Target (TGT) 10-K risk factor changes: FY2018 vs FY2017

While reputations may take decades to build, any negative incidents can quickly erode trust and confidence, particularly if they result in negative mainstream and social media publicity, [added: consumer boycotts,] governmental investigations, or litigation.

Negative [added: reputational] incidents could [removed: lead to tangible adverse effects on] [added: adversely affect] our [removed: business, including consumer boycotts,] [added: business through] lost sales, loss of new store and technology development opportunities, or team member retention and recruiting difficulties.

For example, CVS operates clinics and pharmacies within our stores, and our guests’ perceptions of and experiences with CVS may [removed: impact] [added: affect] our reputation.

In the past, we have been able to compete successfully by differentiating our guests’ shopping experience through a careful combination of price, merchandise assortment, store environment, convenience, guest service, loyalty [removed: programs] [added: programs,] and marketing efforts.

No single competitive factor is dominant, and actions by our competitors on any of these factors or the failure of our strategies could [removed: have an adverse effect on] [added: adversely affect] our sales, gross margins, and expenses.

[removed: These brands are an important part of] [added: We sell many products under] our [removed: business because they] [added: owned and exclusive brands, which help] differentiate us from other retailers, generally carry higher margins than equivalent national brand products and represent a significant portion of our overall sales.

If we are unable to successfully [removed: develop] [added: develop, support,] and [removed: support] [added: evolve] our owned and exclusive brands, if one or more of these brands experiences a loss of consumer acceptance or confidence, or if we are unable to successfully protect our intellectual property rights in these brands, our sales and gross margins could be adversely affected.

The continuing migration [removed: and evolution] of retailing to digital channels has increased our challenges in differentiating ourselves from other retailers.

In particular, consumers are able to quickly and conveniently comparison shop and determine real-time product availability using digital tools, which can lead to decisions based solely on price, the functionality of the digital tools or a combination of [removed: those and other] factors.

We must compete by offering a [removed: consistent and] [added: consistent,] convenient shopping experience [added: and value] for our guests regardless of [removed: the ultimate] sales [removed: channel.][added: channel and by providing our guests and team members with reliable, effective, and easy-to-use digital tools.]

[removed: Failures to effectively execute] [added: Any difficulties] in [removed: these] [added: executing our differentiation] efforts, actions by our competitors in response to these efforts, or failures [removed: of our] [added: by] vendors [removed: to manage] [added: in managing] their own channels, content and technology systems could hurt our ability to differentiate ourselves from other retailers [removed: and, as a result, have an adverse effect on] [added: and adversely affect our] sales, gross margins, and expenses.

[removed: devices to] shop in our stores and online and provide feedback and public commentary about all aspects of our business.

Our evolving retailing efforts include implementing new technology, software and processes to be able to [added: cost-effectively] fulfill guest orders directly from our vendors and from any point within our system of stores and distribution centers.

If we are unable to attract and retain team [removed: members or] [added: members,] contract with third [removed: parties having] [added: parties, or make selective acquisitions to obtain] the specialized skills needed to support these efforts, [removed: implement improvements to our guest‑facing technology in a timely manner,] collect accurate, relevant, and usable guest data to support our personalization efforts, allow real-time and accurate visibility to product availability when guests are ready to purchase, quickly and efficiently fulfill [removed: our guests] orders using the fulfillment and payment methods [removed: they] [added: guests] demand, or provide a convenient and consistent experience for our guests across all sales channels, our ability to compete and our results of operations could be adversely affected.

In addition, if Target.com and our other [removed: guest‑facing] technology systems do not appeal to our guests, [added: integrate with our vendors or other third parties,] reliably function as designed, integrate across all sales channels, or maintain the privacy of [removed: guest data] [added: data,] we may experience a loss of guest confidence and lost sales, which could adversely affect our reputation and results of operations.

If we [removed: fail to] [added: do not] anticipate and respond quickly to changing consumer preferences, our sales, gross margins and profitability could suffer.

A large part of our business is dependent on our ability to make trend‑right decisions and effectively manage our inventory in a broad range of merchandise categories, including apparel, accessories, home décor, electronics, toys, seasonal offerings, [removed: food] [added: food,] and other merchandise.

[removed: Failure to] [added: If we do not] obtain accurate and relevant data on guest preferences, predict changing consumer tastes, preferences, spending patterns and other lifestyle decisions, emphasize the correct categories, implement [added: competitive and] effective [removed: promotions,] [added: pricing] and [added: promotion strategies, or] personalize our offerings to our [removed: guests] [added: guests, we] may [removed: result in] [added: experience] lost sales, spoilage, and increased inventory markdowns, which would [removed: lead to a deterioration in] [added: adversely affect] our results of operations by [removed: hurting] [added: reducing] our [removed: sales,] gross [removed: margins,] [added: margins] and [added: hurting our] profitability.

[removed: Technology] Investments and Infrastructure Risks

If our capital investments in [removed: technology, supply chain, new stores and] remodeling existing [removed: stores] [added: stores, building new stores, and improving technology and supply chain infrastructure] do not achieve appropriate returns, our competitive position, financial condition and results of operations may be adversely affected.

Our business [removed: is becoming increasingly reliant] [added: also relies] on [added: investments in] technology [removed: investments,] and [added: selective acquisitions, and] the returns on these investments can be less predictable than [removed: building new stores and] remodeling [removed: existing] [added: and building] stores.

We are currently making, and [removed: will] [added: expect to] continue to make, significant [removed: technology] investments [removed: to provide a consistent] [added: in technology] and [removed: improved] [added: selective acquisitions to improve] guest [removed: experience] [added: experiences] across [removed: all] sales channels and improve our supply chain and inventory management systems.

These [removed: technology initiatives] [added: investments] might not provide the anticipated benefits or desired [removed: return or may provide them on a delayed schedule or at a higher cost.][added: return.]

Our business [removed: also] depends, in part, on our ability to [removed: build new stores and] remodel existing stores [added: and build new stores] in a manner that achieves appropriate returns on our capital investment.

[removed: We] [added: When building new stores, we] compete with other retailers and businesses for suitable locations for our stores.

Many of our expected new store sites are [removed: smaller and] [added: smaller,] non-standard footprints located in fully developed markets, which require changes to our supply chain practices and are generally more time-consuming, expensive and uncertain undertakings than expansion into undeveloped suburban and ex-urban markets.

Targeting the wrong [removed: technology or store] [added: investment] opportunities, failing to [removed: make] [added: successfully meet our strategic objectives when making] the [removed: best] [added: correct] investments, being unable to make new concepts [removed: scalable or] [added: scalable,] making an investment commitment significantly above or below our [removed: needs] [added: needs, or failing to effectively incorporate acquired businesses into our business] could result in the loss of our competitive position and adversely [removed: impact] [added: affect] our financial condition or results of operations.

We rely extensively on our computer systems to manage and account for inventory, process guest transactions, manage and maintain the privacy of guest data, communicate with our vendors and other third parties, service [removed: REDcard] [added: Target-branded credit and debit card] accounts, and summarize and analyze results.

If our systems are damaged or fail to function properly or reliably, we may incur substantial repair or replacement costs, experience data loss or theft and impediments to our ability to manage inventories or process guest transactions, engage in additional [added: promotional activities to retain our guests, and encounter lost guest confidence, which could adversely affect our results of operations.]

We continually [removed: make significant technology investments that are intended] [added: invest] to [removed: help] maintain and update our [removed: existing] computer systems.

The potential problems and interruptions associated with implementing technology [removed: initiatives] [added: initiatives, as well as providing training and support for those initiatives,] could disrupt or reduce our operational efficiency, and could negatively impact guest experience and guest confidence.

If our efforts to protect the security of information about our guests, team [removed: members and] [added: members,] vendors [added: and other third parties] are unsuccessful, we may face additional costly government enforcement actions and private litigation, and our sales and reputation could suffer.

We regularly receive and store information about our guests, team members, [added: vendors] and [removed: vendors.][added: other third parties.]

We have programs in place to detect, [removed: contain] [added: contain,] and respond to data security incidents.

In addition, hardware, software, or applications we develop or procure from third parties [added: or through open source solutions] may contain defects in design or manufacture or other problems that could unexpectedly compromise information security.

Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other forms of deceiving our team members, contractors, [removed: vendors,] and [removed: temporary staff.][added: vendors.]

We are dependent on our vendors to supply merchandise to our distribution centers, [removed: stores] [added: stores,] and guests.

As we continue to add capabilities, [added: operating] our fulfillment network becomes [removed: increasingly] [added: more] complex and [removed: operating it becomes more] challenging.

A large portion of our merchandise is sourced, directly or indirectly, from outside the United States, with China as our single largest [removed: source.][added: source, so any major changes in tax policy or trade relations, such as the imposition of additional tariffs]

[removed: Because a large portion of our merchandise is sourced, directly] or [removed: indirectly, from outside the United States, major changes in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of additional tariffs or] duties on imported products, could adversely affect our business, results of operations, effective income tax rate, liquidity and net income.

Our guests are using a variety of electronic devices and platforms to

Our current store remodel program is larger than historic levels and is being implemented using a custom approach based on the condition of each store and characteristics of the surrounding neighborhood.

Pursuing the wrong remodel or new store opportunities, any delays, cost increases, disruptions or other uncertainties related to those opportunities, and lower than expected sales from those opportunities, could adversely impact our results of operations.

In addition, if we are unable to successfully protect any intellectual property rights resulting from our investments, the value received from those investments may be eroded, which could adversely affect our financial condition.

We sell many products under our owned and exclusive brands.

We must provide our guests and team members digital tools that have the right features and are reliable and easy to use.

Our guests are using computers, tablets, mobile phones and other

For example, our apparel and home décor assortment is continually evolving and in other areas of our product assortment, including food, we are supporting guest wellness goals and offering more items that appeal to local cultural and demographic tastes.

promotional activities to retain our guests, and encounter lost guest confidence, which could adversely affect our results of operations.

The results of the recent United States elections may signal a change in trade policy between the United States and other countries.

adverse effect on gross margins, expenses, and results of operations.

An example of our reliance on third parties is our relationship with CVS.

In addition, if we wish to have clinics and pharmacies in any new stores, those clinics and pharmacies must be owned and operated by CVS, which limits our flexibility in designing and operating new stores and new store concepts.

nefit costs, changing demographics, and our reputation and relevance within the labor market.

For example, we recently terminated a relationship with a vendor that supplied us with cotton sheets that were represented to be 100 percent Egyptian cotton after we discovered that the vendor substituted non-Egyptian cotton.

If that event or if similar events in the future cause our guests to seek alternative sources for their needs, we could lose sales and it may be difficult and costly for us to regain the confidence of our guests.

Significant workforce-related legislative changes could increase our expenses and adversely affect our operations.

