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What changed in Target Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Target Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+234 added−239 removedSource: 10-K (2023-03-08) vs 10-K (2022-03-09)

Top changes in Target Corporation's 2023 10-K

234 paragraphs added · 239 removed · 185 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe six pillars of our strategy are: • Delivering affordability to our guests; • Differentiating from our competition with our owned brands and a curated assortment of leading national brands; • Investing to create an engaging and differentiated shopping experience; • Leveraging our stores-as-hubs to efficiently provide a convenient and safe experience for our guests whether they purchase online or physically in-store; • Maintaining and enhancing our relevancy to deepen engagement with guests; and • Leveraging our size and scale to benefit people, the planet, and our business, primarily through Target Forward, the sustainability-focused component of our overall business strategy, announced in 2021.
Biggest changeThe six pillars of our strategy are: • Differentiating from our competition with our assortment of unique owned brands and curated leading national brands; • Investing to create an engaging, convenient, safe, and differentiated shopping experience for our guests; • Leveraging our stores as fulfillment hubs to efficiently meet our guests' needs, whether they purchase online or in-store; • Engaging with our guests through programs like Target Circle and RedCard to maintain and enhance our relevancy; • Delivering affordability to our guests; and • Leveraging our size and scale to benefit people, the planet, and our business, primarily through Target Forward, our enterprise sustainability strategy.
Vendors or third-party distributors ship certain food items and other merchandise directly to our stores. Merchandise sold through our digital channels is distributed to our guests via common carriers (from stores, distribution centers, vendors, and third-party distributors), delivery via our wholly owned subsidiary, Shipt, Inc. (Shipt), and through guest pick-up at our stores.
Vendors or third-party distributors ship certain food items and other merchandise directly to our stores. Merchandise sold through our digital channels is distributed to our guests through guest pick-up at our stores, via common carriers (from stores, distribution centers, vendors, and third-party distributors), and delivery via our wholly owned subsidiary, Shipt, Inc. (Shipt).
TARGET CORPORATION 2021 Form 10-K 4 BUSINESS Table of Contents Index to Financial Statements Human Capital Management In support of our purpose—to help all families discover the joy of everyday life—we invest in our team, our most important asset, by giving them opportunities to grow professionally, take care of themselves, each other and their families, and to make a difference for our guests and our communities.
TARGET CORPORATION 2022 Form 10-K 4 BUSINESS Table of Contents Index to Financial Statements Human Capital Management In support of our purpose—to help all families discover the joy of everyday life—we invest in our team, our most important asset, by giving them opportunities to grow professionally, take care of themselves, each other, and their families, and to make a difference for our guests and our communities.
TARGET CORPORATION 2021 Form 10-K 2 BUSINESS Table of Contents Index to Financial Statements Sales by Fulfillment Channel Financial Highlights For information on key financial highlights, see Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
TARGET CORPORATION 2022 Form 10-K 2 BUSINESS Table of Contents Index to Financial Statements Sales by Fulfillment Channel Financial Highlights For information on key financial highlights, see Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
Boutique™ Smartly™ Auden™ JoyLab™ Smith & Hawken™ Ava & Viv™ Kindfull™ Sonia Kashuk™ Boots & Barkley™ Knox Rose™ Spritz™ Brightroom™ Kona Sol™ Stars Above™ Bullseye's Playground™ Made By Design™ Sun Squad™ Casaluna™ Market Pantry™ Threshold™ Cat & Jack™ Mondo Llama™ Universal Thread™ Cloud Island™ More Than Magic™ up & up™ Colsie™ Opalhouse™ Wild Fable™ Embark™ Open Story™ Wondershop™ Everspring™ Original Use™ Xhilaration™ Favorite Day™ Pillowfort™ Good & Gather™ Project 62™ Exclusive Adult Beverage Brands California Roots™ Mystic Reef™ SunPop™ Headliner™ Photograph™ The Collection™ Jingle & Mingle™ Rosé Bae™ Wine Cube™ We also sell merchandise through periodic exclusive design and creative partnerships, and shop-in-shop experiences, with partners such as Apple, Disney, Levi's, and Ulta Beauty, and generate revenue from in-store amenities such as Target Café, Starbucks, and Target Optical.
Boutique™ Smith & Hawken™ Ava & Viv™ JoyLab™ Sonia Kashuk™ Boots & Barkley™ Kindfull™ Spritz™ Brightroom™ Knox Rose™ Stars Above™ Bullseye's Playground™ Kona Sol™ Sun Squad™ Casaluna™ Made By Design™ Threshold™ Cat & Jack™ Market Pantry™ Universal Thread™ Cloud Island™ Mondo Llama™ up & up™ Colsie™ More Than Magic™ Wild Fable™ Embark™ Opalhouse™ Wondershop™ Everspring™ Open Story™ Xhilaration™ Favorite Day™ Original Use™ Future Collective™ Pillowfort™ Good & Gather™ Project 62™ Exclusive Adult Beverage Brands California Roots™ Jingle & Mingle™ SunPop™ Casa Cantina™ Photograph™ The Collection™ Headliner™ Rosé Bae™ Wine Cube™ We also sell merchandise through periodic exclusive design and creative partnerships, and shop-in-shop experiences, with partners such as Apple, Disney, Levi's, and Ulta Beauty, and generate revenue from in-store amenities such as Starbucks, Target Café, and Target Optical.
Eligibility for, and the level of, benefits vary depending on team members’ full-time or part-time status, work location, compensation level, and tenure. TARGET CORPORATION 2021 Form 10-K 5 BUSINESS & RISK FACTORS Table of Contents Index to Financial Statements Workplace Health and Safety We strive to maintain a safe and secure work environment and have specific safety programs.
Eligibility for, and the level of, benefits vary depending on team members’ full-time or part-time status, work location, compensation level, and tenure. TARGET CORPORATION 2022 Form 10-K 5 BUSINESS Table of Contents Index to Financial Statements Workplace Health and Safety We strive to maintain a safe and secure work environment and have specific safety programs.
Our compensation packages include a starting wage of at least $15 per hour for U.S. hourly team members (who comprise the vast majority of our team), a 401(k) plan with matching contributions up to five percent of eligible earnings, paid vacation and holidays, family leave, merchandise and other discounts, disability insurance, life insurance, healthcare and dependent care flexible spending accounts, debt-free education assistance and tuition reimbursement, free mental health services, an annual short-term incentive program, long-term equity awards, and health insurance benefits, including free virtual health care visits.
Our compensation packages include a starting wage range of $15 to $24 per hour for U.S. hourly team members in our stores and supply chain facilities (who comprise the vast majority of our team), a 401(k) plan with dollar-for-dollar matching contributions up to five percent of eligible earnings, paid vacation and holidays, family leave, merchandise and other discounts, disability insurance, life insurance, healthcare and dependent care flexible spending accounts, debt-free education assistance and tuition reimbursement, free mental health services, an annual short-term incentive program, long-term equity awards, and health insurance benefits, including free virtual health care visits.
As of January 29, 2022, we employed approximately 450,000 full-time, part-time, and seasonal team members. Because of the seasonal nature of the retail business, employment levels peak in the holiday season. We also engage independent contractors, most notably in our Shipt subsidiary. Our Board of Directors, through the Compensation and Human Capital Management Committee, oversees human capital management matters.
As of January 28, 2023, we employed approximately 440,000 full-time, part-time, and seasonal team members. Because of the seasonal nature of the retail business, employment levels peak in the holiday season. We also engage independent contractors, most notably in our Shipt subsidiary. Our Board of Directors, through the Compensation and Human Capital Management Committee, oversees human capital management matters.
Available Information Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at investors.target.com as soon as reasonably practicable after we file such material with, or furnish it to, the U.S.
Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are available free of charge on the Investors section of our website (corporate.target.com/investors) as soon as reasonably practicable after we file such material with, or furnish it to, the U.S.
Our talent and succession planning process supports the development of a diverse talent pipeline for leadership and other critical roles. We monitor our team members’ perceptions of these commitments through a number of surveys and take steps to address areas needing improvement. Diversity, Equity, and Inclusion We embrace diversity and strive to give our team members equitable access to opportunities.
Our talent and succession planning process supports the development of a diverse talent pipeline for leadership and other critical roles. We monitor our team members’ perceptions of these commitments through a number of surveys and take steps to address areas needing improvement.
Seasonality A larger share of annual revenues traditionally occurs in the fourth quarter because it includes the November and December holiday sales period. Merchandise We sell a wide assortment of general merchandise and food. The majority of our general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy, and frozen items.
Seasonality A larger share of annual revenues traditionally occurs in the fourth quarter because it includes the November and December holiday sales period. Merchandise The majority of our stores offer a wide assortment of general merchandise and food.
Approximately one-third of 2021 sales was related to our owned and exclusive brands, including, but not limited, to the following: Owned Brands A New Day™ Goodfellow & Co™ Room Essentials™ All in Motion™ Hearth & Hand™ with Magnolia Shade & Shore™ Archer Farms™ Heyday™ Simply Balanced™ Art Class™ Hyde & EEK!
Approximately one-third of our sales come from our owned and exclusive brands, including, but not limited to, the brands listed below. Owned Brands A New Day™ Goodfellow & Co™ Room Essentials™ All in Motion™ Hearth & Hand™ with Magnolia Shade & Shore™ Art Class™ Heyday™ Smartly™ Auden™ Hyde & EEK!
Developing teams where team members feel heard, respected, and included is a core Target value and is fundamental to creating an inclusive guest experience. Compensation and Benefits Our compensation and benefits are designed to support the financial, mental, and physical well-being of our team members and their families.
Developing environments where all team members feel seen, heard, and welcome to belong is part of Target's core value of inclusivity and is fundamental to creating an inclusive guest experience. Compensation and Benefits Our compensation and benefits are designed to support the financial, mental, and physical well-being of our team members and their families.
This includes administering a comprehensive occupational injury- and illness-prevention program and training for team members. Since the start of the COVID-19 pandemic in 2020, we have continued to invest in the well-being, health, and safety of our team members and guests.
This includes administering a comprehensive occupational injury- and illness-prevention program and training for team members. Throughout the COVID-19 pandemic, we continued to invest in the well-being, health, and safety of our team members with a variety of mental, emotional, and physical wellness resources.
Strategy Our team, technology, and operations enable us to meet our corporate purpose and offer a preferred shopping experience to our guests through a durable, growth-driving enterprise strategy that differentiates Target in the marketplace.
Strategy Our team, technology, and operations enable us to serve guests, fulfill our purpose, and drive business results through a durable, growth-focused enterprise strategy that differentiates Target in the marketplace.
We monitor the representation of women and racially or ethnically diverse team members at different levels throughout the company and disclose the composition of our team in our annual Workforce Diversity Report (which includes demographic information using the categories disclosed in our EEO-1 report).
We monitor the representation of women and racially or ethnically diverse team members at different levels throughout the company and disclose the composition of our team in our annual Workforce Diversity Report and EEO-1 report. We set company-wide DE&I goals to drive progress in these areas.
CVS Pharmacy, Inc. (CVS) operates pharmacies and clinics in our stores under a perpetual operating agreement from which we generate annual occupancy income. Customer Loyalty Programs Our guests receive a 5 percent discount on nearly all purchases and receive free shipping at Target.com when they use their Target Debit Card, Target Credit Card, or Target™ MasterCard ® (collectively, RedCards™).
Customer Loyalty Programs Our guests receive a 5 percent discount on nearly all purchases and receive free shipping at Target.com when they use their Target Debit Card, RedCard Reloadable Account, Target Credit Card, or Target MasterCard ® (collectively, RedCards™).
Pay Less." brand promise, and our "Bullseye Design," ha ve been registered with the U.S. Patent and Trademark Office. We also seek to obtain and preserve intellectual property protection for our brands. Geographic Information Nearly all of our revenues are generated within the U.S. The vast majority of our property and equipment is located within the U.S.
Intellectual Property Our brand image is a critical element of our business strategy. Our principal trademarks, including Target, our "Expect More. Pay Less." brand promise, and our "Bullseye Design," ha ve been registered with the U.S. Patent and Trademark Office. We also seek to obtain and preserve intellectual property protection for our brands.
The Liquidity and Capital Resources section in MD&A provides additional details. Competition We compete with traditional and internet retailers, including department stores, off-price general merchandise retailers, wholesale clubs, category-specific retailers, drug stores, supermarkets, direct-to-consumer brands, and other forms of retail commerce.
Competition We compete with traditional and internet retailers, including department stores, off-price general merchandise retailers, wholesale clubs, category-specific retailers, drug stores, supermarkets, direct-to-consumer brands, and other forms of retail commerce. Our ability to positively differentiate ourselves from other retailers and provide compelling value to our guests largely determines our competitive position within the retail industry.
Nearly all of our stores larger than 170,000 square feet offer a full line of food items comparable to traditional supermarkets. Our small format stores, generally smaller than 50,000 square feet, offer curated general merchandise and food assortments.
Nearly all of our stores larger than 170,000 square feet offer a variety of general merchandise and a full line of food items comparable to traditional supermarkets. Our digital channels include a wide merchandise and food assortment, including many items found in our stores, along with a complementary assortment sold by Target and third parties.
Working Capital Effective inventory management is key to our ongoing success, and we use various techniques including demand forecasting and planning and various forms of replenishment management. We achieve effective inventory management by staying in-stock in core product offerings, maintaining positive vendor relationships, and carefully planning inventory levels for seasonal and apparel items to minimize markdowns.
We achieve effective inventory management by staying in-stock in core product offerings, maintaining positive vendor relationships, and carefully planning inventory levels for seasonal and apparel items to minimize markdowns. During 2022, rapid changes in consumer preferences and supply chain volatility resulted in increased working capital needs. The Business Environment and Liquidity and Capital Resources sections in MD&A provide additional details.
