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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 April 30, 2022
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 1-6049
 
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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 May 20, 2022, were 463,696,413.



TARGET CORPORATION

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
   
 
   
 



FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations  
 Three Months Ended
(millions, except per share data) (unaudited)April 30, 2022May 1, 2021
Sales$24,830 $23,879 
Other revenue340 318 
Total revenue25,170 24,197 
Cost of sales 18,461 16,716 
Selling, general and administrative expenses4,762 4,509 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 601 598 
Operating income1,346 2,374 
Net interest expense112 108 
Net other (income) / expense(15)(343)
Earnings before income taxes1,249 2,609 
Provision for income taxes240 512 
Net earnings$1,009 $2,097 
Basic earnings per share$2.17 $4.20 
Diluted earnings per share$2.16 $4.17 
Weighted average common shares outstanding
Basic464.0 498.6 
Diluted467.8 503.4 
Antidilutive shares  

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q1 2022 Form 10-Q
1

FINANCIAL STATEMENTS
Consolidated Statements of Comprehensive Income 
 Three Months Ended
(millions) (unaudited)April 30, 2022May 1, 2021
Net earnings$1,009 $2,097 
Other comprehensive income, net of tax  
Pension benefit liabilities11 22 
 Cash flow hedges and currency translation adjustment190 9 
Other comprehensive income201 31 
Comprehensive income$1,210 $2,128 

See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q1 2022 Form 10-Q
2

FINANCIAL STATEMENTS
Consolidated Statements of Financial Position   
(millions, except footnotes) (unaudited)April 30,
2022
January 29,
2022
May 1,
2021
Assets 
Cash and cash equivalents$1,112 $5,911 $7,816 
Inventory15,083 13,902 10,539 
Other current assets1,758 1,760 1,576 
Total current assets17,953 21,573 19,931 
Property and equipment
Land6,164 6,164 6,146 
Buildings and improvements33,300 32,985 31,710 
Fixtures and equipment6,459 6,407 5,496 
Computer hardware and software2,588 2,505 2,256 
Construction-in-progress1,444 1,257 973 
Accumulated depreciation(21,285)(21,137)(19,777)
Property and equipment, net28,670 28,181 26,804 
Operating lease assets2,571 2,556 2,362 
Other noncurrent assets1,648 1,501 1,374 
Total assets$50,842 $53,811 $50,471 
Liabilities and shareholders’ investment
Accounts payable$14,053 $15,478 $11,637 
Accrued and other current liabilities5,582 6,098 5,788 
Current portion of long-term debt and other borrowings1,089 171 1,173 
Total current liabilities20,724 21,747 18,598 
Long-term debt and other borrowings13,379 13,549 11,509 
Noncurrent operating lease liabilities2,581 2,493 2,337 
Deferred income taxes1,752 1,566 1,169 
Other noncurrent liabilities1,632 1,629 1,899 
Total noncurrent liabilities19,344 19,237 16,914 
Shareholders’ investment
Common stock39 39 41 
Additional paid-in capital5,592 6,421 6,271 
Retained earnings5,495 6,920 9,372 
Accumulated other comprehensive loss(352)(553)(725)
Total shareholders’ investment10,774 12,827 14,959 
Total liabilities and shareholders’ investment$50,842 $53,811 $50,471 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 463,683,711, 471,274,073 and 496,093,160 shares issued and outstanding as of April 30, 2022, January 29, 2022, and May 1, 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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Q1 2022 Form 10-Q
3

