  —  —  —  134  134 
Dividends declared —  —  —  (428) —  (428)
Repurchase of stock (9.8) (1) —  (2,265) —  (2,266)
Stock options and awards 0.2  —  40  —  —  40 
January 29, 2022 471.3  $ 39  $ 6,421  $ 6,920  $ (553) $ 12,827 

TARGET CORPORATION
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Q2 2022 Form 10-Q
5

FINANCIAL STATEMENTS
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 29, 2022 471.3  $ 39  $ 6,421  $ 6,920  $ (553) $ 12,827 
Net earnings —  —  —  1,009  —  1,009 
Other comprehensive income —  —  —  —  201  201 
Dividends declared —  —  —  (426) —  (426)
Repurchase of stock (0.1) —  —  (10) —  (10)
Accelerated share repurchase pending final settlement (8.9) (1) (751) (1,998) —  (2,750)
Stock options and awards 1.4  (78) —  —  (77)
April 30, 2022 463.7  $ 39  $ 5,592  $ 5,495  $ (352) $ 10,774 
Net earnings —  —  —  183  —  183 
Other comprehensive income —  —  —  —  (17) (17)
Dividends declared —  —  —  (502) —  (502)
Repurchase of stock (3.6) (1) 870  (755) —  114 
Stock options and awards 0.1  —  40  —  —  40 
July 31, 2022 460.2  $ 38  $ 6,502  $ 4,421  $ (369) $ 10,592 

We declared $1.08 and $0.90 dividends per share for the three months ended July 30, 2022, and July 31, 2021, and $3.38 per share for the fiscal year ended January 29, 2022.


TARGET CORPORATION
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Q2 2022 Form 10-Q
6

FINANCIAL STATEMENTS
INDEX

TARGET CORPORATION
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Q2 2022 Form 10-Q
7

FINANCIAL STATEMENTS
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 2021 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.

2. Dermstore Sale

In February 2021, we sold our wholly owned subsidiary Dermstore LLC (Dermstore) for $356 million in cash and recognized a $335 million pretax gain, which is included in Net Other (Income) / Expense. Dermstore represented less than 1 percent of our consolidated revenues, operating income and net assets.

TARGET CORPORATION
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Q2 2022 Form 10-Q
8

FINANCIAL STATEMENTS
NOTES
3. Revenues

General 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).

Revenues Three Months Ended Six Months Ended
(millions) July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Apparel and accessories (a)
$ 4,617  $ 4,751  $ 8,856  $ 9,020 
Beauty and household essentials (b)
7,208  6,726  14,261  13,090 
Food and beverage (c)
5,268  4,687  10,773  9,543 
Hardlines (d)
3,866  3,867  7,579  7,813 
Home furnishings and décor (e)
4,647  4,748  8,918  9,158 
Other 47  47  96  81 
Sales 25,653  24,826  50,483  48,705 
Credit card profit sharing 181  172  366  343 
Other 203  162  358  309 
Other revenue 384  334  724  652 
Total revenue $ 26,037  $ 25,160  $ 51,207  $ 49,357 
(a)Includes apparel for women, men, boys, girls, toddlers, infants and newborns, as well as jewelry, accessories, and shoes.
(b)Includes beauty and personal care, baby gear, cleaning, paper products, and pet supplies.
(c)Includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and food service in our stores.
(d)Includes electronics (including video game hardware and software), toys, entertainment, sporting goods, and luggage.
(e)Includes furniture, lighting, storage, kitchenware, small appliances, home décor, bed and bath, home improvement, school/office supplies, greeting cards and party supplies, and other seasonal merchandise.

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 July 30, 2022, January 29, 2022, and July 31, 2021, the accrual for estimated returns was $175 million, $165 million, and $176 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 January 29,
2022
Gift Cards Issued During Current Period But Not Redeemed (b)
Revenue Recognized From Beginning Liability July 30,
2022
(millions)
Gift card liability (a)
$ 1,202  $ 423  $ (660) $ 965 
(a)Included in Accrued and Other Current Liabilities.
(b)Net of estimated breakage.

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.

TARGET CORPORATION
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Q2 2022 Form 10-Q
9

FINANCIAL STATEMENTS
NOTES
Other — Includes advertising, Shipt membership and service revenues, commissions earned on third-party sales through Target.com, rental income, and other miscellaneous revenues.