We champion workplace diversity and an inclusive work environment with a focus on attracting, engaging, developing and advancing diverse talent.
Diversity, Equity, and Inclusion (DE&I) We embrace diversity and strive to give our team members equitable access to opportunities. We champion workplace diversity and an inclusive work environment with a focus on attracting, engaging, developing, and advancing team members equitably in order to reflect the guests and communities we serve.
Our digital channels include a wide merchandise assortment, including many items found in our stores, along with a complementary assortment sold by Target and third parties. Sales by Product Category TARGET CORPORATION 2021 Form 10-K 3 BUSINESS Table of Contents Index to Financial Statements A significant portion of our sales is from national brand merchandise.
We manage our business across the five core merchandise categories shown below. Within categories, gross margins vary depending on the type of merchandise. Sales by Merchandise Category TARGET CORPORATION 2022 Form 10-K 3 BUSINESS Table of Contents Index to Financial Statements A significant portion of our sales is from national brand merchandise.
As illustrated by the charts below, our strategy places stores at the center of our flexible fulfillment approach, with stores fulfilling over 95 percent of total sales.
Our recent growth in sales demonstrates the strength and relevance of Target’s strategy. Our strategy places stores at the center of our flexible fulfillment approach, with stores fulfilling more than 96 percent of total sales, which provides convenience for our guests at a reduced fulfillment cost.
Information on our website is not part of this or any other report we file with, or furnish to, the SEC. TARGET CORPORATION 2021 Form 10-K 6 RISK FACTORS Table of Contents Index to Financial Statements
TARGET CORPORATION 2022 Form 10-K 6 BUSINESS & RISK FACTORS Table of Contents Index to Financial Statements Information About Our Executive Officers Executive officers are elected by, and serve at the pleasure of, the Board of Directors.
Securities and Exchange Commission (SEC). In addition, the SEC maintains a website (http://www.sec.gov) that contains information we electronically file with, or furnish to, the SEC. Our Corporate Governance Guidelines, Code of Ethics, Corporate 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.
Securities and Exchange Commission (SEC). In addition, the SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
We extended certain benefits to our team members in light of the COVID-19 pandemic, including bonuses, fully-paid leaves for up to 30 days, free back-up dependent care, and a variety of mental, emotional, and physical wellness resources. We also enacted dozens of safety, social distancing, and cleaning measures designed to protect our team and guests during the COVID-19 pandemic.
We also enacted dozens of safety, social distancing, and cleaning measures designed to protect our team and guests during the COVID-19 pandemic. Working Capital Effective inventory management is key to our ongoing success, and we use various techniques including demand forecasting and planning and various forms of replenishment management.
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Our ability to positively differentiate ourselves from other retailers and provide compelling value to our guests largely determines our competitive position within the retail industry. Intellectual Property Our brand image is a critical element of our business strategy. Our principal trademarks, including Target, our "Expect More.
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CVS Pharmacy, Inc. (CVS) operates pharmacies and clinics in our stores under a perpetual operating agreement from which we generate annual occupancy income.
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Geographic Information Nearly all of our revenues are generated within the U.S. The vast majority of our property and equipment is located within the U.S. Available Information Our internet website is corporate.target.com.
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Investors should note that we currently announce material information to our investors and others using filings with the SEC, press releases, public conference calls, webcasts, or our corporate website (corporate.target.com). Information that we post on our corporate website could be deemed material to investors.
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We encourage investors, the media, and others interested in us to review the information we post on these channels. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.
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There are no family relationships between any of the officers named and any other executive officer or member of the Board of Directors, or any arrangement or understanding pursuant to which any person was selected as an officer. Name Title and Recent Business Experience Age Katie M. Boylan Executive Vice President and Chief Communications Officer since February 2021.
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Senior Vice President and Chief Communications Officer from January 2019 to February 2021. Senior Vice President, Communications from June 2017 to January 2019. 46 Brian C. Cornell Chair of the Board and Chief Executive Officer since August 2014. 64 Michael J. Fiddelke Executive Vice President and Chief Financial Officer since November 2019.
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Senior Vice President, Operations from August 2018 to October 2019. Senior Vice President, Merchandising Capabilities from March 2017 to August 2018. 46 A. Christina Hennington Executive Vice President and Chief Growth Officer since February 2021. Executive Vice President and Chief Merchandising Officer, Hardlines, Essentials and Capabilities from January 2020 to February 2021.
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Senior Vice President, Group Merchandise Manager, Essentials, Beauty, Hardlines and Services from January 2019 to January 2020. Senior Vice President, Merchandising Essentials, Beauty and Wellness from April 2017 to January 2019. 48 Melissa K. Kremer Executive Vice President and Chief Human Resources Officer since January 2019.
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Senior Vice President, Talent and Organizational Effectiveness from October 2017 to January 2019. 45 Don H. Liu Executive Vice President, Chief Legal & Risk Officer and Corporate Secretary since October 2017. 61 John J. Mulligan Executive Vice President and Chief Operating Officer since September 2015. 57 Cara A. Sylvester Executive Vice President and Chief Guest Experience Officer since May 2022.
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Executive Vice President and Chief Marketing & Digital Officer from February 2021 to May 2022. Senior Vice President, Home from March 2019 to February 2021. Vice President, Beauty & Dermstore from June 2017 to March 2019. 45 Laysha L. Ward Executive Vice President and Chief External Engagement Officer since January 2017. 55

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe classification of workers as employees or independent contractors, in particular, is an area that is experiencing legal challenges and legislative changes. If our Shipt subsidiary is required to treat its independent contractor network as employees, it could result in higher compensation and benefit costs.
Biggest changeOur Shipt subsidiary is a technology company that connects Shipt members through its online marketplace with a network of independent contractors who select, purchase, and deliver groceries and household essentials ordered from Target and other retailers. The classification of workers as employees or independent contractors, in particular, is an area that is experiencing legal challenges and legislative changes.
Many team members are in entry-level or part-time positions with historically high turnover rates. Our ability to meet our changing labor needs while controlling our costs is subject to external factors such as labor laws and regulations, unemployment levels, prevailing wage rates, benefit costs, changing demographics, and our reputation and relevance within the labor market.
Many team members are in entry-level or part-time positions with high turnover rates historically. Our ability to meet our changing labor needs while controlling our costs is subject to external factors such as labor laws and regulations, unemployment levels, prevailing wage rates, benefit costs, changing demographics, and our reputation within the labor market.
If we, our vendors, or other third parties with whom we do business experience additional significant data security incidents or fail to detect and appropriately respond to significant incidents, we could be exposed to government enforcement actions and private litigation.
If we, our vendors, or other third parties with whom we do business experience additional significant data security incidents or fail to detect and appropriately respond to significant incidents, we could be exposed to costly government enforcement actions and private litigation.
We have a social compliance audit process that performs audits regularly, but we cannot continuously monitor every vendor, so we are also dependent on our vendors to ensure that the products we buy comply with our standards.
We have a social compliance audit process that performs audits regularly, but we cannot continuously monitor every vendor, so we are also dependent on our vendors to ensure that the products we buy comply with applicable standards.
In addition to our United States operations, we have support offices in India and China, and any extended disruption of our operations in our different locations, whether due to labor difficulties or otherwise, could adversely affect our operations and financial results.
In addition to our United States operations, we have support offices in India and China, and any extended disruption of our operations in our different locations, whether due to labor difficulties or otherwise, could adversely affect our results of operations.
All of our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products we buy comply with all safety standards.
Our vendors must comply with applicable product safety laws, and we are dependent on them to ensure that the products we buy comply with all safety standards.
Our continued access to financial markets depends on multiple factors including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings. If rating agencies lower our credit ratings, it could adversely affect our ability to access the debt markets, our cost of funds, and other terms for new debt issuances.
Our continued access to financial markets depends on multiple factors including the condition of debt capital markets, our operating performance, and our credit ratings. If rating agencies lower our credit ratings, it could adversely affect our ability to access the debt markets, our cost of funds, and other terms for new debt issuances.
Each of the credit rating agencies reviews its rating periodically, and there is no guarantee our current credit rating will remain the same. In addition, we use a variety of derivative products to manage our exposure to market risk, principally interest rate fluctuations.
Each of the credit rating agencies reviews its rating periodically, and there is no guarantee that our current credit ratings will remain the same. In addition, we use a variety of derivative products to manage our exposure to market risk, principally interest rate fluctuations.
Financial Risks Increases in our effective income tax rate could adversely affect our business, results of operations, liquidity, and net income. Several factors influence our effective income tax rate, including tax laws and regulations, the related interpretations, and our ability to sustain our reporting positions on examination.
Financial Risks Increases in our effective income tax rate could adversely affect our results of operations. Several factors influence our effective income tax rate, including tax laws and regulations, the related interpretations, and our ability to sustain our reporting positions on examination.
We believe that one of the reasons our shareholders, guests, team members, and vendors choose Target is the positive reputation we have built over many years for serving those constituencies and the communities in which we operate. To be successful in the future, we must continue to preserve Target's reputation.
We believe that one of the reasons our shareholders, guests, team members, and vendors choose Target is the positive reputation we have built over many years for serving those constituencies and the communities in which we operate. To be successful in the future, we must continue to preserve Target's reputation. Our reputation is largely based on perceptions.
In addition, our guests could lose confidence in our ability to protect their information, stop using our RedCards or loyalty programs, or stop shopping with us altogether, which could adversely affect our reputation, sales, and results of operations.
In addition, our guests could lose confidence in our ability to protect their information, stop using our RedCards or loyalty programs, or stop shopping with us altogether, which could adversely affect our reputation, results of operations, and financial condition.
Events that give rise to actual, potential, or perceived product safety concerns, including food or drug contamination and product defects, could expose us to government enforcement action or private litigation and result in costly product recalls and other liabilities.
Events that give rise to actual or perceived product safety concerns, including food or drug contamination and product defects, could expose us to government enforcement actions and private litigation and result in costly product recalls and other liabilities.
Disruptions or turmoil in the financial markets could reduce our ability to fund our operations and capital investments, and lead to losses on derivative positions resulting from counterparty failures, which could adversely affect our financial position and results of operations.
Disruptions or turmoil in the financial markets could reduce our ability to fund our operations and capital investments and lead to losses on derivative positions from counterparty failures, which could adversely affect our financial condition and results of operations.
When building new stores, we compete with other retailers and businesses for suitable locations for our stores. Pursuing the wrong remodel or new store opportunities and any delays, cost increases, disruptions, or other uncertainties related to those opportunities could adversely affect our results of operations.
When building new stores, we compete with other retailers and businesses for suitable locations for our stores. Pursuing the wrong remodel or new store opportunities and any delays, cost increases, or other difficulties related to those projects could adversely affect our results of operations and financial condition.
The legal and regulatory environment regarding information security, cybersecurity, and data privacy is dynamic, increasingly demanding, and has enhanced requirements for using and treating personal data.
The legal and regulatory environment regarding information security, cybersecurity, and data privacy is dynamic and has strict requirements for using and treating personal data.
Nearly all of our sales are in the U.S., making our results highly dependent on the health of the U.S. economy and U.S. consumer confidence, which can be affected by a variety of factors, including housing prices, unemployment rates, and inflation.
Nearly all of our sales are in the U.S., making our results highly dependent on the health of the U.S. economy and U.S. consumer confidence and spending, which can be affected by a variety of factors, including inflation, interest rates, housing prices, unemployment rates, household debt and wage levels, and credit usage.
If we are unable to contract with third parties having the specialized skills needed to support those strategies or integrate their products and services with our business, or if they fail to meet our performance standards and expectations, then our reputation and results of operations could be adversely affected.
If we are unable to contract with third parties having the specialized skills needed to support our operations or if they fail to meet our performance standards, then our reputation and results of operations could be adversely affected.
Political or financial instability, currency fluctuations, the outbreak of pandemics or other illnesses (such as the COVID-19 pandemic), labor shortages, labor unrest and activism, transport capacity and costs, inflation, port security, weather conditions, natural disasters, armed conflicts, or other events that could alter or suspend our operations, slow or disrupt port activities, or affect foreign trade are beyond our control and could materially disrupt our supply of merchandise, increase our costs, and/or adversely affect our results of operations.
Political or financial instability, currency fluctuations, the outbreak of pandemics or other illnesses, labor shortages, labor unrest or strikes, transport capacity and costs, inflation, port security, weather conditions, natural disasters, armed conflicts, or other events that could affect foreign trade are beyond our control and could disrupt our supply of merchandise, increase our costs, and adversely affect our results of operations.
Any major changes in tax or trade policy, such as the imposition of additional tariffs or duties on imported products, between the U.S. and countries from which we source merchandise could require us to take certain actions, including for example raising prices on products we sell and seeking alternative sources of supply from vendors in other countries with whom we have less familiarity, which could adversely affect our reputation, sales, and our results of operations.
Any major changes in tax or trade policy between the U.S. and countries from which we source merchandise, such as the imposition of additional tariffs or duties on imported products, could require us to take certain actions, including raising prices on products we sell and seeking alternative sources of supply from vendors in other countries.
We rely on third parties to support our business, including portions of our technology infrastructure, development, and support; our digital platforms; our replenishment and fulfillment operations; store and supply chain infrastructure construction and remodel program; credit and debit card transaction processing; extensions of credit for our RedCard program; infrastructure supporting our guest contact centers; aspects of our food offerings; and delivery services.