FINANCIAL STATEMENTS
Consolidated Statements of Cash Flows  
 Three Months Ended
(millions) (unaudited)April 30, 2022May 1, 2021
Operating activities  
Net earnings$1,009 $2,097 
Adjustments to reconcile net earnings to cash (required for) provided by operating activities:  
Depreciation and amortization679 667 
Share-based compensation expense83 79 
Deferred income taxes115 170 
Gain on Dermstore sale (335)
Noncash losses / (gains) and other, net
52 (30)
Changes in operating accounts: 
Inventory(1,181)114 
Other assets(86)(5)
Accounts payable(1,560)(1,205)
Accrued and other liabilities(505)(413)
Cash (required for) provided by operating activities(1,394)1,139 
Investing activities  
Expenditures for property and equipment(952)(540)
Proceeds from disposal of property and equipment2 12 
Proceeds from Dermstore sale 356 
Other investments2 7 
Cash required for investing activities(948)(165)
Financing activities  
Change in commercial paper, net945  
Reductions of long-term debt(48)(21)
Dividends paid(424)(340)
Repurchase of stock(181)(1,310)
Accelerated share repurchase pending final settlement(2,750) 
Stock option exercises1 2 
Cash required for financing activities(2,457)(1,669)
Net decrease in cash and cash equivalents(4,799)(695)
Cash and cash equivalents at beginning of period 5,911 8,511 
Cash and cash equivalents at end of period $1,112 $7,816 
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities$62 $69 
Leased assets obtained in exchange for new operating lease liabilities59 189 
 
See accompanying Notes to Consolidated Financial Statements.
TARGET CORPORATION
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Q1 2022 Form 10-Q
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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
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Q1 2022 Form 10-Q
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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 

We declared $0.90 and $0.68 dividends per share for the three months ended April 30, 2022, and May 1, 2021, respectively, 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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Q1 2022 Form 10-Q
6

FINANCIAL STATEMENTS
INDEX

INDEX TO NOTES
TARGET CORPORATION
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Q1 2022 Form 10-Q
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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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Q1 2022 Form 10-Q
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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 Ended
(millions)April 30, 2022May 1, 2021
Apparel and accessories (a)
$4,239 $4,269 
Beauty and household essentials (b)
7,053 6,364 
Food and beverage (c)
5,505 4,856 
Hardlines (d)
3,713 3,946 
Home furnishings and décor (e)
4,271 4,410 
Other49 34 
Sales24,830 23,879 
Credit card profit sharing185 171 
Other155 147 
Other revenue340 318 
Total revenue$25,170 $24,197 
(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 April 30, 2022, January 29, 2022, and May 1, 2021, the accrual for estimated returns was $204 million, $165 million, and $196 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 LiabilityApril 30,
2022
(millions)
Gift card liability (a)
$1,202 $276 $(465)$1,013 
(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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Q1 2022 Form 10-Q
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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 LevelApril 30, 2022January 29, 2022May 1, 2021
Assets   
Short-term investmentsCash and Cash EquivalentsLevel 1$182 $4,985 $6,895 
Prepaid forward contracts Other Current AssetsLevel 137 35 37 
Interest rate swapsOther Current AssetsLevel 241 17  
Interest rate swapsOther Noncurrent AssetsLevel 2292 135 149 
Liabilities   
Interest rate swapsOther Noncurrent LiabilitiesLevel 227   

Significant Financial Instruments Not Measured at Fair Value (a)

(millions)
April 30, 2022January 29, 2022May 1, 2021
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt, including current portion (b)
$11,549 $11,466 $11,568 $12,808 $10,646 $12,335 
(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 $23 million and $41 million during the three months ended April 30, 2022, and May 1, 2021, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

6. Commercial Paper and Long-Term Debt

We obtain short-term financing from time to time under our commercial paper program. For the three months ended April 30, 2022, the maximum amount outstanding was $1.1 billion, and the average daily amount outstanding was $291 million, at a weighted average annual interest rate of 0.4 percent. As of April 30, 2022, $945 million 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 the three months ended May 1, 2021.

7. Derivative Financial Instruments

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

TARGET CORPORATION
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Q1 2022 Form 10-Q
10

FINANCIAL STATEMENTS
NOTES
As of April 30, 2022, January 29, 2022, and May 1, 2021, we were party to interest rate swaps with notional amounts totaling $1.5 billion. 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 months ended April 30, 2022, and May 1, 2021.

