10q10k10q10k.net

What changed in Target Corporation's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Target Corporation's 2023 and 2024 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 2024 report.

+216 added−193 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-08)

Top changes in Target Corporation's 2024 10-K

216 paragraphs added · 193 removed · 172 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

24 edited+9 added−4 removed18 unchanged
Biggest changeSenior 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.
Biggest changeCornell Chair of the Board and Chief Executive Officer since August 2014. 65 Michael J. Fiddelke Executive Vice President and Chief Operating Officer since February 2024 and Chief Financial Officer since November 2019. Senior Vice President, Operations from August 2018 to October 2019. Senior Vice President, Merchandising Capabilities from March 2017 to August 2018. 47 A.
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™).
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, Target MasterCard ® , or RedCard Reloadable Account (collectively, RedCards™).
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.
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, sick pay, merchandise and other discounts, disability insurance, life insurance, healthcare and dependent care flexible spending accounts, tuition-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.
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.
Most 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.
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 2023 Form 10-K 5 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.
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.
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 2023 Form 10-K 4 BUSINESS Table of Contents Index to Financial Statements A significant portion of our sales is from national brand merchandise.
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).
Sales by Fulfillment Channel TARGET CORPORATION 2023 Form 10-K 3 BUSINESS Table of Contents Index to Financial Statements 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 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.
TARGET CORPORATION 2023 Form 10-K 7 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.
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.
Boutique™ Smith & Hawken™ Bullseye's Playground™ JoyLab™ Sonia Kashuk™ Casaluna™ Kindfull™ Spritz™ Cat & Jack™ Knox Rose™ Stars Above™ Cloud Island™ Kona Sol™ Sun Squad™ Colsie™ Made By Design™ Threshold™ dealworthy™ Market Pantry™ Universal Thread™ Embark™ Mondo Llama™ up & up™ Everspring™ More Than Magic™ Wild Fable™ Favorite Day™ Opalhouse™ Wondershop™ Figmint™ Open Story™ Xhilaration™ 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.
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.
As of February 3, 2024, we employed approximately 415,000 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.
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).
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, supply chain facilities, vendors, and third-party distributors), and same-day delivery via our wholly owned subsidiary, Shipt, Inc. (Shipt).
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 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. The Business Environment and Liquidity and Capital Resources sections in MD&A provide additional details.
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.
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 Brian C.
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.
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. Senior Vice President, Group Merchandise Manager, Essentials, Beauty, Hardlines and Services from January 2019 to January 2020.
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.
Eligibility for, and the level of, benefits vary depending on team members’ full-time or part-time status, work location, compensation level, and tenure. Workplace Health and Safety We strive to maintain a safe and secure work environment and have specific safety programs. This includes administering a comprehensive occupational injury- and illness-prevention program and training for team members.
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.
Senior Vice President, Merchandising Essentials, Beauty and Wellness from April 2017 to January 2019. 49 Melissa K. Kremer Executive Vice President and Chief Human Resources Officer since January 2019. Senior Vice President, Talent and Organizational Effectiveness from October 2017 to January 2019. 46 Don H. Liu Executive Vice President, Chief Legal & Compliance Officer and Corporate Secretary since October 2023.
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.
Executive Vice President, Chief Legal & Risk Officer and Corporate Secretary from October 2017 to October 2023. 62 Cara A. Sylvester Executive Vice President and Chief Guest Experience Officer since May 2022. Executive Vice President and Chief Marketing & Digital Officer from February 2021 to May 2022. Senior Vice President, Home from March 2019 to February 2021.
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!
Approximately one-third of our sales come from our owned and exclusive brands, including, but not limited to, the brands listed below.
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.
Diversity, Equity, and Inclusion (DE&I) We champion workplace inclusion, belonging and diversity with a focus on engaging, developing, advancing and attracting team members equitably in support of our business. We disclose the composition of our team in our annual Workforce Diversity Report and EEO-1 report.
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.
TARGET CORPORATION 2023 Form 10-K 6 BUSINESS Table of Contents Index to Financial Statements 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.
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
Vice President, Beauty & Dermstore from June 2017 to March 2019. 46 Matthew L. Zabel Executive Vice President and Chief Corporate Affairs Officer since October 2023. Executive Vice President and General Counsel from May 2022 to October 2023. Senior Vice President, Risk and Employee & Labor Relations from August 2020 to May 2022.
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.
Our strategy continues to leverage stores as fulfillment hubs, with stores fulfilling more than 96 percent of total sales, which provides convenience for our guests at a reduced fulfillment cost. TARGET CORPORATION 2023 Form 10-K 2 BUSINESS Table of Contents Index to Financial Statements (a) 2023 consisted of 53 weeks. The extra week in 2023 contributed $1.7 billion of sales.
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.
We set company-wide DE&I goals to drive our business, and learn and grow as an organization. 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.
We also seek to drive customer loyalty and trip frequency through our Target Circle program, where members earn 1 percent rewards on nearly all non-RedCard purchases, among other benefits. Distribution The vast majority of merchandise is distributed to our stores through our network of distribution centers. Common carriers ship merchandise to and from our distribution centers.