4. 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 July 30, 2022 January 29, 2022 July 31, 2021
Assets      
Short-term investments Cash and Cash Equivalents Level 1 $ 189  $ 4,985  $ 6,439 
Prepaid forward contracts Other Current Assets Level 1 26  35  44 
Interest rate swaps Other Current Assets Level 2 34  17  — 
Interest rate swaps Other Noncurrent Assets Level 2 290  135  160 
Liabilities      
Interest rate swaps Other Noncurrent Liabilities Level 2 —  — 

Significant Financial Instruments Not Measured at Fair Value (a)

(millions)
July 30, 2022 January 29, 2022 July 31, 2021
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt, including current portion (b)
$ 11,511  $ 11,529  $ 11,568  $ 12,808  $ 10,620  $ 12,594 
(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, unamortized swap valuation adjustments, and lease liabilities.

5. Property and Equipment

We review long-lived assets for impairment when store performance expectations, events, or changes in circumstances—such as a decision to relocate or close a store, office, or distribution center, discontinue a project, or make significant software changes—indicate that the asset’s carrying value may not be recoverable. We recognized impairment charges of $27 million and $50 million for the three and six months ended July 30, 2022, respectively. We recognized impairment charges of $39 million and $81 million for the three and six months ended July 31, 2021, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

6. Commercial Paper and Long-Term Debt

We obtain short-term financing from time to time under our commercial paper program. For the six months ended July 30, 2022, the maximum amount outstanding was $1.5 billion, and the average daily amount outstanding was $538 million, at a weighted average annual interest rate of 1.1 percent. As of July 30, 2022, $1.5 billion was outstanding and is classified within Current Portion of Long-Term Debt and Other Borrowings on our Consolidated Statement of Financial Position. No balances were outstanding at any time during 2021.

7. Derivative Financial Instruments

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 4 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

TARGET CORPORATION
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Q2 2022 Form 10-Q
10

FINANCIAL STATEMENTS
NOTES
We were party to interest rate swaps with notional amounts totaling $2.25 billion as of July 30, 2022, and $1.5 billion as of January 29, 2022, and July 31, 2021. We pay a floating rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during the three and six months ended July 30, 2022, and July 31, 2021.

We were party to forward-starting interest rate swaps with notional amounts totaling $2.15 billion as of July 30, 2022, and January 29, 2022, and $250 million as of July 31, 2021. We use these derivative financial instruments, which have been designated as cash flow hedges, to hedge the interest rate exposure of anticipated future debt issuances during the next three years. Based on the fair value of these swaps as of July 30, 2022, Accumulated Other Comprehensive Loss (AOCI) included an unrealized gain of $296 million. Any unrealized gain or loss at the time of debt issuance will be reclassified and impact Net Interest Expense as we record interest expense on the associated debt.

Effect of Hedges on Debt
(millions)
July 30, 2022 January 29, 2022 July 31, 2021
Long-term debt and other borrowings
Carrying amount of hedged debt $ 2,263  $ 1,572  $ 1,649 
Cumulative hedging adjustments, included in carrying amount 22  77  154 

Effect of Hedges on Net Interest Expense Three Months Ended Six Months Ended
(millions) July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges $ 49  $ 22  $ (55) $ (29)
Hedged debt (49) (22) 55  29 
Total $ —  $ —  $ —  $ — 

8. Income Taxes

For the three and six months ended July 30, 2022, our effective tax rate was 15.8 percent and 18.7 percent, respectively, compared with 23.4 percent and 21.4 percent for the three and six months ended July 31, 2021, respectively. For the three month period, the decrease reflects lower pretax earnings during the three months ended July 30, 2022, resulting in a larger tax rate benefit from ongoing and discrete tax items, compared with the prior year. For the six month period, the decrease reflects lower pretax earnings during the six months ended July 30, 2022, compared with the prior year, partially offset by the impacts of discrete tax benefits during the six months ended July 31, 2021, including the resolution of certain income tax matters.

9. Share Repurchase

We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase (ASR) arrangements, and other privately negotiated transactions with financial institutions.