In particular, we have historically relied on the public debt markets to fund portions of our capital investments and the commercial paper market and bank credit facilities to fund seasonal needs for working capital.

Fiscal [removed: 2016] [added: 2017 (a 53-week year)] included the following notable items:

| [removed: • |] GAAP [added: diluted] earnings per share from continuing operations [removed: were $4.58.] | [added: | | | | | | | | | $ | 5.32 | | | | | | | | | | | $ | 4.58 | | | | | | | | | | | $ | 5.25 | |]

| • | Comparable digital channel sales growth of 27 percent contributed [removed: 1.0] [added: 1.2] percentage points of comparable sales growth. |

| • | We returned [removed: $5.0] [added: $2.4] billion to shareholders through dividends and share [removed: repurchase.] [added: repurchases.] |

Earnings from continuing operations before interest expense and income taxes in [removed: 2016] [added: 2017] decreased by [removed: $561] [added: $657] million or [removed: 10.1] [added: 13.2] percent from [removed: 2015 to $4,969 million, primarily due] [added: 2016] to [removed: the 2015 gain on the Pharmacy Transaction.][added: $4,312 million.]

Operating cash flow provided by continuing operations was [added: $6,849 million in 2017 compared with] $5,329 [removed: million, $5,254 million, and $5,157] million [removed: for 2016, 2015, and 2014, respectively.][added: in 2016.]

Refer to Note [removed: 6 of] [added: 22 to] the Financial Statements for additional [removed: information about the transaction.][added: information.]

| [removed: 2016] [added: 2017 (a)] | | | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | | | [removed: 2016/2015] [added: 2017/2016] | | [removed: 2015/2014] [added: 2016/2015] | | |

| GAAP diluted earnings per share | $ | [removed: 4.58] [added: 5.32] | | $ | [removed: 5.25] [added: 4.58] | | $ | [removed: 3.83] [added: 5.25] | | [removed: (12.7] [added: 16.2] | [removed: )%] [added: %] | [removed: 37.2] [added: (12.7] | [removed: %] [added: )%] |

| Adjustments | [removed: 0.42] [added: (0.61] | | [added: )] | [removed: (0.56] [added: 0.42] | | [removed: )] | [removed: 0.39] [added: (0.56] | | [added: )] | | | | |

| Adjusted diluted earnings per share | $ | [removed: 5.01] [added: 4.71] | | $ | [removed: 4.69] [added: 5.01] | | $ | [removed: 4.22] [added: 4.69] | | [removed: 6.7] [added: (5.9] | [removed: %] [added: )%] | [removed: 11.3] [added: 6.7] | % |

A reconciliation of non-GAAP financial measures to GAAP measures is provided on page [removed: 21.][added: 22.]

For the trailing twelve months ended [removed: January 28, 2017,] [added: February 3, 2018,] ROIC was [removed: 15.0] [added: 15.9] percent, compared with [removed: 16.0] [added: 15.0] percent for the trailing twelve months ended January [removed: 30, 2016.][added: 28, 2017.]

Excluding the [removed: net gain on] [added: discrete impacts of] the [removed: Pharmacy Transaction,] [added: Tax Act,] ROIC was [removed: 13.9] [added: 14.0] percent for the trailing twelve months ended [removed: January 30, 2016.][added: February 3, 2018.]

A reconciliation of ROIC is provided on page [removed: 22.][added: 24.]

| (dollars in millions) | [removed: 2016] [added: 2017 (a)] | | | [removed: 2015 (a)] [added: 2016] | | | [removed: 2014 (a)] [added: 2015 (b)] | | | [removed: 2016/2015] [added: 2017/2016] | | [removed: 2015/2014] [added: 2016/2015] | |

| Sales | $ | [removed: 69,495] [added: 71,879] | | $ | [removed: 73,785] [added: 69,495] | | $ | [removed: 72,618] [added: 73,785] | | [removed: (5.8] [added: 3.4] | [removed: )%] [added: %] | [removed: 1.6] [added: (5.8] | [removed: %] [added: )%] |

| SG&A expenses [removed: (b)] [added: (d)] | [removed: 13,360] [added: 14,248] | | | [removed: 14,448] [added: 13,360] | | | [removed: 14,503] [added: 14,448] | | | [removed: (7.5] [added: 6.6] | [removed: )] | [removed: (0.4] [added: (7.5] | ) |

| [removed: Depreciation] [added: \+ Total depreciation] and amortization [added: (b)] | [removed: 2,298] [added: 2,445] | | | [removed: 2,213] [added: 2,298] | | | [removed: 2,129] [added: 2,213] | | | [removed: 3.8] [added: 6.4] | | [removed: 3.9] [added: 3.8] | |

| EBIT | $ | [removed: 4,965] [added: 4,312] | | $ | [removed: 5,127] [added: 4,965] | | $ | [removed: 4,708] [added: 5,127] | | [removed: (3.2] [added: (13.2] | )% | [removed: 8.9] [added: (3.2] | [removed: %] [added: )%] |

| [removed: (a)] [added: (b)] | Sales [added: and Cost of Sales] include $3,815 million and [removed: $4,148 million] [added: $3,076 million, respectively,] related to our former pharmacy and clinic businesses for [removed: 2015 and 2014, respectively, and cost of sales include $3,076 million and $3,222 million, respectively.] [added: 2015.] The sale of these businesses had no notable impact on [removed: EBITDA or] EBIT. |

| [removed: (b)] [added: (d)] | For [added: 2017,] 2016, [removed: 2015,] and [removed: 2014,] [added: 2015,] SG&A [added: Expenses] includes [removed: $663] [added: $694] million, [removed: $641] [added: $663] million, and [removed: $629] [added: $641] million, respectively, of net profit-sharing income [removed: from the arrangement with TD.] [added: under our credit card program agreement.] |

| Rate Analysis | [removed: 2016] [added: 2017 (a)] | | [removed: 2015] [added: 2016] | | [removed: 2014] [added: 2015] | |

| SG&A expense rate | [removed: 19.2] [added: 19.8] | | [removed: 19.6] [added: 19.2] | | [removed: 20.0] [added: 19.6] | |

[removed: |] Depreciation and [removed: amortization expense rate | 3.3 | | 3.0 | | 2.9 | |][added: Amortization Expense Rate]

| EBIT margin rate [removed: (a)] [added: (c)] | [removed: 7.1] [added: 6.0] | | [removed: 6.9] [added: 7.1] | | [removed: 6.5] [added: 6.9] | |

| [removed: (a)] [added: (c)] | Excluding sales of our former pharmacy and clinic businesses, [removed: EBITDA margin rates were 10.5 percent and 10.0 percent for 2015 and 2014, respectively. and] EBIT margin [removed: rates were] [added: rate was] 7.3 percent [removed: and 6.9 percent, respectively.] [added: for 2015.] |

[removed: Refer to] Note 2 of the Financial Statements [removed: for] [added: provides] a [removed: definition of] gift card [removed: breakage.][added: "breakage" definition.]

Digital channel sales include all sales initiated through mobile applications and our [removed: conventional] websites.

Digital channel sales may be fulfilled through our [added: stores, our] distribution centers, our vendors, or [added: other delivery options, including store drive-up and delivery via] our [removed: stores.][added: wholly own subsidiary, Shipt.]

The decrease in 2016 sales [added: compared to 2015] reflects a decrease of approximately $3,815 million due to the Pharmacy Transaction and a [added: 0.5 percent] comparable sales [removed: decrease of 0.5 percent,] [added: decrease,] partially offset by the contribution from new stores.

| Sales by Channel | [removed: 2016] [added: 2017] | | [removed: 2015 (a)] [added: 2016] | | [removed: 2014] [added: 2015] (a) | |

| Stores | [removed: 95.6] [added: 94.5] | % | [removed: 96.6] [added: 95.6] | % | [removed: 97.4] [added: 96.6] | % |

| Digital | [removed: 4.4] [added: 5.5] | | [removed: 3.4] [added: 4.4] | | [removed: 2.6] [added: 3.4] | |

| (a) | Excluding sales of our former pharmacy and clinic businesses, stores and digital channels sales were 96.4 percent and 3.6 percent of total sales, respectively, for [removed: 2015 and 97.2 and 2.8 percent of total sales, respectively, for 2014.] [added: 2015.] |

Comparable sales is a measure that highlights the performance of our [removed: existing] 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 | [removed: 2016] [added: 2017] | | [removed: 2015] [added: 2016] | | [removed: 2014] [added: 2015] | |

| Comparable sales change | [added: 1.3 | % |] (0.5 | )% | 2.1 | % | [removed: 1.3 | % |]

| Drivers of change in comparable [removed: sales:] [added: sales] | | | | | | |

| Number of transactions | [added: 1.6 | |] (0.8 | ) | 1.3 | | [removed: (0.2 | ) |]

| • | GAAP earnings per share from continuing operations were $5.32, including discrete benefits related to the Tax Cuts and Jobs Act (the Tax Act). |

| • | Adjusted earnings per share were $4.71, which excludes discrete benefits related to the Tax Act and other items described on page 22. |

| • | Comparable sales increased 1.3 percent, driven by a 1.6 percent increase in traffic. |

| • | We made several investments to improve and expand our delivery capabilities; most notably, we purchased Shipt, an online same-day delivery company, for approximately $550 million. |

Sales were $71,879 million for 2017, an increase of $2,384 million or 3.4 percent from the prior year, due to a comparable sales increase of 1.3 percent, the extra week in 2017, and the contribution from new stores.

The Analysis of Results of Operations discussion provides more information.

Operating cash flow provided by continuing operations was $6,849 million for 2017, an increase of $1,520 million, or 28.5 percent from $5,329 million for 2016.

Refer to the Cash Flows discussion within the Liquidity and Capital Resources section of MD&A on page 25 for additional information.

(a) Consisted of 53 weeks.

| Cost of sales (c) | 51,125 | | | 49,145 | | | 52,241 | | | 4.0 | | (5.9 | ) |

| Gross margin | 20,754 | | | 20,350 | | | 21,544 | | | 2.0 | | (5.5 | ) |

| Depreciation and amortization (exclusive of depreciation included in cost of sales) (c) | 2,194 | | | 2,025 | | | 1,969 | | | 8.4 | | 2.8 | |

| (a) | Consisted of 53 weeks. |

| (c) | Refer to Note 3 of the Financial Statements for information about the reclassification of supply chain-related depreciation expense to Cost of Sales. |

| Gross margin rate (b) | 28.9 | % | 29.3 | % | 29.2 | % |

| Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate (b) | 3.1 | | 2.9 | | 2.7 | |

| (a) | Consisted of 53 weeks. |

| (b) | Reclassifying supply chain-related depreciation expense to Cost of Sales reduced the gross margin and depreciation and amortization rates by 0.3-0.4 percentage points for all periods presented. |

The increase in 2017 sales is due to a comparable sales increase of 1.3 percent, the extra week in 2017, and the contribution from new stores.