Among other benefits, Target Circle 360 members receive access to same-day delivery and our fastest available shipping option with no additional markup or fees. Distribution Most merchandise is distributed to our stores through our network of distribution centers. Common carriers ship merchandise to and from our distribution centers.
Removed
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.
Added
Strategy Target delivers on our purpose of helping all families discover the joy of everyday life through our curated, multi-category assortment, outstanding value, and a team that’s centered on care for each other, our guests, and communities. Our stores, digital experience, fulfillment services, and loyalty ecosystem also play a critical role in differentiating Target and bringing our purpose to life.
Removed
The 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.
Added
Our strategy aims to expand Target’s relevancy in consumers’ lives and drive traffic, sales , and market share growth.
Removed
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.
Added
Core elements include: • Delighting with newness, style, and value by strengthening our owned brands portfolio, curating leading national brands, and expanding the breadth and depth of signature partnerships. • Delivering value by providing everyday low pricing and leveraging promotions and our loyalty ecosystem, Target Circle. • Opening new stores, updating existing stores , and enhancing our digital experience to reach more consumers and provide a reliably convenient, easy , and inspiring shopping experience. • Transforming our supply chain for increased efficiency, speed, capacity, and reliability across our network. • Being a favorite discovery destination by making it easy for consumers to discover Target’s products and experiences across different channels and touchpoints, including our stores, our mobile app and website, and social platforms. • Expanding our capabilities, such as our Roundel advertising business, to leverage our assets and enhance the guest experience.
Removed
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.
Added
Our strategy defines how we’ll continue to differentiate Target, and we’ll seek to enable growth through: • Our Team – A highly engaged, diverse, purpose-driven, and community-oriented team . • Consumer-Centricity – A deep understanding of consumers . • Technology – A connected ecosystem of data, insights, and technology, including artificial intelligence . • Efficiency – Simplify work for our teams to make it easier to deliver a great guest experience. • Sustainability – Resiliency in our business model through our Target Forward strategy.
Added
Owned Brands A New Day™ Future Collective™ Original Use™ All in Motion™ Gigglescape™ Pillowfort™ Art Class™ Good & Gather™ Project 62™ Auden™ Goodfellow & Co™ Room Essentials™ Ava & Viv™ Hearth & Hand™ with Magnolia Shade & Shore™ Boots & Barkley™ Heyday™ Smartly™ Brightroom™ Hyde & EEK!
Added
We also seek to drive customer loyalty and trip frequency through our Target Circle™ program which offers guests instant discounts and Target Circle Rewards redeemable on future purchases. In March 2024, we announced changes to Target Circle, including the integration of Target Circle Card™ (formerly RedCard) and the addition of a Target Circle 360™ paid membership option.
Added
Senior Vice President, Enterprise Risk from September 2017 to August 2020. 55 Note: As previously disclosed, Mr. Liu intends to retire as Target's Chief Legal & Compliance Officer and Corporate Secretary in 2024. Mr.
Added
Liu intends to remain in his current role until a successor is appointed, and is expected to serve as a strategic advisor for a transition period following such appointment. In addition, as previously disclosed, in connection with the appointment of Mr. Fiddelke to the position of Executive Vice President and Chief Operating Officer, Mr.
Added
Fiddelke will remain Chief Financial Officer until a successor is appointed to that role.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

58 edited+18 added−4 removed33 unchanged
Biggest changeUnauthorized 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.
Biggest changeIn addition, hardware or software that we develop or obtain from third parties may contain defects that could compromise information security, cybersecurity, or data privacy. Unauthorized parties may also attempt to gain access to our information systems or facilities, or those of third parties with whom we do business, through fraud, deception, social engineering, or other bad acts.
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.
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 technology systems, but implementing significant changes increases the risk of system disruption.
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.
If we need to seek alternative sources of supply from vendors with whom we have less familiarity, the risk of these 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.
For example, owned brand products involve greater responsible sourcing risk in the selection of vendors, which can exacerbate reputational risk. In addition, owned brand products generally require longer lead times between order placement and product delivery and require us to take ownership of those products earlier in the supply chain.
For example, owned brand products involve greater responsible sourcing risk in the selection of vendors, which can exacerbate reputational risk. In addition, owned brand products generally need longer lead times between order placement and product delivery and require us to take ownership of those products earlier in the supply chain.
The long-term effects of the COVID-19 pandemic, or other similar public health crises, may also continue to amplify other risks discussed in this Item 1A, Risk Factors, including risks related to macroeconomic conditions and consumer confidence and spending, supply chain, information security, cybersecurity, and data privacy, and our workforce, any of which could have a material effect on us.
The long-term effects of the COVID-19 pandemic, or the effects of other similar public health crises, may amplify other risks discussed in this Item 1A, Risk Factors, including risks related to macroeconomic conditions and consumer confidence and spending, supply chain, information security, cybersecurity, and data privacy, and our workforce, any of which could have a material effect on us.