We were party to forward-starting interest rate swaps with notional amounts totaling $2.15 billion as of April 30, 2022, and January 29, 2022, and $250 million as of May 1, 2021. We use these derivative financial instruments, which have been designated as cash flow hedges, to hedge the interest rate exposure of anticipated future debt issuances during the next three years. Based on the fair value of these swaps as of April 30, 2022, Accumulated Other Comprehensive Loss (AOCI) included an unrealized gain of $333 million. Any unrealized gain or loss at the time of debt issuance will be reclassified and reduce Net Interest Expense as we record interest expense on the associated debt.

Effect of Hedges on Debt
(millions)
April 30, 2022January 29, 2022May 1, 2021
Long-term debt and other borrowings
Carrying amount of hedged debt$1,468 $1,572 $1,627 
Cumulative hedging adjustments, included in carrying amount(27)77 132 

Effect of Hedges on Net Interest ExpenseThree Months Ended
(millions)April 30, 2022May 1, 2021
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges$(104)$(51)
Hedged debt104 51 
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 Ended
(millions, except per share data)April 30, 2022May 1, 2021
Number of shares purchased0.1 6.1 
Average price paid per share$208.60 $190.77 
Total investment$10 $1,165 
Note: This table excludes activity related to the ASR arrangements described below because final settlement had not occurred as of April 30, 2022.

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 agreement, we paid $2.75 billion and received an initial delivery of 8.9 million shares, which were retired, resulting in a $2 billion reduction to Retained Earnings. As of April 30, 2022, $751 million is included in the Consolidated Statement of Financial Position as a reduction to Additional Paid-in Capital.
TARGET CORPORATION
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Q1 2022 Form 10-Q
11

FINANCIAL STATEMENTS
NOTES
9. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits ExpenseThree Months Ended
(millions)ClassificationApril 30, 2022May 1, 2021
Service cost benefits earnedSG&A $23 $24 
Interest cost on projected benefit obligationNet Other (Income) / Expense29 24 
Expected return on assetsNet Other (Income) / Expense(59)(59)
Amortization of lossesNet Other (Income) / Expense15 29 
Total$8 $18 
 
10. Accumulated Other Comprehensive Income (Loss)

 
Change in Accumulated Other Comprehensive Income (Loss)Cash Flow
Hedges
Currency Translation AdjustmentPensionTotal
(millions)
January 29, 2022$49 $(19)$(583)$(553)
Other comprehensive income (loss) before reclassifications, net of tax190   190 
Amounts reclassified from AOCI, net of tax  11 11 
April 30, 2022$239 $(19)$(572)$(352)

TARGET CORPORATION
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Q1 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

First quarter 2022 included the following notable items:

GAAP diluted earnings per share were $2.16.
Adjusted diluted earnings per share were $2.19.
Total revenue increased 4.0 percent, driven by an increase in comparable sales.
Comparable sales increased 3.3 percent, driven primarily by a 3.9 percent increase in traffic.
Comparable stores originated sales grew 3.4 percent.
Comparable digitally originated sales increased 3.2 percent.
Operating income of $1.3 billion was 43.3 percent lower than for the comparable prior-year period, driven primarily by a decrease in gross margin, reflecting inventory actions taken as a result of lower-than-expected sales in our discretionary categories (Apparel and Accessories, Hardlines, and Home Furnishings and Décor) and supply chain disruptions, as well as increased freight and merchandise costs.

Sales were $24.8 billion for the three months ended April 30, 2022, an increase of $1.0 billion, or 4.0 percent, from the comparable prior-year period. Cash flow required for operating activities was $1.4 billion for the three months ended April 30, 2022, a decrease of $2.5 billion, or 222.4 percent, from $1.1 billion cash flow provided by operating activities for the three months ended May 1, 2021. The drivers of the operating cash flow decrease are described on page 20.

