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 October 31, 2020

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

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)

Registrant’s telephone number, including area code: 612/304-6073

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

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, smaller reporting company, or an emerging growth company (as defined 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 ☒

Indicate the number of shares outstanding of each of registrant’s classes of common stock, as of the latest practicable date. Total shares of common stock, par value $0.0833, outstanding at November 20, 2020 were 500,773,141.

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	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
Signature		27

FINANCIAL STATEMENTS	Table of Contents
	Index to Notes

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations
	Three Months Ended				Nine Months Ended
(millions, except per share data) (unaudited)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Sales	$	22,336	$	18,414	$	64,403	$	53,997
Other revenue	296		251		819		716
Total revenue	22,632		18,665		65,222		54,713
Cost of sales	15,509		12,935		45,692		37,808
Selling, general and administrative expenses	4,647		4,153		13,167		11,728
Depreciation and amortization (exclusive of depreciation included in cost of sales)	541		575		1,660		1,717
Operating income	1,935		1,002		4,703		3,460
Net interest expense	632		113		871		359
Net other (income) / expense	5		(12)		16		(38)
Earnings from continuing operations before income taxes	1,298		901		3,816		3,139
Provision for income taxes	284		195		828		703
Net earnings from continuing operations	1,014		706		2,988		2,436
Discontinued operations, net of tax	—		8		—		11
Net earnings	$	1,014	$	714	$	2,988	$	2,447
Basic earnings per share
Continuing operations	$	2.02	$	1.38	$	5.97	$	4.75
Discontinued operations	—		0.02		—		0.02
Net earnings per share	$	2.02	$	1.40	$	5.97	$	4.77
Diluted earnings per share
Continuing operations	$	2.01	$	1.37	$	5.91	$	4.71
Discontinued operations	—		0.02		—		0.02
Net earnings per share	$	2.01	$	1.39	$	5.91	$	4.74
Weighted average common shares outstanding
Basic	500.6		509.7		500.6		512.5
Diluted	505.4		514.8		505.2		516.8
Antidilutive shares	—		—		—		—

Note: Per share amounts may not foot due to rounding.

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION Q3 2020 Form 10-Q 1

FINANCIAL STATEMENTS	Table of Contents
	Index to Notes

Consolidated Statements of Comprehensive Income
	Three Months Ended				Nine Months Ended
(millions) (unaudited)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Net earnings	$	1,014	$	714	$	2,988	$	2,447
Other comprehensive income
Pension, net of tax	22		10		66		30
Currency translation adjustment and cash flow hedges, net of tax	14		(1)		5		2
Other comprehensive income	36		9		71		32
Comprehensive income	$	1,050	$	723	$	3,059	$	2,479

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION Q3 2020 Form 10-Q 2

FINANCIAL STATEMENTS	Table of Contents
	Index to Notes

Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited)	October 31, 2020		February 1, 2020		November 2, 2019
Assets
Cash and cash equivalents	$	5,996	$	2,577	$	969
Inventory	12,712		8,992		11,396
Other current assets	1,601		1,333		1,440
Total current assets	20,309		12,902		13,805
Property and equipment
Land	6,063		6,036		6,040
Buildings and improvements	31,398		30,603		30,467
Fixtures and equipment	5,843		6,083		6,032
Computer hardware and software	2,706		2,692		2,636
Construction-in-progress	518		533		298
Accumulated depreciation	(19,755)		(19,664)		(19,089)
Property and equipment, net	26,773		26,283		26,384
Operating lease assets	2,208		2,236		2,151
Other noncurrent assets	1,371		1,358		1,401
Total assets	$	50,661	$	42,779	$	43,741
Liabilities and shareholders’ investment
Accounts payable	$	14,203	$	9,920	$	11,258
Accrued and other current liabilities	5,023		4,406		4,191
Current portion of long-term debt and other borrowings	131		161		1,159
Total current liabilities	19,357		14,487		16,608
Long-term debt and other borrowings	12,490		11,338		10,513
Noncurrent operating lease liabilities	2,196		2,275		2,208
Deferred income taxes	1,171		1,122		1,215
Other noncurrent liabilities	2,128		1,724		1,652
Total noncurrent liabilities	17,985		16,459		15,588
Shareholders’ investment
Common stock	42		42		42
Additional paid-in capital	6,285		6,226		6,006
Retained earnings	7,789		6,433		6,270
Accumulated other comprehensive loss	(797)		(868)		(773)
Total shareholders’ investment	13,319		11,833		11,545
Total liabilities and shareholders’ investment	$	50,661	$	42,779	$	43,741

