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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 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
 
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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)
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 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, 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 companyEmerging 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
 
 
 
 
 
 
 
 
   
 
   
 



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 31, 2020November 2, 2019October 31, 2020November 2, 2019
Sales$22,336 $18,414 $64,403 $53,997 
Other revenue296 251 819 716 
Total revenue22,632 18,665 65,222 54,713 
Cost of sales 15,509 12,935 45,692 37,808 
Selling, general and administrative expenses4,647 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 expense632 113 871 359 
Net other (income) / expense5 (12)16 (38)
Earnings from continuing operations before income taxes1,298 901 3,816 3,139 
Provision for income taxes284 195 828 703 
Net earnings from continuing operations1,014 706 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
Basic500.6 509.7 500.6 512.5 
Diluted505.4 514.8 505.2 516.8 
Antidilutive shares    
Note: Per share amounts may not foot due to rounding.

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2020 Form 10-Q
1

FINANCIAL STATEMENTS

Consolidated Statements of Comprehensive Income  
 Three Months EndedNine Months Ended
(millions) (unaudited)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Net earnings$1,014 $714 $2,988 $2,447 
Other comprehensive income    
Pension, net of tax22 10 66 30 
Currency translation adjustment and cash flow hedges, net of tax14 (1)5 2 
Other comprehensive income36 9 71 32 
Comprehensive income$1,050 $723 $3,059 $2,479 

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q3 2020 Form 10-Q
2

FINANCIAL STATEMENTS

Consolidated Statements of Financial Position   
(millions, except footnotes) (unaudited)October 31, 2020February 1, 2020November 2, 2019
Assets 
Cash and cash equivalents$5,996 $2,577 $969 
Inventory12,712 8,992 11,396 
Other current assets1,601 1,333 1,440 
Total current assets20,309 12,902 13,805 
Property and equipment   
Land6,063 6,036 6,040 
Buildings and improvements31,398 30,603 30,467 
Fixtures and equipment5,843 6,083 6,032 
Computer hardware and software2,706 2,692 2,636 
Construction-in-progress518 533 298 
Accumulated depreciation(19,755)(19,664)(19,089)
Property and equipment, net26,773 26,283 26,384 
Operating lease assets2,208 2,236 2,151 
Other noncurrent assets1,371 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 liabilities5,023 4,406 4,191 
Current portion of long-term debt and other borrowings131 161 1,159 
Total current liabilities19,357 14,487 16,608 
Long-term debt and other borrowings12,490 11,338 10,513 
Noncurrent operating lease liabilities2,196 2,275 2,208 
Deferred income taxes1,171 1,122 1,215 
Other noncurrent liabilities2,128 1,724 1,652 
Total noncurrent liabilities17,985 16,459 15,588 
Shareholders’ investment   
Common stock42 42 42 
Additional paid-in capital6,285 6,226 6,006 
Retained earnings7,789 6,433 6,270 
Accumulated other comprehensive loss(797)(868)(773)
Total shareholders’ investment13,319 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
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Q3 2020 Form 10-Q
3

FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows  
 Nine Months Ended
(millions) (unaudited)October 31, 2020November 2, 2019
Operating activities  
Net earnings$2,988 $2,447 
Earnings from discontinued operations, net of tax 11 
Net earnings from continuing operations2,988 2,436 
Adjustments to reconcile net earnings to cash provided by operations  
Depreciation and amortization1,848 1,905 
Share-based compensation expense161 116 
Deferred income taxes26 235 
Loss on debt extinguishment512  
Noncash losses / (gains) and other, net
124 6 
Changes in operating accounts 
Inventory(3,720)(1,899)
Other assets(174)(10)
Accounts payable4,287 1,473 
Accrued and other liabilities992 (121)
Cash provided by operating activities—continuing operations7,044 4,141 
Cash provided by operating activities—discontinued operations
 18 
Cash provided by operations7,044 4,159 
Investing activities  
Expenditures for property and equipment(2,009)(2,403)
Proceeds from disposal of property and equipment27 29 
Other investments(3)14 
Cash required for investing activities(1,985)(2,360)
Financing activities  
Additions to long-term debt2,480 994 
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 exercises18 65 
Cash required for financing activities(1,640)(2,386)
Net increase in cash and cash equivalents3,419 (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
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Q3 2020 Form 10-Q
4

