Item 1. Financial Statements

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Item 1. Financial Statements


Consolidated Statements of Operations
	Three Months Ended
(millions, except per share data) (unaudited)	April 29, 2023		April 30, 2022
Sales	$	24,948	$	24,830
Other revenue	374		340
Total revenue	25,322		25,170
Cost of sales	18,386		18,461
Selling, general and administrative expenses	5,025		4,762
Depreciation and amortization (exclusive of depreciation included in cost of sales)	583		601
Operating income	1,328		1,346
Net interest expense	147		112
Net other income	(23)		(15)
Earnings before income taxes	1,204		1,249
Provision for income taxes	254		240


Net earnings	$	950	$	1,009



Basic earnings per share	$	2.06	$	2.17



Diluted earnings per share	$	2.05	$	2.16
Weighted average common shares outstanding
Basic	460.9		464.0
Diluted	462.9		467.8
Antidilutive shares	1.2		—

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 2023 Form 10-Q			1


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Comprehensive Income
	Three Months Ended
(millions) (unaudited)	April 29, 2023		April 30, 2022
Net earnings	$	950	$	1,009
Other comprehensive income, net of tax
Pension benefit liabilities	2		11
Cash flow hedges and currency translation adjustment	(5)		190
Other comprehensive income	(3)		201
Comprehensive income	$	947	$	1,210

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 2023 Form 10-Q			2


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Financial Position
(millions, except footnotes) (unaudited)	April 29, 2023		January 28, 2023		April 30, 2022
Assets
Cash and cash equivalents	$	1,321	$	2,229	$	1,112
Inventory	12,616		13,499		15,083
Other current assets	1,836		2,118		1,758
Total current assets	15,773		17,846		17,953
Property and equipment
Land	6,493		6,231		6,164
Buildings and improvements	35,198		34,746		33,300
Fixtures and equipment	7,473		7,439		6,459
Computer hardware and software	3,067		3,039		2,588
Construction-in-progress	2,822		2,688		1,444
Accumulated depreciation	(22,657)		(22,631)		(21,285)
Property and equipment, net	32,396		31,512		28,670
Operating lease assets	2,640		2,657		2,571
Other noncurrent assets	1,341		1,320		1,648
Total assets	$	52,150	$	53,335	$	50,842
Liabilities and shareholders’ investment
Accounts payable	$	11,935	$	13,487	$	14,053
Accrued and other current liabilities	5,732		5,883		5,582
Current portion of long-term debt and other borrowings	200		130		1,089
Total current liabilities	17,867		19,500		20,724
Long-term debt and other borrowings	16,010		16,009		13,379
Noncurrent operating lease liabilities	2,621		2,638		2,581
Deferred income taxes	2,289		2,196		1,752
Other noncurrent liabilities	1,758		1,760		1,632
Total noncurrent liabilities	22,678		22,603		19,344
Shareholders’ investment
Common stock	38		38		39
Additional paid-in capital	6,541		6,608		5,592
Retained earnings	5,448		5,005		5,495
Accumulated other comprehensive loss	(422)		(419)		(352)
Total shareholders’ investment	11,605		11,232		10,774
Total liabilities and shareholders’ investment	$	52,150	$	53,335	$	50,842

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 461,552,843, 460,346,947, and 463,683,711 shares issued and outstanding as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively.

Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 2023 Form 10-Q			3


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Cash Flows
	Three Months Ended
(millions) (unaudited)	April 29, 2023		April 30, 2022
Operating activities
Net earnings	$	950	$	1,009


Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization	667		679
Share-based compensation expense	43		83
Deferred income taxes	95		115

Noncash losses / (gains) and other, net	(11)		52
Changes in operating accounts:
Inventory	883		(1,181)
Other assets	34		(86)
Accounts payable	(1,463)		(1,560)
Accrued and other liabilities	67		(505)


Cash provided by (required for) operating activities	1,265		(1,394)
Investing activities
Expenditures for property and equipment	(1,605)		(952)
Proceeds from disposal of property and equipment	2		2
Other investments	1		2
Cash required for investing activities	(1,602)		(948)
Financing activities
Change in commercial paper, net	90		945