The extra week contributed $1,167 million of sales, or 1.7 percentage points of increase over 2016.

| (a) | For all periods presented, pet supplies, which represented approximately 2 percent of total sales, has been reclassified from food and beverage to beauty and household essentials. |

The 2017 decrease was primarily due to increased digital fulfillment costs.

Benefits from cost savings initiatives were offset by net investments in pricing and promotions.

The increase in 2017 was primarily due to higher compensation costs, including both bonus expense and store wages, partially offset by cost savings primarily driven by efficiency in our technology operations.

Our depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate was 3.1 percent in 2017, 2.9 percent in 2016, and 2.7 percent in 2015.

The 2017 increase was primarily due to higher accelerated depreciation for planned store remodels, partially offset by the rate impact of the 53rd week of sales.

The 2016 increase was due to the rate impact of lower sales in 2016 than 2015.

| February 3, 2018 | | January 28, 2017 | | | February 3, 2018 | | January 28, 2017 | | |

Our 2017 effective income tax rate from continuing operations decreased to 19.7 percent, from 32.7 percent in 2016, driven primarily by the impact of the Tax Act, which among other matters reduced the U.S. corporate income tax rate from 35 percent to 21 percent effective January 1, 2018.

The Tax Act reduced our 2017 income tax expense by $388 million, comprised of the following:

| • | The new lower tax rate reduced tax expense by $36 million. Target’s U.S. federal statutory tax rate was 33.7 percent for 2017, which reflects a blended federal statutory rate of 35% for approximately 11 months and 21% for approximately 1 month. |

| • | We recognized a provisional net tax benefit of $352 million related to remeasurement of our net deferred tax liabilities, including $381 million of benefit from the new lower rate, partially offset by $29 million of deferred income tax expense from our foreign operations. In 2017, due to changes effected by the Tax Act and other reasons, we have not asserted indefinite reinvestment in our foreign operations. |

Certain other provisions of the Tax Act not expected to have a material impact on net income are as follows:

| • | Through 2022, the Tax Act allows companies to immediately deduct the cost of certain capital expenditures from taxable income instead of deducting the costs over time. This provision phases out over 2023-2027. |

| • | The Tax Act implements a territorial tax system and imposes a one-time repatriation tax on deemed repatriated accumulated foreign earnings as of December 31, 2017. The one-time repatriation tax did not materially affect our net tax expense because in the aggregate our foreign entities have an accumulated earnings deficit, driven by our discontinued operations. |

| • | Although the Tax Act generally eliminates U.S. federal income tax on dividends from foreign subsidiaries, it creates a new requirement that certain income referred to as global intangible low-taxed income earned by controlled foreign corporations must be included currently in the gross income of the entity's U.S. shareholder. |

| • | The Tax Act limits the deductibility of interest, executive compensation, and certain other expenses. |

As described in Note 23 of the Financial Statements, certain aspects of our 2017 income tax provision related to the Tax Act amounts are provisional.

We expect a 2018 effective tax rate of 22 percent to 25 percent.

We expect a corresponding 2018 operating cash flow benefit from the lower rate and, to a lesser degree, additional operating cash flow benefits from the immediate deductibility provision described above.

| • | Adjusted earnings per share were $5.01. |

| • | Comparable sales decreased 0.5 percent, reflecting a 0.8 percent decrease in traffic. |

Sales were $69,495 million for 2016, a decrease of $4,290 million or 5.8 percent from the prior year, primarily due to the Pharmacy Transaction.

In 2015, proceeds from the Pharmacy Transaction are included in investing cash flows provided by continuing operations.

| Cost of sales | 48,872 | | | 51,997 | | | 51,278 | | | (6.0 | ) | 1.4 | |

| Gross margin | 20,623 | | | 21,788 | | | 21,340 | | | (5.4 | ) | 2.1 | |

| EBITDA | 7,263 | | | 7,340 | | | 6,837 | | | (1.1 | ) | 7.4 | |

| Gross margin rate | 29.7 | % | 29.5 | % | 29.4 | % |

| EBITDA margin rate (a) | 10.5 | | 9.9 | | 9.4 | |

The increase in 2015 sales reflects an increase in comparable sales of 2.1 percent and the contribution from new stores, partially offset by a decrease of approximately $550 million due to the Pharmacy Transaction.

The 2015 increase was primarily due to favorable category sales mix and lower promotional activity relative to the highly promotional period in 2014 following the 2013 data breach, partially offset by the impact of increased digital channel sales.

The decrease in 2015 primarily resulted from cost saving initiatives and reduced marketing expense, partially offset by investments in other initiatives, none of which were individually significant.

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Our 2015 effective income tax rate from continuing operations decreased to 32.5 percent, from 33.0 percent in 2014, driven primarily by the $112 million tax benefit from releasing the valuation allowance on a capital loss.

This benefit was partially offset by a year-over-year decrease in the favorable resolution of various income tax matters and the rate impact of higher pretax earnings.

The resolution of various income tax matters reduced tax expense by $8 million and $35 million in 2015 and 2014, respectively.

| Adjusted diluted earnings per share from continuing operations | | | | | | | | | | $ | 5.01 | | | | | | | | | | | $ | 4.69 | | | | | | | | | | | $ | 4.22 | |

| (c) | Refer to Note 19 of the Financial Statements. |

| (f) | Excluding the net gain on the Pharmacy Transaction, ROIC was 13.9 percent for the trailing twelve months ended January 30, 2016. |

Our period-end cash and cash equivalents balance decreased to $2,512 million from $4,046 million in 2015, primarily reflecting deployment during 2016 of proceeds from the Pharmacy Transaction and payment of related taxes.

Due to the timing of the sale late in 2015, we did not fully deploy the net proceeds by the end of 2015.

Short-term investments of $1,110 million and $3,008 million were included in cash and cash equivalents at the end of 2016 and 2015, respectively.

Our 2016 operations were funded by internally and externally generated funds.

Operating cash flow provided by continuing operations was $5,329 million in 2016 compared with $5,254 million in 2015.

These cash flows, combined with period year-end cash position, allowed us to invest in the business, fund early debt retirement and maturities, pay dividends, and repurchase shares under our share repurchase program.

Proceeds from the Pharmacy Transaction are included in investing cash flows provided by continuing operations during 2015.

The decrease was due to our alignment of inventory levels with the slowing sales trend while appropriately supporting instocks.

Short-term and Long-term Financing

| Commercial Paper | | | | | | | | | |

| (dollars in millions) | 2016 | | | 2015 | | | 2014 | | |

| Maximum daily amount outstanding during the year | $ | 89 | | $ | — | | $ | 590 | |

| Average amount outstanding during the year | 1 | | | — | | | 129 | | |

| Amount outstanding at year-end | — | | | — | | | — | | |

| Weighted average interest rate | 0.43 | | % | — | | % | 0.11 | | % |

Capital expenditures decreased in 2015 from the prior year as we opened fewer large-format stores and realized efficiency gains in technology, partially offset by increased guest experience and supply chain investments.

As noted in the footnote to the chart presented above, we substantially increased our investments in leases in 2016 and 2015.

| Long-term debt (a) | $ | 11,814 | | $ | 1,683 | | $ | 1,203 | | $ | 2,150 | | $ | 6,778 | |

| Capital lease obligations (b) | 1,963 | | | 82 | | | 174 | | | 178 | | | 1,529 | | |

| Deferred compensation (c) | 515 | | | 56 | | | 114 | | | 121 | | | 224 | | |

At [removed: January 28, 2017,] [added: February 3, 2018,] our exposure to market risk was primarily from interest rate changes on our debt obligations, some of which are at a LIBOR-plus floating-rate.

At [removed: January 28, 2017,] [added: February 3, 2018,] our floating rate [removed: debt] [added: short-term investments] exceeded our floating rate [removed: short-term investments] [added: debt] by approximately [removed: $140] [added: $900] million.

Based on our balance sheet position at [removed: January 28, 2017,] [added: February 3, 2018,] the annualized effect of a 0.1 percentage point increase in floating interest rates on our floating rate debt obligations, net of our floating rate short-term investments, would not be significant.

Based on our balance sheet position at [removed: January 28, 2017,] [added: February 3, 2018,] the annualized effect of a 0.5 percentage point decrease in interest rates would be to decrease earnings before income taxes by [removed: $7] [added: $6] million.

A 0.5 percentage point decrease to the weighted average discount rate would increase annual expense by [removed: $30] [added: $31] million.

Our ability to deliver a preferred shopping experience to our guests is supported by our supply chain and technology, our devotion to innovation, our loyalty [removed: offerings such as REDcard Rewards and Cartwheel,] [added: offerings,] and our disciplined approach to managing our business and investing in future growth.

[removed: Refer to] [added: See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and] Note [removed: 9] [added: 6] of [removed: the] Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data (the Financial Statements) for more [removed: information on the credit card profit sharing.][added: information.]

Canadian financial results [removed: prior to the Filing] are included in our financial statements [removed: and classified within] [added: as our only] discontinued operations.

[removed: On December 16, 2015, we] [added: We] sold our pharmacy and clinic businesses (Pharmacy Transaction) to CVS [removed: Pharmacy, Inc. (CVS).][added: in December of 2015.]

CVS [removed: now] [added: Pharmacy, Inc. (CVS)] operates [removed: the pharmacy] [added: pharmacies] and [removed: clinic businesses] [added: clinics] in our stores under a perpetual operating agreement, subject to termination in limited circumstances.

For information on key financial highlights and segment financial information, see [removed: the items referenced in] Item 6, Selected Financial Data, MD&A, and Note 30 of the Financial Statements.

A larger share of annual revenues and earnings traditionally occurs in the fourth quarter because it includes the [removed: peak holiday sales period of] November and [removed: December.][added: December holiday sales period.]

Our [removed: small, flexible] [added: small] format stores, generally smaller than 50,000 square feet, offer curated general merchandise and food assortments.

Our digital channels include a wide [removed: assortment of general merchandise,] [added: merchandise assortment,] including many items found in our stores, along with a complementary assortment such as additional sizes and colors sold only online.

Approximately one-third of [removed: 2016] [added: 2017] sales [added: is] related to our owned and exclusive brands, including but not limited to the following:

| [removed: C9 by Champion® |] Hand Made Modern® | [removed: Mossimo®] | [added: |]

| [removed: DENIZEN® from Levi's®] [added: Fieldcrest®] | Just One You® made by carter's® | [removed: Nate Berkus] [added: Oh Joy!®] for Target |

We also sell merchandise through periodic exclusive design and creative partnerships and generate revenue from in-store amenities such as Target Café and [removed: Target Photo, and] leased or licensed departments such as Target Optical, Starbucks, and other food service offerings.