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 500,754,729, 504,198,962 and 506,677,740 shares issued and outstanding as of October 31, 2020, February 1, 2020, and November 2, 2019, 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 Q3 2020 Form 10-Q 3

FINANCIAL STATEMENTS	Table of Contents
	Index to Notes

Consolidated Statements of Cash Flows
	Nine Months Ended
(millions) (unaudited)	October 31, 2020		November 2, 2019
Operating activities
Net earnings	$	2,988	$	2,447
Earnings from discontinued operations, net of tax	—		11
Net earnings from continuing operations	2,988		2,436
Adjustments to reconcile net earnings to cash provided by operations
Depreciation and amortization	1,848		1,905
Share-based compensation expense	161		116
Deferred income taxes	26		235
Loss on debt extinguishment	512		—
Noncash losses / (gains) and other, net	124		6
Changes in operating accounts
Inventory	(3,720)		(1,899)
Other assets	(174)		(10)
Accounts payable	4,287		1,473
Accrued and other liabilities	992		(121)
Cash provided by operating activities—continuing operations	7,044		4,141
Cash provided by operating activities—discontinued operations	—		18
Cash provided by operations	7,044		4,159
Investing activities
Expenditures for property and equipment	(2,009)		(2,403)
Proceeds from disposal of property and equipment	27		29
Other investments	(3)		14
Cash required for investing activities	(1,985)		(2,360)
Financing activities
Additions to long-term debt	2,480		994
Reductions of long-term debt	(2,395)		(1,041)
Dividends paid	(1,002)		(995)
Repurchase of stock	(741)		(959)
Accelerated share repurchase pending final settlement	—		(450)
Stock option exercises	18		65
Cash required for financing activities	(1,640)		(2,386)
Net increase in cash and cash equivalents	3,419		(587)
Cash and cash equivalents at beginning of period	2,577		1,556
Cash and cash equivalents at end of period	$	5,996	$	969
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities	$	344	$	301
Leased assets obtained in exchange for new operating lease liabilities	186		334

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION Q3 2020 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
February 2, 2019	517.8	$	43	$	6,042	$	6,017	$	(805)	$	11,297
Net earnings	—	—		—		795		—		795
Other comprehensive income	—	—		—		—		13		13
Dividends declared	—	—		—		(330)		—		(330)
Repurchase of stock	(3.6)	—		—		(277)		—		(277)
Accelerated share repurchase pending final settlement	(3.0)	—		(153)		(247)		—		(400)
Stock options and awards	1.1	—		19		—		—		19
May 4, 2019	512.3	$	43	$	5,908	$	5,958	$	(792)	$	11,117
Net earnings	—	—		—		938		—		938
Other comprehensive income	—	—		—		—		10		10
Dividends declared	—	—		—		(341)		—		(341)
Repurchase of stock	(1.3)	—		153		(94)		—		59
Stock options and awards	0.3	—		53		—		—		53
August 3, 2019	511.3	$	43	$	6,114	$	6,461	$	(782)	$	11,836
Net earnings	—	—		—		714		—		714
Other comprehensive income	—	—		—		—		9		9
Dividends declared	—	—		—		(338)		—		(338)
Repurchase of stock	(3.0)	(1)		—		(295)		—		(296)
Accelerated share repurchase pending final settlement	(2.5)	—		(178)		(272)		—		(450)
Stock options and awards	0.9	—		70		—		—		70
November 2, 2019	506.7	$	42	$	6,006	$	6,270	$	(773)	$	11,545
Net earnings	—	—		—		834		—		834
Other comprehensive loss	—	—		—		—		(95)		(95)
Dividends declared	—	—		—		(336)		—		(336)
Repurchase of stock	(2.6)	—		178		(335)		—		(157)
Stock options and awards	0.1	—		42		—		—		42
February 1, 2020	504.2	$	42	$	6,226	$	6,433	$	(868)	$	11,833

