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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 28, 2023
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
 
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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 filerAccelerated filer
Non-accelerated filerSmaller 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 17, 2023, were 461,661,800.


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 28, 2023October 29, 2022October 28, 2023October 29, 2022
Sales$25,004 $26,122 $74,336 $76,605 
Other revenue394 396 1,157 1,120 
Total revenue25,398 26,518 75,493 77,725 
Cost of sales 18,149 19,680 54,333 58,283 
Selling, general and administrative expenses5,316 5,219 15,525 14,983 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 616 597 1,793 1,770 
Operating income1,317 1,022 3,842 2,689 
Net interest expense107 125 395 349 
Net other income(25)(12)(64)(35)
Earnings before income taxes1,235 909 3,511 2,375 
Provision for income taxes264 197 755 471 
Net earnings$971 $712 $2,756 $1,904 
Basic earnings per share$2.10 $1.55 $5.97 $4.11 
Diluted earnings per share$2.10 $1.54 $5.96 $4.09 
Weighted average common shares outstanding
Basic461.6 460.3 461.4 462.6 
Diluted462.6 462.5 462.7 465.3 
Antidilutive shares3.0 1.3 2.6 1.1 

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2023 Form 10-Q
1

FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income  
 Three Months EndedNine Months Ended
(millions) (unaudited)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Net earnings$971 $712 $2,756 $1,904 
Other comprehensive income, net of tax    
Pension benefit liabilities 11 3 33 
Cash flow hedges and currency translation adjustment(5)150 (14)312 
Other comprehensive income (loss)(5)161 (11)345 
Comprehensive income$966 $873 $2,745 $2,249 

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2023 Form 10-Q
2

FINANCIAL STATEMENTS
Consolidated Statements of Financial Position   
(millions, except footnotes) (unaudited)October 28,
2023
January 28,
2023
October 29,
2022
Assets 
Cash and cash equivalents$1,910 $2,229 $954 
Inventory14,731 13,499 17,117 
Other current assets1,958 2,118 2,322 
Total current assets18,599 17,846 20,393 
Property and equipment
Land6,520 6,231 6,214 
Buildings and improvements36,627 34,746 34,279 
Fixtures and equipment8,490 7,439 7,184 
Computer hardware and software3,312 3,039 2,899 
Construction-in-progress2,000 2,688 2,358 
Accumulated depreciation(23,781)(22,631)(22,013)
Property and equipment, net33,168 31,512 30,921 
Operating lease assets3,086 2,657 2,596 
Other noncurrent assets1,376 1,320 1,705 
Total assets$56,229 $53,335 $55,615 
Liabilities and shareholders’ investment
Accounts payable$14,291 $13,487 $15,438 
Accrued and other current liabilities6,099 5,883 6,138 
Current portion of long-term debt and other borrowings1,112 130 2,207 
Total current liabilities21,502 19,500 23,783 
Long-term debt and other borrowings14,883 16,009 14,237 
Noncurrent operating lease liabilities3,031 2,638 2,590 
Deferred income taxes2,447 2,196 2,240 
Other noncurrent liabilities1,852 1,760 1,746 
Total noncurrent liabilities22,213 22,603 20,813 
Shareholders’ investment
Common stock38 38 38 
Additional paid-in capital6,681 6,608 6,558 
Retained earnings6,225 5,005 4,631 
Accumulated other comprehensive loss(430)(419)(208)
Total shareholders’ investment12,514 11,232 11,019 
Total liabilities and shareholders’ investment$56,229 $53,335 $55,615 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 461,651,176, 460,346,947, and 460,297,654 shares issued and outstanding as of October 28, 2023, January 28, 2023, and October 29, 2022, 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 2023 Form 10-Q
3

FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows  
 Nine Months Ended
(millions) (unaudited)October 28, 2023October 29, 2022
Operating activities  
Net earnings$2,756 $1,904 
Adjustments to reconcile net earnings to cash provided by operating activities:  
Depreciation and amortization2,072 2,004 
Share-based compensation expense176 177 
Deferred income taxes252 548 
Noncash losses / (gains) and other, net
101 141 
Changes in operating accounts: 
Inventory(1,232)(3,215)
Other assets(208)(205)
Accounts payable887 (224)
Accrued and other liabilities528 (578)
Cash provided by operating activities
5,332 552 
Investing activities  
Expenditures for property and equipment(3,952)(4,323)
Proceeds from disposal of property and equipment24 4 
Other investments18 16 
Cash required for investing activities(3,910)(4,303)
Financing activities  
Change in commercial paper, net 2,104 
Additions to long-term debt 991 
Reductions of long-term debt(114)(139)
Dividends paid(1,503)(1,339)
Repurchase of stock (2,646)
Shares withheld for taxes on share-based compensation(124)(179)
Stock option exercises 2 
Cash required for financing activities(1,741)(1,206)
Net decrease in cash and cash equivalents(319)(4,957)
Cash and cash equivalents at beginning of period 2,229 5,911 
Cash and cash equivalents at end of period $1,910 $954 
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities$86 $116 
Leased assets obtained in exchange for new operating lease liabilities679 203 
 
See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2023 Form 10-Q
4

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 loss— — — — (17)(17)
Dividends declared— — — (502)— (502)
Repurchase of stock(3.6)(1)870 (755)— 114 
Stock options and awards0.1 — 40 — — 40 
July 30, 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 
Net earnings— — — 876 — 876 
Other comprehensive loss— — — — (211)(211)
Dividends declared— — — (502)— (502)
Stock options and awards— — 50 — — 50 
January 28, 2023460.3 $38 $6,608 $5,005 $(419)$11,232 

TARGET CORPORATION
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Q3 2023 Form 10-Q
5

FINANCIAL STATEMENTS
Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
January 28, 2023460.3 $38 $6,608 $5,005 $(419)$11,232 
Net earnings— — — 950 — 950 
Other comprehensive loss— — — — (3)(3)
Dividends declared— — — (507)— (507)
Stock options and awards1.3 — (67)— — (67)
April 29, 2023461.6 $38 $6,541 $5,448 $(422)$11,605 
Net earnings— — — 835 — 835 
Other comprehensive loss— — — — (3)(3)
Dividends declared— — — (516)— (516)
Stock options and awards— — 69 — — 69 
July 29, 2023461.6 $38 $6,610 $5,767 $(425)$11,990 
Net earnings— — — 971 — 971 
Other comprehensive loss
— — — — (5)(5)
Dividends declared— — — (513)— (513)
Stock options and awards0.1 — 71 — — 71 
October 28, 2023461.7 $38 $6,681 $6,225 $(430)$12,514 

We declared $1.10 and $1.08 dividends per share for the three months ended October 28, 2023 and October 29, 2022, respectively, and $4.14 per share for the fiscal year ended January 28, 2023.

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION
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Q3 2023 Form 10-Q
6

FINANCIAL STATEMENTS
INDEX

INDEX TO NOTES
TARGET CORPORATION
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Q3 2023 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 most recent Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements.

We operate as a single segment that is designed to enable guests to purchase products seamlessly in stores or through our digital channels. Nearly all of our revenues are generated in the U.S. The vast majority of our long-lived assets are located within the U.S.

Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year.

TARGET CORPORATION
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Q3 2023 Form 10-Q
8

FINANCIAL STATEMENTS
NOTES
2. Revenue

Merchandise sales represent the vast majority of our revenues. We also earn revenues from a variety of other sources, most notably credit card profit-sharing income from our arrangement with TD Bank Group (TD).

RevenueThree Months EndedNine Months Ended
(millions)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Apparel & accessories (a)
$4,007 $4,367 $12,075 $13,223 
Beauty & household essentials (b)
7,619 7,465 22,814 21,726 
Food & beverage (c)
5,736 5,748 17,125 16,521 
Hardlines (d)
3,192 3,665 9,966 11,244 
Home furnishings & décor (e)
4,420 4,832 12,230 13,750 
Other30 45 126 141 
Sales25,004 26,122 74,336 76,605 
Credit card profit sharing165 184 508 550 
Other229 212 649 570 
Other revenue394 396 1,157 1,120 
Total revenue$25,398 $26,518 $75,493 $77,725 
(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 28, 2023, January 28, 2023, and October 29, 2022, the accrual for estimated returns was $207 million, $174 million, and $209 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 28,
2023
Gift Cards Issued During Current Period But Not Redeemed (b)
Revenue Recognized From Beginning LiabilityOctober 28,
2023
(millions)
Gift card liability (a)
$1,240 $466 $(796)$910 
(a)Included in Accrued and Other Current Liabilities.
(b)Net of estimated breakage.