Share Repurchase Activity Three Months Ended Six Months Ended
(millions, except per share data)
July 31, 2022 (a)
July 31, 2021
July 31, 2022 (a)
July 31, 2021
Number of shares purchased 12.5  6.6  12.5  12.7 
Average price paid per share $ 211.58  $ 233.81  $ 211.57  $ 213.06 
Total investment $ 2,636  $ 1,535  $ 2,646  $ 2,700 
(a)    Includes activity related to the ASR arrangement entered in first quarter 2022 because final settlement occurred in second quarter 2022. Under the ASR arrangement, we repurchased 12.5 million shares for a total cash investment of $2.6 billion. We did not enter into any other ASR arrangements during the periods presented.
TARGET CORPORATION
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Q2 2022 Form 10-Q
11

FINANCIAL STATEMENTS
NOTES
10. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits Expense Three Months Ended Six Months Ended
(millions) Classification July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Service cost benefits earned SG&A $ 23  $ 24  $ 46  $ 48 
Interest cost on projected benefit obligation Net Other (Income) / Expense 30  24  59  48 
Expected return on assets Net Other (Income) / Expense (58) (59) (117) (118)
Amortization of losses Net Other (Income) / Expense 15  28  30  57 
Amortization of prior service cost Net Other (Income) / Expense 10  (1) 10  (1)
Total $ 20  $ 16  $ 28  $ 34 
 
11. Accumulated Other Comprehensive Income (Loss)

 
Change in Accumulated Other Comprehensive Income (Loss) Cash Flow
Hedges
Currency Translation Adjustment Pension Total
(millions)
January 29, 2022 $ 49  $ (19) $ (583) $ (553)
Other comprehensive income (loss) before reclassifications, net of tax 163  (1) —  162 
Amounts reclassified from AOCI, net of tax —  —  22  22 
July 30, 2022 $ 212  $ (20) $ (561) $ (369)


TARGET CORPORATION
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Q2 2022 Form 10-Q
12

MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL SUMMARY
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financial Summary

Second quarter 2022 included the following notable items:

GAAP diluted earnings per share were $0.39.
Adjusted diluted earnings per share were $0.39.
Total revenue increased 3.5 percent, reflecting total sales growth of 3.3 percent and a 14.8 percent increase in other revenue.
Comparable sales increased 2.6 percent, driven by a 2.7 percent increase in traffic.
Comparable stores originated sales grew 1.3 percent.
Comparable digitally originated sales increased 9.0 percent.
Operating income of $321 million was 87.0 percent lower than the comparable prior-year period, driven primarily by a decrease in gross margin, reflecting inventory actions taken as a result of lower-than-expected sales in our discretionary categories (Apparel and Accessories, Hardlines, and Home Furnishings and Décor) and supply chain disruptions, as well as increased freight and merchandise costs. See Business Environment below for additional information.

Sales were $25.7 billion for the three months ended July 30, 2022, an increase of $0.8 billion, or 3.3 percent, from the comparable prior-year period. Cash flow required for operating activities was $47 million for the six months ended July 30, 2022, compared with $3.4 billion cash flow provided by operating activities for the six months ended July 31, 2021. The drivers of the operating cash flow decrease are described on page 20.

Earnings Per Share Three Months Ended Six Months Ended
July 30, 2022 July 31, 2021 Change July 30, 2022 July 31, 2021 Change
GAAP diluted earnings per share $ 0.39  $ 3.65  (89.2) % $ 2.55  $ 7.82  (67.4) %
Adjustments —  (0.01) 0.03  (0.48)
Adjusted diluted earnings per share $ 0.39  $ 3.64  (89.2) % $ 2.59  $ 7.34  (64.8) %
Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations. 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 July 30, 2022, after-tax ROIC was 18.4 percent, compared with 31.7 percent for the trailing twelve months ended July 31, 2021. The calculation of ROIC is provided on page 19.

Business Environment

During the first two quarters of 2022, we have seen a shift in consumer demand away from discretionary categories (Apparel and Accessories, Hardlines, and Home Furnishings and Décor), resulting in lower-than-expected sales and higher-than-expected inventories in these areas. In response to this shift in demand, we took several actions to address our inventory position and create additional flexibility in a rapidly changing environment, including increasing promotional and clearance markdowns, removing excess inventory, and cancelling purchase orders. These factors, net of pricing actions we have taken to address the impact of merchandise and freight cost inflation, have resulted in decreased profitability in the first half of 2022 compared to the prior-year period. Additionally, in response to continued disruption in our supply chain, we have ordered and are receiving merchandise earlier, and added incremental holding capacity near U.S. ports to add flexibility in the portions of the supply chain most affected by external volatility. We believe that the actions we have taken, including the reduction of orders for Fall merchandise in our discretionary categories, reduce our risks and provide additional flexibility to focus on serving guests in a rapidly changing environment. The Gross Margin Rate analysis on page 16 and the Inventory section on page 20 provide additional information.