We rely on third parties to support our business operations, including portions of our technology infrastructure, digital platforms, replenishment and fulfillment operations, store and supply chain infrastructure, delivery services, guest contact centers, payment processing, and extensions of credit for our RedCard program.
In addition, if we fail to comply with other applicable laws and regulations, including the Foreign Corrupt Practices Act and other anti-bribery laws, we could be subject to reputation and legal risk, including government enforcement action and class action civil litigation, which could adversely affect our results of operations by increasing our costs, reducing our margins, and lowering our sales.
In addition, if we fail to comply with other applicable laws and regulations, including the Foreign Corrupt Practices Act and other anti-bribery laws, we could be subject to legal and reputational risks, including government enforcement actions and class action civil litigation, which could adversely affect our results of operations and financial condition.
If our replenishment and fulfillment network does not operate properly, if a vendor fails to deliver on its commitments, or if common carriers have difficulty providing capacity to meet demands for their services like they experienced at times during 2020 and 2021, we could experience merchandise out-of-stocks, delivery delays or increased delivery costs, which could lead to lost sales and decreased guest confidence, and adversely affect our results of operations.
If our replenishment and fulfillment network does not operate properly, if a vendor fails to deliver on its commitments, or if common carriers have difficulty providing capacity to meet demands for their services like they experienced in recent years, we could experience merchandise out-of-stocks, delays in shipping and receiving merchandise, and increased costs, which could adversely affect our reputation and results of operations.
There have been periodic closings and ship diversions, labor disputes, and congestion disrupting U.S. ports, including those in California where we receive a significant portion of the products we source from outside the U.S. In addition, some vendors have had difficulty supplying us products in the quantities we seek.
For example, there have been periodic closings and ship diversions, labor disputes, and congestion disrupting U.S. ports, including in California where we receive a significant portion of the products we source from outside the U.S.
For example, in the past, we have experienced disruptions in our point-of-sale system that prevented our ability to process debit or credit transactions, negatively impacted some guests’ experiences, and generated negative publicity.
For example, in the past, we have experienced disruptions in our point-of-sale system that prevented our ability to process debit or credit transactions, which negatively impacted some guests’ experiences and generated negative publicity. We continually invest to maintain and update our systems, but implementing significant changes increases the risk of system disruption.
Uncharacteristic or significant weather conditions, including the impacts of climate change, can affect consumer shopping patterns, particularly in apparel and seasonal items, which could lead to lost sales or greater than expected markdowns and adversely affect our short-term results of operations.
Uncharacteristic or significant weather conditions, including the physical impacts of climate change, can affect consumer shopping patterns, particularly in apparel and seasonal items, which could lead to lower sales or greater than expected markdowns and adversely affect our results of operations. In addition, we have significant operations in certain states where natural disasters are more prevalent.
If our merchandise offerings do not meet applicable safety standards or Target's or our guests’ expectations regarding safety, supply chain transparency, and responsible sourcing, we could experience lost sales and increased costs and be exposed to legal and reputational risk.
If any of our merchandise offerings do not meet applicable safety standards or Target's or our guests’ expectations regarding safety, supply chain transparency, and responsible sourcing, we could be exposed to legal and reputational risks and our results of operations could be adversely affected.
We are periodically subject to labor organizing efforts and activism, which could negatively impact how we are perceived by team members and our overall reputation. If we become subject to one or more collective bargaining agreements in the future, it could adversely affect our labor costs, how we operate our business, and our results of operations.
If we become subject to one or more collective bargaining agreements in the future, it could adversely affect our labor costs, how we operate our business, and our results of operations.
Complying with current or contemplated data protection laws and regulations may cause us to incur substantial costs, require changes to our business practices, limit our ability to obtain data used to provide a differentiated guest experience, and expose us to further litigation and regulatory risks, each of which could adversely affect our results of operations.
Complying with current or contemplated data protection laws and regulations, or any failure to comply, could cause us to incur substantial costs, require changes to our business practices, and expose us to litigation and regulatory risks, each of which could adversely affect our reputation, results of operations, and financial condition.
With over 400,000 team members, our workforce costs represent our largest operating expense, and our business is dependent on our ability to attract, train, and retain the appropriate mix of qualified team members, contractors, and temporary staffing and effectively organize and manage those resources as our business and strategic priorities change.
If we do not effectively manage our workforce, our labor costs and results of operations could be adversely affected. With over 400,000 team members, our workforce costs represent our largest operating expense, and our business is dependent on our ability to attract, train, and retain the appropriate mix of qualified team members, contractors, and temporary staffing.
TARGET CORPORATION 2021 Form 10-K 8 RISK FACTORS Table of Contents Index to Financial Statements A significant disruption in our computer systems and our inability to adequately maintain and update those systems could adversely affect our operations and negatively affect our guests. We rely extensively on computer systems throughout our business.
Any of these outcomes could adversely affect our results of operations and financial condition. TARGET CORPORATION 2022 Form 10-K 9 RISK FACTORS Table of Contents Index to Financial Statements A significant disruption in our computing and information systems and our inability to adequately maintain and update those systems could adversely affect our operations and negatively affect our guests.
If we are unable to access the capital markets or obtain bank credit, our financial position, liquidity, and results of operations could suffer. We are dependent on a stable, liquid, and well-functioning financial system to fund our operations and capital investments.
TARGET CORPORATION 2022 Form 10-K 13 RISK FACTORS & UNRESOLVED STAFF COMMENTS Table of Contents Index to Financial Statements If we are unable to access the capital markets or obtain bank credit, our financial condition and results of operations could suffer. We are dependent on a stable, liquid, and well-functioning financial system to fund our operations and capital investments.
In addition, three of our largest states by total sales are California, Texas, and Florida, areas where natural disasters are more prevalent. Natural disasters in those states or in other areas where our sales or operations are concentrated could result in significant physical damage to or closure of one or more of our stores, distribution centers, facilities, or key vendors.
Natural disasters in those states or in other areas where we operate could result in significant physical damage to or closure of one or more of our stores, distribution centers, facilities, or key vendors.
If we need to seek alternative sources of supply from vendors with whom we have less familiarity, the risk of our standards not being met may increase.
If we need to seek alternative sources of supply from vendors with whom we have less familiarity, the risk of our standards not being met may increase. Negative guest perceptions regarding the safety and sourcing of the products we sell could harm our reputation and adversely affect our results of operations.
Changes in the costs of procuring commodities used in our merchandise or the costs related to our supply chain could adversely affect our results of operations. If services we obtain from third parties are unavailable, disrupted, or fail to meet our standards and expectations, our operations could be adversely affected.
If services we obtain from third parties are unavailable or fail to meet our standards, our reputation and results of operations could be adversely affected.
Consumers may also use third-party channels or devices, such as voice assistants and smart home devices, to initiate shopping searches and place orders, which could sometimes make us dependent on the capabilities and search algorithms of those third parties to reach those consumers.
Consumers may also use third-party channels or devices to initiate shopping searches and place orders, which could make us dependent on the capabilities and search algorithms of those third parties to reach those consumers. Any difficulties in executing our differentiation efforts could adversely affect our results of operations and financial condition.
Our expenses could increase and our operations could be adversely affected by law changes or adverse judicial developments involving an employer's obligation to recognize collective bargaining units, minimum wage requirements, advance scheduling notice requirements, health care or other mandates, the classification of exempt and non-exempt employees, and the classification of workers as either employees or independent contractors (particularly as it applies to our Shipt subsidiary, a technology company that connects Shipt members through its online marketplace with a network of independent contractors who select, purchase, and deliver groceries and household essentials ordered from Target and other retailers).
Our expenses could increase and our operations could be adversely affected by changes in law or adverse judicial developments involving our workforce, including an employer’s obligation to recognize collective bargaining units, minimum wage requirements, advance scheduling notice requirements, health care or other mandates, the classification of exempt and non-exempt employees, and the classification of workers as either employees or independent contractors.
Investments and Infrastructure Risks If our capital investments in remodeling existing stores, building new stores, improving technology, and expanding our supply chain infrastructure do not achieve appropriate returns, our competitive position, financial condition, and results of operations could be adversely affected.
Investments and Infrastructure Risks If our capital investments do not achieve appropriate returns, our competitive position, results of operations, and financial condition could be adversely affected. Our business depends, in part, on our ability to remodel existing stores and build new stores in a manner that achieves appropriate returns on our capital investment.
While reputations may take decades to build, negative incidents involving us or others with whom we do business can quickly erode trust and confidence and can result in consumer boycotts, workforce unrest or walkouts, government investigations, or litigation.
It may be difficult to address negative publicity across media channels, regardless of whether it is accurate. Negative incidents involving us, our workforce, or others with whom we do business could quickly erode trust and confidence and result in consumer boycotts, workforce unrest or walkouts, government investigations, and litigation.
If our systems are damaged, disrupted, 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, and encounter lost guest confidence, which could require additional promotional activities to attract guests and otherwise adversely affect our results of operations.
If our systems are damaged or disrupted, we may incur substantial costs, experience data loss or theft, and be unable to manage inventories or process guest transactions, which could adversely affect our reputation, results of operations, and financial condition.
A large portion of our merchandise is sourced, directly or indirectly, from outside the U.S., with China as our single largest source.
TARGET CORPORATION 2022 Form 10-K 10 RISK FACTORS Table of Contents Index to Financial Statements A large portion of the merchandise that we offer is sourced, directly or indirectly, from outside the U.S., with China as our single largest source.
In addition, weather conditions, natural disasters, and other catastrophic events, such as the COVID-19 pandemic, in areas where we or our vendors have operations, could adversely affect the availability or cost of certain products within our supply chain, cause delays in the distribution of merchandise from our vendors to our distribution centers, stores, and guests, affect consumer purchasing power, or reduce consumer demand, which could adversely affect our results of operations by increasing our costs and lowering our sales.
In addition, weather conditions, natural disasters, and other catastrophic events in areas where we or our vendors operate, or depend upon for continued operations, could adversely affect the availability and cost of certain products within our supply chain, affect consumer purchasing power, and reduce consumer demand. Any of these events could adversely affect our results of operations.
TARGET CORPORATION 2021 Form 10-K 7 RISK FACTORS Table of Contents Index to Financial Statements If we are unable to successfully provide a relevant and reliable experience for our guests across multiple channels, our sales, results of operations, and reputation could be adversely affected.
TARGET CORPORATION 2022 Form 10-K 8 RISK FACTORS Table of Contents Index to Financial Statements If we are unable to successfully develop, source, and market our owned and exclusive brand products, our results of operations could be adversely affected.
If we do not obtain accurate and relevant data on guest preferences, predict and quickly respond to changing consumer preferences, spending patterns, and other lifestyle decisions, emphasize the correct categories, implement competitive and effective pricing and promotion strategies, or personalize our offerings to our guests, we may experience lost sales, spoilage, and increased inventory markdowns, which could adversely affect our results of operations.
If we do not predict and quickly respond to changing consumer preferences and spending patterns, we may experience lower sales, spoilage, and increased inventory markdowns, which could adversely affect our results of operations.
Our only significant data security incident was a data breach that occurred in 2013 and went undetected for several weeks. Both we and our vendors have experienced data security incidents since that data breach; however, to date, these other incidents have not been material to our results of operations.
Our only significant data security incident was a data breach that occurred in 2013 and went undetected for several weeks. The 2013 data breach adversely affected our reputation and results of operations.
The effectiveness of these investments can be less predictable than remodeling stores, and might not provide the anticipated benefits. Pursuing the wrong investment opportunities, being unable to make new concepts scalable, or misjudging our replenishment and fulfillment capacity needs could result in the loss of our competitive position and adversely affect our financial condition or results of operations.
We are making, and expect to continue to make, significant investments in technology and supply chain infrastructure. The effectiveness of these investments can be less predictable than remodeling or building new stores, and might not provide the anticipated benefits, which could adversely affect our results of operations and financial condition.
TARGET CORPORATION 2021 Form 10-K 11 RISK FACTORS Table of Contents Index to Financial Statements Uncharacteristic or significant weather conditions, natural disasters, and other catastrophic events could adversely affect our results of operations.
TARGET CORPORATION 2022 Form 10-K 12 RISK FACTORS Table of Contents Index to Financial Statements Failure to address product safety and sourcing concerns could adversely affect our results of operations.
Competitive and Reputational Risks Our continued success is dependent on positive perceptions of Target which, if eroded, could adversely affect our business and our relationships with our guests and team members.
If we are unable to effectively adapt to future changes in consumer preferences and spending patterns, our results of operations and financial condition could be adversely affected. Our continued success is dependent on positive perceptions of Target which, if eroded, could adversely affect our business and our relationships with our guests and team members.
Guest perceptions regarding the cleanliness and safety of our stores, the environmental impact of our business, the functionality, reliability, and speed of our digital channels and fulfillment options, our in-stock levels, the value and exclusivity of our offerings, and our efforts to source merchandise responsibly and ethically are among the factors that affect our ability to compete.
Our ability to successfully differentiate ourselves depends on many competitive factors, including guest perceptions regarding the safety and cleanliness of our stores, the value and exclusivity of our offerings, our in-stock levels, the effectiveness of our digital channels and fulfillment options, our ability to responsibly source merchandise, and our ability to create a personalized guest experience.
An increase in remote working arrangements by our team members, vendors, and other third parties, which was accelerated by the COVID-19 pandemic, has amplified our already extensive reliance on computer systems and on our continued and unimpeded access to the Internet to use those systems, as well as the risks related to that reliance.
For example, the rise in remote working arrangements by our team members, vendors, and other third parties that began during the COVID-19 pandemic increases the risk of a data security compromise and has amplified our already extensive reliance on computing and information systems and unimpeded Internet access.
Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, malicious attacks, security breaches, catastrophic events, and implementation errors.
We rely extensively on computing and information systems throughout our business. We also rely on continued and unimpeded access to the Internet to use our systems. Our systems are subject to possible damage or interruption from many events, including power outages, telecommunications failures, malicious attacks, security breaches, and implementation errors.
Based on the prominence and notoriety of our prior significant data breach, even minor additional data security incidents could draw greater scrutiny.
Both we and our vendors have experienced data security incidents since that data breach; however, to date, these other incidents have not been material to our results of operations. Based on the prominence and notoriety of our prior significant data breach, additional data security incidents could draw greater scrutiny.
TARGET CORPORATION 2021 Form 10-K 9 RISK FACTORS Table of Contents Index to Financial Statements Supply Chain and Third-Party Risks Changes in our relationships with our vendors, changes in tax or trade policy, interruptions in our operations or supply chain, or increased commodity or supply chain costs could adversely affect our results of operations.
Supply Chain and Third-Party Risks Changes in our relationships with our vendors, changes in tax or trade policy, interruptions in our operations or supply chain, and increased commodity or supply chain costs could adversely affect our reputation and results of operations. We are dependent on our vendors, including common carriers, to supply merchandise to our distribution centers, stores, and guests.
In addition, hardware, software, or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security, cybersecurity, and data privacy.
We have programs in place to detect, contain, and respond to data security incidents. However, we may be unable to anticipate security incidents or implement adequate preventive measures. In addition, hardware or software that we develop or obtain from third parties may contain defects that could compromise information security, cybersecurity, or data privacy.
Our ability to meet those labor needs could be further strained by expanded laws, regulations, and mandates adopted in connection with the COVID-19 pandemic. If we are unable to attract and retain a workforce meeting our needs, our operations, guest service levels, support functions, and competitiveness could suffer and our results of operations could be adversely affected.
If we are unable to attract and retain a workforce meeting our needs, our operations, guest service levels, support functions, and competitiveness could suffer and our results of operations could be adversely affected. We are periodically subject to labor organizing efforts and activism, which could negatively impact how we are perceived by team members and our overall reputation.
Information Security, Cybersecurity, and Data Privacy Risks If our efforts to provide information security, cybersecurity, and data privacy are unsuccessful or if we are unable to meet increasingly demanding regulatory requirements, we may face additional costly government enforcement actions and private litigation, and our reputation and results of operations could suffer.
Information Security, Cybersecurity, and Data Privacy Risks If our efforts to maintain information security, cybersecurity, and data privacy are unsuccessful or if we are unable to meet increasingly demanding regulatory requirements, our reputation, results of operations, and financial condition could be adversely affected. We regularly receive and store information about our guests, team members, vendors, and other third parties.
Negative reputational incidents could adversely affect our business and results of operations, including through lost sales, loss of new store and development opportunities, or team member retention and recruiting difficulties. If we are unable to positively differentiate ourselves from other retailers, our results of operations could be adversely affected.
Negative reputational incidents or negative perceptions of us could adversely affect our business and results of operations, including through lower sales, the termination of business relationships, loss of new store and development opportunities, and team member retention and recruiting difficulties. In addition, stakeholder expectations regarding environmental, social, and governance matters continue to evolve and are not uniform.
A deterioration in U.S. macroeconomic conditions or consumer confidence, the likelihood of which is made more uncertain by the unknown duration, severity, and lasting impact of the COVID-19 pandemic and recent increases in the inflation rate, could adversely affect our business in many ways, including slowing sales growth, reducing overall sales, and reducing gross margins.
A deterioration in U.S. macroeconomic conditions or consumer confidence or spending could adversely affect our business in many ways, including slowing sales growth, reducing overall sales, reducing gross margins, and lowering our credit card profit-sharing revenue, each of which could adversely affect our results of operations and financial condition.
If we are unable to successfully develop, support, and 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, our sales and gross margins could be adversely affected.
Our owned and exclusive brand products represent approximately one third of our overall sales and generally carry higher margins than equivalent national brand products. If we are unable to successfully develop, source, and market our owned and exclusive brands, or if we are unable to successfully protect our related intellectual property rights, our results of operations could be adversely affected.
The combination of port disruptions, the COVID-19 pandemic, and other events in our supply chain have caused us to make alternative arrangements to continue the flow of inventory, and if these types of events recur, worsen, or occur in other countries through which we source products, it may have a material impact on our costs or inventory supply.
We have from time to time made alternative arrangements to continue the flow of inventory as a result of supply chain disruptions in the U.S. and other countries. If these types of events recur, it could increase our costs and adversely affect our supply of inventory.
Changes in the legal or regulatory environment affecting information security, cybersecurity and data privacy, product safety, payment methods and related fees, responsible sourcing, supply chain transparency, environmental protection, waste management, climate change, or other ESG matters, among others, could cause our expenses to increase without an ability to pass through any increased expenses through higher prices.
Changes in the legal or regulatory environment affecting any other area of our business, including information security, cybersecurity, and data privacy, product safety, or payment methods could cause our expenses to increase and adversely affect our results of operations.
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, and vendors.
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, deception, or other bad acts. Although we conduct regular training as part of our information security, cybersecurity, and data privacy efforts, that training may not be completely effective in preventing successful attacks.
For example, we have a limited ability to end our relationship with CVS, which leases space to operate their clinics and pharmacies within our stores. If our guests have negative experiences with or unfavorably view CVS or other companies with whom we have relationships, it could cause them to reduce or stop their business with us.
Reputational harm can also occur indirectly through companies with whom we do business. We have relationships with a variety of other companies, including Apple, CVS, Disney, Levi’s, Starbucks, and Ulta Beauty. If our guests have negative experiences with or view unfavorably any of the companies with whom we have relationships, it could cause them to stop shopping with us.
TARGET CORPORATION 2021 Form 10-K 12 RISK FACTORS & UNRESOLVED STAFF COMMENTS Table of Contents Index to Financial Statements Our failure to comply with applicable laws, or changes in these laws could increase our costs, reduce our margins, and lower our sales. Our business is subject to a wide array of laws and regulations.
Our failure to comply with applicable laws, or changes in these laws, could adversely affect our results of operations and financial condition. Our business is subject to a wide variety of complex laws and regulations.
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 programs, and marketing efforts.
Competitive and Reputational Risks If we are unable to positively differentiate ourselves from other retailers, our results of operations and financial condition could be adversely affected. We attempt to differentiate our guest experience through a careful combination of price, merchandise assortment, store environment, convenience, guest service, loyalty programs, and marketing.
We rely on a large, global, and changing workforce of team members, contractors, and temporary staffing. If we do not effectively manage our workforce and the concentration of work in certain global locations, our labor costs and results of operations could be adversely affected.
Furthermore, any failure to achieve our goals with respect to reducing our impact on the environment, or perception of a failure to act responsibly with respect to the environment, could adversely affect our reputation and results of operations. We rely on a large, global, and changing workforce of team members, contractors, and temporary staffing.
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, food and beverage, and others.
If we do not anticipate and respond quickly to changing consumer preferences, our results of operations and financial condition could suffer. A large part of our business is dependent on our ability to make trend-right decisions in a broad range of merchandise categories.
The fluidity of this situation limits our ability to predict the ultimate impact of COVID-19 on our business, financial condition, and financial performance, which could be material. Our earnings depend on the state of macroeconomic conditions and consumer confidence in the U.S.
TARGET CORPORATION 2022 Form 10-K 11 RISK FACTORS Table of Contents Index to Financial Statements Our earnings depend on the state of macroeconomic conditions and consumer confidence and spending in the U.S.
Removed
Our reputation is based in large part on perceptions, both about us and others with whom we do business, and broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of Target. It may be difficult to control negative publicity, regardless of whether it is accurate.
Added
If we fail to differentiate our guest experience from our competitors, our results of operations and financial condition could be adversely affected. TARGET CORPORATION 2022 Form 10-K 7 RISK FACTORS Table of Contents Index to Financial Statements The retail industry's continuing migration to digital channels and multiple fulfillment options for consumers has affected the ways we differentiate from other retailers.
Removed
Target’s responses to crises and our position or perceived lack of position on environmental, social, and governance (ESG) matters, such as sustainability, responsible sourcing, and diversity, equity, and inclusion (DE&I), and any perceived lack of transparency about those matters, could harm our reputation.
Added
Since consumers can quickly comparison shop using digital tools, they may make decisions based solely on price or convenience, which could limit our ability to differentiate from our competitors. In addition, providing multiple fulfillment options and implementing new technology is complex, costly, and may not meet our guests’ expectations.
Removed
In addition, our ability to create a personalized guest experience through the collection and use of accurate and relevant guest data is important to our ability to differentiate from other retailers. No single competitive factor is dominant, and actions by our competitors on any of these factors could adversely affect our sales, gross margins, and expenses.
Added
If we are unable to offset the increased costs of new technology and expanded fulfillment options with improved performance or efficiencies, our results of operations could be adversely affected. To remain competitive, we must anticipate and adapt to developments and offerings by other retailers.
Removed
Our owned and exclusive brand products help differentiate us from other retailers, generally carry higher margins than equivalent national brand products, and represent approximately one-third of our overall sales.
Added
Our ability to predict and adapt to changing consumer preferences depends on many factors, including obtaining accurate and relevant data on guest preferences, emphasizing relevant merchandise categories, effectively managing our inventory levels, and implementing competitive and effective pricing and promotion strategies.
Removed
The retail industry's continuing migration to digital channels has affected the ways we differentiate from other retailers. In particular, consumers can quickly and conveniently comparison shop and determine real-time product availability using digital tools, which can lead to decisions based solely on price or the functionality of the digital tools.
Added
We have not always been able to predict rapid changes in consumer preferences and spending patterns, including those that were impacted by the COVID-19 pandemic, which has previously resulted in insufficient or excess inventory, increased costs, and adverse impacts on our results of operations.
Removed
Any difficulties in executing our differentiation efforts or actions by our competitors in response to these efforts could adversely affect our sales, gross margins, and expenses.
Added
We have established, and may continue to establish, various goals and initiatives on these matters, including with respect to diversity, equity, and inclusion topics. We cannot guarantee that we will achieve these goals and initiatives.
Removed
Our business has evolved from an in-store experience to interacting with guests across multiple channels (in-store, online, mobile, and social media, among others). Our guests are using those channels to shop with us and provide feedback and public commentary about our business. We must anticipate and meet changing guest expectations and counteract developments and investments by our competitors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest change(in thousands) Alabama 22 3,132 Montana 7 777 Alaska 3 504 Nebraska 14 2,005 Arizona 46 6,081 Nevada 18 2,262 Arkansas 9 1,165 New Hampshire 10 1,236 California 309 37,069 New Jersey 48 6,094 Colorado 45 6,360 New Mexico 10 1,185 Connecticut 21 2,731 New York 95 10,617 Delaware 4 551 North Carolina 52 6,653 District of Columbia 5 342 North Dakota 4 554 Florida 127 17,309 Ohio 64 7,828 Georgia 51 6,826 Oklahoma 15 2,167 Hawaii 8 1,234 Oregon 21 2,303 Idaho 7 725 Pennsylvania 76 9,120 Illinois 100 12,149 Rhode Island 4 517 Indiana 32 4,185 South Carolina 19 2,359 Iowa 21 2,860 South Dakota 5 580 Kansas 17 2,385 Tennessee 30 3,816 Kentucky 14 1,571 Texas 153 21,029 Louisiana 15 2,120 Utah 15 1,981 Maine 5 630 Vermont 1 60 Maryland 40 4,967 Virginia 60 7,755 Massachusetts 50 5,546 Washington 40 4,424 Michigan 54 6,298 West Virginia 6 755 Minnesota 73 10,315 Wisconsin 38 4,611 Mississippi 6 743 Wyoming 2 187 Missouri 35 4,611 Total 1,926 243,284 Stores and Distribution Centers as of January 29, 2022 Stores Distribution Centers (a) Owned 1,528 34 Leased 242 14 Owned buildings on leased land 156 — Total 1,926 48 (a) The 48 distribution centers have a total of 57.0 million square feet.
Biggest changeProperties Stores as of January 28, 2023 Stores Retail Square Feet (in thousands) Stores as of January 28, 2023 Stores Retail Square Feet (in thousands) Alabama 22 3,132 Montana 7 777 Alaska 3 504 Nebraska 14 2,005 Arizona 46 6,081 Nevada 18 2,262 Arkansas 9 1,165 New Hampshire 10 1,236 California 314 37,304 New Jersey 49 6,189 Colorado 45 6,361 New Mexico 10 1,185 Connecticut 21 2,732 New York 100 10,820 Delaware 4 551 North Carolina 52 6,653 District of Columbia 5 342 North Dakota 4 554 Florida 127 17,225 Ohio 65 7,863 Georgia 51 6,826 Oklahoma 15 2,167 Hawaii 8 1,234 Oregon 22 2,353 Idaho 7 725 Pennsylvania 78 9,260 Illinois 100 12,171 Rhode Island 4 517 Indiana 32 4,186 South Carolina 20 2,389 Iowa 21 2,859 South Dakota 5 580 Kansas 17 2,385 Tennessee 30 3,815 Kentucky 14 1,575 Texas 154 21,176 Louisiana 16 2,195 Utah 15 1,981 Maine 6 741 Vermont 1 60 Maryland 41 5,070 Virginia 61 7,789 Massachusetts 50 5,546 Washington 40 4,424 Michigan 54 6,300 West Virginia 6 755 Minnesota 73 10,332 Wisconsin 38 4,614 Mississippi 6 743 Wyoming 3 257 Missouri 35 4,618 Total 1,948 244,584 Stores and Supply Chain Facilities as of January 28, 2023 Stores Supply Chain Facilities (a) Owned 1,530 37 Leased 261 18 Owned buildings on leased land 157 — Total 1,948 55 (a) Supply Chain Facilities includes distribution centers and sortation centers with a total of 59.2 million square feet.