Earnings Per Share Three Months Ended
April 30, 2022May 1, 2021Change
GAAP diluted earnings per share$2.16 $4.17 (48.2)%
Adjustments0.03 (0.47)
Adjusted diluted earnings per share$2.19 $3.69 (40.7)%
Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 18.

We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital allocation effectiveness over time. For the trailing twelve months ended April 30, 2022, after-tax ROIC was 25.3 percent, compared with 30.7 percent for the trailing twelve months ended May 1, 2021. The calculation of ROIC is provided on page 19.

Supply Chain Disruptions and Demand Shifts

We have seen continued supply chain disruptions. In addition to country of origin production delays, trucker and dockworker shortages, volatile consumer demand, and other factors have led to industry-wide U.S. port and ground transportation delays. In response, we have taken various actions, including ordering and receiving merchandise earlier, securing incremental freight and storage capacity, and maintaining elevated levels of staffing. In addition, we have recently seen a significant shift in consumer demand away from longer lead time discretionary categories, resulting in lower-than-expected sales and higher-than-expected inventories in these areas. These factors have resulted in increased costs, as well as increased clearance and promotional markdowns, which contributed to decreased profitability in the first quarter of 2022 compared to the prior-year period. These factors will result in increased costs and decreased profitability in future periods, the impact of which could be material. The Gross Margin Rate analysis on page 16 provides additional information.
TARGET CORPORATION
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Q1 2022 Form 10-Q
13

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

Summary of Operating Income Three Months Ended 
(dollars in millions)April 30, 2022May 1, 2021Change
Sales$24,830 $23,879 4.0 %
Other revenue340 318 6.7 
Total revenue25,170 24,197 4.0 
Cost of sales18,461 16,716 10.4 
Selling, general and administrative expenses4,762 4,509 5.6 
Depreciation and amortization (exclusive of depreciation included in cost of sales)601 598 0.3 
Operating income$1,346 $2,374 (43.3)%

Rate AnalysisThree Months Ended
April 30, 2022May 1, 2021
Gross margin rate25.7 %30.0 %
SG&A expense rate18.9 18.6 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)2.4 2.5 
Operating income margin rate5.3 9.8 
Note: Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue.

Sales

Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage. We use comparable sales to evaluate the performance of our stores and digital channel sales by measuring the change in sales for a period over the comparable prior-year period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months, digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies. Digitally originated sales include all sales initiated through mobile applications and our websites. Our stores fulfill the majority of digitally originated sales, including shipment from stores to guests, store Order Pickup or Drive Up, and delivery via Shipt. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.

Sales growth—from both comparable sales and new stores—represents an important driver of our long-term profitability. We expect that comparable sales growth will drive the majority of our total sales growth. We believe that our ability to successfully differentiate our guests’ shopping experience through a careful combination of merchandise assortment, price, convenience, guest experience, and other factors will, over the long-term, drive both increasing shopping frequency (traffic) and the amount spent each visit (average transaction amount).

Comparable SalesThree Months Ended
 April 30, 2022May 1, 2021
Comparable sales change3.3 %22.9 %
Drivers of change in comparable sales  
Number of transactions (traffic)3.9 17.1 
Average transaction amount(0.6)5.0 

TARGET CORPORATION
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Q1 2022 Form 10-Q
14

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Comparable Sales by ChannelThree Months Ended
 April 30, 2022May 1, 2021
Stores originated comparable sales change3.4 %18.0 %
Digitally originated comparable sales change3.2 50.2 

Sales by ChannelThree Months Ended
 April 30, 2022May 1, 2021
Stores originated81.8 %81.7 %
Digitally originated18.2 18.3 
Total100 %100 %

Sales by Fulfillment ChannelThree Months Ended
 April 30, 2022May 1, 2021
Stores 96.5 %96.3 %
Other3.5 3.7 
Total100 %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 Ended
April 30, 2022May 1, 2021
Apparel and accessories17 %18 %
Beauty and household essentials29 27 
Food and beverage22 20 
Hardlines15 17 
Home furnishings and décor17 18 
Total100 %100 %

Note 3 to the Financial Statements provides additional product category sales information. The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix and the transfer of sales to new stores, makes further analysis of sales metrics infeasible.