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.
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, geopolitical conflicts, terrorist attacks, 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.
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.
A deterioration in U.S. macroeconomic conditions or consumer confidence or spending could adversely affect our business in many ways, including reducing 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 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.
If we fail to differentiate our guest experience from our competitors, our results of operations and financial condition could be adversely affected. TARGET CORPORATION 2023 Form 10-K 8 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.
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.
We have made, 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.
In addition, prices of fuel and other commodities that our supply chain depends on are historically volatile and subject to fluctuations based on a variety of international and domestic factors. Rapid and significant changes in commodity prices, as has occurred in recent years, could further increase our costs and adversely affect our results of operations.
In addition, prices of fuel and other commodities on which our supply chain depends are historically volatile and subject to fluctuations based on a variety of international and domestic factors. Rapid and significant changes in commodity prices, as have occurred in recent years, could further increase our costs and adversely affect our results of operations.
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.
For example, the continued utilization of 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.
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.
Consumers may also use third-party channels, devices, technologies, and capabilities (including artificial intelligence) 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 failures or difficulties in executing our differentiation efforts could adversely affect our results of operations and financial condition.
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.
Changes in the legal or regulatory environment affecting any other area related to our business, including information security, cybersecurity, and data privacy, product safety, payment methods, or climate and emissions disclosure could cause our expenses to increase and adversely affect our results of operations.
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.
Our ability to predict and adapt to changing consumer preferences depends on many factors, including obtaining accurate and relevant data on guest preferences, successfully implementing new technologies and capabilities emphasizing relevant merchandise categories, effectively managing our inventory levels, and implementing competitive and effective pricing and promotion strategies.
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.
Investment and Infrastructure Risks If our capital investments do not achieve appropriate returns or our efficiency efforts are not successful, 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.
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.
If we are unable to contract with third parties having the specialized skills needed to support our operations, if any third-party services are interrupted, or if they fail to meet our performance standards, then our reputation and results of operations could be adversely affected.
In addition, the interconnected nature of the global economy means that international events such as armed conflicts, geopolitical conflicts, public health crises, energy availability, and market volatility can all affect macroeconomic conditions in the U.S.
In addition, the interconnected nature of the global economy means that international events such as geopolitical conflicts, terrorist attacks, armed conflicts, public health crises, energy availability, trade disputes, and market volatility can all affect macroeconomic conditions in the U.S.
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.
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 during the COVID-19 pandemic, 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.
For example, our stores-as-hubs strategy depends on adequate replenishment facilities to receive, store, and move inventory to stores on a timely basis. Underestimating our replenishment capacity needs could result in lower in-stock levels or increased costs for temporary storage. Conversely, overestimating replenishment capacity needs could result in inefficient deployment of capital.
For example, our stores-as-hubs strategy depends on adequate replenishment facilities to receive, store, and move inventory to stores on a timely basis. Underestimating our replenishment capacity needs could result in lower in-stock levels or increased costs for temporary storage.
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.
If we, our vendors, or other third parties with whom we do business experience additional significant information security, cybersecurity, or data privacy incidents or fail to detect and appropriately respond to significant incidents, our business operations could be severely disrupted and we could be exposed to costly government enforcement actions and private litigation.
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.
In addition, if we fail to comply with other applicable laws and regulations, including the Foreign Corrupt Practices Act and other anti-bribery laws, anti-money laundering laws, import restrictions, responsible sourcing laws, and sanctions programs, 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.
Our sourcing vendors, including any third parties selling through our digital channels, must also meet our expectations across multiple areas of social compliance, including supply chain transparency and responsible sourcing.
Our sourcing vendors, including any third parties selling through our digital channels, must also meet our expectations and comply with applicable laws and regulations across multiple areas of social compliance, including supply chain transparency and responsible sourcing.
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.
If we are unable to successfully develop, source, and market our owned and exclusive brand products, our results of operations 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.
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.
Complying with current or contemplated information security, cybersecurity, data protection, and data processing laws and regulations (including reporting and disclosure regimes), 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.
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.
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 and impact any of the locations or modes of transportation that we depend on, it could increase our costs and adversely affect our supply of inventory.
Our Shipt subsidiary has faced, and continues to face, legal challenges to its worker classification. If, as a result of judicial decisions or legislation, Shipt is required to treat its network of independent contractors as employees, we may experience higher digital fulfillment costs, which could adversely affect our results of operations and financial condition.
If, as a result of judicial decisions or legislation, Shipt is required to treat its network of independent contractors as employees, we may experience higher digital fulfillment costs, which could adversely affect our results of operations and financial condition.
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, there have been periodic closings and ship diversions, conflicts, labor disputes, and congestion disrupting railways, trucking, waterways, and ports around the world, including at California ports where we receive a significant portion of the products we source from outside the U.S.
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.
Both we and our vendors have experienced additional information security, cybersecurity, and data privacy incidents; however, to date, these other incidents have not been material to our business strategy, results of operations, or financial condition. Based on the prominence and notoriety of our prior significant data breach, additional information security, cybersecurity, or data privacy incidents could draw greater scrutiny.