For additional information on our properties, see the Capital Expenditures section in MD&A and Notes 12 and 18 to the Consolidated Financial Statements. TARGET CORPORATION 2021 Form 10-K 14 LEGAL PROCEEDINGS & MINE SAFETY DISCLOSURES Table of Contents Index to Financial Statements
For additional information on our properties, see the Capital Expenditures section in MD&A and Notes 11 and 17 to the Consolidated Financial Statements. TARGET CORPORATION 2022 Form 10-K 15 LEGAL PROCEEDINGS & MINE SAFETY DISCLOSURES Table of Contents Index to Financial Statements
Removed
Item 2. Properties Stores as of January 29, 2022 Stores Retail Sq. Ft. (in thousands) Stores as of January 29, 2022 Stores Retail Sq. Ft.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShare Repurchase Activity Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Programs Period October 31, 2021 through November 27, 2021 Open market and privately negotiated purchases 2,411,568 $ 252.02 2,411,568 $ 14,023,992,438 November 28, 2021 through January 1, 2022 Open market and privately negotiated purchases 4,871,000 234.03 4,871,000 12,884,021,368 January 2, 2022 through January 29, 2022 Open market and privately negotiated purchases 2,445,937 228.12 2,445,937 12,326,055,745 Total 9,728,505 $ 237.00 9,728,505 $ 12,326,055,745 TARGET CORPORATION 2021 Form 10-K 17 OTHER INFORMATION Table of Contents Index to Financial Statements Fiscal Years Ended January 28, 2017 February 3, 2018 February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 Target $ 100.00 $ 119.37 $ 120.35 $ 193.23 $ 322.52 $ 392.81 S&P 500 Index 100.00 122.83 122.76 149.23 174.97 211.72 Peer Group 100.00 143.88 150.04 181.80 252.23 264.20 The graph above compares the cumulative total shareholder return on our common stock for the last five fiscal years with (i) the cumulative total return on the S&P 500 Index and (ii) the peer group consisting of 19 online, general merchandise, department stores, food, and specialty retailers (Albertsons Companies, Inc., Amazon.com, Inc., Best Buy Co., Inc., Costco Wholesale Corporation, CVS Health Corporation, Dollar General Corporation, Dollar Tree, Inc., The Gap, Inc., The Home Depot, Inc., Kohl's Corporation, The Kroger Co., Lowe's Companies, Inc., Macy's, Inc., Nordstrom, Inc., Rite Aid Corporation, Ross Stores, Inc., The TJX Companies, Inc., Walgreens Boots Alliance, Inc., and Walmart Inc.) (Peer Group).
Biggest changeTARGET CORPORATION 2022 Form 10-K 17 OTHER INFORMATION Table of Contents Index to Financial Statements Fiscal Years Ended February 3, 2018 February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 Target $ 100.00 $ 100.82 $ 161.87 $ 270.17 $ 329.06 $ 260.13 S&P 500 Index 100.00 99.94 121.49 142.45 172.36 160.94 Peer Group 100.00 104.28 126.36 175.31 183.63 156.02 The graph above compares the cumulative total shareholder return on our common stock for the last five fiscal years with (i) the cumulative total return on the S&P 500 Index and (ii) the peer group consisting of 19 online, general merchandise, department stores, food, and specialty retailers (Albertsons Companies, Inc., Amazon.com, Inc., Best Buy Co., Inc., Costco Wholesale Corporation, CVS Health Corporation, Dollar General Corporation, Dollar Tree, Inc., The Gap, Inc., The Home Depot, Inc., Kohl's Corporation, The Kroger Co., Lowe's Companies, Inc., Macy's, Inc., Nordstrom, Inc., Rite Aid Corporation, Ross Stores, Inc., The TJX Companies, Inc., Walgreens Boots Alliance, Inc., and Walmart Inc.) (Peer Group).
As of March 3, 2022, there were 13,454 shareholders of record. Dividends declared per share for 2021, 2020, and 2019, are disclosed in our Consolidated Statements of Shareholders' Investment . On August 11, 2021, our Board of Directors authorized a $15 billion share repurchase program with no stated expiration.
As of March 2, 2023, there were 13,187 shareholders of record. Dividends declared per share for 2022, 2021, and 2020, are disclosed in our Consolidated Statements of Shareholders' Investment . On August 11, 2021, our Board of Directors authorized a $15 billion share repurchase program with no stated expiration.
The Peer Group is consistent with the retail peer group used for our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 8, 2022, excluding Publix Super Markets, Inc., which is not quoted on a public stock exchange. The peer group is weighted by the market capitalization of each component company.
The Peer Group is consistent with the retail peer group described in our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 14, 2023, excluding Publix Super Markets, Inc., which is not quoted on a public stock exchange. The peer group is weighted by the market capitalization of each component company.
The graph assumes the investment of $100 in Target common stock, the S&P 500 Index, and the Peer Group on January 30, 2017, and reinvestment of all dividends.
The graph assumes the investment of $100 in Target common stock, the S&P 500 Index, and the Peer Group on February 3, 2018, and reinvestment of all dividends.
The table below presents information with respect to Target common stock purchases made during the three months ended January 29, 2022, by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.
There were no Target common stock purchases made during the three months ended January 28, 2023 by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.
Under the program, we have repurchased 11.3 million shares of common at an average price of $236.76, for a total investment of $2.7 billion.
Under the program, we have repurchased 23.8 million shares of common at an average price of $223.52, for a total investment of $5.3 billion. As of January 28, 2023, the dollar value of shares that may yet be purchased under the program is $9.7 billion.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis decrease reflected the net impact of • supply chain pressure related to increased compensation and headcount in our distribution centers, partially offset by the small net benefit of a higher percentage of digital sales fulfilled through our lower-cost same-day fulfillment options • higher merchandise and freight costs partially offset by historically low promotional and clearance markdown rates; and • favorable mix in the relative growth rates of higher and lower margin categories.
Biggest changeThis decrease reflected the net impact of • merchandising pressure, including ◦ higher clearance and promotional markdown rates, including the impact of inventory impairments and other actions taken in our Discretionary categories; and ◦ higher merchandise and freight costs, partially offset by the benefit of retail price increases; • supply chain pressure related to increased compensation and headcount in our distribution centers, investments in new facilities, and costs of managing excess inventory; • higher inventory shrink; and • favorable mix in the relative growth rates of higher and lower margin categories.
The most important factors which could cause our actual results to differ from our forward-looking statements are set forth on our description of risk factors included in Part I , Item 1A , Risk Factors to this Form 10-K, which should be read in conjunction with the forward-looking statements in this report.
The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors included in Part I , Item 1A , Risk Factors to this Form 10-K, which should be read in conjunction with the forward-looking statements in this report.
TARGET CORPORATION 2021 Form 10-K 26 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements Analysis of Financial Condition Liquidity and Capital Resources Capital Allocation We follow a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to profitably grow our business, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.
TARGET CORPORATION 2022 Form 10-K 26 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements Analysis of Financial Condition Liquidity and Capital Resources Capital Allocation We follow a disciplined and balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, we fully invest in opportunities to profitably grow our business, create sustainable long-term value, and maintain our current operations and assets; second, we maintain a competitive quarterly dividend and seek to grow it annually; and finally, we return any excess cash to shareholders by repurchasing shares within the limits of our credit rating goals.
(a) Represents a loss on our investment in Casper Sleep Inc., which is not core to our continuing operations. (b) Other items unrelated to current period operations, none of which were individually significant. (c) Represents benefits from the resolution of certain income tax matters unrelated to current period operations.
(a) Represents a loss on our investment in Casper Sleep Inc., which is not core to our operations. (b) Other items unrelated to current period operations, none of which were individually significant. (c) Represents benefits from the resolution of certain income tax matters unrelated to current period operations.
TARGET CORPORATION 2021 Form 10-K 31 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents FORWARD LOOKING STATEMENTS & QUANTITATIVE AND QUALITATIVE DISCLOSURES Index to Financial Statements Forward-Looking Statements This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words "expect," "may," "could," "believe," "would," "might," "anticipates," or similar words.
TARGET CORPORATION 2022 Form 10-K 31 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents FORWARD LOOKING STATEMENTS & QUANTITATIVE AND QUALITATIVE DISCLOSURES Index to Financial Statements Forward-Looking Statements This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words "expect," "may," "could," "believe," "would," "might," "anticipates," or similar words.
A 1 percentage point decrease in our expected long-term rate of return would increase annual expense by $41 million. The discount rate used to determine benefit obligations is adjusted annually based on the interest rate for long-term high-quality corporate bonds, using yields for maturities that are in line with the duration of our pension liabilities.
A 1 percentage point decrease in our expected long-term rate of return would increase annual expense by $42 million. The discount rate used to determine benefit obligations is adjusted annually based on the interest rate for long-term high-quality corporate bonds, using yields for maturities that are in line with the duration of our pension liabilities.
However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may cause a material adverse impact on the results of operations, cash flows, or financial condition for the period in which the ruling occurs, or future periods. Refer to Note 15 to the Financial Statements for further information on contingencies.
However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may cause a material adverse impact on the results of operations, cash flows, or financial condition for the period in which the ruling occurs, or future periods. Refer to Note 14 to the Financial Statements for further information on contingencies.
TARGET CORPORATION 2021 Form 10-K 25 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Financial Statements We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income.
TARGET CORPORATION 2022 Form 10-K 25 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Financial Statements We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-back of operating lease interest to operating income.
Note 16 to the Financial Statements provides additional information. Future Cash Requirements We enter into contractual obligations in the ordinary course of business that may require future cash payments. Such obligations include, but are not limited to, purchase commitments, debt service, leasing arrangements, and liabilities related to deferred compensation and pensions.
Note 15 to the Financial Statements provides additional information. Future Cash Requirements We enter into contractual obligations in the ordinary course of business that may require future cash payments. Such obligations include, but are not limited to, purchase commitments, debt service, leasing arrangements, and liabilities related to deferred compensation and pensions.
Based on our experience, we use a graduated compensation growth schedule that assumes higher compensation growth for younger, shorter-service pension-eligible team members than it does for older, longer-service pension-eligible team members. Pension benefits are further described in Note 24 to the Financial Statements.
Based on our experience, we use a graduated compensation growth schedule that assumes higher compensation growth for younger, shorter-service pension-eligible team members than it does for older, longer-service pension-eligible team members. Pension benefits are further described in Note 23 to the Financial Statements.
Adjusted diluted earnings per share from continuing operations (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our continuing operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 24 .
Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 24 .
See Part II , Item 5 , Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of this Annual Report on Form 10-K and Note 21 to the Financial Statements for more information.
See Part II , Item 5 , Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of this Annual Report on Form 10-K and Note 20 to the Financial Statements for more information.
Additionally, as of January 29, 2022, no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control and (ii) our long-term credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.
Additionally, as of January 28, 2023, no notes or debentures contained provisions requiring acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control and (ii) our long-term credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.
We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings from continuing operations.
We believe these measures provide meaningful information about our operational efficiency compared with our competitors by excluding the impact of differences in tax jurisdictions and structures, debt levels, and for EBITDA, capital investment. These measures are not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is net earnings.
Our benefit obligation and related expense will fluctuate with changes in interest rates. A 1 percentage point decrease in the weighted average discount rate would increase annual expense by $62 million.
Our benefit obligation and related expense will fluctuate with changes in interest rates. A 1 percentage point decrease in the weighted average discount rate would increase annual expense by $59 million.
These assumptions, with adjustments made for any significant plan or participant changes, are used to determine the period-end benefit obligation and establish expense for the next year. Our 2021 expected long-term rate of return on plan assets of 5.80 percent was determined by the portfolio composition, historical long-term investment performance, and current market conditions.
These assumptions, with adjustments made for any significant plan or participant changes, are used to determine the period-end benefit obligation and establish expense for the next year. Our 2022 expected long-term rate of return on plan assets of 5.60 percent was determined by the portfolio composition, historical long-term investment performance, and current market conditions.
All other rates are calculated by dividing the applicable amount by total revenue. A discussion regarding Results of Operations and Analysis of Financial Condition for 2020, as compared to 2019, is included in Part II , Item 7 , MD&A to our Annual Report on Form 10-K for the year ended January 30, 2021.
All other rates are calculated by dividing the applicable amount by total revenue. A discussion regarding Analysis of Results of Operations and Analysis of Financial Condition for 2021, as compared to 2020, is included in Part II, Item 7, MD&A to our Annual Report on Form 10-K for the year ended January 29, 2022.
As of January 29, 2022, our credit ratings were as follows: Credit Ratings Moody's Standard and Poor's Fitch Long-term debt A2 A A Commercial paper P-1 A-1 F1 If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted.
As of January 28, 2023, our credit ratings were as follows: Credit Ratings Moody's Standard and Poor's Fitch Long-term debt A2 A A Commercial paper P-1 A-1 F1 If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new debt issuances could be adversely impacted.
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants.
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facilities also contain a debt leverage covenant. We are, and expect to remain, in compliance with these covenants.
This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place dollar limits on our investments in individual funds or instruments. Operating Cash Flows Cash flows provided by operating activities were $8.6 billion in 2021 compared with $10.5 billion in 2020.