We monitor the percentage of purchases that are paid for using RedCards (RedCard Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on RedCards are also incremental sales for Target. Guests receive a 5 percent discount on virtually all purchases when they use a RedCard at Target. RedCard sales increased for the three months ended April 30, 2022, and May 1, 2021; however, RedCard penetration declined as total Sales increased at a faster pace.

RedCard PenetrationThree Months Ended
 April 30, 2022May 1, 2021
Target Debit Card11.6 %12.1 %
Target Credit Cards8.7 8.4 
Total RedCard Penetration20.3 %20.5 %
Note: Amounts may not foot due to rounding.


TARGET CORPORATION
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Q1 2022 Form 10-Q
15

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Gross Margin Rate
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For the three months ended April 30, 2022, our gross margin rate was 25.7 percent compared with 30.0 percent in the comparable prior-year period. This decrease reflected the net impact of

higher clearance and promotional markdown rates, which were largely the result of inventory impairments and other actions taken in our longer lead time discretionary categories, as well as supply chain disruptions, and higher merchandise and freight costs, partially offset by the benefit of retail price increases;
supply chain pressure related to increased compensation and headcount in our distribution centers; and
unfavorable mix in the relative growth rates of higher and lower margin categories.

Supply Chain Disruptions and Demand Shifts on page 13 provides additional information.

Selling, General, and Administrative Expense Rate

For the three months ended April 30, 2022, our SG&A expense rate was 18.9 percent compared with 18.6 percent for the comparable prior-year period. The increase reflected the net impact of cost increases across our business, including investments in hourly team member wages, partially offset by lower incentive compensation expense.

Store Data

Change in Number of StoresThree Months Ended
April 30, 2022May 1, 2021
Beginning store count1,926 1,897 
Opened12 
Closed— — 
Ending store count1,933 1,909 

Number of Stores and
Retail Square Feet
Number of Stores
Retail Square Feet (a)
April 30, 2022January 29, 2022May 1, 2021April 30, 2022January 29, 2022May 1, 2021
170,000 or more sq. ft.274 274 273 49,071 49,071 48,798 
50,000 to 169,999 sq. ft.1,519 1,516 1,510 190,461 190,205 189,618 
49,999 or less sq. ft.140 136 126 4,147 4,008 3,690 
Total1,933 1,926 1,909 243,679 243,284 242,106 
(a)In thousands; reflects total square feet less office, distribution center, and vacant space.
 
TARGET CORPORATION
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Q1 2022 Form 10-Q
16

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Other Performance Factors

Net Interest Expense

Net interest expense was $112 million for the three months ended April 30, 2022, compared with $108 million in the comparable prior-year period.

Net Other (Income) / Expense

Net Other (Income) / Expense was $(15) million for the three months ended April 30, 2022, compared with $(343) million in the comparable prior-year period. The three months ended May 1, 2021, included the $335 million pretax gain on the February 2021 sale of Dermstore. Note 2 to the Financial Statements provides additional information.

Provision for Income Taxes
 
Our effective income tax rate for the three months ended April 30, 2022, was 19.2 percent, compared with 19.6 percent in the comparable prior-year period. The decrease reflects lower pretax earnings in the current period resulting in a larger tax rate benefit from fixed and discrete items, partially offset by the impacts of discrete tax benefits in the prior-year quarter, including the resolution of certain income tax matters.


TARGET CORPORATION
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Q1 2022 Form 10-Q
17

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

To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS). This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. This measure is not in accordance with, or an alternative to, U.S. GAAP. The most comparable GAAP measure is diluted earnings per share. Adjusted EPS should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate Adjusted EPS differently, limiting the usefulness of the measure for comparisons with other companies.