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.
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 (including by independent contractors via our Shipt subsidiary), guest contact centers, payment processing, and extensions of credit for our Target-branded payment card program.
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.
In addition, our guests could lose confidence in our ability to protect their information, stop using our Target-branded payment cards or loyalty programs, or stop shopping with us altogether. Any of these outcomes could adversely affect our reputation, results of operations, and financial condition.
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.
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. Changes in any of those factors could change our effective tax rate, which could adversely affect our net income.
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.
In addition to our U.S. operations, we have support offices and sourcing operations in India, China, and other countries, 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. Failure to address product safety and sourcing concerns could adversely affect our 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.
In addition, we use a variety of derivative products to manage our exposure to market risk, principally interest rate fluctuations. 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.
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.
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.
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.
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.
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.
Supply Chain and Third-Party Risks Changes in our relationships with our vendors or other companies, 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.
To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, guest experience, and results of operations. In addition, sustained high rates of inventory shrink at certain stores could impact the profitability of those stores and result in the impairment of long-term assets.
To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, guest experience, and results of operations.
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.
We have established, and may continue to establish, various goals and initiatives on these matters, including with respect to sustainability and diversity, equity, and inclusion topics. We cannot guarantee that we will achieve these goals and initiatives. Any failure, or perceived failure, by us to achieve these goals and initiatives could adversely affect our reputation and results of operations.
This exposes us to enhanced risks of supply chain disruptions and changing consumer preferences, which could adversely affect our results of operations. If we are unable to protect against inventory shrink, our results of operations and financial condition could be adversely affected. Our business depends on our ability to effectively manage our inventory.
This requires longer-term forecasting of consumer demand, including for categories where consumer preferences may change rapidly, and exposes us to enhanced risks of supply chain disruptions, which could adversely affect our results of operations. If we are unable to protect against inventory shrink, our results of operations and financial condition could be adversely affected.
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.
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 of merchandise we import.
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.
Negative incidents involving us, our workforce, or others with whom we do business could quickly erode trust and confidence and result in changes in consumer behavior (including consumer boycotts), workforce unrest or walkouts, government investigations, and litigation.
We have historically experienced loss of inventory (also called shrink) due to damage, theft (including from organized retail crime), and other causes. We continue to experience elevated levels of inventory shrink relative to historical levels, which have adversely affected, and could continue to adversely affect, our results of operations and financial condition.
We continue to experience elevated levels of inventory shrink relative to historical levels, which have adversely affected, and could continue to adversely affect, our results of operations and financial condition.
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.
These systems are subject to possible damage or interruption from many events, including power outages, telecommunications failures, third-party failures, malicious attacks, security breaches, and implementation errors.
Any failure, or perceived failure, by us to achieve these goals and initiatives or to otherwise meet evolving and varied stakeholder expectations could adversely affect our reputation and result in legal and regulatory proceedings against us. Any of these outcomes could negatively impact our results of operations and financial condition.
Furthermore, any failure, or perceived failure, by us to achieve our sustainability goals or to otherwise meet evolving, varied, and sometimes conflicting stakeholder expectations regarding the environment, could adversely affect our reputation and results of operations.
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.
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. Many team members are in entry-level or part-time positions with high turnover rates historically.
Legal, Regulatory, Global, and Other External Risks The effects of the COVID-19 pandemic, or other similar public health crises, may continue to amplify the risks and uncertainties facing our business. The long-term impacts of the social, economic, and financial disruptions caused by the COVID-19 pandemic and the government responses to such disruptions are unknown.
TARGET CORPORATION 2023 Form 10-K 12 RISK FACTORS Table of Contents Index to Financial Statements Legal, Regulatory, Global, and Other External Risks The long-term effects of the COVID-19 pandemic, or the effects of other similar public health crises, may amplify the risks and uncertainties facing our business.
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.
Our earnings depend on the state of macroeconomic conditions and consumer confidence and spending in the U.S.
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.
If our guests have negative experiences with, or view unfavorably, any of the companies or individuals with whom we have relationships, it could cause them to stop shopping with us and negatively impact our results of operations.
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.
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 and borrowings. Each of the credit rating agencies reviews its rating periodically, and there is no guarantee that our current credit ratings will remain the same.
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.
TARGET CORPORATION 2023 Form 10-K 14 RISK FACTORS, UNRESOLVED STAFF COMMENTS, & CYBERSECURITY Table of Contents Index to Financial Statements Financial Risks Increases in our effective income tax rate could adversely affect our results of operations.
Our 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.
The classification of workers as employees or independent contractors, in particular, is an area that is experiencing legal challenges and legislative changes. Our Shipt subsidiary has faced, and continues to face, legal challenges to its worker classification.
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 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 legal and regulatory environment regarding information security, cybersecurity, and data privacy is dynamic and has strict requirements for using and treating personal data.