This policy allows investments in large money market funds or in highly rated direct short-term instruments that mature in 60 days or less. We also place dollar limits on our investments in individual funds or instruments. Operating Cash Flows Cash flows provided by operating activities were $4.0 billion in 2022 compared with $8.6 billion in 2021.
We have paid dividends every quarter since our 1967 initial public offering and it is our intent to continue to do so in the future. Share Repurchases During 2021 and 2020 we returned $7.2 billion and $609 million, respectively, to shareholders through share repurchase.
We have paid dividends every quarter since our 1967 initial public offering and it is our intent to continue to do so in the future. Share Repurchases During 2022 and 2021 we returned $2.6 billion and $7.2 billion, respectively, to shareholders through share repurchase.
TARGET CORPORATION 2021 Form 10-K 24 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Financial Statements Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings from continuing operations before interest expense, income taxes, depreciation, and amortization (EBITDA) are non-GAAP financial measures.
TARGET CORPORATION 2022 Form 10-K 24 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Financial Statements Earnings before interest expense and income taxes (EBIT) and earnings before interest expense, income taxes, depreciation, and amortization (EBITDA) are non-GAAP financial measures.
The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the continued execution of our share repurchase program, our expected capital expenditures and new lease commitments, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, contributions and payments related to our pension plan, the expected return on plan assets, the expected timing and recognition of compensation expenses, the effects of macroeconomic conditions, the adequacy of our reserves for general liability, workers' compensation and property loss, the expected outcome of, and adequacy of our reserves for claims, litigation, and the resolution of tax matters, our expectations regarding our contractual obligations, liabilities, and vendor income, the expected ability to recognize deferred tax assets and liabilities and the timing of such recognition, the expected impact of changes in information technology systems, future responses to and effects of the COVID-19 pandemic, and changes in our assumptions and expectations.
The principal forward-looking statements in this report include: our financial performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding of debt maturities, the execution of our share repurchase program, our expected capital expenditures and new lease commitments, the expected compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding future dividends, the expected contributions and payments related to our pension plan, the expected return on plan assets, the expected timing and recognition of compensation expenses, the adequacy of our reserves for general liability, workers' compensation, and property loss, the expected outcome of, and adequacy of our reserves for claims, litigation, and the resolution of tax matters, our expectations regarding our contractual obligations, liabilities, and vendor income, the expected ability to recognize deferred tax assets and liabilities and the timing of such recognition, our expectations regarding arrangements with our partners, and changes in our assumptions and expectations.
We expect capital expenditures in 2022 of approximately $4.0 billion to $5.0 billion to support remodels, new stores, and supply chain projects. Supply chain projects will add replenishment capacity and modernize our network, including the use of sortation centers to enhance our last-mile delivery capabilities.
We expect capital expenditures in 2023 of approximately $4.0 billion to $5.0 billion to support full-store remodels and other existing store investments, new stores, and supply chain projects. Supply chain projects will add replenishment capacity and modernize our network, including the use of sortation centers to enhance our last-mile delivery capabilities.
Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings.
Within these parameters, we seek to minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the condition of debt capital markets, our operating performance, and maintaining strong credit ratings.
Reconciliation of Non-GAAP Adjusted EPS 2021 2020 2019 (millions, except per share data) Pretax Net of Tax Per Share Amounts Pretax Net of Tax Per Share Amounts Pretax Net of Tax Per Share Amounts GAAP diluted earnings per share from continuing operations $ 14.10 $ 8.64 $ 6.34 Adjustments Gain on Dermstore Sale $ (335) $ (269) $ (0.55) $ — $ — $ — $ — $ — $ — Loss on debt extinguishment — — — 512 379 0.75 10 8 0.01 Loss on investment (a) — — — 19 14 0.03 41 31 0.06 Other (b) 9 7 0.01 28 20 0.04 (17) (13) (0.02) Income tax matters (c) — — — — (21) (0.04) — — — Adjusted diluted earnings per share from continuing operations $ 13.56 $ 9.42 $ 6.39 Note: Amounts may not foot due to rounding.
Reconciliation of Non-GAAP Adjusted EPS 2022 2021 2020 (millions, except per share data) Pretax Net of Tax Per Share Amounts Pretax Net of Tax Per Share Amounts Pretax Net of Tax Per Share Amounts GAAP diluted earnings per share $ 5.98 $ 14.10 $ 8.64 Adjustments Gain on Dermstore Sale $ — $ — $ — $ (335) $ (269) $ (0.55) $ — $ — $ — Loss on debt extinguishment — — — — — — 512 379 0.75 Loss on investment (a) — — — — — — 19 14 0.03 Other (b) 20 15 0.03 9 7 0.01 28 20 0.04 Income tax matters (c) — — — — — — — (21) (0.04) Adjusted diluted earnings per share $ 6.02 $ 13.56 $ 9.42 Note: Amounts may not foot due to rounding.
We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measure is diluted earnings per share from continuing operations.
This metric excludes certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. This measure is not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measure is diluted earnings per share.
For the trailing twelve months ended January 29, 2022, and January 30, 2021, includes tax effect of $2.1 billion and $1.4 billion, respectively, related to EBIT, and $19 million and $18 million, respectively, related to operating lease interest. (c) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.
For the trailing twelve months ended January 28, 2023, and January 29, 2022, includes tax effect of $0.7 billion and $2.1 billion, respectively, related to EBIT, and $17 million and $19 million, respectively, related to operating lease interest. (c) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.
In addition to these cash investments, we entered into leases related to new stores in 2021, 2020, and 2019 with total future minimum lease payments of $401 million, $764 million, and $669 million, respectively, and new leases related to our supply chain with total future minimum lease payments of $226 million, $442 million, and $185 million, respectively.
In addition to these cash investments, we entered into leases related to new stores in 2022, 2021, and 2020 with total future minimum lease payments of $319 million, $401 million, and $764 million, respectively, and new leases related to our supply chain with total future minimum lease payments of $1.6 billion, $226 million, and $442 million, respectively.
Note 4 to the Financial Statements defines gift card "breakage." We use comparable sales to evaluate the performance of our stores and digital channel sales by measuring the change in sales for a period over the comparable, prior-year period of equivalent length.
Sales Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage. Note 3 to the Financial Statements defines gift card "breakage." We use comparable sales to evaluate the performance of our stores and digital channel sales by measuring the change in sales for a period over the comparable, prior-year period of equivalent length.
After-Tax Return on Invested Capital (dollars in millions) Trailing Twelve Months Numerator January 29, 2022 January 30, 2021 Operating income $ 8,946 $ 6,539 + Net other income / (expense) 382 (16) EBIT 9,328 6,523 + Operating lease interest (a) 87 87 - Income taxes (b) 2,073 1,404 Net operating profit after taxes $ 7,342 $ 5,206 Denominator January 29, 2022 January 30, 2021 February 1, 2020 Current portion of long-term debt and other borrowings $ 171 $ 1,144 $ 161 + Noncurrent portion of long-term debt 13,549 11,536 11,338 + Shareholders' investment 12,827 14,440 11,833 + Operating lease liabilities (c) 2,747 2,429 2,475 - Cash and cash equivalents 5,911 8,511 2,577 Invested capital $ 23,383 $ 21,038 $ 23,230 Average invested capital (d) $ 22,210 $ 22,134 After-tax return on invested capital 33.1 % 23.5 % (a) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases.
After-Tax Return on Invested Capital (dollars in millions) Trailing Twelve Months Numerator January 28, 2023 January 29, 2022 Operating income $ 3,848 $ 8,946 + Net other income / (expense) 48 382 EBIT 3,896 9,328 + Operating lease interest (a) 93 87 - Income taxes (b) 744 2,073 Net operating profit after taxes $ 3,245 $ 7,342 Denominator January 28, 2023 January 29, 2022 January 30, 2021 Current portion of long-term debt and other borrowings $ 130 $ 171 $ 1,144 + Noncurrent portion of long-term debt 16,009 13,549 11,536 + Shareholders' investment 11,232 12,827 14,440 + Operating lease liabilities (c) 2,934 2,747 2,429 - Cash and cash equivalents 2,229 5,911 8,511 Invested capital $ 28,076 $ 23,383 $ 21,038 Average invested capital (d) $ 25,729 $ 22,210 After-tax return on invested capital 12.6 % 33.1 % (a) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases.
Our year-end cash and cash equivalents balance decreased to $5.9 billion from $8.5 billion in 2020. Our cash and cash equivalents balance includes short-term investments of $5.0 billion and $7.6 billion as of January 29, 2022, and January 30, 2021, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments.
Our year-end cash and cash equivalents balance decreased to $2.2 billion from $5.9 billion in 2021. Our cash and cash equivalents balance includes short-term investments of $1.3 billion and $5.0 billion as of January 28, 2023, and January 29, 2022, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments.
Comparable Sales 2021 2020 2019 Comparable sales change 12.7 % 19.3 % 3.4 % Drivers of change in comparable sales Number of transactions (traffic) 12.3 3.7 2.7 Average transaction amount 0.4 15.0 0.7 Comparable Sales by Channel 2021 2020 2019 Stores originated comparable sales change 11.0 % 7.2 % 1.4 % Digitally originated comparable sales change 20.8 144.7 28.6 Sales by Channel 2021 2020 2019 Stores originated 81.1 % 82.1 % 91.2 % Digitally originated 18.9 17.9 8.8 Total 100 % 100 % 100 % Sales by Fulfillment Channel 2021 2020 2019 Stores 96.4 % 96.0 % 97.2 % Other 3.6 4.0 2.8 Total 100 % 100 % 100 % Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Shipt.
Comparable Sales 2022 2021 2020 Comparable sales change 2.2 % 12.7 % 19.3 % Drivers of change in comparable sales Number of transactions (traffic) 2.1 12.3 3.7 Average transaction amount 0.1 0.4 15.0 TARGET CORPORATION 2022 Form 10-K 21 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Financial Statements Comparable Sales by Channel 2022 2021 2020 Stores originated comparable sales change 2.4 % 11.0 % 7.2 % Digitally originated comparable sales change 1.5 20.8 144.7 Sales by Channel 2022 2021 2020 Stores originated 81.4 % 81.1 % 82.1 % Digitally originated 18.6 18.9 17.9 Total 100 % 100 % 100 % Sales by Fulfillment Channel 2022 2021 2020 Stores 96.7 % 96.4 % 96.0 % Other 3.3 3.6 4.0 Total 100 % 100 % 100 % Note: Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Shipt.
We expect to complete approximately 200 full-store remodels, open 25 to 30 new stores, and add more than 250 Ulta Beauty shop-in-shops during 2022. Additionally, we will continue to invest in optimizing front-end space. We also expect to continue to invest in new store and supply chain leases.
We expect to complete approximately 70 full-store remodels, open about 20 new stores, and add additional Ulta Beauty shop-in-shops during 2023. Additionally, we will continue to invest in optimizing front-end space. We also expect to continue to invest in new store and supply chain leases.
Dividends We paid dividends totaling $1.5 billion ($3.16 per share) in 2021 and $1.3 billion ($2.68 per share) in 2020, a per share increase of 17.9 percent. We declared dividends totaling $1.7 billion ($3.38 per share) in 2021 and $1.4 billion ($2.70 per share) in 2020, a per share increase of 25.2 percent.
Dividends We paid dividends totaling $1.8 billion ($3.96 per share) in 2022 and $1.5 billion ($3.16 per share) in 2021, a per share increase of 25.3 percent. We declared dividends totaling $1.9 billion ($4.14 per share) in 2022 and $1.7 billion ($3.38 per share) in 2021, a per share increase of 22.5 percent.
We report after-tax return on invested capital (ROIC) from continuing operations because we believe ROIC provides a meaningful measure of our capital-allocation effectiveness over time. For the trailing twelve months ended January 29, 2022, after-tax ROIC was 33.1 percent, compared with 23.5 percent for the trailing twelve months ended January 30, 2021.
We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital-allocation effectiveness over time. For the trailing twelve months ended January 28, 2023, after-tax ROIC was 12.6 percent, compared with 33.1 percent for the trailing twelve months ended January 29, 2022. The calculation of ROIC is provided on page 26 .
(b) Calculated using the effective tax rates for continuing operations, which were 22.0 percent and 21.2 percent for the trailing twelve months ended January 29, 2022, and January 30, 2021, respectively.
(b) Calculated using the effective tax rates, which were 18.7 percent and 22.0 percent for the trailing twelve months ended January 28, 2023, and January 29, 2022, respectively.
Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above. Fitch raised our long-term debt rating from A- to A during 2021. In 2021, we issued $2.0 billion of debt, and we repaid $1.1 billion of debt at maturity.
Each of the credit rating agencies reviews its rating periodically and there is no guarantee our current credit ratings will remain the same as described above. In 2022, we issued $2.7 billion of debt, and we repaid $62 million of debt at maturity.
Analysis of Results of Operations Summary of Operating Income Percent Change (dollars in millions) 2021 2020 2019 2021/2020 2020/2019 Sales $ 104,611 $ 92,400 $ 77,130 13.2 % 19.8 % Other revenue 1,394 1,161 982 20.2 18.2 Total revenue 106,005 93,561 78,112 13.3 19.8 Cost of sales 74,963 66,177 54,864 13.3 20.6 SG&A expenses 19,752 18,615 16,233 6.1 14.7 Depreciation and amortization (exclusive of depreciation included in cost of sales) 2,344 2,230 2,357 5.1 (5.4) Operating income $ 8,946 $ 6,539 $ 4,658 36.8 % 40.4 % Rate Analysis 2021 2020 2019 Gross margin rate 28.3 % 28.4 % 28.9 % SG&A expense rate 18.6 19.9 20.8 Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate 2.2 2.4 3.0 Operating income margin rate 8.4 7.0 6.0 Note: Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales.