TARGET CORPORATION
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Q2 2022 Form 10-Q
13

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Analysis of Results of Operations

Summary of Operating Income Three Months Ended   Six Months Ended  
(dollars in millions) July 30, 2022 July 31, 2021 Change July 30, 2022 July 31, 2021 Change
Sales $ 25,653  $ 24,826  3.3  % $ 50,483  $ 48,705  3.7  %
Other revenue 384  334  14.8  724  652  10.9 
Total revenue 26,037  25,160  3.5  51,207  49,357  3.7 
Cost of sales 20,142  17,280  16.6  38,603  33,996  13.6 
Selling, general and administrative expenses 5,002  4,849  3.1  9,764  9,358  4.3 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 572  564  1.5  1,173  1,162  0.9 
Operating income $ 321  $ 2,467  (87.0) % $ 1,667  $ 4,841  (65.6) %

Rate Analysis Three Months Ended Six Months Ended
July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Gross margin rate 21.5  % 30.4  % 23.5  % 30.2  %
SG&A expense rate 19.2  19.3  19.1  19.0 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales) 2.2  2.2  2.3  2.4 
Operating income margin rate 1.2  9.8  3.3  9.8 
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 Pickup or Drive Up, and delivery via 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).

Comparable Sales Three Months Ended Six Months Ended
  July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Comparable sales change 2.6  % 8.9  % 3.0  % 15.3  %
Drivers of change in comparable sales        
Number of transactions (traffic) 2.7  12.7  3.3  14.8 
Average transaction amount 0.0  (3.4) (0.3) 0.5 

TARGET CORPORATION
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Q2 2022 Form 10-Q
14

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Comparable Sales by Channel Three Months Ended Six Months Ended
  July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Stores originated comparable sales change 1.3  % 8.7  % 2.3  % 13.0  %
Digitally originated comparable sales change 9.0  9.9  6.1  27.3 

Sales by Channel Three Months Ended Six Months Ended
  July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Stores originated 82.1  % 83.0  % 81.9  % 82.3  %
Digitally originated 17.9  17.0  18.1  17.7 
Total 100  % 100  % 100  % 100  %

Sales by Fulfillment Channel Three Months Ended Six Months Ended
  July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Stores 96.6  % 96.6  % 96.6  % 96.4  %
Other 3.4  3.4  3.4  3.6 
Total 100  % 100  % 100  % 100  %
Note: 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 Shipt.

Sales by Product Category Three Months Ended Six Months Ended
July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Apparel and accessories 18  % 19  % 18  % 18  %
Beauty and household essentials 28  27  28  27 
Food and beverage 21  19  21  20 
Hardlines 15  16  15  16 
Home furnishings and décor 18  19  18  19 
Total 100  % 100  % 100  % 100  %

Note 3 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 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 sales increased for the three and six months ended July 30, 2022, and July 31, 2021; however, RedCard penetration declined as total Sales increased at a faster pace.

RedCard Penetration Three Months Ended Six Months Ended
  July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Target Debit Card 11.2  % 11.6  % 11.4  % 11.9  %
Target Credit Cards 8.9  8.7  8.8  8.6 
Total RedCard Penetration 20.1  % 20.3  % 20.2  % 20.4  %
Note: Amounts may not foot due to rounding.


TARGET CORPORATION
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Q2 2022 Form 10-Q
15

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Gross Margin Rate

Quarter-to-Date
tgt-20220730_g3.jpg

Year-to-Date
tgt-20220730_g4.jpg
For the three months ended July 30, 2022, our gross margin rate was 21.5 percent compared with 30.4 percent in the comparable prior-year period. For the six months ended July 30, 2022, our gross margin rate was 23.5 percent compared with 30.2 percent in the comparable prior-year period. For both the three and six months ended July 30, 2022, the decrease reflected the net impact of

merchandising pressure, including
higher clearance and promotional markdown rates, which were largely the result of inventory impairments and other actions taken in our discretionary categories; and
higher merchandise and freight costs and higher inventory shrink, partially offset by the benefit of retail price increases;
supply chain pressure related to increased compensation and headcount in our distribution centers, costs of managing excess inventory, and higher last-mile shipping cost; and
unfavorable mix in the relative growth rates of higher and lower margin categories.

Business Environment on page 13 provides additional information.