TARGET CORPORATION 2023 Form 10-K 11 RISK FACTORS Table of Contents Index to Financial Statements The legal and regulatory environment regarding information security, cybersecurity, and data privacy is dynamic and has strict requirements, including for the use and treatment of personal data.
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.
Furthermore, the training we conduct as part of our information security, cybersecurity, and data privacy efforts may not be effective in preventing or limiting successful attacks. Our only significant information security, cybersecurity, or data privacy incident was a data breach that occurred in 2013, which adversely affected our reputation and 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.
Any damage or disruption to our technology systems could severely interrupt our business operations, including our ability to process guest transactions and manage inventories, which could adversely affect our reputation, results of operations, and financial condition.
Changes in any of those factors could change our effective tax rate, which could adversely affect our net income. In addition, changes in our operations both in and outside of the U.S. may cause greater volatility in our effective tax rate.
In addition, changes in our operations both in and outside of the U.S. may cause greater volatility in our effective tax rate. If we are unable to access the capital markets or obtain bank credit, our financial condition and results of operations could suffer.
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.
We are dependent on a stable, liquid, and well-functioning financial system to fund our operations and capital investments. Our continued access to financial markets depends on multiple factors including the condition of debt capital markets, the condition of the banking sector, our operating performance, and our credit ratings.
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.
Any adverse perception of Target could negatively impact our results of operations and financial condition and result in legal and regulatory proceedings against us. TARGET CORPORATION 2023 Form 10-K 9 RISK FACTORS Table of Contents Index to Financial Statements Reputational harm can also occur indirectly through companies and others with whom we do business.
Removed
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.
Added
It may be difficult to address negative publicity across media channels, regardless of its accuracy or the reputability of its source, including as a result of fictitious media content (such as content produced by generative artificial intelligence or bad actors).
Removed
In addition, the impact on our business of the long-term effects of the COVID-19 pandemic, or other similar public health crises, will depend on numerous factors that we cannot accurately predict.
Added
We have recently experienced negative perceptions of our business, which have adversely affected consumer behavior, and we could experience similar occurrences in the future. In addition, stakeholder expectations regarding environmental, social, and governance matters continue to evolve and are not uniform.
Removed
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.
Added
Furthermore, our shareholders, guests, team members, and other stakeholders have evolving, varied, and sometimes conflicting expectations regarding many aspects of our business, including our operations, product and service offerings, and environmental, social, and governance matters.
Removed
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.
Added
Recently, our inability to meet some of those expectations has adversely affected our reputation, and the inability to meet all of those expectations in the future could adversely affect our reputation with some or all of our stakeholders.
Added
We have consumer-facing relationships with a variety of other companies, including Apple, CVS, Disney, Levi’s, Starbucks, and Ulta Beauty. In addition, we have relationships with third-party companies that sell and ship items directly to guests through our digital channels. We also have relationships with designers, celebrities, influencers, and other individuals, including for advertising campaigns and marketing programs.
Added
Our business depends on our ability to effectively manage our inventory. We have historically experienced loss of inventory (also called shrink) due to damage, theft (including from organized retail crime), and other causes.
Added
In addition, sustained high rates of inventory shrink at certain stores have contributed, and may continue to contribute, to the closure of certain stores and the impairment of long-term assets.
Added
Furthermore, remodels and new store projects have previously been, and may in the future be, delayed or cancelled based on changes in macroeconomic conditions, changes in expected project benefits, and other factors, which could result in the inefficient deployment of our capital and adversely affect our results of operations and financial condition.
Added
Conversely, overestimating replenishment capacity needs, changes in macroeconomic conditions, changes in expected project benefits, and other factors have resulted, and could in the future result, in delays or cancellations of supply chain infrastructure TARGET CORPORATION 2023 Form 10-K 10 RISK FACTORS Table of Contents Index to Financial Statements projects and the inefficient deployment of our capital.
Added
Any of these outcomes could adversely affect our results of operations and financial condition. In addition, we have undertaken an enterprise-wide initiative to simplify and gain efficiencies across our business, with a focus on reducing complexities and lowering costs.
Added
We cannot guarantee that we will realize all of the potential cost savings from this initiative and we may experience difficulties and delays in identifying and achieving such cost savings, which could adversely affect our results of operations and financial condition.
Added
A significant disruption to our technology systems and our failure to adequately maintain and update those systems could adversely affect our operations and negatively affect our guests. We rely extensively on technology systems throughout our business. We also rely on continued and unimpeded access to the Internet to use our technology systems.
Added
We also rely extensively on information systems throughout our business. We have programs in place to detect, contain, and respond to information security, cybersecurity, and data privacy incidents.
Added
However, we may be unable to anticipate security incidents or implement adequate preventive measures as cyber threats continue to evolve and cyberattacks become more sophisticated and frequent, including through the introduction of viruses and malware (such as ransomware) and the use of artificial intelligence by threat actors.
Added
Errors or malicious actions by our team members or contractors, faulty password management, and other vulnerabilities or irregularities could also overcome our security measures or those of third parties with whom we do business and result in a compromise or breach of our or their information systems.
