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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 October 29, 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-20221029_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 classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0833 per shareTGTNew 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 November 18, 2022, were 460,310,088.

TARGET CORPORATION

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
   
 
   
 


FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations    
 Three Months EndedNine Months Ended
(millions, except per share data) (unaudited)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Sales$26,122 $25,290 $76,605 $73,995 
Other revenue396 362 1,120 1,014 
Total revenue26,518 25,652 77,725 75,009 
Cost of sales 19,680 18,206 58,283 52,202 
Selling, general and administrative expenses5,219 4,859 14,983 14,217 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 597 577 1,770 1,739 
Operating income1,022 2,010 2,689 6,851 
Net interest expense125 105 349 317 
Net other (income) / expense(12)(6)(35)(356)
Earnings before income taxes909 1,911 2,375 6,890 
Provision for income taxes197 423 471 1,488 
Net earnings$712 $1,488 $1,904 $5,402 
Basic earnings per share$1.55 $3.07 $4.11 $10.97 
Diluted earnings per share$1.54 $3.04 $4.09 $10.87 
Weighted average common shares outstanding
Basic460.3 484.8 462.6 492.2 
Diluted462.5 489.4 465.3 496.8 
Antidilutive shares1.3 — 1.1 — 

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2022 Form 10-Q
1
FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income  
 Three Months EndedNine Months Ended
(millions) (unaudited)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Net earnings$712 $1,488 $1,904 $5,402 
Other comprehensive income, net of tax    
Pension benefit liabilities11 21 33 63 
Cash flow hedges and currency translation adjustment150 5 312 6 
Other comprehensive income161 26 345 69 
Comprehensive income$873 $1,514 $2,249 $5,471 

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2022 Form 10-Q
2
FINANCIAL STATEMENTS
Consolidated Statements of Financial Position   
(millions, except footnotes) (unaudited)October 29,
2022		January 29,
2022		October 30,
2021
Assets 
Cash and cash equivalents$954 $5,911 $5,753 
Inventory17,117 13,902 14,958 
Other current assets2,322 1,760 1,865 
Total current assets20,393 21,573 22,576 
Property and equipment
Land6,214 6,164 6,146 
Buildings and improvements34,279 32,985 32,478 
Fixtures and equipment7,184 6,407 6,144 
Computer hardware and software2,899 2,505 2,447 
Construction-in-progress2,358 1,257 1,302 
Accumulated depreciation(22,013)(21,137)(20,602)
Property and equipment, net30,921 28,181 27,915 
Operating lease assets2,596 2,556 2,539 
Other noncurrent assets1,705 1,501 1,381 
Total assets$55,615 $53,811 $54,411 
Liabilities and shareholders’ investment
Accounts payable$15,438 $15,478 $16,250 
Accrued and other current liabilities6,138 6,098 5,925 
Current portion of long-term debt and other borrowings2,207 171 1,176 
Total current liabilities23,783 21,747 23,351 
Long-term debt and other borrowings14,237 13,549 11,586 
Noncurrent operating lease liabilities2,590 2,493 2,494 
Deferred income taxes2,240 1,566 1,246 
Other noncurrent liabilities1,746 1,629 1,931 
Total noncurrent liabilities20,813 19,237 17,257 
Shareholders’ investment
Common stock38 39 40 
Additional paid-in capital6,558 6,421 6,381 
Retained earnings4,631 6,920 8,069 
Accumulated other comprehensive loss(208)(553)(687)
Total shareholders’ investment11,019 12,827 13,803 
Total liabilities and shareholders’ investment$55,615 $53,811 $54,411 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 460,297,654, 471,274,073 and 480,905,493 shares issued and outstanding as of October 29, 2022, January 29, 2022, and October 30, 2021, 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
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Q3 2022 Form 10-Q
3
FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows  
 Nine Months Ended
(millions) (unaudited)October 29, 2022October 30, 2021
Operating activities  
Net earnings$1,904 $5,402 
Adjustments to reconcile net earnings to cash provided by operating activities:  
Depreciation and amortization2,004 1,952 
Share-based compensation expense177 187 
Deferred income taxes548 233 
Gain on Dermstore sale— (335)
Noncash losses / (gains) and other, net
141 18 
Changes in operating accounts: 
Inventory(3,215)(4,305)
Other assets(205)(117)
Accounts payable(224)3,284 
Accrued and other liabilities(578)(722)
Cash provided by operating activities552 5,597 
Investing activities  
Expenditures for property and equipment(4,323)(2,483)
Proceeds from disposal of property and equipment4 23 
Proceeds from Dermstore sale— 356 
Other investments16 14 
Cash required for investing activities(4,303)(2,090)
Financing activities  
Change in commercial paper, net2,104 — 
Additions to long-term debt991 — 
Reductions of long-term debt(139)(112)
Dividends paid(1,339)(1,116)
Repurchase of stock(2,825)(5,042)
Stock option exercises2 5 
Cash required for financing activities(1,206)(6,265)
Net decrease in cash and cash equivalents(4,957)(2,758)
Cash and cash equivalents at beginning of period 5,911 8,511 
Cash and cash equivalents at end of period $954 $5,753 
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities$116 $234 
Leased assets obtained in exchange for new operating lease liabilities203 482 
 