Selling, General, and Administrative Expense Rate

For the three months ended July 30, 2022, our SG&A expense rate was 19.2 percent compared with 19.3 percent for the comparable prior-year period. For the six months ended July 30, 2022, our SG&A expense rate was 19.1 percent compared with 19.0 percent for the comparable prior-year end. For both the three and six months ended July 30, 2022, the rates reflected lower incentive compensation, and the net impact of cost increases across our business, including investments in hourly team member wages, compared to the comparable prior-year periods.

TARGET CORPORATION
tgt-20220730_g2.jpg
Q2 2022 Form 10-Q
16

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Store Data

Change in Number of Stores Three Months Ended Six Months Ended
July 30, 2022 July 31, 2021 July 30, 2022 July 31, 2021
Beginning store count 1,933  1,909  1,926  1,897 
Opened 12  14 
Closed (1) (2) (1) (2)
Ending store count 1,937  1,909  1,937  1,909 

Number of Stores and
Retail Square Feet
Number of Stores
Retail Square Feet (a)
July 30, 2022 January 29, 2022 July 31, 2021 July 30, 2022 January 29, 2022 July 31, 2021
170,000 or more sq. ft. 273  274  273  48,798  49,071  48,798 
50,000 to 169,999 sq. ft. 1,521  1,516  1,510  190,734  190,205  189,624 
49,999 or less sq. ft. 143  136  126  4,256  4,008  3,709 
Total 1,937  1,926  1,909  243,788  243,284  242,131 
(a)In thousands; reflects total square feet less office, distribution center, and vacant space.
 
Other Performance Factors

Net Interest Expense

Net interest expense was $112 million and $224 million for the three and six months ended July 30, 2022, respectively, compared with $104 million and $212 million in the comparable prior-year periods. The increase in net interest expense was primarily due to higher average debt and commercial paper levels for the three and six months ended July 30, 2022, compared with the prior-year periods.

Net Other (Income) / Expense

Net Other (Income) / Expense was $(8) million and $(23) million for the three and six months ended July 30, 2022, respectively, compared with $(7) million and $(350) million in the comparable prior-year periods. The six months ended July 31, 2021, included the $335 million pretax gain on the February 2021 sale of Dermstore. Note 2 to the Financial Statements provides additional information.

Provision for Income Taxes
 
Our effective income tax rate for the three and six months ended July 30, 2022, was 15.8 percent and 18.7 percent, respectively, compared with 23.4 percent and 21.4 percent in the respective comparable prior-year periods. For the three month period, the decrease reflects lower pretax earnings in the current year resulting in a larger tax rate benefit from ongoing and discrete tax items. For the six month period, the decrease reflects lower pretax earnings in the current period, partially offset by the impacts of discrete tax benefits in the prior-year period, including the resolution of certain income tax matters. Our effective tax rate is generally more volatile at lower amounts of pretax income because the impact of discrete, deductible, and nondeductible tax items and credits is greater.

TARGET CORPORATION
tgt-20220730_g2.jpg
Q2 2022 Form 10-Q
17

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 (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 operations. This measure is not in accordance with, or an alternative to, U.S. GAAP. 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.

Reconciliation of Non-GAAP Adjusted EPS Three Months Ended
July 30, 2022 July 31, 2021
(millions, except per share data) Pretax Net of Tax Per Share Pretax Net of Tax Per Share
GAAP diluted earnings per share $ 0.39  $ 3.65 
Adjustments
Other (a)
$ —  $ —  $ —  $ (5) $ (4) $ (0.01)
Adjusted diluted earnings per share $ 0.39  $ 3.64 

Reconciliation of Non-GAAP Adjusted EPS Six Months Ended
July 30, 2022 July 31, 2021
(millions, except per share data) Pretax Net of Tax Per Share Pretax Net of Tax Per Share
GAAP diluted earnings per share $ 2.55  $ 7.82 
Adjustments
Gain on Dermstore sale $ —  $ —  $ —  $ (335) $ (269) $ (0.54)
Other (a)
20  15  0.03  36  27  0.05 
Adjusted diluted earnings per share $ 2.59  $ 7.34 
Note: Amounts may not foot due to rounding.
(a)Other items unrelated to current period operations, none of which were individually significant.

Earnings before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation, and amortization (EBITDA) are non-GAAP financial measures. We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies.