Added
We are dependent on our vendors, independent contractors, and other third parties (including common carriers) to supply merchandise to our distribution centers, stores, and guests.
Added
In addition, we have consumer-facing relationships with a variety of other companies, including Apple, CVS, Disney, Levi’s, Starbucks, and Ulta Beauty. Any termination of, or adverse change in, our relationship with any of these companies could decrease our sales, increase our costs, and negatively impact our reputation and results of operations.
Added
TARGET CORPORATION 2023 Form 10-K 13 RISK FACTORS Table of Contents Index to Financial Statements We rely on a large, global, and changing workforce of team members, contractors, and temporary staffing. If we do not effectively manage our workforce, our labor costs and results of operations could be adversely affected.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
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.
Biggest changeProperties Stores as of February 3, 2024 Stores Retail Square Feet (in thousands) Stores as of February 3, 2024 Stores Retail Square Feet (in thousands) Alabama 23 3,153 Montana 7 777 Alaska 3 504 Nebraska 14 2,015 Arizona 46 6,080 Nevada 18 2,262 Arkansas 9 1,165 New Hampshire 10 1,236 California 316 37,482 New Jersey 51 6,333 Colorado 45 6,361 New Mexico 10 1,185 Connecticut 21 2,745 New York 104 11,061 Delaware 4 551 North Carolina 53 6,773 District of Columbia 5 342 North Dakota 4 594 Florida 128 17,329 Ohio 65 7,865 Georgia 51 6,827 Oklahoma 15 2,167 Hawaii 9 1,367 Oregon 19 2,240 Idaho 7 725 Pennsylvania 77 9,241 Illinois 101 12,283 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 156 21,448 Louisiana 16 2,195 Utah 16 2,080 Maine 6 741 Vermont 1 60 Maryland 40 5,055 Virginia 60 7,763 Massachusetts 50 5,559 Washington 38 4,376 Michigan 54 6,300 West Virginia 7 851 Minnesota 72 10,310 Wisconsin 38 4,614 Mississippi 6 743 Wyoming 3 257 Missouri 35 4,618 Total 1,956 245,939 Stores and Supply Chain Facilities as of February 3, 2024 Stores Supply Chain Facilities (a) Owned 1,532 38 Leased 264 20 Owned buildings on leased land 160 — Total 1,956 58 (a) Supply Chain Facilities includes distribution centers, sortation centers, and other facilities with a total of 61.5 million square feet.
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
For additional information on our properties, see the Capital Expenditures section in MD&A and Notes 11 and 18 to the Consolidated Financial Statements. TARGET CORPORATION 2023 Form 10-K 18 LEGAL PROCEEDINGS & MINE SAFETY DISCLOSURES Table of Contents Index to Financial Statements

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed1 unchanged
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).
Biggest changeTARGET CORPORATION 2023 Form 10-K 20 OTHER INFORMATION Table of Contents Index to Financial Statements Fiscal Years Ended February 2, 2019 February 1, 2020 January 30, 2021 January 29, 2022 January 28, 2023 February 3, 2024 Target $ 100.00 $ 160.56 $ 267.98 $ 326.39 $ 258.02 $ 229.98 S&P 500 Index 100.00 121.56 142.53 172.46 161.03 199.42 Current Peer Group 100.00 121.09 168.10 176.18 149.86 204.49 Previous Peer Group 100.00 121.17 168.11 176.09 149.62 204.41 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 previous 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.) (Previous Peer Group), and (iii) the new peer group consisting of the companies in the Previous Peer Group, plus BJ's Wholesale Club Holdings, Inc.
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.
(Current Peer Group). The Current 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 12, 2024, 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.
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.
Under the program, we have repurchased 23.8 million shares of common stock at an average price of $223.52, for a total investment of $5.3 billion. As of February 3, 2024, the dollar value of shares that may yet be purchased under the program is $9.7 billion.
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.
There were no Target common stock purchases made during the three months ended February 3, 2024 by Target or any "affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.
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 graph assumes the investment of $100 in Target common stock, the S&P 500 Index, and the Peer Group on February 2, 2019, and reinvestment of all dividends.
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.
As of March 6, 2024, there were 12,716 shareholders of record. Dividends declared per share for 2023, 2022, and 2021, 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.

Item 7. Management's Discussion & Analysis

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

74 edited+16 added−12 removed21 unchanged
Biggest changeDuring 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.
Biggest changeDuring 2023, 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 three new supply chain facilities to support our growth and commitment to fast delivery times, while helping our teams work more efficiently and managing our shipping costs; • Fulfilled over 60 percent of our digital sales through our same-day fulfillment options: Order Pickup, Drive Up, and delivery via Shipt; • Rolled out Drive Up with Starbucks and Returns with Drive Up nationwide; • Continued to emphasize newness across our assortment and continued to introduce new owned and exclusive brands and designer collaborations, including our first kitchen owned brand Figmint, collections from Kendra Scott, a collaboration with Rowing Blazers, and Stanley drinkware in exclusive colors; • Completed 65 full store remodels and continued to invest in other stores, including 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 21 new stores in a variety of sizes with new design elements that reflect the local community; • Invested in team member wages and benefits; and • Offered compelling promotions, attractive every day price points on key items, and free and easy payment and fulfillment options.