TARGET CORPORATION 2022 Form 10-K 20 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Financial Statements Analysis of Results of Operations Summary of Operating Income Percent Change (dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Sales $ 107,588 $ 104,611 $ 92,400 2.8 % 13.2 % Other revenue 1,532 1,394 1,161 9.8 20.2 Total revenue 109,120 106,005 93,561 2.9 13.3 Cost of sales 82,229 74,963 66,177 9.7 13.3 SG&A expenses 20,658 19,752 18,615 4.6 6.1 Depreciation and amortization (exclusive of depreciation included in cost of sales) 2,385 2,344 2,230 1.8 5.1 Operating income $ 3,848 $ 8,946 $ 6,539 (57.0) % 36.8 % Rate Analysis 2022 2021 2020 Gross margin rate 23.6 % 28.3 % 28.4 % SG&A expense rate 18.9 18.6 19.9 Depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate 2.2 2.2 2.4 Operating income margin rate 3.5 8.4 7.0 Note: Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales.
Some of these supply chain disruptions and resulting actions have resulted in increased costs. The Gross Margin Rate analysis on page 22 provides additional information. Sale of Dermstore In February 2021, we sold Dermstore LLC (Dermstore) for $356 million in cash and recognized a $335 million pretax gain, which is included in Net Other (Income) / Expense.
The Gross Margin Rate analysis on page 23 and Inventory section on page 27 provide additional information. Sale of Dermstore In February 2021, we sold Dermstore LLC (Dermstore) for $356 million in cash and recognized a $335 million pretax gain, which is included in Net Other (Income) / Expense.
EBIT and EBITDA Percent Change (dollars in millions) 2021 2020 2019 2021/2020 2020/2019 Net earnings from continuing operations $ 6,946 $ 4,368 $ 3,269 59.0 % 33.6 % + Provision for income taxes 1,961 1,178 921 66.5 27.9 + Net interest expense 421 977 477 (56.9) 105.1 EBIT $ 9,328 $ 6,523 $ 4,667 43.0 % 39.8 % + Total depreciation and amortization (a) 2,642 2,485 2,604 6.3 (4.6) EBITDA $ 11,970 $ 9,008 $ 7,271 32.9 % 23.9 % (a) Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.
EBIT and EBITDA Percent Change (dollars in millions) 2022 2021 2020 2022/2021 2021/2020 Net earnings $ 2,780 $ 6,946 $ 4,368 (60.0) % 59.0 % + Provision for income taxes 638 1,961 1,178 (67.5) 66.5 + Net interest expense 478 421 977 13.4 (56.9) EBIT $ 3,896 $ 9,328 $ 6,523 (58.2) % 43.0 % + Total depreciation and amortization (a) 2,700 2,642 2,485 2.2 6.3 EBITDA $ 6,596 $ 11,970 $ 9,008 (44.9) % 32.9 % (a) Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.
The majority of the year-end vendor income receivables are collected within the following fiscal quarter, and we do not believe there is a reasonable likelihood that the assumptions used in our estimate will change significantly. Historically, adjustments to our vendor income receivable have not been material.
Based on historical trending and data, this receivable is computed by forecasting vendor income collections and estimating the amount earned. The majority of the year-end vendor income receivables are collected within the following fiscal quarter, and we do not believe there is a reasonable likelihood that the assumptions used in our estimate will change significantly.
Vendor income earned can vary based on a number of factors, including purchase volumes, sales volumes, and our pricing and promotion strategies. We establish a receivable for vendor income that is earned but not yet received. Based on historical trending and data, this receivable is computed by forecasting vendor income collections and estimating the amount earned.
Substantially all vendor income is recorded as a reduction of cost of sales. Vendor income earned can vary based on a number of factors, including purchase volumes, sales volumes, and our pricing and promotion strategies. We establish a receivable for vendor income that is earned but not yet received.
Since the onset of the COVID-19 pandemic, we have experienced strong comparable sales growth and significant volatility in our sales category and channel mix. Supply Chain Disruptions In recent months, we have seen increasing supply chain disruptions.
Business Environment Following the onset of the COVID-19 pandemic in 2020, we experienced strong comparable sales growth and significant volatility in our category and channel mix, which continued through 2021, along with increasing supply chain disruptions.
The evaluation is performed primarily at the store level. An impairment loss is recognized when estimated undiscounted future cash flows from the operation and/or eventual disposition of the asset or asset group is less than its carrying amount, and is measured as the excess of its carrying amount over fair value.
An impairment loss is recognized when estimated undiscounted future cash flows from the operation and/or eventual disposition of the asset or asset group is less than its carrying amount, and is measured as the excess of its carrying amount over fair value. We estimate fair value by obtaining market appraisals, obtaining valuations from third-party brokers, or using other valuation techniques.
In the Notes to the Consolidated Financial Statements , we describe the significant accounting policies used in preparing the consolidated financial statements. Our management has discussed the development, selection, and disclosure of our critical accounting estimates with the Audit & Risk Committee of our Board of Directors.
Our management has discussed the development, selection, and disclosure of our critical accounting estimates with the Audit & Risk Committee of our Board of Directors.
TARGET CORPORATION 2021 Form 10-K 22 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Financial Statements Store Data Change in Number of Stores 2021 2020 Beginning store count 1,897 1,868 Opened 32 30 Closed (3) (1) Ending store count 1,926 1,897 Number of Stores and Retail Square Feet Number of Stores Retail Square Feet (a) January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021 170,000 or more sq. ft. 274 273 49,071 48,798 50,000 to 169,999 sq. ft. 1,516 1,509 190,205 189,508 49,999 or less sq. ft. 136 115 4,008 3,342 Total 1,926 1,897 243,284 241,648 (a) In thousands; reflects total square feet less office, distribution center, and vacant space.
Store Data Change in Number of Stores 2022 2021 Beginning store count 1,926 1,897 Opened 23 32 Closed (1) (3) Ending store count 1,948 1,926 Number of Stores and Retail Square Feet Number of Stores Retail Square Feet (a) January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022 170,000 or more sq. ft. 274 274 48,985 49,071 50,000 to 169,999 sq. ft. 1,527 1,516 191,241 190,205 49,999 or less sq. ft. 147 136 4,358 4,008 Total 1,948 1,926 244,584 243,284 (a) In thousands; reflects total square feet less office, distribution center, and vacant space.
In 2021, we obtained a committed $3.0 billion unsecured revolving credit facility that will expire in October 2026. This new facility replaced our $2.5 billion unsecured revolving credit facility that was set to expire in October 2023. No balances were outstanding under either credit facility at any time during 2021 or 2020.
In 2022, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2023. We also extended our existing committed $3.0 billion unsecured revolving credit facility, which now expires in October 2027. No balances were outstanding under either credit facility at any time during 2022 or 2021.
In addition to country of origin production delays, trucker and dockworker shortages, a broad-based surge in consumer demand, and other factors have led to industry-wide U.S. port and ground transportation delays. In response, we have taken various actions, including ordering merchandise earlier, securing ocean freight routes, and increased use of air transport for certain merchandise.
In addition to country of origin production delays, trucker and dockworker shortages, a broad-based surge in consumer demand, and other factors led to industry-wide U.S. port and ground transportation delays.
We periodically reassess these probabilities and record any changes in the financial statements as appropriate. Liabilities for uncertain tax positions, including interest and penalties, were $138 million and $193 million as of January 29, 2022, and January 30, 2021, respectively. We believe the resolution of these matters will not materially affect our consolidated financial statements.
Gross uncertain tax positions, including interest and penalties, were $241 million and $138 million as of January 28, 2023, and January 29, 2022, respectively. We believe the resolution of these matters will not materially affect our consolidated financial statements. Income taxes are described further in Note 18 to the Financial Statements.
Financial Summary 2021 included the following notable items: • GAAP diluted earnings per share were $14.10. • Adjusted diluted earnings per share were $13.56. • Total revenue increased 13.3 percent, driven by an increase in comparable sales. • Comparable sales increased 12.7 percent, driven by a 12.3 percent increase in traffic. ◦ Comparable store originated sales grew 11.0 percent. ◦ Comparable digitally originated sales increased 20.8 percent. • Operating income of $8.9 billion was 36.8 percent higher than the comparable prior-year period. • We recognized a $335 million pretax gain on the sale of Dermstore.
Financial Summary 2022 included the following notable items: • GAAP diluted earnings per share were $5.98. • Adjusted diluted earnings per share were $6.02. • Total revenue increased 2.9 percent, reflecting total sales growth of 2.8 percent and a 9.8 percent increase in other revenue. • Comparable sales increased 2.2 percent, driven by a 2.1 percent increase in traffic. ◦ Comparable store originated sales grew 2.4 percent. ◦ Comparable digitally originated sales increased 1.5 percent. • Operating income of $3.8 billion was 57.0 percent lower than the comparable prior-year period.
Additionally, we offer a branded proprietary Target Debit Card. Collectively, we refer to these products as RedCards™. We monitor the percentage of purchases that are paid for using RedCards (RedCard Penetration) because our internal analysis has indicated that a meaningful portion of incremental purchases on our RedCards are also incremental sales for Target.
Guests receive a 5 percent discount on virtually all purchases when they use a RedCard at Target. We monitor the percentage of purchases that are paid for using RedCards (RedCard Penetration) because our internal analysis has indicated that a meaningful portion of incremental purchases on our RedCards are also incremental sales for Target.
Insurance/self-insurance: We retain a substantial portion of the risk related to certain general liability, workers' compensation, property loss, and team member medical and dental claims. However, we maintain stop-loss coverage to limit the exposure related to certain risks. Liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported.
However, we maintain stop-loss coverage to limit the exposure related to certain risks. Liabilities associated with these losses include estimates of both claims filed and losses incurred but not yet reported. We use actuarial methods which consider a number of factors to estimate our ultimate cost of losses.
TARGET CORPORATION 2021 Form 10-K 29 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and apply judgments that affect the reported amounts.
Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and apply judgments that affect the reported amounts. In the Notes to the Consolidated Financial Statements , we describe the significant accounting policies used in preparing the consolidated financial statements.
Income taxes are described further in Note 19 to the Financial Statements. Pension accounting: We maintain a funded qualified defined benefit pension plan, as well as nonqualified and international pension plans that are generally unfunded, for certain current and retired team members.
TARGET CORPORATION 2022 Form 10-K 30 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION & NEW ACCOUNTING PRONOUNCEMENTS Index to Financial Statements Pension accounting: We maintain a funded qualified defined benefit pension plan, as well as nonqualified and international pension plans that are generally unfunded, for certain current and retired team members.
The increase in inventory levels reflect our efforts to align inventory with sales trends, and elevated in-transit inventory related to import supply chain delays. TARGET CORPORATION 2021 Form 10-K 27 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements Capital Expenditures Note: Amounts may not foot due to rounding.
TARGET CORPORATION 2022 Form 10-K 27 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements Capital Expenditures Note: Amounts may not foot due to rounding. Capital expenditures increased in 2022 from the prior year as we invested in our strategic initiatives, including an increase in investments in both stores and in our supply chain.
Our shrink estimate is based on historical losses verified by physical inventory counts. Historically, our actual physical inventory count results have shown our estimates to be reliable. Market adjustments for markdowns are recorded when the salability of the merchandise has diminished. Salability can be impacted by consumer preferences and seasonality, among other factors.
Our inventory is valued at the lower of LIFO cost or market. We reduce inventory for estimated losses related to shrink and markdowns. Our shrink estimate is based on historical losses verified by physical inventory counts. Historically, our actual physical inventory count results have shown our estimates to be reliable.
The following items require significant estimation or judgment: Inventory and cost of sales: The vast majority of our inventory is accounted for under the retail inventory accounting method using the last-in, first-out method (LIFO). Our inventory is valued at the lower of LIFO cost or market. We reduce inventory for estimated losses related to shrink and markdowns.
The following items require significant estimation or judgment: TARGET CORPORATION 2022 Form 10-K 29 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements Inventory and cost of sales: The vast majority of our inventory is accounted for under the retail inventory accounting method using the last-in, first-out method (LIFO).
For 2021, operating cash flows reflect stronger operating results, offset by increased inventory investment and lower accounts payable leverage, compared with 2020. Additionally, operating cash flows for 2021 reflect a $1.0 billion increase in income tax payments. Inventory Year-end inventory was $13.9 billion, compared with $10.7 billion in 2020.
For 2022, operating cash flows decreased as a result of lower earnings and lower accounts payable leverage, partially offset by decreased inventory investment, compared with 2021. Inventory Year-end inventory was $13.5 billion, compared with $13.9 billion in 2021.
Financing Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to minimize our borrowing costs.
TARGET CORPORATION 2022 Form 10-K 28 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF FINANCIAL CONDITION Index to Financial Statements Financing Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt maturities, and to manage our net exposure to floating interest rate volatility.
Significant judgment is required in determining the timing and amounts of deductible and taxable items, and in evaluating the ultimate resolution of tax matters in dispute with tax authorities. The benefits of uncertain tax positions are recorded in our financial statements only after determining it is likely the uncertain tax positions would withstand challenge by taxing authorities.
The benefits of uncertain tax positions are recorded in our financial statements only after determining it is likely the uncertain tax positions would withstand challenge by taxing authorities. We periodically reassess these probabilities and record any changes in the financial statements as appropriate.
Sales were $104.6 billion for 2021, an increase of $12.2 billion, or 13.2 percent, from the prior year. Operating cash flow provided by continuing operations was $8.6 billion for 2021, a decrease of $(1.9) billion, or (18.1) percent, from $10.5 billion for 2020. The drivers of the operating cash flow decrease are described on page 2 7 .