The majority of our stores also have a CVS pharmacy from which we will generate ongoing [removed: annual, inflation adjusted] [added: annual] occupancy-related income (see MD&A and Note 6 of the Financial Statements for more information).

The vast majority of merchandise is distributed to our stores through our network of [removed: 40] [added: 41] distribution centers.

Merchandise sold through our digital channels is distributed to our guests via common carriers [removed: from our] [added: (from stores,] distribution centers, [removed: from] vendors [removed: or] [added: and] third party [removed: distributors, from our stores or] [added: distributors) and] through guest pick-up at our stores.

At [removed: January 28, 2017,] [added: February 3, 2018,] we employed approximately [removed: 323,000] [added: 345,000] full-time, part-time and seasonal employees, referred to as "team members." [removed: During] [added: Because of] the [removed: 2016 holiday sales period our] [added: seasonal nature of the retail business,] employment levels [removed: peaked at approximately 373,000 team members.][added: peak in the holiday season.]

[removed: Additional details are provided in the] [added: The] Liquidity and Capital Resources section in [removed: MD&A.][added: MD&A provides additional details.]

Our ability to positively differentiate ourselves from other retailers and provide [removed: a] compelling value [removed: proposition] [added: to our guests] largely determines our competitive position within the retail industry.

Our principal trademarks, including Target, SuperTarget and our "Bullseye Design," have been registered with the [removed: U.S.] [added: United States] Patent and Trademark Office.

The vast majority of our [removed: long-lived assets are] [added: property and equipment is] located within the United States.

Our Corporate Governance Guidelines, Business Conduct Guide, Corporate [removed: Social] Responsibility Report, and the charters for the committees of our Board of Directors are also available free of charge in print upon request or at investors.target.com.

In 2014, we announced our exit from the Canadian market.

| A New Day™ | Goodfellow & Co.™ | Sonia Kashuk® |

| Archer Farms® | JoyLab™ | Spritz™ |

| Art Class™ | Knox Rose™ | Sutton & Dodge® |

| Ava & Viv® | Market Pantry® | Threshold™ |

| Boots & Barkley® | Merona® | up & up® |

| Bullseye's Playground™ | Pillowfort™ | Who What Wear™ |

| Cat & Jack™ | Project 62™ | Wine Cube® |

| Cloud Island™ | Room Essentials® | Wondershop™ |

| Embark® | Simply Balanced™ | Xhilaration® |

| Gilligan & O'Malley® | Smith & Hawken® | |

| C9 by Champion® | Hearth & Hand™ with Magnolia | Mossimo® |

| DENIZEN® from Levi's® | Isabel Maternity™ by Ingrid & Isabel® | Nate Berkus™ for Target |

| Genuine Kids® from OshKosh® | Kid Made Modern® | |

We continue to expand other delivery options, including store drive-up and delivery via our wholly-owned subsidiary, Shipt, Inc. (Shipt).

We expect less variability in working capital needs throughout the year than we have historically experienced due to efforts to better match payables to inventory levels.

We perform account servicing and primary marketing functions for, and earn a substantial portion of the profits generated by, the Target Credit Card and Target MasterCard consumer receivables portfolio, which is underwritten, funded, and owned by TD Bank Group (TD).

Prior to January 15, 2015, we operated a Canadian Segment.

On January 15, 2015, we announced our exit from the Canadian market, and Target Canada Co. and certain other wholly owned subsidiaries of Target filed for protection (the Filing) in Canada under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice in Toronto (the Court).

Following the Filing, we no longer consolidate our former Canadian retail operation.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Note 7 of the Financial Statements for more information.

Prior to December 16, 2015, we operated 1,672 pharmacies and 79 clinics in our stores.

See MD&A and Note 6 of the Financial Statements for more information.

Discontinued operations in this Annual Report on Form 10-K refers only to our discontinued Canadian operations.

| Archer Farms® | Market Pantry® | Sutton & Dodge® |

| Art Class™ | Merona® | Threshold™ |

| Ava & Viv® | Pillowfort™ | up & up® |

| Boots & Barkley® | Room Essentials® | Wine Cube® |

| Cat & Jack™ | Simply Balanced™ | Wondershop™ |

| Embark® | Smith & Hawken® | Xhilaration® |

| Gilligan & O'Malley® | Sonia Kashuk® | |

| Knox Rose™ | Spritz™ | |

| Fieldcrest® | Kid Made Modern® | Oh Joy!® for Target |

| Genuine Kids® from OshKosh® | Liz Lange® for Target | |

Our working capital needs are greater in the months leading up to the holiday sales period, which we typically finance with cash flow provided by operations and short-term borrowings.

On May 17, 2016 and May 24, 2016, Target Corporation and certain present and former officers were named as defendants in two purported federal securities law class actions filed in the United States District Court for the District of [removed: Minnesota.][added: Minnesota (the Court).]

The plaintiffs filed a Consolidated Amended Class Action Complaint [removed: (Consolidated] [added: (the First] Complaint) on November 14, 2016, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 relating to [removed: certain prior disclosures of Target about its expansion of retail operations into] [added: the] Canada [removed: (Canada Disclosure).Target,] [added: Disclosure and naming Target,] its former chief executive officer, its present chief operating officer, and the former president of Target Canada [removed: are named] as [removed: defendants in the Consolidated Complaint.][added: defendants.]

The plaintiff [removed: seeks] [added: sought to represent a class consisting of all purchasers of Target common stock between March 20, 2013 and August 4, 2014 and sought] damages and other relief, including attorneys’ fees, based on allegations that the defendants misled investors about the performance and prospects of Target Canada and that such conduct affected the value of Target common stock.

[removed: That] [added: A hearing on that] motion [added: was held on February 22, 2018, but it] has not yet been [removed: heard or] decided.

Target intends to [added: continue to] vigorously defend [removed: this consolidated action.][added: these actions.]

On July 12, 2016 and July 15, 2016, Target Corporation, the Plan Investment Committee and Target’s current chief operating officer were named as defendants in two purported Employee Retirement Income Security Act of 1974 (ERISA) class actions filed in the [removed: United States District Court for the District of Minnesota.][added: Court.]

The plaintiffs filed an Amended Class Action Complaint [removed: (Amended Complaint)] [added: (the First ERISA Class Action)] on December 14, 2016, alleging violations of Sections 404 and 405 of ERISA relating to the Canada [removed: Disclosure.][added: Disclosure and naming Target, the Plan Investment Committee, and seven present or former officers as defendants.]

The plaintiffs [removed: seek] [added: sought] to represent a class consisting of all persons who were participants in or beneficiaries of the Target Corporation 401(k) Plan or the Target Corporation Ventures 401(k) Plan (collectively, the Plans) at any time between February 27, 2013 and May 19, 2014 and whose Plan accounts included investments in Target [removed: stock.][added: stock and sought damages, an injunction and other unspecified equitable relief, and attorneys’ fees, expenses, and costs, based on allegations that the defendants breached their fiduciary duties by failing to take action to prevent Plan participants from continuing to purchase Target stock during the class period at prices that allegedly were artificially inflated.]

Representatives of Target have had a series of meetings with representatives of the Attorney General’s Office and certain California District Attorneys’ Offices to discuss the [removed: allegations and attempt to resolve the matter.][added: allegations.]

The Federal Securities Law Class Actions and ERISA Class Actions defined below relate to certain prior disclosures by Target about its expansion of retail operations into Canada (the Canada Disclosure).

On July 31, 2017 the Court issued a combined order dismissing the Federal Securities Law Class Actions.

On August 29, 2017 the plaintiff filed a motion to alter or amend the final judgment entered by the Court dismissing the Federal Securities Law Class Actions.

The plaintiffs also asked the Court for permission to file a Second Amended Class Action Complaint (the Second Complaint), which has substantially similar allegations, defendants, class representation, and damages sought as the First Complaint.

On October 16, 2017, Target and the other defendants filed their opposition to plaintiff's motion to alter or amend the final judgment dismissing the Federal Securities Law Class Actions.

On July 31, 2017 the Court issued a combined order dismissing the ERISA Class Actions.

On August 30, 2017 the plaintiffs filed a new ERISA Class Action (the Second ERISA Class Action) in the Court, which has substantially similar allegations, defendants, class representation, and damages sought as the First ERISA Class Action, except that the class period is extended to August 6, 2014.

On November 13, 2017, Target and the other defendants filed a motion to dismiss the Second ERISA Class Action.

No formal legal action has been commenced, but the parties are discussing resolution of the matter.

The actions subsequently were consolidated under the caption In re: Target Corporation Securities Litigation, Case No. 0:16-cv-01315-JNE-BRT.

The plaintiff seeks to represent a class consisting of all purchasers of Target common stock between March 20, 2013 and August 4, 2014.

On February 10, 2017, Target and the other defendants moved to dismiss the Consolidated Complaint.

The actions subsequently were consolidated under the caption In re: Target Corporation ERISA Litigation, Case No. 0:16-cv-02400-JNE-BRT.

Target, the Plan Investment Committee, and seven present or former officers are named as defendants in the Amended Complaint.

The plaintiffs seek damages, an injunction and other unspecified equitable relief, and attorneys’ fees, expenses, and costs, based on allegations that the defendants breached their fiduciary duties by failing to take action to prevent Plan participants from continuing to purchase Target stock during the class period at prices that allegedly were artificially inflated.

On February 24, 2017, Target and the other defendants moved to dismiss the Amended Complaint.

No formal legal action has been commenced, nor has any specific relief been sought, to date.

| For the fiscal year ended [removed: January 28, 2017] [added: February 3, 2018] | |

[removed: ][added: ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or a] smaller reporting [added: company, or an emerging growth] company (as defined in Rule 12b-2 of the [added: Exchange] Act).

| Large accelerated filer x | [added: |] Accelerated filer o | [added: |] Non-accelerated filer o [removed: (Do not check if a smaller reporting company)] | [removed: Smaller reporting company o] |

The aggregate market value of the voting stock held by non-affiliates of the registrant as of July [removed: 30, 2016] [added: 29, 2017] was [removed: $43,242,921,133,] [added: $30,595,914,184,] based on the closing price of [removed: $75.33] [added: $56.11] per share of Common Stock as reported on the New York Stock Exchange Composite Index.