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.
The principal forward-looking statements in this report include statements regarding: our future financial and operational performance, our strategy for growth, 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.
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.
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.
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.
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.
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.
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 2023 compared with $4.0 billion in 2022.
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.
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.
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.
TARGET CORPORATION 2023 Form 10-K 29 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.
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.
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.
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 .
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 28 .
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.
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.
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.
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 $36 million.
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.
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 2022, as compared to 2021, is included in Part II, Item 7, MD&A to our Annual Report on Form 10-K for the year ended January 28, 2023.
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).
The following items require significant estimation or judgment: TARGET CORPORATION 2023 Form 10-K 32 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).
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.
TARGET CORPORATION 2023 Form 10-K 28 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.
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.
Additionally, as of February 3, 2024, 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.
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.
TARGET CORPORATION 2023 Form 10-K 31 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.
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.
The Gross Margin Rate analysis on page 26 and Inventory section on page 30 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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Overview We continue to make strategic investments to support our durable operating and financial model that further differentiates Target and is designed to drive sustainable sales and profit growth.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Overview We continue to make strategic investments to support our durable operating and financial model that further differentiates Target and is designed to drive sustainable sales and profit growth over the long term.
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.
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 2023 expected long-term rate of return on plan assets of 6.50 percent was determined by the portfolio composition, historical long-term investment performance, and current market conditions.
(d) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.
(e) Average based on the invested capital at the end of the current period and the invested capital at the end of the comparable prior period.
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.
As of February 3, 2024, 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.
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.
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.
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.
In addition to these cash investments, we entered into leases related to new stores in 2023, 2022, and 2021 with total future minimum lease payments of $122 million, $319 million, and $401 million, respectively, and new leases related to our supply chain with total future minimum lease payments of $21 million, $1.6 billion, and $226 million, respectively.
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.
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.
We believe that our ability to successfully differentiate our guests’ shopping experience through a careful combination of merchandise assortment, price, convenience, guest experience, and other factors will over the long-term drive both increasing shopping frequency (number of transactions, or "traffic") and the amount spent each visit (average transaction amount).
We believe that our ability to successfully differentiate our guests’ shopping experience through a careful combination of merchandise assortment, price, convenience, guest experience, and other factors will over the long-term drive both increasing shopping frequency (number of transactions, or "traffic") and the amount spent each visit (average transaction amount). The extra week in 2023 contributed $1,715 million to total sales.
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.
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 We did not repurchase any shares during 2023. During 2022 we returned $2.6 billion to shareholders through share repurchase.
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.
For the trailing twelve months ended February 3, 2024, and January 28, 2023, includes tax effect of $1.3 billion and $0.7 billion, respectively, related to EBIT, and $26 million and $17 million, respectively, related to operating lease interest. (d) Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities and Noncurrent Operating Lease Liabilities, respectively.
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.
Our year-end cash and cash equivalents balance increased to $3.8 billion from $2.2 billion in 2022. Our cash and cash equivalents balance includes short-term investments of $2.9 billion and $1.3 billion as of February 3, 2024, and January 28, 2023, respectively. Our investment policy is designed to preserve principal and liquidity of our short-term investments.
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.
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.
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 .
See Business Environment below for additional information. Sales were $105.8 billion for 2023, a decrease of $1.8 billion, or 1.7 percent, from the prior year. Operating cash flow was $8.6 billion for 2023, an increase of $4.6 billion, or 114.6 percent, from $4.0 billion for 2022. The drivers of the operating cash flow increase are described on page 30 .
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.
TARGET CORPORATION 2023 Form 10-K 22 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents FINANCIAL SUMMARY Index to Financial Statements Earnings Per Share Percent Change 2023 (a) 2022 2021 2023/2022 2022/2021 GAAP diluted earnings per share $ 8.94 $ 5.98 $ 14.10 49.4 % (57.6) % Adjustments — 0.03 (0.53) Adjusted diluted earnings per share $ 8.94 $ 6.02 $ 13.56 48.6 % (55.7) % 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.
Reconciliation of Non-GAAP Adjusted EPS 2023 (a) 2022 2021 (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 $ 8.94 $ 5.98 $ 14.10 Adjustments Gain on Dermstore Sale $ — $ — $ — $ — $ — $ — $ (335) $ (269) $ (0.55) Other (b) — — — 20 15 0.03 9 7 0.01 Adjusted diluted earnings per share $ 8.94 $ 6.02 $ 13.56 Note: Amounts may not foot due to rounding.
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.
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.
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.
TARGET CORPORATION 2023 Form 10-K 30 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 in 2023 reflect investments in our strategic initiatives, including investments in both stores and in our supply chain.
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.