TARGET CORPORATION Q3 2020 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 1, 2020	504.2	$	42	$	6,226	$	6,433	$	(868)	$	11,833
Net earnings	—	—		—		284		—		284
Other comprehensive income	—	—		—		—		14		14
Dividends declared	—	—		—		(333)		—		(333)
Repurchase of stock	(5.7)	—		—		(609)		—		(609)
Stock options and awards	1.4	—		(20)		—		—		(20)
May 2, 2020	499.9	$	42	$	6,206	$	5,775	$	(854)	$	11,169
Net earnings	—	—		—		1,690		—		1,690
Other comprehensive income	—	—		—		—		21		21
Dividends declared	—	—		—		(344)		—		(344)
Stock options and awards	0.4	—		42		—		—		42
August 1, 2020	500.3	$	42	$	6,248	$	7,121	$	(833)	$	12,578
Net earnings	—	—		—		1,014		—		1,014
Other comprehensive income	—	—		—		—		36		36
Dividends declared	—	—		—		(346)		—		(346)
Stock options and awards	0.5	—		37		—		—		37
October 31, 2020	500.8	$	42	$	6,285	$	7,789	$	(797)	$	13,319

We declared $0.68 and $0.66 dividends per share for the three months ended October 31, 2020, and November 2, 2019, respectively, and $2.62 per share for the fiscal year ended February 1, 2020.

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION Q3 2020 Form 10-Q 6

FINANCIAL STATEMENTS	Table of Contents
INDEX	Index to Notes

INDEX TO NOTES
Notes to Consolidated Financial Statements		7
Note 1	Accounting Policies	8
Note 2	Coronavirus (COVID-19)	8
Note 3	Revenues	9
Note 4	Fair Value Measurements	10
Note 5	Property and Equipment	10
Note 6	Commercial Paper and Long-Term Debt	10
Note 7	Derivative Financial Instruments	11
Note 8	Share Repurchase	11
Note 9	Pension Benefits	12
Note 10	Accumulated Other Comprehensive Loss	12

TARGET CORPORATION Q3 2020 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 (SEC) 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 (U.S.) 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 2019 Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.

We operate as a single segment that includes all of our continuing operations, which are 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. Coronavirus (COVID-19)

On March 11, 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) a pandemic, and on March 13, 2020, the United States declared a national emergency. States and cities have taken various measures in response to COVID-19, including mandating the closure of certain businesses and encouraging or requiring citizens to avoid large gatherings. To date, virtually all of our stores, digital channels, and distribution centers have remained open.

Throughout the nine months ended October 31, 2020, guest shopping patterns changed significantly and unpredictably in reaction to the COVID-19 pandemic. Four of our five core merchandise categories have experienced significant sales growth throughout the year; however, sales of Apparel and Accessories declined significantly in the first quarter before rebounding in the second and third quarters. Note 3 provides sales by category. In response to these changes, we have taken many actions, including accelerating purchases of certain merchandise in our core categories and slowing or canceling certain purchase orders, primarily for Apparel and Accessories. As a result of these actions, during the first quarter of 2020, we recorded $216 million of purchase order cancellation fees in Cost of Sales.