Total shares of Common Stock, par value $0.0833, outstanding at March [removed: 2, 2017] [added: 8, 2018] were [removed: 552,675,341.][added: 538,796,010.]

| Portions of Target's Proxy Statement [added: for the Annual Meeting of Shareholders] to be [removed: filed] [added: held] on [removed: or about May 1, 2017] [added: June 13, 2018] are incorporated into Part III. |

| [Item [removed: 1](#s334A2F60CF5A79D61BBA722606AD4D2D)] [added: 1](#s2BF2F77C0A8726E67087A2539034E41D)] | | [removed: [Business](#s334A2F60CF5A79D61BBA722606AD4D2D)] [added: [Business](#s2BF2F77C0A8726E67087A2539034E41D)] | [removed: [2](#s334A2F60CF5A79D61BBA722606AD4D2D)] [added: [2](#s2BF2F77C0A8726E67087A2539034E41D)] |

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| [Item [removed: 1B](#s1E0EA52AB3FD4CAAB830722607185D2F)] [added: 1B](#s599A5923B5B711C5931DA25390854138)] | | [Unresolved Staff [removed: Comments](#s1E0EA52AB3FD4CAAB830722607185D2F)] [added: Comments](#s599A5923B5B711C5931DA25390854138)] | [removed: [10](#s1E0EA52AB3FD4CAAB830722607185D2F)] [added: [10](#s599A5923B5B711C5931DA25390854138)] |

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| [PART [removed: III](#s82F39B99C53A6918BB70722612BCB285)] [added: III](#sF0446C51DDB2885652D1A2539BC868D2)] | | | |

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10-K 1 tgt-20180203x10k.htm 10-K

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| Smaller reporting company o | | | Emerging growth company o | | |

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.

| [PART I](#s16B3543D32391C8EF703A2539010EF36) | | | |

| [PART II](#sDBE7CDC16D042B782D0DA253915E8AB1) | | | |

| [PART IV](#sA58EFD48A1DF44EC39D4A2539CC3BDF1) | | | |

| [Signatures](#s1E65C5DD1D267844189AA2539D14AB5B) | | | [69](#s1E65C5DD1D267844189AA2539D14AB5B) |

10-K 1 tgt-20170128x10k.htm 10-K

See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 126-2 of the Exchange Act.

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| [PART I](#s9570597549D2D5432DA17226068D85E5) | | | |

| [PART II](#s5E79CA58167E68401A64722607D9BD8F) | | | |

| [PART IV](#s6D4F1F31CF141BAB202B72261393169B) | | | |

| [Signatures](#s69811F97D3A5EDDE76DE722613E57D07) | | | [65](#s69811F97D3A5EDDE76DE722613E57D07) |

| [Exhibit Index](#sD89B0608E1FDE611733B7226142B3D53) | | | [67](#sD89B0608E1FDE611733B7226142B3D53) |

| Stores at [removed: January 28, 2017] [added: February 3, 2018] | Stores | | Retail Sq. Ft. (in thousands) | | | | Stores | | Retail Sq. Ft. (in thousands) | |

| Connecticut | 20 | | 2,672 | | | New York | [removed: 75] [added: 79] | | [removed: 9,961] [added: 10,117] | |

| Delaware | 3 | | 440 | | | North Carolina | [removed: 49] [added: 51] | | [removed: 6,496] [added: 6,540] | |

| Florida | 122 | | [removed: 17,135] [added: 16,985] | | | Ohio | [removed: 61] [added: 62] | | [removed: 7,659] [added: 7,675] | |

| Georgia | [removed: 51] [added: 50] | | [removed: 6,916] [added: 6,820] | | | Oklahoma | 15 | | 2,168 | |

| Hawaii | [removed: 6] [added: 7] | | [removed: 971] [added: 1,111] | | | Oregon | 19 | | 2,280 | |

| Idaho | 6 | | 664 | | | Pennsylvania | [removed: 69] [added: 71] | | [removed: 8,741] [added: 8,827] | |

| Illinois | [removed: 92] [added: 94] | | [removed: 12,361] [added: 12,152] | | | Rhode Island | 4 | | 517 | |

| Kansas | [removed: 18] [added: 17] | | [removed: 2,473] [added: 2,385] | | | Tennessee | 31 | | 3,990 | |

| Kentucky | 13 | | 1,551 | | | Texas | [removed: 147] [added: 149] | | [removed: 20,726] [added: 20,863] | |

| Maryland | 39 | | [removed: 4,952] [added: 4,860] | | | Virginia | 58 | | 7,689 | |

| Michigan | [removed: 55] [added: 53] | | [removed: 6,603] [added: 6,370] | | | West Virginia | 6 | | 755 | |

| Minnesota | [removed: 75] [added: 74] | | [removed: 10,634] [added: 10,440] | | | Wisconsin | 37 | | 4,560 | |

| Stores and Distribution Centers at [removed: January 28, 2017] [added: February 3, 2018] | Stores | | Distribution Centers (a) | |

(a) The [removed: 40] [added: 41] distribution centers have a total of [removed: 51,831] [added: 52,549] thousand square feet.

| Arizona | 47 | | 6,187 | | | Nevada | 17 | | 2,242 | |

| California | 283 | | 35,948 | | | New Jersey | 45 | | 5,882 | |

| Louisiana | 15 | | 2,120 | | | Utah | 13 | | 1,954 | |

| Massachusetts | 42 | | 5,260 | | | Washington | 37 | | 4,329 | |

| Missouri | 35 | | 4,608 | | | | | | | |

| | | | | | | Total | 1,822 | | 239,355 | |

| Owned | 1,526 | | 33 | |

| Leased | 136 | | 8 | |

| Total | 1,822 | | 41 | |

| Arizona | 46 | | 6,136 | | | Nevada | 17 | | 2,230 | |

| California | 273 | | 35,575 | | | New Jersey | 46 | | 5,929 | |

| Louisiana | 16 | | 2,246 | | | Utah | 13 | | 1,953 | |

| Massachusetts | 40 | | 5,188 | | | Washington | 37 | | 4,328 | |

| Missouri | 35 | | 4,609 | | | | | | | |

| | | | | | | Total | 1,802 | | 239,502 | |

| Owned | 1,535 | | 33 | |

| Leased | 107 | | 7 | |

| Total | 1,802 | | 40 | |

| Brian C. Cornell | Chairman of the Board and Chief Executive Officer since August 2014. Chief Executive Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc., a multinational food and beverage corporation, from March 2012 to July 2014. | [removed: 58] [added: 59] | |

| Rick H. Gomez | Executive Vice President and Chief Marketing Officer since January 2017. Senior Vice President, Brand and Category Marketing from April 2013 to January 2017. Vice President, Brand Marketing at MillerCoors, a multinational brewing company, from April 2011 to April 2013. | [removed: 47] [added: 48] | |

| Don H. Liu | Executive Vice President, Chief Legal [added: & Risk] Officer and Corporate Secretary since [added: October 2017. Executive Vice President, Chief Legal Officer and Corporate Secretary from] August [removed: 2016.] [added: 2016 to September 2017.] Executive Vice President, General Counsel and Corporate Secretary of Xerox Corporation from July 2014 to [removed: July] [added: August] 2016, and Senior Vice President, General Counsel and Corporate Secretary from March 2007 to [removed: August] [added: July] 2014. | [removed: 55] [added: 56] | |

| Stephanie A. Lundquist | Executive Vice President and Chief Human Resources Officer since February 2016. Senior Vice President, Human Resources from January 2015 to February 2016. Senior Vice President, Stores and Distribution Human Resources from February 2014 to January 2015. From March 2011 to January 2014, Ms. Lundquist held several leadership positions with Target Canada. | [removed: 41] [added: 42] | |

| Michael E. McNamara | Executive Vice [removed: President,] [added: President and] Chief Information [removed: and] [added: &] Digital Officer since September 2016. Executive Vice President and Chief Information Officer from June 2015 to September 2016. Chief Information Officer of Tesco PLC, a multinational grocery and general merchandise retailer, from March 2011 to May 2015. | [removed: 52] [added: 53] | |

| John J. Mulligan | Executive Vice President and Chief Operating Officer since September 2015. Executive Vice President and Chief Financial Officer from April 2012 to August 2015. | [removed: 51] [added: 52] | |

| Janna A. Potts | Executive Vice President and Chief Stores Officer since January 2016. Senior Vice President, Stores and Supply Chain Human Resources from February 2015 to January 2016. Senior Vice President, Target Canada Stores and Distribution from March 2014 to January 2015. Senior Vice President, Store Operations from August 2009 to March 2014. | [removed: 49] [added: 50] | |

| Cathy R. Smith | Executive Vice President and Chief Financial Officer since September 2015. Executive Vice President and Chief Financial Officer of Express Scripts Holding Company, a pharmacy benefit manager, from February 2014 to December 2014. Executive Vice President of Strategy and Chief Financial Officer for Walmart International, a division of Wal-Mart Stores, Inc., a discount retailer, from March 2010 to January 2014. | [removed: 53] [added: 54] | |

| Mark J. Tritton | Executive Vice President and Chief Merchandising Officer since June 2016. President of Nordstrom Product Group, of Nordstrom Inc., a fashion specialty retailer, from June 2009 to June 2016. | [removed: 53] [added: 54] | |

| Laysha L. Ward | Executive Vice President and Chief External Engagement Officer since January 2017. Chief Corporate Social Responsibility Officer from December 2014 to January 2017. President, Community Relations and Target Foundation from July 2008 to December 2014. | [removed: 49] [added: 50] | |

| Minsok Pak | Executive Vice President and Chief Strategy & Innovation Officer since August 2017. Senior Vice President of Shopper Marketing & Channel Development, LEGO Retail, LEGO Group, a developer and producer of toys, from April 2016 to July 2017. Partner, Digital Transformation, McKinsey & Company, a global management consulting firm, from April 2014 to April 2016. Managing Director, Actium Corporation, a private equity firm, from June 2010 to April 2014. | 49 | |

| Casey L. Carl | Executive Vice President and Chief Strategy and Innovation Officer since December 2014. President, Omnichannel and Senior Vice President, Enterprise Strategy from July 2014 to December 2014. President, Multichannel, from November 2011 to July 2014. | 41 | |

| Jacqueline Hourigan Rice | Executive Vice President and Chief Risk and Compliance Officer since December 2014. Chief Compliance Officer of General Motors Company, a vehicle manufacturer, from March 2013 to November 2014. Executive Director, Global Ethics & Compliance of General Motors Company from January 2010 to February 2013. | 45 | |

At March [removed: 2, 2017,] [added: 8, 2018,] there were [removed: 15,067] [added: 14,710] shareholders of record.

Dividends declared per share and the high and low closing common stock price for each fiscal quarter during [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] are disclosed in Note 31 of the Financial Statements.

On September 20, 2016, our Board of Directors authorized a [removed: new] $5 billion share repurchase program.

We began repurchasing shares under this [removed: new] authorization during the fourth quarter of [removed: 2016 upon completion of the previous $10 billion program.][added: 2016.]

There is no stated expiration for the share repurchase [removed: programs.][added: program.]

Under [removed: these programs,] [added: this program,] we repurchased [removed: 50.9] [added: 21.3] million shares of common stock [removed: in fiscal 2016,] [added: through February 3, 2018,] at an average price of [removed: $72.35,] [added: $60.52,] for a total investment of [removed: $3.7] [added: $1.3] billion.