EBIT and EBITDA Three Months Ended   Six Months Ended  
(dollars in millions) July 30, 2022 July 31, 2021 Change July 30, 2022 July 31, 2021 Change
Net earnings $ 183  $ 1,817  (89.9) % $ 1,192  $ 3,914  (69.6) %
+ Provision for income taxes 34  553  (93.8) 274  1,065  (74.3)
+ Net interest expense 112  104  8.0  224  212  5.8 
EBIT $ 329  $ 2,474  (86.7) % $ 1,690  $ 5,191  (67.4) %
+ Total depreciation and amortization (a)
650  633  2.8  1,329  1,300  2.3 
EBITDA $ 979  $ 3,107  (68.5) % $ 3,019  $ 6,491  (53.5) %
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

TARGET CORPORATION
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Q2 2022 Form 10-Q
18

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 July 30, 2022 July 31, 2021
Operating income $ 5,773  $ 8,611 
 + Net other income / (expense) 54  346 
EBIT 5,827  8,957 
 + Operating lease interest (a)
88  84 
  - Income taxes (b)
1,282  1,918 
Net operating profit after taxes $ 4,633  $ 7,123 

Denominator July 30, 2022 July 31, 2021 August 1, 2020
Current portion of long-term debt and other borrowings $ 1,649  $ 1,190  $ 109 
 + Noncurrent portion of long-term debt 13,453  11,589  14,188 
 + Shareholders' investment 10,592  14,860  12,578 
 + Operating lease liabilities (c)
2,823  2,695  2,448 
  - Cash and cash equivalents 1,117  7,368  7,284 
Invested capital $ 27,400  $ 22,966  $ 22,039 
Average invested capital (d)
$ 25,183  $ 22,502 
After-tax return on invested capital 18.4  % 31.7  %
(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. 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, which were 21.7 percent and 21.2 percent for the trailing twelve months ended July 30, 2022, and July 31, 2021, respectively. For the trailing twelve months ended July 30, 2022, and July 31, 2021, includes tax effect of $1.3 billion and $1.9 billion related to EBIT, and $19 million and $18 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, 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.

TARGET CORPORATION
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Q2 2022 Form 10-Q
19

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF FINANCIAL CONDITION
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.

Our cash and cash equivalents balance was $1.1 billion, $5.9 billion, and $7.4 billion as of July 30, 2022, January 29, 2022, and July 31, 2021, respectively. Our cash and cash equivalents balance includes short-term investments of $189 million, $5.0 billion, and $6.4 billion as of July 30, 2022, January 29, 2022, and July 31, 2021, 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
 
Cash flows required for operating activities were $47 million for the six months ended July 30, 2022, compared with $3.4 billion of cash flows provided by operating activities for the six months ended July 31, 2021. For the six months ended July 30, 2022, operating cash flows decreased as a result of lower earnings, increased inventory levels and lower accounts payable leverage due to decreased inventory turnover, compared with the six months ended July 31, 2021.

Inventory

Inventory was $15.3 billion as of July 30, 2022, compared with $13.9 billion and $11.3 billion at January 29, 2022, and July 31, 2021, respectively. The increase over the balance as of July 31, 2021, primarily reflects the following:
our decision to move merchandise receipt timing earlier due to expected supply chain volatility,
investments in our inventory position in our frequency categories (Food and Beverage and Beauty and Household Essentials),
lower-than-expected sales in our discretionary categories, partially offset by actions taken during the current year to reduce excess inventory in these categories, and
increases in unit costs across all of our categories.

The increase was amplified by unintentionally low inventory levels last year resulting from supply chain disruptions, and demand shifts, described within the Business Environment section on page 13.

Investing Cash Flows

Investing cash flows included capital investments of $2.5 billion and $1.3 billion for the six months ended July 30, 2022, and July 31, 2021, respectively. The increase primarily reflects an increase in store remodel activity, investment in supply chain, and the impact of inflation on these projects. For the six months ended July 31, 2021, investing cash flows included $356 million of proceeds from the sale of Dermstore.

Dividends
 
We paid dividends totaling $417 million ($0.90 per share) and $841 million ($1.80 per share) for the three and six months ended July 30, 2022, respectively, and $336 million ($0.68 per share) and $676 million ($1.36 per share) for the three and six months ended July 31, 2021, respectively, a per share increase of 32.4 percent. We declared dividends totaling $502 million ($1.08 per share) during the second quarter of 2022 and $445 million ($0.90 per share) during the second quarter of 2021, a per share increase of 20.0 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.
TARGET CORPORATION
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Q2 2022 Form 10-Q
20

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF FINANCIAL CONDITION

Share Repurchase

We returned $2.6 billion to shareholders through share repurchase during the six months ended July 30, 2022. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 9 to the Financial Statements for more information.