TARGET CORPORATION
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Q3 2023 Form 10-Q
9

FINANCIAL STATEMENTS
NOTES
Other Revenue

Credit card profit sharing — We receive payments under a credit card program agreement with TD. Under the agreement, we receive a percentage of the profits generated by the Target Credit Card and Target MasterCard receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance.

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


3. Fair Value Measurements

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

 
Financial Instruments Measured On a Recurring BasisFair Value
(millions)ClassificationMeasurement LevelOctober 28, 2023January 28, 2023October 29, 2022
Assets   
Short-term investmentsCash and Cash EquivalentsLevel 1$1,004 $1,343 $ 
Prepaid forward contracts Other Current AssetsLevel 118 27 27 
Interest rate swapsOther Current AssetsLevel 2  53 
Interest rate swapsOther Noncurrent AssetsLevel 2 7 341 
Liabilities   
Interest rate swapsOther Current LiabilitiesLevel 27   
Interest rate swapsOther Noncurrent LiabilitiesLevel 2190 81 147 

Significant Financial Instruments Not Measured at Fair Value (a)

(millions)
October 28, 2023January 28, 2023October 29, 2022
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt, including current portion (b)
$14,149 $12,485 $14,141 $13,688 $12,505 $11,291 
(a)The carrying amounts of certain other current assets, commercial paper, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.
(b)The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for the same or similar types of financial instruments and would be classified as Level 2. These amounts exclude commercial paper, fair value hedge adjustments, and lease liabilities.

4. Supplier Finance Programs

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

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

Our outstanding vendor obligations eligible for early payment under these arrangements totaled $4.5 billion, $3.4 billion, and $4.5 billion as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively, and are included within Accounts Payable on our Consolidated Statements of Financial Position. Our outstanding vendor obligations do not represent actual receivables sold by our vendors to the financial institutions, which may be lower.

TARGET CORPORATION
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Q3 2023 Form 10-Q
10

FINANCIAL STATEMENTS
NOTES
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 $64 million and $98 million for the three and nine months ended October 28, 2023, respectively. We recognized impairment charges of $5 million and $55 million for the three and nine months ended October 29, 2022, 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 three months ended October 28, 2023, there were no commercial paper amounts outstanding. For the three months ended October 29, 2022, the maximum amount outstanding was $2.1 billion and the average daily amount outstanding was $1.1 billion, at a weighted average annual interest rate of 2.8 percent.

For the nine months ended October 28, 2023 and October 29, 2022, the maximum amounts outstanding were $90 million and $2.1 billion, respectively, and the average daily amounts outstanding were $1 million and $713 million, respectively, at a weighted average annual interest rate of 4.8 percent and 1.9 percent, respectively.

No balances were outstanding as of October 28, 2023. 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 Statements of Financial Position.

In October 2023, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2024 and terminated our prior 364-day credit facility. We also exercised our option to extend our existing five-year unsecured revolving credit facility, which has a maximum committed capacity of $3.0 billion and now expires in October 2028. No balances were outstanding under either credit facility at any time during 2023 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 3 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

We were party to interest rate swaps with notional amounts totaling $2.45 billion as of October 28, 2023, January 28, 2023, and October 29, 2022. 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 28, 2023 and October 29, 2022.

During 2023, we amended interest rate swaps with notional amounts totaling $1.5 billion to replace the London Interbank Offered Rate (LIBOR) with the daily Secured Overnight Financing Rate (SOFR) as part of our planned reference rate reform activities. These amendments did not result in any change to our application of hedge accounting or any impact to our consolidated financial statements.

We were party to forward-starting interest rate swaps with notional amounts totaling $1.45 billion as of October 29, 2022. During 2022, we terminated all remaining forward-starting interest rate swap agreements. The resulting gains upon termination were recorded in Accumulated Other Comprehensive Loss and will be recognized as a reduction to Net Interest Expense over the respective term of the debt.