The table below presents information with respect to Target common stock purchases made during the three months ended [removed: January 28, 2017,] [added: February 3, 2018,] by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.

| October [removed: 30, 2016] [added: 29, 2017] through November [removed: 26, 2016] [added: 25, 2017] | | | | | | | | | | | | | |

| November [removed: 27, 2016] [added: 26, 2017] through December [removed: 31, 2016] [added: 30, 2017] | | | | | | | | | | | | | |

| Open market and privately negotiated purchases | [removed: —] [added: 583,027] | | | [removed: —] [added: $] | [added: 55.36] | | | [removed: —] [added: 583,027] | | | [removed: 5,246,730,198] [added: $] | [added: 3,841,829,136] | |

| (a) | Represents the incremental shares received upon final settlement of the accelerated share repurchase agreement (ASR) initiated in third quarter [removed: 2016.] [added: 2017.] |

[removed: ][added: ]

| | [removed: January 28, 2012 | | |] February 2, 2013 | | | February 1, 2014 | | | January 31, 2015 | | | January 30, 2016 | | | January 28, 2017 | | | [added: February 3, 2018 | | |]

The graph above compares the cumulative total shareholder return on our common stock for the last five fiscal years with [added: (i)] the cumulative total return on the S&P 500 [removed: Index and a] [added: Index, (ii) the] peer group [added: used in previous filings] consisting of 18 online, general merchandise, department store, food, and specialty retailers, which are large and meaningful competitors (Amazon.com, Inc., Best Buy Co., Inc., Costco Wholesale Corporation, CVS Health Corporation, Dollar General Corporation, The Gap, Inc., The Home Depot, Inc., Kohl's Corporation, The Kroger Co., Lowe's Companies, Inc., Macy's, Inc., Publix Super Markets, Inc., Rite Aid Corporation, Sears Holdings Corporation, Staples, Inc., The TJX Companies, Inc., Walgreens Boots Alliance, Inc., and [removed: Wal-Mart Stores,] [added: Walmart] Inc.) [removed: (Peer] [added: (Previous Peer Group), and (iii) a new peer group consisting of the companies in the Previous Peer Group excluding Publix Super Markets, Inc., which is no longer quoted on a public stock exchange and Staples, Inc., which is no longer publicly traded, plus Dollar Tree, Inc. (Current Peer] Group).

The [removed: peer group] [added: Current Peer Group] is consistent with the retail peer group used for our definitive Proxy Statement [added: for the Annual Meeting of Shareholders] to be [removed: filed] [added: held] on [removed: or about May 1, 2017.][added: June 13, 2018.]

The graph assumes the investment of $100 in Target common stock, the S&P 500 Index and the Peer Group on [removed: January 28, 2012,] [added: February 2, 2013,] and reinvestment of all dividends.

| August 2017 ASR (a) | 279,645 | | | 57.78 | | | | 279,645 | | | 3,931,213,840 | | |

| November 2017 ASR | 2,350,000 | | | 65.97 | | | | 2,350,000 | | | 3,681,213,840 | | |

| Open market and privately negotiated purchases | 548,183 | | | 57.37 | | | | 548,183 | | | 3,649,761,870 | | |

| December 31, 2017 through February 3, 2018 | | | | | | | | | | | | | |

| Open market and privately negotiated purchases | 527,361 | | | 66.45 | | | | 527,361 | | | 3,614,721,098 | | |

| November 2017 ASR (b) | — | | | — | | | | — | | | 3,709,702,895 | | |

| Total | 4,288,216 | | | $ | 62.95 | | | 4,288,216 | | | $ | 3,709,702,895 | |

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| (b) | No additional shares were received upon final settlement of the ASR initiated in November 2017. |

| Target | $ | 100.00 | | $ | 94.85 | | $ | 127.22 | | $ | 128.74 | | $ | 116.88 | | $ | 139.50 | |

| S&P 500 Index | 100.00 | | | 120.30 | | | 137.42 | | | 136.50 | | | 164.99 | | | 202.66 | | |

| Current Peer Group | 100.00 | | | 121.51 | | | 151.16 | | | 164.97 | | | 183.17 | | | 263.52 | | |

| Previous Peer Group | 100.00 | | | 120.95 | | | 149.92 | | | 163.25 | | | 181.67 | | | 261.95 | | |

On January 11, 2012, our Board of Directors authorized the repurchase of $5 billion of our common stock and on June 9, 2015 expanded the program by an additional $5 billion for a total authorization of $10 billion.

| Open market and privately negotiated purchases | 802,412 | | | $ | 67.23 | | | 802,412 | | | $ | 5,210,467,654 | |

| September 2016 ASR (a) | 1,286,423 | | | 67.67 | | | | 1,286,423 | | | 5,246,730,198 | | |

| December 2016 ASR | 4,618,451 | | | 76.77 | | | | 4,618,451 | | | 4,892,156,933 | | |

| January 1, 2017 through January 28, 2017 | | | | | | | | | | | | | |

| Open market and privately negotiated purchases | 2,362,745 | | | 66.27 | | | | 2,362,745 | | | 4,735,572,452 | | |

| Total | 9,070,031 | | | $ | 71.90 | | | 9,070,031 | | | $ | 4,735,572,452 | |

| Target | $ | 100.00 | | $ | 124.97 | | $ | 118.53 | | $ | 158.98 | | $ | 160.89 | | $ | 146.06 | |

| S&P 500 Index | 100.00 | | | 117.61 | | | 141.49 | | | 161.61 | | | 160.54 | | | 194.04 | | |

| Peer Group | 100.00 | | | 127.43 | | | 154.12 | | | 191.03 | | | 208.03 | | | 231.50 | | |

| (millions, except per share data) | [added: 2017 (a) | | |] 2016 | | | 2015 | | | 2014 | | | 2013 | | | [removed: 2012 (a) | | |]

| Sales [removed: (b)] | $ | [removed: 69,495] [added: 71,879] | | $ | [removed: 73,785] [added: 69,495] | | $ | [removed: 72,618] [added: 73,785] | | $ | [removed: 71,279] [added: 72,618] | | $ | [removed: 73,301] [added: 71,279] | |

| Continuing operations | [added: 2,928 | | |] 2,669 | | | 3,321 | | | 2,449 | | | 2,694 | | | [removed: 3,315 | | |]

| Discontinued operations | [added: 6 | | |] 68 | | | 42 | | | (4,085 | | ) | (723 | | ) | [removed: (316 | | ) |]

| Net earnings / (loss) | [added: 2,934 | | |] 2,737 | | | 3,363 | | | (1,636 | | ) | 1,971 | | | [removed: 2,999 | | |]

| Continuing operations | [added: 5.35 | | |] 4.62 | | | 5.29 | | | 3.86 | | | 4.24 | | | [removed: 5.05 | | |]

| Discontinued operations | [added: 0.01 | | |] 0.12 | | | 0.07 | | | (6.44 | | ) | (1.14 | | ) | [removed: (0.48 | | ) |]

| Basic earnings / (loss) per share | [added: 5.36 | | |] 4.74 | | | 5.35 | | | (2.58 | | ) | 3.10 | | | [removed: 4.57 | | |]

| Continuing operations | [added: 5.32 | | |] 4.58 | | | 5.25 | | | 3.83 | | | 4.20 | | | [removed: 5.00 | | |]

| Discontinued operations | [added: 0.01 | | |] 0.12 | | | 0.07 | | | (6.38 | | ) | (1.13 | | ) | [removed: (0.48 | | ) |]

| Diluted earnings / (loss) per share | [added: 5.33 | | |] 4.70 | | | 5.31 | | | (2.56 | | ) | 3.07 | | | [removed: 4.52 | | |]

| Cash dividends declared per share | [added: 2.46 | | |] 2.36 | | | 2.20 | | | 1.99 | | | 1.65 | | | [removed: 1.38 | | |]

| Total assets | [added: 38,999 | | |] 37,431 | | | 40,262 | | | 41,172 | | | 44,325 | | | [removed: 47,878 | | |]

| Long-term debt, including current portion | [added: 11,587 | | |] 12,749 | | | 12,760 | | | 12,725 | | | 12,494 | | | [removed: 16,260 | | |]

Per share amounts may not foot due to rounding.

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| (b) | For 2012, includes credit card revenues. |

| Brian C. Cornell Chairman and Chief Executive Officer March [removed: 8, 2017] [added: 14, 2018] | | Cathy R. Smith Executive Vice President and Chief Financial Officer |

Report of Independent Registered Public Accounting Firm [removed: on Consolidated Financial Statements]

[removed: The] [added: To the Shareholders and the] Board of Directors [removed: and Shareholders][added: of]

We have audited the accompanying consolidated statements of financial position of Target Corporation [removed: and subsidiaries] (the Corporation) as of [removed: January 28, 2017] [added: February 3, 2018] and January [removed: 30, 2016, and] [added: 28, 2017,] the related consolidated statements of operations, comprehensive income, cash [removed: flows,] [added: flows] and shareholders' investment for each of the three years in the period ended [removed: January 28, 2017.][added: February 3, 2018, and the related notes (collectively referred to as the "consolidated financial statements").]

Our responsibility is to express an opinion on [removed: these] [added: the Corporation's] financial statements based on our audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material [removed: misstatement.][added: misstatement, whether due to error or fraud.]

[removed: An audit includes] [added: Such procedures included] examining, on a test basis, evidence [removed: supporting] [added: regarding] the amounts and disclosures in the financial statements.

[removed: An audit] [added: Our audits] also [removed: includes assessing] [added: included evaluating] the accounting principles used and significant estimates made by management, as well as evaluating the overall [added: presentation of the] financial [removed: statement presentation.][added: statements.]

In our opinion, the [added: consolidated] financial statements [removed: referred to above] present fairly, in all material respects, the [removed: consolidated] financial position of [removed: Target] [added: the] Corporation [removed: and subsidiaries] at [removed: January 28, 2017] [added: February 3, 2018] and January [removed: 30, 2016,] [added: 28, 2017,] and the [removed: consolidated] results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the three years in the period ended [removed: January 28, 2017,] [added: February 3, 2018,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the Corporation's internal control over financial reporting as of [removed: January 28, 2017,] [added: February 3, 2018,] based on criteria established in Internal [removed: Control—Integrated] [added: Control-Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: Framework),] [added: framework)] and our report dated March [removed: 8, 2017,] [added: 14, 2018,] expressed an unqualified opinion thereon.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we assessed the effectiveness of our internal control over financial reporting as of [removed: January 28, 2017,] [added: February 3, 2018,] based on the framework in Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Our internal control over financial reporting as of [removed: January 28, 2017,] [added: February 3, 2018,] has been audited by Ernst & Young LLP, the independent registered public accounting firm who has also audited our consolidated financial statements, as stated in their report which appears on this page.