See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2022 Form 10-Q
4
FINANCIAL STATEMENTS
Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
January 30, 2021500.9 $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 awards1.3 — (58)— — (58)
May 1, 2021496.1 $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 awards0.2 — 61 — — 61 
July 31, 2021489.7 $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, 2021480.9 $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 awards0.2 — 40 — — 40 
January 29, 2022471.3 $39 $6,421 $6,920 $(553)$12,827 

TARGET CORPORATION
tgt-20221029_g2.jpg
Q3 2022 Form 10-Q
5
FINANCIAL STATEMENTS
Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
January 29, 2022471.3 $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 awards1.4 1 (78)— — (77)
April 30, 2022463.7 $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 awards0.1 — 40 — — 40 
July 31, 2022460.2 $38 $6,502 $4,421 $(369)$10,592 
Net earnings— — — 712 — 712 
Other comprehensive income— — — — 161 161 
Dividends declared— — — (502)— (502)
Stock options and awards0.1 — 56 — — 56 
October 29, 2022460.3 $38 $6,558 $4,631 $(208)$11,019 

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

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION
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Q3 2022 Form 10-Q
6
FINANCIAL STATEMENTS
INDEX

INDEX TO NOTES
TARGET CORPORATION
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Q3 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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Q3 2022 Form 10-Q
8
FINANCIAL STATEMENTS
NOTES
3. Revenues

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).

RevenuesThree Months EndedNine Months Ended
(millions)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Apparel and accessories (a)
$4,367 $4,364 $13,223 $13,384 
Beauty and household essentials (b)
7,465 6,980 21,726 20,070 
Food and beverage (c)
5,748 5,074 16,521 14,617 
Hardlines (d)
3,665 3,841 11,244 11,654 
Home furnishings and décor (e)
4,832 4,989 13,750 14,147 
Other45 42 141 123 
Sales26,122 25,290 76,605 73,995 
Credit card profit sharing184 184 550 527 
Other212 178 570 487 
Other revenue396 362 1,120 1,014 
Total revenue$26,518 $25,652 $77,725 $75,009 
(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 29, 2022, January 29, 2022, and October 30, 2021, the accrual for estimated returns was $209 million, $165 million, and $210 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 ActivityJanuary 29,
2022
Gift Cards Issued During Current Period But Not Redeemed (b)
Revenue Recognized From Beginning LiabilityOctober 29,
2022
(millions)
Gift card liability (a)
$1,202 $533 $(772)$963 
(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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Q3 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 BasisFair Value
(millions)ClassificationMeasurement LevelOctober 29, 2022January 29, 2022October 30, 2021
Assets   
Short-term investmentsCash and Cash EquivalentsLevel 1$— $4,985 $4,818 
Prepaid forward contracts Other Current AssetsLevel 127 35 44 
Interest rate swapsOther Current AssetsLevel 253 17 12 
Interest rate swapsOther Noncurrent AssetsLevel 2341 135 116 
Liabilities   
Interest rate swapsOther Noncurrent LiabilitiesLevel 2147 — — 

Significant Financial Instruments Not Measured at Fair Value (a)

(millions)
October 29, 2022January 29, 2022October 30, 2021
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Long-term debt, including current portion (b)
$12,505 $11,291 $11,568 $12,808 $10,605 $12,300 
(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 $5 million and $55 million for the three and nine months ended October 29, 2022, respectively. We recognized impairment charges of $3 million and $84 million for the three and nine months ended October 30, 2021, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

6. Commercial Paper and Long-Term Debt

In September 2022, we issued unsecured fixed rate debt of $1.0 billion at 4.5 percent that matures in September 2032. In connection with this issuance, we terminated certain of our forward-starting interest rate swaps. Note 7 provides additional information.