TARGET CORPORATION
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Q3 2023 Form 10-Q
11

FINANCIAL STATEMENTS
NOTES
Effect of Hedges on Debt
(millions)
October 28, 2023January 28, 2023October 29, 2022
Long-term debt and other borrowings
Carrying amount of hedged debt$2,245 $2,366 $2,294 
Cumulative hedging adjustments, included in carrying amount(197)(74)(146)

Effect of Hedges on Net Interest ExpenseThree Months EndedNine Months Ended
(millions)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swaps designated as fair value hedges$(60)$(168)$(123)$(223)
Hedged debt60 168 123 223 
Gain on cash flow hedges recognized in Net Interest Expense6  18  
Total$6 $ $18 $ 

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 nine months ended October 28, 2023.

Share Repurchase ActivityThree Months EndedNine Months Ended
(millions, except per share data)October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Number of shares purchased   12.5 
Average price paid per share$ $ $ $211.57 
Total investment$ $ $ $2,646 

9. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits ExpenseThree Months EndedNine Months Ended
(millions)ClassificationOctober 28, 2023October 29, 2022October 28, 2023October 29, 2022
Service cost benefits earnedSG&A $19 $22 $58 $68 
Interest cost on projected benefit obligationNet Other Income42 29 125 88 
Expected return on assetsNet Other Income(67)(59)(201)(176)
Amortization of lossesNet Other Income 16 1 46 
Prior service costNet Other Income  11 10 
Total$(6)$8 $(6)$36 
 
TARGET CORPORATION
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Q3 2023 Form 10-Q
12

FINANCIAL STATEMENTS
NOTES
10. Accumulated Other Comprehensive Income (Loss)

 
Change in Accumulated Other Comprehensive Income (Loss)Cash Flow HedgesCurrency Translation AdjustmentPensionTotal
(millions)
January 28, 2023$300 $(23)$(696)$(419)
Other comprehensive income (loss) before reclassifications, net of tax (1) (1)
Amounts reclassified from AOCI, net of tax(13) 3 (10)
October 28, 2023$287 $(24)$(693)$(430)


TARGET CORPORATION
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Q3 2023 Form 10-Q
13

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 2023 included the following notable items:

GAAP and Adjusted diluted earnings per share were $2.10.
Total revenue was $25.4 billion, a decrease of 4.2 percent, reflecting a total sales decrease of 4.3 percent and a 0.6 percent decrease in other revenue.
Comparable sales decreased 4.9 percent, reflecting a 4.1 percent decrease in traffic and a 0.8 percent decrease in average transaction amount.
Comparable stores-originated sales declined 4.6 percent.
Comparable digitally-originated sales declined 6.0 percent.
Operating income of $1.3 billion was 28.9 percent higher than the comparable prior-year period. See Business Environment below for additional information.

Cash flow provided by operating activities was $5.3 billion for the nine months ended October 28, 2023, compared with $552 million for the nine months ended October 29, 2022. The drivers of the operating cash flow increase are described on page 21.

Earnings Per ShareThree Months EndedNine Months Ended
October 28, 2023October 29, 2022ChangeOctober 28, 2023October 29, 2022Change
GAAP diluted earnings per share$2.10 $1.54 36.3 %$5.96 $4.09 45.6 %
Adjustments— — — 0.03 
Adjusted diluted earnings per share$2.10 $1.54 36.3 %$5.96 $4.12 44.4 %
Note: 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 28, 2023, after-tax ROIC was 13.9 percent, compared with 14.6 percent for the trailing twelve months ended October 29, 2022. The calculation of ROIC is provided on page 20.

Business Environment

During the third quarter of 2023, we experienced sales declines across our business, primarily in each of our Discretionary categories (Apparel & Accessories, Hardlines, and Home Furnishings & Décor), partially offset by net growth in Frequency categories (Beauty & Household Essentials and Food & Beverage). The trend of decreased Discretionary category sales began in 2022. In response, during 2022, we took actions and employed strategies to align inventories with sales trends. These actions, as well as improvements in the supply chain, have resulted in decreased inventory as of October 28, 2023 compared with October 29, 2022. These actions and improvements have also resulted in a reduction in costs related to managing elevated inventory levels and reduced our working capital investment.

Along with supply chain improvements, we have experienced a significant decrease in freight costs due to a decline in freight rates compared to 2022. We have also experienced lower digital fulfillment costs due to a decrease in digital sales and an increased mix of digital sales fulfilled through lower-cost same-day services.