Reductions of long-term debt	(46)		(48)
Dividends paid	(497)		(424)
Repurchase of stock	—		(10)
Accelerated share repurchase pending final settlement	—		(2,750)
Shares withheld for taxes on share-based compensation	(118)		(171)
Stock option exercises	—		1
Cash required for financing activities	(571)		(2,457)
Net decrease in cash and cash equivalents	(908)		(4,799)
Cash and cash equivalents at beginning of period	2,229		5,911
Cash and cash equivalents at end of period	$	1,321	$	1,112
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities	$	15	$	62
Leased assets obtained in exchange for new operating lease liabilities	54		59

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 2023 Form 10-Q			4


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Shareholders’ Investment
	Common	Stock		Additional				Accumulated Other
	Stock	Par		Paid-in		Retained		Comprehensive
(millions) (unaudited)	Shares	Value		Capital		Earnings		(Loss) / Income		Total
January 29, 2022	471.3	$	39	$	6,421	$	6,920	$	(553)	$	12,827
Net earnings	—	—		—		1,009		—		1,009
Other comprehensive income	—	—		—		—		201		201
Dividends declared	—	—		—		(426)		—		(426)
Repurchase of stock	(0.1)	—		—		(10)		—		(10)
Accelerated share repurchase pending final settlement	(8.9)	(1)		(751)		(1,998)		—		(2,750)
Stock options and awards	1.4	1		(78)		—		—		(77)
April 30, 2022	463.7	$	39	$	5,592	$	5,495	$	(352)	$	10,774
Net earnings	—	—		—		183		—		183
Other comprehensive loss	—	—		—		—		(17)		(17)
Dividends declared	—	—		—		(502)		—		(502)
Repurchase of stock	(3.6)	(1)		870		(755)		—		114
Stock options and awards	0.1	—		40		—		—		40
July 30, 2022	460.2	$	38	$	6,502	$	4,421	$	(369)	$	10,592
Net earnings	—	—		—		712		—		712
Other comprehensive income	—	—		—		—		161		161
Dividends declared	—	—		—		(502)		—		(502)


Stock options and awards	0.1	—		56		—		—		56
October 29, 2022	460.3	$	38	$	6,558	$	4,631	$	(208)	$	11,019
Net earnings	—	—		—		876		—		876
Other comprehensive loss	—	—		—		—		(211)		(211)
Dividends declared	—	—		—		(502)		—		(502)

Stock options and awards	—	—		50		—		—		50
January 28, 2023	460.3	$	38	$	6,608	$	5,005	$	(419)	$	11,232


TARGET CORPORATION						Q1 2023 Form 10-Q			5


			FINANCIAL STATEMENTS			Table of Contents
						Index to Notes


Consolidated Statements of Shareholders’ Investment
	Common	Stock		Additional				Accumulated Other
	Stock	Par		Paid-in		Retained		Comprehensive
(millions) (unaudited)	Shares	Value		Capital		Earnings		(Loss) / Income		Total
January 28, 2023	460.3	$	38	$	6,608	$	5,005	$	(419)	$	11,232
Net earnings	—	—		—		950		—		950
Other comprehensive loss	—	—		—		—		(3)		(3)
Dividends declared	—	—		—		(507)		—		(507)


Stock options and awards	1.3	—		(67)		—		—		(67)
April 29, 2023	461.6	$	38	$	6,541	$	5,448	$	(422)	$	11,605

We declared $1.08 and $0.90 dividends per share for the three months ended April 29, 2023, and April 30, 2022, and $4.14 per share for the fiscal year ended January 28, 2023.

See accompanying Notes to Consolidated Financial Statements.


TARGET CORPORATION						Q1 2023 Form 10-Q			6


			FINANCIAL STATEMENTS			Table of Contents
			INDEX			Index to Notes


INDEX TO NOTES

Notes to Consolidated Financial Statements		8
Note 1	Accounting Policies	8
Note 2	Revenue	9
Note 3	Fair Value Measurements	10
Note 4	Supplier Finance Programs	10
Note 5	Commercial Paper and Long-Term Debt	10
Note 6	Derivative Financial Instruments	11
Note 7	Share Repurchase	12
Note 8	Pension Benefits	12
Note 9	Accumulated Other Comprehensive Income (Loss)	12


TARGET CORPORATION						Q1 2023 Form 10-Q			7


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

Notes to Consolidated Financial Statements (unaudited)

1. Accounting Policies

These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (U.S. GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in our most recent Form 10-K.