See Business Environment below for additional information. Sales were $107.6 billion for 2022, an increase of $3.0 billion, or 2.8 percent, from the prior year. Operating cash flow was $4.0 billion for 2022, a decrease of $(4.6) billion, or (53.4) percent, from $8.6 billion for 2021. The drivers of the operating cash flow decrease are described on page 27 .
Earnings Per Share From Continuing Operations Percent Change 2021 2020 2019 2021/2020 2020/2019 GAAP diluted earnings per share $ 14.10 $ 8.64 $ 6.34 63.1 % 36.3 % Adjustments (0.53) 0.78 0.05 Adjusted diluted earnings per share $ 13.56 $ 9.42 $ 6.39 44.0 % 47.4 % Note: Amounts may not foot due to rounding.
TARGET CORPORATION 2022 Form 10-K 19 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents FINANCIAL SUMMARY & ANALYSIS OF OPERATIONS Index to Financial Statements Earnings Per Share Percent Change 2022 2021 2020 2022/2021 2021/2020 GAAP diluted earnings per share $ 5.98 $ 14.10 $ 8.64 (57.6) % 63.1 % Adjustments 0.03 (0.53) 0.78 Adjusted diluted earnings per share $ 6.02 $ 13.56 $ 9.42 (55.7) % 44.0 % Note: Amounts may not foot due to rounding.
We use actuarial methods which consider a number of factors to estimate our ultimate cost of losses. General liability and workers' compensation liabilities are recorded based on our estimate of their net present value; other liabilities referred to above are not discounted.
General liability and workers' compensation liabilities are recorded based on our estimate of their net present value; other liabilities referred to above are not discounted. Our workers' compensation and general liability accrual was $560 million and $519 million as of January 28, 2023, and January 29, 2022, respectively.
Vendor income: We receive various forms of consideration from our vendors (vendor income), principally earned as a result of volume rebates, markdown allowances, promotions, and advertising allowances. Substantially all vendor income is recorded as a reduction of cost of sales.
Inventory was $13.5 billion and $13.9 billion as of January 28, 2023, and January 29, 2022, respectively, and is further described in Note 9 to the Financial Statements. Vendor income: We receive various forms of consideration from our vendors (vendor income), principally earned as a result of volume rebates, markdown allowances, promotions, and advertising allowances.
Net Other (Income) / Expense Net Other (Income) / Expense was $(382) million and $16 million for 2021 and 2020, respectively. 2021 included the $335 million gain on the February 2021 sale of Dermstore. Provision for Income Taxes Our 2021 effective income tax rate was 22.0 percent compared with 21.2 percent in 2020.
The increase in net interest expense was primarily due to higher average debt and commercial paper levels in 2022 compared with 2021. Net Other (Income) / Expense Net Other (Income) / Expense was $(48) million and $(382) million for 2022 and 2021, respectively. 2021 included the $335 million gain on the February 2021 sale of Dermstore.
The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible. TD Bank Group offers credit to qualified guests through Target-branded credit cards: the Target Credit Card and the Target MasterCard Credit Card (Target Credit Cards).
Part I, Item 1 , Business of this Form 10-K and Note 3 to the Financial Statements provides additional product category sales information. The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.
Vendor income receivable was $518 million and $504 million as of January 29, 2022, and January 30, 2021, respectively. Vendor income is described further in Note 6 to the Financial Statements. Long-lived assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.
Long-lived assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The evaluation is performed primarily at the store level.
TARGET CORPORATION 2021 Form 10-K 20 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Financial Statements Sales Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage.
TARGET CORPORATION 2022 Form 10-K 22 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Financial Statements Gross Margin Rate Our gross margin rate was 23.6 percent in 2022 and 28.3 percent in 2021.
Capital expenditures increased in 2021 from the prior year as we invested in our strategic initiatives, including store remodels, some of which were delayed in 2020, new store openings, and supply chain projects. Beyond full-store remodels, we invested in optimizing front-end space in high-volume locations to increase the efficiency of our Same-Day Services, and built-out about 100 Ulta Beauty shop-in-shops.
The increase also reflects the impact of inflation on these projects. Beyond full-store remodels, we invested in optimizing front-end space in high-volume locations to increase the efficiency of our Same-Day Services, and built-out and opened approximately 250 Ulta Beauty shop-in-shops. We have completed over 1,000 full-store remodels since the launch of the current program in 2017, including 140 in 2022.
For example, a 5 percent increase or decrease in average claim costs would have impacted our self-insurance expense by $26 million in 2021. Historically, adjustments to our estimates have not been material. Refer to Part II , Item 7A , Quantitative and Qualitative Disclosures About Market Risk , for further disclosure of the market risks associated with these exposures.
Refer to Part II , Item 7A , Quantitative and Qualitative Disclosures About Market Risk , for further disclosure of the market risks associated with these exposures. We maintain insurance coverage to limit our exposure to certain events, including network security matters.
Selling, General and Administrative (SG&A) Expense Rate Our SG&A expense rate was 18.6 percent in 2021, compared with 19.9 percent in 2020, reflecting the leverage benefit from strong revenue growth.
Selling, General and Administrative (SG&A) Expense Rate Our SG&A expense rate was 18.9 percent in 2022, compared with 18.6 percent in 2021, reflecting the net impact of cost increases across our business, including investments in hourly team member wages, partially offset by lower incentive compensation in 2022 compared to the prior year.
The calculation of ROIC is provided on page 26 . TARGET CORPORATION 2021 Form 10-K 19 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents FINANCIAL SUMMARY & ANALYSIS OF OPERATIONS Index to Financial Statements COVID-19 The COVID-19 pandemic continues to evolve.
TARGET CORPORATION 2022 Form 10-K 23 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Financial Statements Other Performance Factors Net Interest Expense Net interest expense was $478 million for 2022, compared with $421 million for 2021.
Our workers' compensation and general liability accrual was $519 million and $510 million as of January 29, 2022, and January 30, 2021, respectively. We believe that the amounts accrued are appropriate; however, our liabilities could be significantly affected if future occurrences or loss developments differ from our assumptions.
We believe that the amounts accrued are appropriate; however, our liabilities could be significantly affected if future occurrences or loss developments differ from our assumptions. For example, a 5 percent increase or decrease in average claim costs would have impacted our self-insurance expense by $28 million in 2022. Historically, adjustments to our estimates have not been material.
Removed
During 2021, in support of our enterprise strategy described in Item 1 on page 2 of this Form 10-K, we • Expanded our digital fulfillment capabilities, including adding permanent storage capacity in more than 200 high-volume stores, adding thousands of new items to the list available for Order Pickup and Drive Up, and doubling the number of Drive Up parking stalls compared with last year.
Added
During 2022, in support of our enterprise strategy described in Item 1 on page 2 of this Form 10-K, we • Expanded our supply chain capacity and digital fulfillment capabilities, including adding one new distribution center and six new sortation centers to support our growth and commitment to fast delivery times, while helping our teams work more efficiently and managing our shipping costs; • Fulfilled over 50 percent of our digital sales through our same-day fulfillment options: Order Pickup, Drive Up, and delivery via Shipt; • Continued the steady stream of newness across our assortment and continued to introduce new owned and exclusive brands, including fashion forward brands Future Collective TM and Houston White x Target; • Completed 140 full store remodels and invested in hundreds of other stores through projects to increase efficiency of our Same-Day Services, build-out and open Ulta Beauty shop-in-shops, and expand Apple and Disney experiences; • Opened 23 new stores, including a new larger-footprint store with reimagined design elements and additional stores in key urban markets and on college campuses; • Invested in our team through our updated starting wage range, expanded access to health care benefits, and our debt-free education assistance program; • Offered compelling promotions, attractive every day price points on key items, and free and easy payment and fulfillment options, including our new RedCard Reloadable Account, which provides all the benefits of our RedCard program without the need for a credit check or an existing bank account; and • Launched Target Zero, a collection of products designed to reduce waste and make it easier to shop sustainably, and completed retrofitting our first store designed to be net zero energy, located in Vista, California.
Removed
During 2021, over 50 percent of our digital sales were fulfilled by our same-day fulfillment options: Order Pickup, Drive Up, and delivery via Shipt. • Continued the steady stream of newness across our assortment and continued to introduce new owned brands, including our arts and crafts owned brand, Mondo Llama TM , our sweet and savory food brand, Favorite Day TM , our pet food brand, Kindfull TM , and our first dedicated storage and home organization owned brand, Brightroom TM .
Added
In response to the rising guest demand and supply chain constraints, we took various actions, including ordering merchandise earlier, securing ocean freight routes, adding incremental holding capacity near U.S. ports, and increasing use of air transport for certain merchandise. Some of these supply chain disruptions and resulting actions resulted in increased costs.
Removed
For the first time in history, 11 brands delivered $1 billion or more in sales, with 4 brands delivering over $2 billion in sales, driven by strength in Apparel, Home Furnishings & Decor and Food & Beverage. • Launched Ulta Beauty at Target on Target.com and in about 100 Target locations, and expanded our Apple and Disney experiences. • Remodeled 145 stores. • Opened 32 new stores, including 28 additional small format stores in key urban markets and on college campuses. • Invested significantly in our team, including recognition bonuses and launch of a new debt-free education assistance program.
Added
In 2022, our comparable sales growth slowed significantly, reflecting sales decreases in our Discretionary categories (Apparel & Accessories, Hardlines, and Home Furnishings & Decor) that substantially offset growth in our Frequency categories (Beauty & Household Essentials and Food & Beverage).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−1 removed1 unchanged
Biggest changeWe record our general liability and workers' compensation liabilities at net present value; therefore, these liabilities fluctuate with changes in interest rates. Based on our balance sheet position as of January 29, 2022, the annualized effect of a 0.5 percentage point increase/(decrease) in interest rates would increase/(decrease) earnings before income taxes by $6 million.
Biggest changeBased on our balance sheet position as of January 28, 2023, the annualized effect of a 0.5 percentage point increase/(decrease) in interest rates would increase/(decrease) earnings before income taxes by $7 million. In addition, we are exposed to market return fluctuations on our qualified defined benefit pension plan.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of January 29, 2022, our exposure to market risk was primarily from interest rate changes on our debt obligations and short-term investments, some of which are at a London Interbank Offered Rate (LIBOR).
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of January 28, 2023, our exposure to market risk was primarily from interest rate changes on our debt obligations and short-term investments, some of which are at a London Interbank Offered Rate (LIBOR).
Based on our balance sheet position as of January 29, 2022, 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 increase our earnings before income taxes by $3 million.
Based on our balance sheet position as of January 28, 2023, 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 decrease our earnings before income taxes by $1 million.
Our interest rate exposure is primarily due to differences between our floating rate debt obligations compared to our floating rate short-term investments. As of January 29, 2022, our floating rate short-term investments exceeded our floating rate debt by approximately $3.5 billion.
Our interest rate exposure is primarily due to differences between our floating rate debt obligations compared to our floating rate short-term investments. As of January 28, 2023, our floating rate debt exceeded our floating rate short-term investments by approximately $1.2 billion.
TARGET CORPORATION 2021 Form 10-K 33 FINANCIAL STATEMENTS Table of Contents INDEX Index to Financial Statements
TARGET CORPORATION 2022 Form 10-K 32 FINANCIAL STATEMENTS Table of Contents INDEX Index to Financial Statements
In addition, we are exposed to market return fluctuations on our qualified defined benefit pension plan. The value of our pension liabilities is inversely related to changes in interest rates. A 1 percentage point decrease in the weighted average discount rate would increase annual expense by $62 million.
The value of our pension liabilities is inversely related to changes in interest rates. A 1 percentage point decrease in the weighted average discount rate would increase annual expense by $59 million. To protect against declines in interest rates, we hold high-quality, long-duration bonds and derivative instruments in our pension plan trust.
See further description of our debt and derivative instruments in Notes 16 and 17 to the Financial Statements. The United Kingdom's Financial Conduct Authority has announced the intent to phase out LIBOR by June 2023. We do not expect the phase out to materially impact our financial statements, liquidity, or access to capital markets.
The United Kingdom's Financial Conduct Authority has announced the intent to phase out LIBOR by June 2023. We do not expect the phase out to materially impact our financial statements, liquidity, or access to capital markets. We record our general liability and workers' compensation liabilities at net present value; therefore, these liabilities fluctuate with changes in interest rates.
In general, we expect our floating rate debt to exceed our floating rate short-term investments over time, but that may vary in different interest rate and economic environments. For example, our short-term investments as of January 29, 2022, exceeded our floating rate debt due to operating cash flow acceleration driven by strong operating results.
In general, we expect our floating rate debt to exceed our floating rate short-term investments over time, but that may vary in different interest rate and economic environments. See further description of our debt and derivative instruments in Notes 15 and 16 to the Financial Statements.
TARGET CORPORATION 2021 Form 10-K 32 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents QUANTITATIVE AND QUALITATIVE DISCLOSURES Index to Financial Statements As more fully described in Note 23 to the Financial Statements, we are exposed to market returns on accumulated team member balances in our nonqualified, unfunded deferred compensation plans.
As of January 28, 2023, we had hedged 70 percent of the interest rate exposure of our plan liabilities. As more fully described in Note 22 to the Financial Statements, we are exposed to market returns on accumulated team member balances in our nonqualified, unfunded deferred compensation plans.
Removed
To protect against declines in interest rates, we hold high-quality, long-duration bonds and derivative instruments in our pension plan trust. As of January 29, 2022, we had hedged 70 percent of the interest rate exposure of our plan liabilities.

Other TGT 10-K year-over-year comparisons