Reconciliation of Non-GAAP Adjusted EPSThree Months Ended
April 30, 2022May 1, 2021
(millions, except per share data)PretaxNet of TaxPer SharePretaxNet of TaxPer Share
GAAP diluted earnings per share $2.16 $4.17 
Adjustments
Gain on Dermstore sale$— $— $— $(335)$(269)$(0.53)
Other (a)
20 15 0.03 41 30 0.06 
Adjusted diluted earnings per share $2.19 $3.69 
Note: Amounts may not foot due to rounding.
(a)Other items unrelated to current period operations, none of which were individually significant.

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

EBIT and EBITDAThree Months Ended 
(dollars in millions)April 30, 2022May 1, 2021Change
Net earnings$1,009 $2,097 (51.9)%
+ Provision for income taxes240 512 (53.1)
+ Net interest expense112 108 3.8 
EBIT$1,361 $2,717 (49.9)%
+ Total depreciation and amortization (a)
679 667 1.8 
EBITDA$2,040 $3,384 (39.7)%
(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

TARGET CORPORATION
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Q1 2022 Form 10-Q
18

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

After-Tax Return on Invested Capital
(dollars in millions)
Trailing Twelve Months
NumeratorApril 30, 2022May 1, 2021
Operating income$7,918 $8,444 
 + Net other income / (expense)55 350 
EBIT7,973 8,794 
 + Operating lease interest (a)
87 85 
  - Income taxes (b)
1,804 1,864 
Net operating profit after taxes$6,256 $7,015 

DenominatorApril 30, 2022May 1, 2021May 2, 2020
Current portion of long-term debt and other borrowings$1,089 $1,173 $168 
 + Noncurrent portion of long-term debt13,379 11,509 14,073 
 + Shareholders' investment10,774 14,959 11,169 
 + Operating lease liabilities (c)
2,854 2,563 2,448 
  - Cash and cash equivalents1,112 7,816 4,566 
Invested capital$26,984 $22,388 $23,292 
Average invested capital (d)
$24,686 $22,840 
After-tax return on invested capital25.3 %30.7 %
(a)Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A. Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors.
(b)Calculated using the effective tax rates, which were 22.4 percent and 21.0 percent for the trailing twelve months ended April 30, 2022, and May 1, 2021, respectively. For the trailing twelve months ended April 30, 2022, and May 1, 2021, includes tax effect of $1.8 billion related to EBIT, and $19 million and $18 million, respectively, related to operating lease interest.
(c)Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.
(d)Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.

TARGET CORPORATION
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Q1 2022 Form 10-Q
19

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF FINANCIAL CONDITION
Analysis of Financial Condition

Liquidity and Capital Resources

Capital Allocation

We follow a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to profitably grow our business, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.

Our cash and cash equivalents balance was $1.1 billion, $5.9 billion, and $7.8 billion as of April 30, 2022, January 29, 2022, and May 1, 2021, respectively. Our cash and cash equivalents balance includes short-term investments of $182 million, $5.0 billion, and $6.9 billion as of April 30, 2022, January 29, 2022, and May 1, 2021, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments. This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place dollar limits on our investments in individual funds or instruments.

Operating Cash Flows
 
Cash flows required for operating activities were $1.4 billion for the three months ended April 30, 2022, compared with $1.1 billion of cash flows provided by operating activities for the three months ended May 1, 2021. For the three months ended April 30, 2022, operating cash flows decreased as a result of lower earnings, increased inventory levels and lower accounts payable leverage due to decreased inventory turnover, compared with the three months ended May 1, 2021.

Inventory

Inventory was $15.1 billion as of April 30, 2022, compared with $13.9 billion and $10.5 billion at January 29, 2022, and May 1, 2021, respectively. The increase over the balance as of May 1, 2021, primarily reflects lower-than-expected sales in our discretionary categories, as well as the impact of supply chain disruptions and demand shifts described on page 13.