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

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

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


TARGET CORPORATION						Q1 2023 Form 10-Q			8


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

2. Revenue

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


Revenue	Three Months Ended
(millions)	April 29, 2023		April 30, 2022
Apparel & accessories (a)	$	3,967	$	4,239
Beauty & household essentials (b)	7,682		7,053
Food & beverage (c)	5,997		5,505
Hardlines (d)	3,391		3,713
Home furnishings & décor (e)	3,855		4,271
Other	56		49
Sales	24,948		24,830

Credit card profit sharing	174		185
Other	200		155
Other revenue	374		340

Total revenue	$	25,322	$	25,170

*(a)*Includes apparel for women, men, boys, girls, toddlers, infants and newborns, as well as jewelry, accessories, and shoes.

*(b)*Includes beauty and personal care, baby gear, cleaning, paper products, and pet supplies.

*(c)*Includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and food service in our stores.

*(d)*Includes electronics (including video game hardware and software), toys, entertainment, sporting goods, and luggage.

*(e)*Includes furniture, lighting, storage, kitchenware, small appliances, home décor, bed and bath, home improvement, school/office supplies, greeting cards and party supplies, and other seasonal merchandise.

Merchandise sales — We record almost all retail store revenues at the point of sale. Digitally originated sales may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Sales are recognized net of expected returns, which we estimate using historical return patterns and our expectation of future returns. As of April 29, 2023, January 28, 2023, and April 30, 2022, the accrual for estimated returns was $206 million, $174 million, and $204 million, respectively.

Revenue from Target gift card sales is recognized upon gift card redemption, which is typically within one year of issuance.


Gift Card Liability Activity	January 28, 2023		Gift Cards Issued During Current Period But Not Redeemed (b)		Revenue Recognized From Beginning Liability		April 29, 2023
(millions)
Gift card liability (a)	$	1,240	$	268	$	(481)	$	1,027

*(a)*Included in Accrued and Other Current Liabilities.

*(b)*Net of estimated breakage.

Other Revenue

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


TARGET CORPORATION						Q1 2023 Form 10-Q			9


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

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

3. Fair Value Measurements

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


Financial Instruments Measured On a Recurring Basis			Fair Value
(millions)	Classification	Measurement Level	April 29, 2023		January 28, 2023		April 30, 2022
Assets
Short-term investments	Cash and Cash Equivalents	Level 1	$	408	$	1,343	$	182
Prepaid forward contracts	Other Current Assets	Level 1	25		27		37

Interest rate swaps	Other Current Assets	Level 2	—		—		41
Interest rate swaps	Other Noncurrent Assets	Level 2	7		7		292
Liabilities

Interest rate swaps	Other Noncurrent Liabilities	Level 2	72		81		27


Significant Financial Instruments Not Measured at Fair Value (a) (millions)	April 29, 2023					January 28, 2023					April 30, 2022
Carrying Amount	Fair Value				Carrying Amount	Fair Value				Carrying Amount	Fair Value
Long-term debt, including current portion (b)	$	14,144	$	13,672		$	14,141	$	13,688		$	11,549	$	11,466

*(a)*The carrying amounts of certain other current assets, commercial paper, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.

*(b)*The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for the same or similar types of financial instruments and would be classified as Level 2. These amounts exclude commercial paper, fair value hedge adjustments, and lease liabilities.

4. Supplier Finance Programs

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

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

Our outstanding vendor obligations eligible for early payment under these arrangements totaled $3.3 billion, $3.4 billion, and $4.4 billion as of April 29, 2023, January 28, 2023, and April 30, 2022, respectively, and are included within Accounts Payable on our Consolidated Statements of Financial Position. Our outstanding vendor obligations do not represent actual receivables sold by our vendors to the financial institutions, which may be lower.

5. Commercial Paper and Long-Term Debt

We obtain short-term financing from time to time under our commercial paper program. For the three months ended April 29, 2023 and April 30, 2022, the maximum amounts outstanding were $90 million and $1.1 billion, respectively, and the average daily amounts outstanding were $2 million and $291 million, respectively, at a weighted average annual interest rate of 4.8 percent and 0.4 percent, respectively. As of April 29, 2023 and April 30, 2022, $90 million and $945 million, respectively, were outstanding and are classified within Current Portion of Long-Term Debt and Other Borrowings on our Consolidated Statements of Financial Position.