FINANCIAL STATEMENTS

Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
February 2, 2019517.8 $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 awards1.1 — 19 — — 19 
May 4, 2019512.3 $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 awards0.3 — 53 — — 53 
August 3, 2019511.3 $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 awards0.9 — 70 — — 70 
November 2, 2019506.7 $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 awards0.1 — 42 — — 42 
February 1, 2020504.2 $42 $6,226 $6,433 $(868)$11,833 

TARGET CORPORATION
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Q3 2020 Form 10-Q
5

FINANCIAL STATEMENTS

Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
February 1, 2020504.2 $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 awards1.4 — (20)— — (20)
May 2, 2020499.9 $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 awards0.4 — 42 — — 42 
August 1, 2020500.3 $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 awards0.5 — 37 — — 37 
October 31, 2020500.8 $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
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Q3 2020 Form 10-Q
6

FINANCIAL STATEMENTS
INDEX


INDEX TO NOTES

TARGET CORPORATION
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Q3 2020 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 (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
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Q3 2020 Form 10-Q
8

FINANCIAL STATEMENTS
NOTES
3. Revenues

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

RevenuesThree Months EndedNine Months Ended
(millions)October 31, 2020November 2, 2019October 31, 2020November 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 
Other26 21 89 83 
Sales22,336 18,414 64,403 53,997 
Credit card profit sharing164 177 488 505 
Other132 74 331 211 
Other revenue296 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 ActivityFebruary 1, 2020
Gift Cards Issued During Current Period But Not Redeemed (b)
Revenue Recognized From Beginning LiabilityOctober 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
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Q3 2020 Form 10-Q
9

FINANCIAL STATEMENTS
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 BasisFair Value at
(millions)ClassificationPricing CategoryOctober 31, 2020February 1, 2020November 2, 2019
Assets   
Short-term investmentsCash and Cash EquivalentsLevel 1$5,089 $1,810 $163 
Prepaid forward contracts Other Current AssetsLevel 132 23 24 
Equity securities (a)
Other Current AssetsLevel 119 39 80 
Interest rate swapsOther Noncurrent AssetsLevel 2205 137 122 
Liabilities   
Interest rate swapsOther Noncurrent LiabilitiesLevel 23   
(a)Represents our investment in Casper Sleep Inc. common stock.

Significant Financial Instruments Not Measured at Fair Value (a)

(millions)
October 31, 2020February 1, 2020November 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
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Q3 2020 Form 10-Q
10

FINANCIAL STATEMENTS
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, 2020February 1, 2020November 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 amount203 137 122 

Effect of Hedges on Net Interest ExpenseThree Months EndedNine Months Ended
(millions)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges$(36)$14 $66 $115 
Hedged debt36 (14)(66)(115)
Total$ $ $ $ 

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 ActivityThree Months EndedNine 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
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Q3 2020 Form 10-Q
11

FINANCIAL STATEMENTS
NOTES
9. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits ExpenseThree Months EndedNine Months Ended
(millions)ClassificationOctober 31, 2020November 2, 2019October 31, 2020November 2, 2019
Service cost benefits earnedSG&A Expenses$25 $23 $76 $69 
Interest cost on projected benefit obligation
Net Other (Income) / Expense30 37 89 111 
Expected return on assetsNet Other (Income) / Expense(61)(62)(182)(186)
Amortization of lossesNet Other (Income) / Expense32 16 96 47 
Amortization of prior service costNet Other (Income) / Expense(3)(3)(9)(8)
Settlement chargesNet Other (Income) / Expense1  1  
Total$24 $11 $71 $33 
 
10. Accumulated Other Comprehensive Loss