We continue to experience higher inventory shrink, as a percentage of sales, relative to historical levels — including significantly higher shrink rates at certain stores. We believe that this trend is pervasive across the retail industry. Increased shrink has had, and if current trends persist will continue to have, an adverse impact on our results of operations, including impairment of our long-lived assets. Note 5 to the Financial Statements provides more information on impairment charges, including those related to store closures.

The Gross Margin Rate analysis on page 17 and the Inventory section on page 21 provide additional information.
TARGET CORPORATION
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Q3 2023 Form 10-Q
14

MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL SUMMARY

Analysis of Results of Operations

Summary of Operating Income Three Months Ended Nine Months Ended 
(dollars in millions)October 28, 2023October 29, 2022ChangeOctober 28, 2023October 29, 2022Change
Sales$25,004 $26,122 (4.3)%$74,336 $76,605 (3.0)%
Other revenue394 396 (0.6)1,157 1,120 3.3 
Total revenue25,398 26,518 (4.2)75,493 77,725 (2.9)
Cost of sales18,149 19,680 (7.8)54,333 58,283 (6.8)
Selling, general and administrative expenses5,316 5,219 1.8 15,525 14,983 3.6 
Depreciation and amortization (exclusive of depreciation included in cost of sales)616 597 3.2 1,793 1,770 1.3 
Operating income$1,317 $1,022 28.9 %$3,842 $2,689 42.9 %

Rate AnalysisThree Months EndedNine Months Ended
October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Gross margin rate27.4 %24.7 %26.9 %23.9 %
SG&A expense rate20.9 19.7 20.6 19.3 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)2.4 2.3 2.4 2.3 
Operating income margin rate5.2 3.9 5.1 3.5 
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 (number of transactions, or "traffic") and the amount spent each visit (average transaction amount).

TARGET CORPORATION
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Q3 2023 Form 10-Q
15

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Comparable SalesThree Months EndedNine Months Ended
 October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Comparable sales change(4.9)%2.7 %(3.5)%2.9 %
Drivers of change in comparable sales    
Number of transactions (traffic)(4.1)1.4 (2.7)2.6 
Average transaction amount(0.8)1.3 (0.8)0.2 

Comparable Sales by ChannelThree Months EndedNine Months Ended
 October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Stores originated comparable sales change(4.6)%3.2 %(2.8)%2.6 %
Digitally originated comparable sales change(6.0)0.3 (6.7)4.1 

Sales by ChannelThree Months EndedNine Months Ended
 October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Stores originated83.2 %82.9 %82.9 %82.3 %
Digitally originated16.8 17.1 17.1 17.7 
Total100 %100 %100 %100 %

Sales by Fulfillment ChannelThree Months EndedNine Months Ended
 October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Stores 97.7 %96.8 %97.5 %96.7 %
Other2.3 3.2 2.5 3.3 
Total100 %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 CategoryThree Months EndedNine Months Ended
October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Apparel & accessories16 %17 %16 %17 %
Beauty & household essentials30 29 31 28 
Food & beverage23 22 23 22 
Hardlines13 14 13 15 
Home furnishings & décor18 18 17 18 
Total100 %100 %100 %100 %

Note 2 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. For the three months ended October 28, 2023 and October 29, 2022, total RedCard Penetration was 18.3 percent and 19.6 percent, respectively. For the nine months ended October 28, 2023 and October 29, 2022, total RedCard Penetration was 18.6 percent and 20.0 percent, respectively.

TARGET CORPORATION
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Q3 2023 Form 10-Q
16

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS

Gross Margin Rate

Quarter-to-Date
39

For the three months ended October 28, 2023, our gross margin rate was 27.4 percent compared with 24.7 percent in the comparable prior-year period. The increase reflected the net impact of

merchandising benefit, including
lower freight costs; and
lower clearance and promotional markdown rates and other costs compared with the prior-year, which included the impact of inventory impairments and other actions;
lower digital fulfillment and supply chain costs due to
a decrease in digital volume;
an increased mix of digital sales fulfilled through lower-cost same-day services; and
lower inventory levels;
favorable category mix; and
higher inventory shrink.

Year-to-Date
55

For the nine months ended October 28, 2023, our gross margin rate was 26.9 percent compared with 23.9 percent in the comparable prior-year period. The increase reflected the net impact of

merchandising benefit, including
lower freight costs;
lower clearance and promotional markdown rates and other costs compared with the prior-year, which included the impact of inventory impairments and other actions; and
TARGET CORPORATION
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Q3 2023 Form 10-Q
17

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
retail price increases;
lower digital fulfillment and supply chain costs due to
a decrease in digital volume;
an increased mix of digital sales fulfilled through lower-cost same-day services; and
lower inventory levels;
favorable category mix; and
higher inventory shrink.