TARGET CORPORATION Q3 2020 Form 10-Q 8

FINANCIAL STATEMENTS	Table of Contents
NOTES	Index to 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				Nine Months Ended
(millions)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Apparel and accessories (a)	$	3,927	$	3,564	$	10,630	$	10,510
Beauty and household essentials (b)	6,103		5,125		18,172		15,172
Food and beverage (c)	4,397		3,717		13,158		10,899
Hardlines (d)	3,377		2,460		9,959		7,348
Home furnishings and décor (e)	4,506		3,527		12,395		9,985
Other	26		21		89		83
Sales	22,336		18,414		64,403		53,997
Credit card profit sharing	164		177		488		505
Other	132		74		331		211
Other revenue	296		251		819		716
Total revenue	$	22,632	$	18,665	$	65,222	$	54,713

(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 October 31, 2020, February 1, 2020, and November 2, 2019, the accrual for estimated returns was $182 million, $117 million, and $137 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 1, 2020		Gift Cards Issued During Current Period But Not Redeemed (b)		Revenue Recognized From Beginning Liability		October 31, 2020
(millions)
Gift card liability (a)	$	935	$	372	$	(549)	$	758

(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 Q3 2020 Form 10-Q 9

FINANCIAL STATEMENTS	Table of Contents
NOTES	Index to Notes

4. Fair Value Measurements

Fair value measurements are reported in one of three levels reflecting the valuation techniques used to determine fair value.

Fair Value Measurements - Recurring Basis			Fair Value at
(millions)	Classification	Pricing Category	October 31, 2020		February 1, 2020		November 2, 2019
Assets
Short-term investments	Cash and Cash Equivalents	Level 1	$	5,089	$	1,810	$	163
Prepaid forward contracts	Other Current Assets	Level 1	32		23		24
Equity securities (a)	Other Current Assets	Level 1	19		39		80
Interest rate swaps	Other Noncurrent Assets	Level 2	205		137		122
Liabilities
Interest rate swaps	Other Noncurrent Liabilities	Level 2	3		—		—

(a)Represents our investment in Casper Sleep Inc. common stock.

Significant Financial Instruments Not Measured at Fair Value (a) (millions)	October 31, 2020				February 1, 2020				November 2, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion (b)	$	10,641	$	12,787	$	9,992	$	11,864	$	10,246	$	11,870

(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 or distribution center, discontinue projects, or make significant software changes—indicate that the asset’s carrying value may not be recoverable. We recognized impairment charges of $2 million and $62 million during the three and nine months ended October 31, 2020, respectively. We recognized impairment charges of $7 million and $21 million during the three and nine months ended November 2, 2019, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

6. Commercial Paper and Long-Term Debt

In March 2020, we issued unsecured fixed rate debt of $1.5 billion at 2.250 percent that matures in April 2025 and $1.0 billion at 2.650 percent that matures in September 2030. In October 2020, we repurchased $1.77 billion of debt before its maturity at a market value of $2.25 billion. We recognized a loss on early retirement of $512 million, which was recorded in Net Interest Expense.

We obtain short-term financing from time to time under our commercial paper program. No balances were outstanding at any time during the nine months ended October 31, 2020. For the nine months ended November 2, 2019, the maximum amount outstanding was $744 million, and the average daily amount outstanding was $55 million at a weighted average annual interest rate of 2.4 percent, with no balance outstanding as of November 2, 2019.

In April 2020, we obtained a committed $900 million 364-day unsecured revolving credit facility. This new facility was in addition to our $2.5 billion unsecured revolving credit facility that expires in October 2023. We terminated the 364-day facility in November 2020. No balances were outstanding under either credit facility at any time during 2020 or 2019.

TARGET CORPORATION Q3 2020 Form 10-Q 10

FINANCIAL STATEMENTS	Table of Contents
NOTES	Index to Notes

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.

As of October 31, 2020, and November 2, 2019, we were party to interest rate swaps with notional amounts totaling $1.5 billion. We pay a variable rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were perfectly effective during the three and nine months ended October 31, 2020, and November 2, 2019.

As of October 31, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $250 million to hedge the interest rate exposure of anticipated future debt issuances. We designated these derivative financial instruments as cash flow hedges. We assess, both at inception and on an ongoing basis, whether the derivative financial instrument is highly effective in offsetting changes in cash flows of the hedged item and whether it is probable that the hedged forecasted transaction will occur. As of October 31, 2020, a $1 million loss was recorded in Accumulated Other Comprehensive Loss and will be reclassified to Net Interest Expense when the forecasted transaction affects earnings.