We obtain short-term financing from time to time under our commercial paper program. For the nine months ended October 29, 2022, the maximum amount outstanding was $2.1 billion, and the average daily amount outstanding was $713 million, at a weighted average annual interest rate of 1.91 percent. As of October 29, 2022, $2.1 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.

TARGET CORPORATION
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Q3 2022 Form 10-Q
10
FINANCIAL STATEMENTS
NOTES
In October 2022, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2023. We also extended our existing committed $3.0 billion unsecured revolving credit facility, which now expires in October 2027. No balances were outstanding under either credit facility at any time during 2021 or 2022.

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.

We were party to interest rate swaps with notional amounts totaling $2.45 billion as of October 29, 2022, and $1.50 billion as of January 29, 2022, and October 30, 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 nine months ended October 29, 2022, and October 30, 2021.

We were party to forward-starting interest rate swaps with notional amounts totaling $1.45 billion as of October 29, 2022, $2.15 billion as of January 29, 2022, and $1.25 billion as of October 30, 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 two years. In September 2022, we terminated forward-starting interest rate swap agreements that hedged $700 million of the $1.0 billion debt issuance described in Note 6. The resulting gain of $109 million was recorded in Accumulated Other Comprehensive Loss (AOCI) and will be recognized as a reduction to Net Interest Expense over the term of the debt. Based on the fair value of our remaining forward-starting interest rate swaps as of October 29, 2022, AOCI included an unrealized gain of $394 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)
October 29, 2022January 29, 2022October 30, 2021
Long-term debt and other borrowings
Carrying amount of hedged debt$2,294 $1,572 $1,609 
Cumulative hedging adjustments, included in carrying amount(146)77 114 

Effect of Hedges on Net Interest ExpenseThree Months EndedNine Months Ended
(millions)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges$(168)$(40)$(223)$(69)
Hedged debt168 40 223 69 
Total$— $— $— $— 

TARGET CORPORATION
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Q3 2022 Form 10-Q
11
FINANCIAL STATEMENTS
NOTES
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. We did not repurchase any of our shares during the three months ended October 29, 2022.

Share Repurchase ActivityThree Months EndedNine Months Ended
(millions, except per share data)October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Number of shares purchased— 8.8 12.5 21.5 
Average price paid per share$— $246.80 $211.57 $226.93 
Total investment$— $2,184 $2,646 $4,884 

During the first quarter of 2022, we entered into an ASR arrangement to repurchase up to $2.75 billion of our common stock. 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.

9. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits ExpenseThree Months EndedNine Months Ended
(millions)ClassificationOctober 29, 2022October 30, 2021October 29, 2022October 30, 2021
Service cost benefits earnedSG&A $22 $25 $68 $73 
Interest cost on projected benefit obligationNet Other (Income) / Expense29 24 88 72 
Expected return on assetsNet Other (Income) / Expense(59)(60)(176)(178)
Amortization of lossesNet Other (Income) / Expense16 28 46 85 
Amortization of prior service costNet Other (Income) / Expense— 2 10 1 
Total$8 $19 $36 $53 
 
10. Accumulated Other Comprehensive Income (Loss)

 
Change in Accumulated Other Comprehensive Income (Loss)Cash Flow HedgesCurrency Translation AdjustmentPensionTotal
(millions)
January 29, 2022$49 $(19)$(583)$(553)
Other comprehensive income (loss) before reclassifications, net of tax316 (3)— 313 
Amounts reclassified from AOCI, net of tax(1)— 33 32 
October 29, 2022$364 $(22)$(550)$(208)


TARGET CORPORATION
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Q3 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

Third quarter 2022 included the following notable items:

•GAAP diluted earnings per share were $1.54.
•Adjusted diluted earnings per share were $1.54.
•Total revenue increased 3.4 percent, reflecting total sales growth of 3.3 percent and a 9.5 percent increase in other revenue.
•Comparable sales increased 2.7 percent, driven by a 1.4 percent increase in traffic and a 1.3 percent increase in average transaction amount.
◦Comparable stores originated sales grew 3.2 percent.
◦Comparable digitally originated sales increased 0.3 percent.
•Operating income of $1.0 billion was 49.2 percent lower than the comparable prior-year period, driven primarily by a decrease in gross margin, reflecting higher clearance and promotional markdown rates, inventory shrink, and higher freight and merchandise costs, partially offset by the benefit of retail price increases. See Business Environment and Gross Margin Rate sections below for additional information.