Business Environment on page 14 provides additional information.

Selling, General, and Administrative Expense Rate

For the three months ended October 28, 2023, our SG&A expense rate was 20.9 percent compared with 19.7 percent for the comparable prior-year period. For the nine months ended October 28, 2023, our SG&A expense rate was 20.6 percent compared with 19.3 percent for the comparable prior-year period. The increase reflected the net impact of cost increases across our business, including investments in team member pay and benefits, and the deleveraging impact of lower sales.

Store Data

Change in Number of StoresThree Months EndedNine Months Ended
October 28, 2023October 29, 2022October 28, 2023October 29, 2022
Beginning store count1,955 1,937 1,948 1,926 
Opened10 21 16 
Closed(9)— (13)(1)
Ending store count1,956 1,941 1,956 1,941 

Number of Stores andNumber of Stores
Retail Square Feet (a)
Retail Square FeetOctober 28, 2023January 28, 2023October 29, 2022October 28, 2023January 28, 2023October 29, 2022
170,000 or more sq. ft.273 274 274 48,824 48,985 48,985 
50,000 to 169,999 sq. ft.1,542 1,527 1,522 192,877 191,241 190,739 
49,999 or less sq. ft.141 147 145 4,207 4,358 4,305 
Total1,956 1,948 1,941 245,908 244,584 244,029 
(a)In thousands; reflects total square feet less office, supply chain facilities, and vacant space.
 
Other Performance Factors

Net Interest Expense

For the three months ended October 28, 2023, net interest expense was $107 million compared with $125 million in the comparable prior-year period. The decrease in net interest expense was primarily due to an increase in interest income, partially offset by higher debt levels and the impact of higher floating interest rates on our interest rate swaps. For the nine months ended October 28, 2023, net interest expense was $395 million compared with $349 million in the respective comparable prior-year period. The increase in net interest expense was primarily due to higher average debt levels in addition to the net impact of higher floating interest rates.

Provision for Income Taxes
 
Our effective income tax rate for the three months ended October 28, 2023 was 21.3 percent, consistent with 21.6 percent for the comparable prior-year period. Our effective tax rate for the nine months ended October 28, 2023 was 21.5 percent, compared with 19.8 percent in the comparable prior-year period. For the nine month period, the increase reflects higher pretax earnings in the current year, resulting in a smaller tax rate benefit from ongoing and discrete tax items.
TARGET CORPORATION
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Q3 2023 Form 10-Q
18

MANAGEMENT'S DISCUSSION AND ANALYSIS
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Reconciliation of Non-GAAP Financial Measures to GAAP Measures

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (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 EPSThree Months Ended
October 28, 2023October 29, 2022
(millions, except per share data)PretaxNet of TaxPer SharePretaxNet of TaxPer Share
GAAP and adjusted diluted earnings per share $2.10 $1.54 

Reconciliation of Non-GAAP Adjusted EPSNine Months Ended
October 28, 2023October 29, 2022
(millions, except per share data)PretaxNet of TaxPer SharePretaxNet of TaxPer Share
GAAP diluted earnings per share $5.96 $4.09 
Adjustments
Other (a)
$— $— $— $20 $15 $0.03 
Adjusted diluted earnings per share $5.96 $4.12 
(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 EBITDAThree Months Ended Nine Months Ended 
(dollars in millions)October 28, 2023October 29, 2022ChangeOctober 28, 2023October 29, 2022Change
Net earnings$971 $712 36.3 %$2,756 $1,904 44.7 %
+ Provision for income taxes264 197 34.2 755 471 60.6 
+ Net interest expense107 125 (14.1)395 349 13.4 
EBIT$1,342 $1,034 29.8 %$3,906 $2,724 43.5 %
+ Total depreciation and amortization (a)
722 674 7.1 2,072 2,004 3.4 
EBITDA$2,064 $1,708 20.9 %$5,978 $4,728 26.5 %
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

TARGET CORPORATION
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Q3 2023 Form 10-Q
19

MANAGEMENT'S DISCUSSION AND ANALYSIS
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income. We believe this metric is useful in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently, limiting the usefulness of the measure for comparisons with other companies.