Report of Independent Registered Public Accounting Firm [removed: on Internal Control over Financial Reporting]

We have audited Target [removed: Corporation and subsidiaries' (the Corporation)] [added: Corporation’s] internal control over financial reporting as of [removed: January 28, 2017,] [added: February 3, 2018,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: Framework)] [added: framework)] (the COSO criteria).

The [removed: Corporation's] [added: Corporation’s] management is responsible for maintaining effective internal control over financial [removed: reporting,] [added: reporting] and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting.

We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

A [removed: company's] [added: company’s] internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, [removed: use] [added: use,] or disposition of the [removed: company's] [added: company’s] assets that could have a material effect on the financial statements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in [removed: conditions] [added: conditions,] or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, [removed: the] [added: Target] Corporation [added: (the Corporation)] maintained, in all material respects, effective internal control over financial reporting as of [removed: January 28, 2017,] [added: February 3, 2018,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the consolidated statements of financial position of [removed: Target] [added: the] Corporation [removed: and subsidiaries] as of [removed: January 28, 2017] [added: February 3, 2018] and January [removed: 30, 2016, and] [added: 28, 2017,] the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended [removed: January 28, 2017,] [added: February 3, 2018,] and [added: the related notes and] our report dated March [removed: 8, 2017,] [added: 14, 2018] expressed an unqualified opinion thereon.

| (millions, except per share data) | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | | |

| Sales | $ | [removed: 69,495] [added: 71,879] | | $ | [removed: 73,785] [added: 69,495] | | $ | [removed: 72,618] [added: 73,785] | |

| Selling, general and administrative expenses | [removed: 13,356] [added: 14,248] | | | [removed: 14,665] [added: 13,356] | | | [removed: 14,676] [added: 14,665] | | |

| Depreciation and amortization | [removed: 2,298] [added: 2,445] | | | [removed: 2,213] [added: 2,298] | | | [removed: 2,129] [added: 2,213] | | |

| Gain on sale | — | | | [removed: (620] [added: —] | | [removed: )] | [removed: —] [added: (620] | | [added: )] |

| Earnings from continuing operations before interest expense and income taxes | [removed: 4,969] [added: 4,312] | | | [removed: 5,530] [added: 4,969] | | | [removed: 4,535] [added: 5,530] | | |

| Net interest expense | [removed: 1,004] [added: 666] | | | [removed: 607] [added: 1,004] | | | [removed: 882] [added: 607] | | |

| Earnings from continuing operations before income taxes | [removed: 3,965] [added: 3,646] | | | [removed: 4,923] [added: 3,965] | | | [removed: 3,653] [added: 4,923] | | |

| Provision for income taxes | [removed: 1,296] [added: 718] | | | [removed: 1,602] [added: 1,296] | | | [removed: 1,204] [added: 1,602] | | |

| Net earnings from continuing operations | [removed: 2,669] [added: 2,928] | | | [removed: 3,321] [added: 2,669] | | | [removed: 2,449] [added: 3,321] | | |

| Discontinued operations, net of tax | [removed: 68] [added: 6] | | | [removed: 42] [added: 68] | | | [removed: (4,085] [added: 42] | | [removed: )] |

| Net earnings [removed: / (loss)] | $ | [removed: 2,737] [added: 2,934] | | $ | [removed: 3,363] [added: 2,737] | | $ | [removed: (1,636] [added: 3,363] | [removed: )] |

| Basic earnings [removed: / (loss)] per share | | | | | | | | | |

| Continuing operations | $ | [removed: 4.62] [added: 5.35] | | $ | [removed: 5.29] [added: 4.62] | | $ | [removed: 3.86] [added: 5.29] | |

| Discontinued operations | [removed: 0.12] [added: 0.01] | | | [removed: 0.07] [added: 0.12] | | | [removed: (6.44] [added: 0.07] | | [removed: )] |

| Net earnings [removed: / (loss)] per share | $ | [removed: 4.74] [added: 5.36] | | $ | [removed: 5.35] [added: 4.74] | | $ | [removed: (2.58] [added: 5.35] | [removed: )] |

| Diluted earnings [removed: / (loss)] per share | | | | | | | | | |

| Continuing operations | $ | [removed: 4.58] [added: 5.32] | | $ | [removed: 5.25] [added: 4.58] | | $ | [removed: 3.83] [added: 5.25] | |

| Discontinued operations | [removed: 0.12] [added: 0.01] | | | [removed: 0.07] [added: 0.12] | | | [removed: (6.38] [added: 0.07] | | [removed: )] |

| /s/ Brian C. Cornell | | /s/ Cathy R. Smith |

Opinion on the Financial Statements

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

/s/ Ernst & Young, LLP

We have served as the Corporation's auditor since 1931.

| Minneapolis, Minnesota March 14, 2018 | |

| /s/ Brian C. Cornell | | /s/ Cathy R. Smith |

| Brian C. Cornell Chairman and Chief Executive Officer March 14, 2018 | | Cathy R. Smith Executive Vice President and Chief Financial Officer |

To the Shareholders and the Board of Directors of

Opinion on Internal Control over Financial Reporting

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control Over Financial Reporting

/s/ Ernst & Young, LLP

| Minneapolis, Minnesota March 14, 2018 | |

| Cost of sales (a) | 51,125 | | | 49,145 | | | 52,241 | | |

| Gross margin | 20,754 | | | 20,350 | | | 21,544 | | |

| Depreciation and amortization (exclusive of depreciation included in cost of sales) (a) | 2,194 | | | 2,025 | | | 1,969 | | |

(a) Refer to Note 3 for additional information about a reclassification of supply chain-related depreciation expense to Cost of Sales.

| Net earnings | $ | 2,934 | | $ | 2,737 | | $ | 3,363 | |

| Cash and cash equivalents | $ | 2,643 | | $ | 2,512 | |

| Net earnings | $ | 2,934 | | $ | 2,737 | | $ | 3,363 | |

| Net earnings from continuing operations | 2,928 | | | 2,669 | | | 3,321 | | |

| Other assets | (168 | | ) | 30 | | | 221 | | |

| Accounts payable | 1,307 | | | (166 | | ) | (362 | | ) |

| Accrued and other liabilities | 450 | | | (350 | | ) | 947 | | |

| Net earnings | — | | — | | | — | | | 2,934 | | | — | | | 2,934 | | |

| Repurchase of stock | (17.6 | ) | (1 | | ) | — | | | (1,026 | | ) | — | | | (1,027 | | ) |

| Reclassification of tax effects to retained earnings (a) | — | | — | | | — | | | 117 | | | (117 | | ) | — | | |

| February 3, 2018 | 541.7 | | $ | 45 | | $ | 5,858 | | $ | 6,553 | | $ | (747 | ) | $ | 11,709 | |

(a) Refer to Note 29.

As described in Note 7, in January 2015, we announced our exit from the Canadian market.

Certain prior-year amounts have been reclassified to conform to the current year presentation.

Note 3 provides more information about a reclassification of supply chain-related depreciation expense to Cost of Sales.

We will adopt the standard in the first quarter of 2018 using the full retrospective approach.

We expect minor changes to the timing of revenue recognition, primarily related to promotional gift cards, which we estimate will increase 2015 beginning retained earnings by less than $20 million upon adoption.

We will continue to record revenue and related costs on a gross basis for the vast majority of these arrangements, which represent approximately 4 percent of consolidated sales.

We will present certain other income streams, including credit card profit sharing income, in an Other Revenue line on our Consolidated Statements of Operations beginning in 2018.

|  | |  |

| Minneapolis, Minnesota March 8, 2017 |  |

|  | |  |

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Cost of sales | 48,872 | | | 51,997 | | | 51,278 | | |

| Gross margin | 20,623 | | | 21,788 | | | 21,340 | | |

| Net income / (loss) | $ | 2,737 | | $ | 3,363 | | $ | (1,636 | ) |

| Cash and cash equivalents, including short-term investments of $1,110 and $3,008 | $ | 2,512 | | $ | 4,046 | |

| Liabilities of discontinued operations | 1 | | | 153 | | |

| Pension and other benefit liabilities | (601 | | ) | (588 | | ) |

| Currency translation adjustment and cash flow hedges | (37 | | ) | (41 | | ) |

| Other assets | 36 | | | 227 | | | (115 | | ) |

| Accounts payable and accrued liabilities | (543 | | ) | 579 | | | 803 | | |

| Change in commercial paper, net | — | | | — | | | (80 | | ) |

(a) Includes cash of our discontinued operations of $25 million at February 1, 2014.

| February 1, 2014 | 632.9 | | $ | 53 | | $ | 4,470 | | $ | 12,599 | | $ | (891 | ) | $ | 16,231 | |

| Net loss | — | | — | | | — | | | (1,636 | | ) | — | | | (1,636 | | ) |

| Repurchase of stock | (0.8 | ) | — | | | — | | | (46 | | ) | — | | | (46 | | ) |

As described in Note 7, in January 2015, we announced our exit from the Canadian market and filed for protection (the Filing) under the Companies' Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice in Toronto (the Court).

As of January 15, 2015, we deconsolidated substantially all of our Canadian operations following the Filing.

See Note 7 for more information.

We are still evaluating whether to use a full retrospective or a modified retrospective approach to adopt the standard.

We currently record revenue and related costs gross, with approximately 3 percent of 2016 consolidated sales made under such arrangements.

Any change to net presentation would not impact gross margin or earnings.

We are also evaluating the presentation of certain ancillary income streams, including the credit card profit sharing income described in Note 9.

Canada Exit

As a result, we recorded a pretax impairment loss on deconsolidation and other related charges, collectively totaling $5.1 billion.

Subsequent to deconsolidation, we use the cost method to account for our equity investment in the Canada Subsidiaries, which has been reflected as zero in our Consolidated Statement of Financial Position at January 28, 2017 and January 30, 2016 based on the estimated fair value of the Canada Subsidiaries' net assets.

The settlement was contingent upon the Canada Subsidiaries' creditors' and the Court's approval of a plan of compromise and arrangement to complete the controlled, orderly, and timely wind-down of the Canada Subsidiaries (Plan).

During the second quarter of 2016, a Plan was approved.

| Sales | $ | — | | $ | — | | $ | 1,902 | |

| Cost of sales | — | | | — | | | 1,541 | | |

| SG&A expenses | — | | | — | | | 909 | | |

| Depreciation and amortization | — | | | — | | | 248 | | |

| Interest expense | — | | | — | | | 73 | | |

| Pretax loss from operations | — | | | — | | | (869 | | ) |

| Pretax Exit Costs (millions) | 2016 | | | 2015 | | | 2014 | | |

| Investment impairment | $ | (222 | ) | $ | (6 | ) | $ | (4,766 | ) |

| Contingent liabilities | 229 | | | (62 | | ) | (240 | | ) |

Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are [removed: effective.][added: effective at a reasonable assurance level.]