TARGET CORPORATION						Q1 2023 Form 10-Q			10


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

6. Derivative Financial Instruments

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 3 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

We were party to interest rate swaps with notional amounts totaling $2.45 billion as of April 29, 2023 and January 28, 2023, and $1.50 billion as of April 30, 2022. We pay a floating rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during the three months ended April 29, 2023 and April 30, 2022.

During the first quarter of 2023, we amended certain of our interest rate swaps, with notional amounts totaling $1.25 billion, to replace the London Interbank Offered Rate (LIBOR) with the daily Secured Overnight Financing Rate (SOFR) as part of our planned reference rate reform activities. These amendments did not result in any change to our application of hedge accounting or any impact to our consolidated financial statements.

We were party to forward-starting interest rate swaps with notional amounts totaling $2.15 billion as of April 30, 2022. During 2022, we terminated all remaining forward-starting interest rate swap agreements. The resulting gains upon termination were recorded in Accumulated Other Comprehensive Loss and will be recognized as a reduction to Net Interest Expense over the respective term of the debt.


Effect of Hedges on Debt (millions)	April 29, 2023		January 28, 2023		April 30, 2022



Long-term debt and other borrowings
Carrying amount of hedged debt	$	2,376	$	2,366	$	1,468
Cumulative hedging adjustments, included in carrying amount	(65)		(74)		(27)


Effect of Hedges on Net Interest Expense	Three Months Ended
(millions)	April 29, 2023		April 30, 2022


Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges	$	9	$	(104)
Hedged debt	(9)		104
Gain on cash flow hedges recognized in Net Interest Expense	6		—
Total	$	6	$	—


TARGET CORPORATION						Q1 2023 Form 10-Q			11


			FINANCIAL STATEMENTS			Table of Contents
			NOTES			Index to Notes

7. Share Repurchase

We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase (ASR) arrangements, and other privately negotiated transactions with financial institutions. We did not repurchase any of our shares during the three months ended April 29, 2023.


Share Repurchase Activity	Three Months Ended
(millions, except per share data)	April 29, 2023		April 30, 2022
Number of shares purchased	—		0.1
Average price paid per share	$	—	$	208.60
Total investment	$	—	$	10

Note: This table excludes activity related to the ASR arrangement described below because final settlement had not occurred as of April 30, 2022.

During the first quarter of 2022, we entered into an ASR arrangement to repurchase up to $2.75 billion of our common stock. Under the agreement, we paid $2.75 billion and received an initial delivery of 8.9 million shares, which were retired, resulting in a $2.0 billion reduction to Retained Earnings. As of April 30, 2022, $751 million was included in the Consolidated Statement of Financial Position as a reduction to Additional Paid-in Capital. Final settlement occurred during the second quarter of 2022. In total, under the ASR arrangement, we repurchased 12.5 million shares for a total cash investment of $2.6 billion.

8. Pension Benefits

We provide pension plan benefits to eligible team members.


Net Pension Benefits Expense		Three Months Ended
(millions)	Classification	April 29, 2023		April 30, 2022
Service cost benefits earned	SG&A	$	20	$	23
Interest cost on projected benefit obligation	Net Other Income	41		29
Expected return on assets	Net Other Income	(67)		(59)
Amortization of losses	Net Other Income	—		15
Prior service cost	Net Other Income	3		—

Total		$	(3)	$	8

9. Accumulated Other Comprehensive Income (Loss)


Change in Accumulated Other Comprehensive Income (Loss)	Cash Flow Hedges		Currency Translation Adjustment		Pension		Total
(millions)
January 28, 2023	$	300	$	(23)	$	(696)	$	(419)
Other comprehensive income (loss) before reclassifications, net of tax	—		—		—		—
Amounts reclassified from AOCI, net of tax	(5)		—		2		(3)
April 29, 2023	$	295	$	(23)	$	(694)	$	(422)


TARGET CORPORATION						Q1 2023 Form 10-Q			12


			MANAGEMENT'S DISCUSSION AND ANALYSIS			Table of Contents
			FINANCIAL SUMMARY			Index to Notes

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