After-Tax Return on Invested Capital
(dollars in millions)
Trailing Twelve Months
NumeratorOctober 28, 2023October 29, 2022
Operating income$5,001 $4,784 
 + Net other income79 61 
EBIT5,080 4,845 
 + Operating lease interest (a)
106 89 
  - Income taxes (b)
1,050 1,059 
Net operating profit after taxes$4,136 $3,875 

DenominatorOctober 28, 2023October 29, 2022October 30, 2021
Current portion of long-term debt and other borrowings$1,112 $2,207 $1,176 
 + Noncurrent portion of long-term debt14,883 14,237 11,586 
 + Shareholders' investment12,514 11,019 13,803 
 + Operating lease liabilities (c)
3,351 2,879 2,737 
  - Cash and cash equivalents1,910 954 5,753 
Invested capital$29,950 $29,388 $23,549 
Average invested capital (d)
$29,670 $26,469 
After-tax return on invested capital13.9 %14.6 %
(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 20.3 percent and 21.5 percent for the trailing twelve months ended October 28, 2023 and October 29, 2022, respectively. For the trailing twelve months ended October 28, 2023 and October 29, 2022, includes tax effect of $1.0 billion related to EBIT and $22 million and $19 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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Q3 2023 Form 10-Q
20

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 $1.9 billion, $2.2 billion, and $954 million as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively. Our cash and cash equivalents balance includes short-term investments of $1.0 billion and $1.3 billion as of October 28, 2023 and January 28, 2023, respectively. We had no short-term investments as of October 29, 2022. 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 provided by operating activities were $5.3 billion for the nine months ended October 28, 2023, compared with $552 million for the nine months ended October 29, 2022. For the nine months ended October 28, 2023, operating cash flows increased as a result of higher net earnings and an improvement in working capital, including lower inventory levels, compared with the nine months ended October 29, 2022.

Inventory

Inventory was $14.7 billion as of October 28, 2023, compared with $13.5 billion and $17.1 billion at January 28, 2023 and October 29, 2022, respectively. The increase from January 28, 2023, reflects the seasonal inventory build ahead of the November and December holiday sales period. The decrease from the balance as of October 29, 2022, primarily reflects actions taken to align inventory levels with sales trends and improvements in the supply chain, including reduced in-transit inventory, as well as cost decreases, primarily due to lower freight rates in 2023 compared to 2022.

The Business Environment section on page 14 provides additional information.

Investing Cash Flows

Cash required for investing activities decreased to $3.9 billion for the nine months ended October 28, 2023, compared to $4.3 billion for the nine months ended October 29, 2022, due to capital investments.

Dividends
 
We paid dividends totaling $507 million ($1.10 per share) and $1.5 billion ($3.26 per share) for the three and nine months ended October 28, 2023, respectively, and $497 million ($1.08 per share) and $1.3 billion ($2.88 per share) for the three and nine months ended October 29, 2022, respectively, a per share increase of 1.9 percent for the three month period and 13.2 percent for the nine month period. We declared dividends totaling $513 million ($1.10 per share) during the third quarter of 2023 and $502 million ($1.08 per share) during the third quarter of 2022, a per share increase of 1.9 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.

Share Repurchase

We did not repurchase any shares during the nine months ended October 28, 2023. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 8 to the Financial Statements for more information.
TARGET CORPORATION
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Q3 2023 Form 10-Q
21

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF FINANCIAL CONDITION

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 October 28, 2023, our credit ratings were as follows:

Credit RatingsMoody’sStandard and Poor’sFitch
Long-term debtA2AA
Commercial paperP-1A-1F1

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 facilities. In October 2023, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2024 and terminated our prior 364-day credit facility. We also exercised our option to extend our existing five-year unsecured revolving credit facility, which has a maximum committed capacity of $3.0 billion and now expires in October 2028. Both credit facilities backstop our commercial paper program. No balances were outstanding under either credit facility at any time during 2023 or 2022. We did not have any balances outstanding under our commercial paper program as of October 28, 2023, and we had $2.1 billion outstanding as of October 29, 2022. 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 facilities also contain a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of October 28, 2023, 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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Q3 2023 Form 10-Q
22

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 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 28, 2023, 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