Certain information required by Part III is incorporated by reference from Target's definitive Proxy Statement [added: for the Annual Meeting of Shareholders] to be [removed: filed] [added: held] on [removed: or about May 1, 2017.][added: June 13, 2018 (our Proxy Statement).]

Except for those portions specifically incorporated in this Form 10-K by reference to [removed: Target's] [added: the] Proxy Statement, no other portions of the Proxy Statement are deemed to be filed as part of this Form 10-K.

The following sections of [removed: Target's] [added: the] Proxy Statement [removed: to be filed on or about May 1, 2017,] are incorporated herein by reference:

See also Item 4A, Executive Officers of Part I [removed: hereof.][added: of this Form 10-K.]

The following sections of [removed: Target's] [added: the] Proxy Statement [removed: to be filed on or about May 1, 2017,] are incorporated herein by reference:

The following sections of [removed: Target's] [added: the] Proxy Statement [removed: to be filed on or about May 1, 2017,] are incorporated herein by reference:

The following sections of [removed: Target's] [added: the] Proxy Statement [removed: to be filed on or about May 1, 2017,] are incorporated herein by reference:

The following section of [removed: Target's] [added: the] Proxy Statement [removed: to be filed on or about May 1, 2017,] is incorporated herein by reference:

| • | Consolidated Statements of Operations for the Years Ended [added: February 3, 2018,] January 28, 2017, [removed: January 30, 2016,] and January [removed: 31, 2015] [added: 30, 2016] |

| • | Consolidated Statements of Comprehensive Income for the Years Ended [added: February 3, 2018,] January 28, 2017, [removed: January 30, 2016,] and January [removed: 31, 2015] [added: 30, 2016] |

| • | Consolidated Statements of Financial Position at [added: February 3, 2018 and] January 28, 2017 [removed: and January 30, 2016] |

| • | Consolidated Statements of Cash Flows for the Years Ended [added: February 3, 2018,] January 28, 2017, [removed: January 30, 2016,] and January [removed: 31, 2015] [added: 30, 2016] |

| • | Consolidated Statements of Shareholders' Investment for the Years Ended [added: February 3, 2018,] January 28, 2017, [removed: January 30, 2016,] and January [removed: 31, 2015] [added: 30, 2016] |

| (2)A | † | [removed: Asset] [added: [Asset] Purchase Agreement dated June 12, 2015 between Target Corporation and CVS Pharmacy, [removed: Inc.] [added: Inc.](http://www.sec.gov/Archives/edgar/data/27419/000002741915000029/tgt-20150801xexhibit2h.htm)] (1) |

| (3)A | | [removed: Amended] [added: [Amended] and Restated Articles of Incorporation (as amended through June 9, [removed: 2010)] [added: 2010)](http://www.sec.gov/Archives/edgar/data/27419/000110465910033363/a10-11723_1ex3da.htm)] (2) |

| (4)A | | [removed: Indenture,] [added: [Indenture,] dated as of August 4, 2000 between Target Corporation and Bank One Trust Company, [removed: N.A.] [added: N.A.](http://www.sec.gov/Archives/edgar/data/27419/000091205700036147/ex-4_1.htm)] (4) |

| B | | [removed: First] [added: [First] Supplemental Indenture dated as of May 1, 2007 to Indenture dated as of August 4, 2000 between Target Corporation and The Bank of New York Trust Company, N.A. (as successor in interest to Bank One Trust Company [removed: N.A.)] [added: N.A.)](http://www.sec.gov/Archives/edgar/data/27419/000110465907034430/a07-12852_1ex4d1.htm)] (5) |

| B | * | [removed: Target] [added: [Target] Corporation Long-Term Incentive Plan (as amended and restated effective June 8, [removed: 2011)] [added: 2011)](http://www.sec.gov/Archives/edgar/data/27419/000110465911048645/a11-14163_1ex10db.htm)] (7) |

| C | * | [removed: Amended] [added: [Amended] and Restated Target Corporation 2011 Long-Term Incentive Plan [added: (as amended and restated effective September 1, 2017)](http://www.sec.gov/Archives/edgar/data/27419/000002741917000027/tgt-2017729_exhibit10c.htm)] (8) |

| D | * | [removed: Target] [added: [Target] Corporation SPP I (2016 Plan Statement) (as amended and restated effective April 3, [removed: 2016)] [added: 2016)](http://www.sec.gov/Archives/edgar/data/27419/000002741916000051/tgt-20160430xexhibit10c.htm)] (9) |

| E | * | [removed: Target] [added: [Target] Corporation SPP II (2016 Plan Statement) (as amended and restated effective April 3, [removed: 2016)] [added: 2016)](http://www.sec.gov/Archives/edgar/data/27419/000002741916000051/tgt-20160430xexhibit10d.htm)] (10) |

| F | * | [removed: Target] [added: [Target] Corporation SPP III (2014 Plan Statement) (as amended and restated effective January 1, [removed: 2014)] [added: 2014)](http://www.sec.gov/Archives/edgar/data/27419/000002741914000014/tgt-20140201xexhibit_10e.htm)] (11) |

| G | * | [removed: Amendment] [added: [Amendment] to Target Corporation SPP III (2014 Plan Statement) (effective April 3, [removed: 2016)] [added: 2016)](http://www.sec.gov/Archives/edgar/data/27419/000002741916000051/tgt-20160430xexhibit10nn.htm)] (12) |

| H | * | [removed: Target] [added: [Target] Corporation Officer Deferred Compensation Plan (as amended and restated effective June 8, [removed: 2011)] [added: 2011)](http://www.sec.gov/Archives/edgar/data/27419/000110465911048645/a11-14163_1ex10df.htm)] (13) |

| I | * | [removed: Target] [added: [Target] Corporation Officer EDCP (2017 Plan Statement) (as amended and restated effective May 1, [removed: 2017)] [added: 2017)](http://www.sec.gov/Archives/edgar/data/27419/000002741917000008/tgt-20170128xexhibit10i.htm) (14)] |

| J | * | [removed: Target] [added: [Target] Corporation Deferred Compensation Plan [removed: Directors (14)] [added: Directors](http://www.sec.gov/Archives/edgar/data/27419/000104746907001800/a2176656zex-10_i.htm) (15)] |

| K | * | [removed: Target] [added: [Target] Corporation DDCP (2013 Plan Statement) (as amended and restated effective December 1, [removed: 2013) (15)] [added: 2013)](http://www.sec.gov/Archives/edgar/data/27419/000002741914000014/tgt-20140201xexhibit_10i.htm) (16)] |

| M | * | [removed: Target] [added: [Target] Corporation Executive Excess Long Term Disability Plan (as restated effective January 1, [removed: 2010 (17)] [added: 2010)](http://www.sec.gov/Archives/edgar/data/27419/000110465910061015/a10-17636_1ex10da.htm) (18)] |

| O | * | [removed: Target] [added: [Target] Corporation Deferred Compensation Trust Agreement (as amended and restated effective January 1, [removed: 2009) (19)] [added: 2009)](http://www.sec.gov/Archives/edgar/data/27419/000104746909002623/a2190597zex-10_o.htm) (20)] |

| [removed: P] [added: Q] | * | [removed: Amendment] [added: [Amendment dated October 25, 2017] to Target Corporation Deferred Compensation Trust Agreement (as amended and restated effective January 1, [removed: 2009) (20)] [added: 2009)](http://www.sec.gov/Archives/edgar/data/27419/000002741917000034/tgt-20171028xexhibit10mm.htm) (22)] |

| [removed: Q] [added: R] | * | [removed: Form] [added: [Form] of Amended and Restated Executive Non-Qualified Stock Option [removed: Agreement (21)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/27419/000002741915000012/tgt_exhibitx10vx10-kxfy2014.htm) (23)] |

| T | * | [removed: Form] [added: [Form] of [removed: Executive] Performance-Based Restricted Stock Unit [removed: Agreement (23)] [added: Agreement](https://www.sec.gov/Archives/edgar/data/27419/000002741918000010/tgt-20180203xexhibit10t.htm)] |

| [removed: V] [added: W] | * | [removed: Form] [added: [Form] of Non-Employee Director Non-Qualified Stock Option [removed: Agreement (24)] [added: Agreement](http://www.sec.gov/Archives/edgar/data/27419/000110465912001595/a12-2427_1ex10dee.htm) (25)] |

| [removed: W] [added: X] | * | [removed: Form] [added: [Form] of Non-Employee Director Restricted Stock Unit [removed: Agreement (25)] [added: Agreement](https://www.sec.gov/Archives/edgar/data/27419/000002741918000010/tgt-20180203xexhibit10x.htm)] |

| [removed: Y] [added: BB] | | [removed: Five-Year] [added: [Five-Year] Credit Agreement dated as of October 5, 2016 among Target Corporation, Bank of America, N.A. as Administrative Agent and the Banks listed [removed: therein (27)] [added: therein](http://www.sec.gov/Archives/edgar/data/27419/000002741916000066/tgt-20161029xexhibit10o.htm) (29)] |

| [removed: Z] [added: DD] | ‡ | [removed: Credit] [added: [Credit] Card Program Agreement dated October 22, 2012 among Target Corporation, Target Enterprise, Inc. and TD Bank USA, [removed: N.A. (28)] [added: N.A.](http://www.sec.gov/Archives/edgar/data/27419/000110465913057305/a13-17284_1ex10dx.htm) (31)] |

| [removed: AA] [added: EE] | ‡ | [removed: First] [added: [First] Amendment dated February 24, 2015 to Credit Card Program Agreement among Target Corporation, Target Enterprise, Inc. and TD Bank USA, [removed: N.A. (29)] [added: N.A.](http://www.sec.gov/Archives/edgar/data/27419/000002741915000018/tgt-20150502xexhibit10ii.htm) (32)] |

| [removed: BB] [added: FF] | ‡ | [removed: Pharmacy] [added: [Pharmacy] Operating Agreement dated December 16, 2015 between Target Corporation and CVS Pharmacy, [removed: Inc. (30)] [added: Inc.](http://www.sec.gov/Archives/edgar/data/27419/000002741916000043/tgt_exhibitx10kk.htm) (33)] |

| [removed: CC] [added: GG] | ‡ | [removed: First] [added: [First] Amendment dated November 30, 2016 to Pharmacy Operating Agreement between Target Corporation and CVS Pharmacy, [removed: Inc.] [added: Inc.](http://www.sec.gov/Archives/edgar/data/27419/000002741917000008/tgt-20170128xexhibit10ccxc.htm) (34)] |

| [removed: FF] [added: Z] | * | [removed: Make-Whole] [added: [Make-Whole] Performance-Based Restricted Stock Unit Agreement with Brian C. Cornell, effective as of August 21, [removed: 2014 (33)] [added: 2014](http://www.sec.gov/Archives/edgar/data/27419/000002741914000028/tgt-20140802xexhibit10ee.htm) (27)] |