Effect of Hedges on Debt (millions)	October 31, 2020		February 1, 2020		November 2, 2019
Long-term debt and other borrowings
Carrying amount of hedged debt	$	1,696	$	1,630	$	1,614
Cumulative hedging adjustments, included in carrying amount	203		137		122

Effect of Hedges on Net Interest Expense	Three Months Ended				Nine Months Ended
(millions)	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges	$	(36)	$	14	$	66	$	115
Hedged debt	36		(14)		(66)		(115)
Total	$	—	$	—	$	—	$	—

8. 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				Nine Months Ended
(millions, except per share data)	October 31, 2020		November 2, 2019 (a)		October 31, 2020		November 2, 2019 (a)
Number of shares purchased	—		3.0		5.7		10.8
Average price paid per share	$	—	$	99.25	$	107.58	$	84.28
Total investment	$	—	$	294	$	609	$	912

(a)This table excludes activity related to the ASR arrangement described below because final settlement had not occurred as of November 2, 2019.

During the third quarter of 2019, we entered into an ASR arrangement to repurchase $300 to $450 million of our common stock. Under the agreement, we paid $450 million and received an initial delivery of 2.5 million shares, which were retired, resulting in a $272 million reduction to Retained Earnings. As of November 2, 2019, $178 million was included as a reduction to Additional Paid-in Capital. Upon final settlement in the fourth quarter of 2019, we received an additional 0.2 million shares, which were retired, and $127 million for the remaining amount not settled in shares. In total, we repurchased 2.7 million shares under the ASR arrangement for a total cash investment of $323 million ($117.64 per share).

TARGET CORPORATION Q3 2020 Form 10-Q 11

FINANCIAL STATEMENTS	Table of Contents
NOTES	Index to Notes

9. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits Expense		Three Months Ended				Nine Months Ended
(millions)	Classification	October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019
Service cost benefits earned	SG&A Expenses	$	25	$	23	$	76	$	69
Interest cost on projected benefit obligation	Net Other (Income) / Expense	30		37		89		111
Expected return on assets	Net Other (Income) / Expense	(61)		(62)		(182)		(186)
Amortization of losses	Net Other (Income) / Expense	32		16		96		47
Amortization of prior service cost	Net Other (Income) / Expense	(3)		(3)		(9)		(8)
Settlement charges	Net Other (Income) / Expense	1		—		1		—
Total		$	24	$	11	$	71	$	33

10. Accumulated Other Comprehensive Loss

Change in Accumulated Other Comprehensive Loss	Cash Flow Hedges		Currency Translation Adjustment		Pension		Total
(millions)
February 1, 2020	$	(12)	$	(19)	$	(837)	$	(868)
Other comprehensive loss before reclassifications, net of tax	(1)		—		—		(1)
Amounts reclassified from AOCI, net of tax	6		—		66		72
October 31, 2020	$	(7)	$	(19)	$	(771)	$	(797)

TARGET CORPORATION Q3 2020 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

Third quarter 2020 includes the following notable items:

•GAAP diluted earnings per share were $2.01.

•Adjusted diluted earnings per share were $2.79.

•Total revenue increased 21.3 percent, driven by an increase in comparable sales.

•Comparable sales increased 20.7 percent, driven by a 15.6 percent increase in average transaction amount.

◦Comparable store sales grew 9.9 percent.

◦Digital channel sales increased 155 percent, contributing 10.9 percentage points to comparable sales growth.

•Operating income of $1.9 billion was 93.1 percent higher than the comparable prior-year period.

•We repurchased $1.77 billion of debt before its maturity at a market value of $2.25 billion, resulting in a loss of $512 million.

Sales were $22.3 billion for the three months ended October 31, 2020, an increase of $3.9 billion, or 21.3 percent, from the same period in the prior year. Operating cash flow provided by continuing operations was $7.0 billion for the nine months ended October 31, 2020, an increase of $2.9 billion, or 70.1 percent, from $4.1 billion for the nine months ended November 2, 2019.

Earnings Per Share from Continuing Operations	Three Months Ended			Nine Months Ended
	October 31, 2020	November 2, 2019	Change	October 31, 2020	November 2, 2019	Change