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 July 30, 2022, our credit ratings were as follows:

Credit Ratings Moody’s Standard and Poor’s Fitch
Long-term debt A2 A A
Commercial paper P-1 A-1 F1

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 have the ability to obtain short-term financing from time to time under our commercial paper program and credit facility. Our committed $3.0 billion unsecured revolving credit facility expires in October 2026 and backstops our commercial paper program. No balances were outstanding under our credit facility at any time during 2022 or 2021. As of July 30, 2022, we had $1.5 billion outstanding under our commercial paper program. We did not have any balances outstanding under our commercial paper program as of July 31, 2021. Note 6 to the Financial Statements provides additional information.

Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of July 30, 2022, 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.

New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements.

TARGET CORPORATION
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Q2 2022 Form 10-Q
21

MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL INFORMATION
FORWARD LOOKING STATEMENTS & CONTROLS AND PROCEDURES
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, 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 January 29, 2022, 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.

Item 3. 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 January 29, 2022.

Item 4. Controls and Procedures

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there were no changes which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we conducted an evaluation, under supervision and with the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

TARGET CORPORATION
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Q2 2022 Form 10-Q
22

SUPPLEMENTAL INFORMATION
PART II. OTHER INFORMATION

Item 1. Legal Proceedings

No response is required under Item 103 of Regulation S-K.

Item 1A. Risk Factors

There have been no material changes to the risk factors described in Part I, Item 1A, Risk Factors of our Form 10-K for the fiscal year ended January 29, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 11, 2021, our Board of Directors authorized a $15 billion share repurchase program with no stated expiration. Under the program, we have repurchased 23.8 million shares of common stock at an average price of $223.52, for a total investment of $5.3 billion. The table below presents information with respect to Target common stock purchases made during the three months ended July 30, 2022, by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.

Share Repurchase Activity Total Number
of Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly Announced Programs
Dollar Value of
Shares that May
Yet Be Purchased
Under Publicly Announced Programs
Period
May 1, 2022 through May 28, 2022
Open market and privately negotiated purchases —  $ —  —  $ 12,316,056,660 
May 29, 2022 through July 2, 2022
Open market and privately negotiated purchases —  —  —  12,316,056,660 
March 2022 ASR (a)
3,569,904  211.58  3,569,904  9,680,505,231 
July 3, 2022 through July 30, 2022
Open market and privately negotiated purchases —  —  —  9,680,505,231 
Total 3,569,904  $ 211.58  3,569,904  $ 9,680,505,231 
(a)Represents the incremental shares received upon final settlement of the accelerated share repurchase (ASR) agreement initiated in first quarter 2022. $211.58 represents the average price paid per share for the 12.5 million total shares repurchased under the ASR, which consists of the 8.9 million shares initially delivered in first quarter 2022 and the 3.6 million shares received upon final settlement in second quarter 2022. Note 9 to the Financial Statements provides additional information.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

TARGET CORPORATION
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Q2 2022 Form 10-Q
23

SUPPLEMENTAL INFORMATION
Item 6. Exhibits

(3)A
   
(3)B
(10)E
(10)F
(10)J
(10)KK
(31)A
   
(31)B
(32)A
(32)B
   
101.INS XBRL Instance Document
   
101.SCH Inline XBRL Taxonomy Extension Schema Document
   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)         Incorporated by reference to Exhibit (3)A to the Registrant’s Form 8-K Report filed June 10, 2010.
 
(2)         Incorporated by reference to Exhibit (3)B to the Registrant’s Form 8-K Report filed April 2, 2020.
TARGET CORPORATION
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Q2 2022 Form 10-Q
24

SUPPLEMENTAL INFORMATION
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  TARGET CORPORATION
   
Dated: August 26, 2022 By:  /s/ Michael J. Fiddelke
  Michael J. Fiddelke
    Executive Vice President and
    Chief Financial Officer
    (Duly Authorized Officer and
    Principal Financial Officer)
/s/ Matthew A. Liegel
Matthew A. Liegel
Senior Vice President, Chief Accounting Officer
and Controller

TARGET CORPORATION
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Q2 2022 Form 10-Q
25
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