Sales were $26.1 billion for the three months ended October 29, 2022, an increase of $832 million, or 3.3 percent, from the comparable prior-year period. Cash flow provided by operating activities was $552 million for the nine months ended October 29, 2022, compared with $5.6 billion for the nine months ended October 30, 2021. The drivers of the operating cash flow decrease are described on page 21.

Earnings Per ShareThree Months EndedNine Months Ended
October 29, 2022October 30, 2021ChangeOctober 29, 2022October 30, 2021Change
GAAP diluted earnings per share$1.54 $3.04 (49.3)%$4.09 $10.87 (62.4)%
Adjustments— (0.01)0.03 (0.50)
Adjusted diluted earnings per share$1.54 $3.03 (49.1)%$4.12 $10.37 (60.2)%
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 19.

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 October 29, 2022, after-tax ROIC was 14.6 percent, compared with 31.3 percent for the trailing twelve months ended October 30, 2021. The calculation of ROIC is provided on page 20.

Business Environment

During the third quarter of 2022, we have continued to see soft trends in Discretionary categories (Apparel and Accessories, Hardlines, and Home Furnishings and Décor), which accelerated in October. We believe this is consistent with the broader industry trends. Our overall comparable sales increase reflects growth in our Frequency categories (Beauty and Household Essentials and Food and Beverage), partially offset by sales decreases in our Discretionary categories. Our comparable sales performance also reflects the impact of retail price increases. Within the quarter, comparable sales grew 2.8 percent in August, 4.0 percent in September, and 0.9 percent in October. Notably, within October, we saw a significant change in the pace of sales, with an increase in comparable sales during the first week, followed by a decrease over the last three weeks of the month, driven by steeper declines in our Discretionary categories.

TARGET CORPORATION
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Q3 2022 Form 10-Q
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL SUMMARY
Throughout the COVID-19 pandemic, the retail industry has experienced continued disruption and volatility in the global supply chain. In response, we have ordered import merchandise (which typically has longer lead times) 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. During the third quarter of 2022, port congestion, shipping container availability, and other supply chain pressures have improved. This has resulted in inventory arriving earlier than anticipated, which has resulted in increased costs of managing elevated inventory levels. These factors, net of pricing actions we have taken to address the impact of higher merchandise and freight costs, have resulted in decreased profitability in the three and nine months ended October 29, 2022, compared to the prior-year periods. We believe that the actions we have taken reduce our risks and provide additional flexibility to focus on serving guests in a rapidly changing environment. The Gross Margin Rate analysis on page 17 and the Inventory section on page 21 provide additional information.

Analysis of Results of Operations

Summary of Operating Income Three Months Ended Nine Months Ended 
(dollars in millions)October 29, 2022October 30, 2021ChangeOctober 29, 2022October 30, 2021Change
Sales$26,122 $25,290 3.3 %$76,605 $73,995 3.5 %
Other revenue396 362 9.5 1,120 1,014 10.4 
Total revenue26,518 25,652 3.4 77,725 75,009 3.6 
Cost of sales19,680 18,206 8.1 58,283 52,202 11.6 
Selling, general and administrative expenses5,219 4,859 7.4 14,983 14,217 5.4 
Depreciation and amortization (exclusive of depreciation included in cost of sales)597 577 3.6 1,770 1,739 1.8 
Operating income$1,022 $2,010 (49.2)%$2,689 $6,851 (60.8)%

Rate AnalysisThree Months EndedNine Months Ended
October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Gross margin rate24.7 %28.0 %23.9 %29.5 %
SG&A expense rate19.7 18.9 19.3 19.0 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)2.3 2.2 2.3 2.3 
Operating income margin rate3.9