Dividends We paid dividends totaling $2.0 billion ($4.36 per share) in 2023 and $1.8 billion ($3.96 per share) in 2022, a per share increase of 10.1 percent. We declared dividends totaling $2.1 billion ($4.38 per share) in 2023 and $1.9 billion ($4.14 per share) in 2022, a per share increase of 5.8 percent.
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.
Comparable Sales 2023 2022 2021 Comparable sales change (3.7) % 2.2 % 12.7 % Drivers of change in comparable sales Number of transactions (traffic) (2.4) 2.1 12.3 Average transaction amount (1.4) 0.1 0.4 Comparable Sales by Channel 2023 2022 2021 Stores originated comparable sales change (3.5) % 2.4 % 11.0 % Digitally originated comparable sales change (4.8) 1.5 20.8 Sales by Channel 2023 2022 2021 Stores originated 81.7 % 81.4 % 81.1 % Digitally originated 18.3 18.6 18.9 Total 100 % 100 % 100 % Sales by Fulfillment Channel 2023 2022 2021 Stores 97.4 % 96.7 % 96.4 % Other 2.6 3.3 3.6 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.
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.
Selling, General and Administrative (SG&A) Expense Rate Our SG&A expense rate was 20.1 percent in 2023, compared with 18.9 percent in 2022, reflecting the net impact of cost increases across our business, including investments in team member pay and benefits, and the deleveraging impact of lower sales in 2023 compared to the prior year.
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.
Financial Summary Fiscal 2023 (a 53-week year) included the following notable items: • GAAP and Adjusted diluted earnings per share were $8.94. • Total revenue decreased 1.6 percent, reflecting a total sales decline of 1.7 percent and a 5.1 percent increase in other revenue. • Comparable sales decreased 3.7 percent, driven by a 2.4 percent decrease in traffic and a 1.4 percent decrease in average transaction amount. ◦ Comparable store originated sales declined 3.5 percent. ◦ Comparable digitally originated sales decreased 4.8 percent. • Operating income of $5.7 billion was 48.3 percent higher than the comparable prior-year period.
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.
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.
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.
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.
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.
TARGET CORPORATION 2023 Form 10-K 34 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.
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.
TARGET CORPORATION 2023 Form 10-K 23 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) 2023 (a) 2022 2021 2023/2022 2022/2021 Sales $ 105,803 $ 107,588 $ 104,611 (1.7) % 2.8 % Other revenue 1,609 1,532 1,394 5.1 9.8 Total revenue 107,412 109,120 106,005 (1.6) 2.9 Cost of sales 77,736 82,229 74,963 (5.5) 9.7 SG&A expenses 21,554 20,658 19,752 4.3 4.6 Depreciation and amortization (exclusive of depreciation included in cost of sales) 2,415 2,385 2,344 1.3 1.8 Operating income $ 5,707 $ 3,848 $ 8,946 48.3 % (57.0) % (a) 2023 consisted of 53 weeks compared with 52 weeks in 2022 and 2021.
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.
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.
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.
We periodically reassess these probabilities and record any changes in the financial statements as appropriate. Gross uncertain tax positions, including interest and penalties, were $366 million and $241 million as of February 3, 2024, and January 28, 2023, respectively. We believe the resolution of these matters will not materially affect our consolidated financial statements.
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.
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 and is adjusted to reflect results of actual physical inventory counts. We generally perform counts at each location annually, with counts taking place throughout the year.
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.
TARGET CORPORATION 2023 Form 10-K 26 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS & OTHER PERFORMANCE FACTORS Index to Financial Statements Store Data Change in Number of Stores 2023 2022 Beginning store count 1,948 1,926 Opened 21 23 Closed (13) (1) Ending store count 1,956 1,948 Number of Stores and Retail Square Feet Number of Stores Retail Square Feet (a) February 3, 2024 January 28, 2023 February 3, 2024 January 28, 2023 170,000 or more sq. ft. 273 274 48,824 48,985 50,000 to 169,999 sq. ft. 1,542 1,527 192,908 191,241 49,999 or less sq. ft. 141 147 4,207 4,358 Total 1,956 1,948 245,939 244,584 (a) In thousands; reflects total square feet less office, distribution center, and vacant space.
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.
EBIT and EBITDA Percent Change (dollars in millions) 2023 (a) 2022 2021 2023/2022 2022/2021 Net earnings $ 4,138 $ 2,780 $ 6,946 48.8 % (60.0) % + Provision for income taxes 1,159 638 1,961 81.7 (67.5) + Net interest expense 502 478 421 5.0 13.4 EBIT $ 5,799 $ 3,896 $ 9,328 48.8 % (58.2) % + Total depreciation and amortization (b) 2,801 2,700 2,642 3.8 2.2 EBITDA $ 8,600 $ 6,596 $ 11,970 30.4 % (44.9) % (a) 2023 consisted of 53 weeks compared with 52 weeks in 2022 and 2021.
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.
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.
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.
For 2023, operating cash flows increased as a result of higher net earnings and an improvement in working capital, including lower inventory levels, compared with 2022. Inventory Year-end inventory was $11.9 billion, compared with $13.5 billion in 2022.
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). Additionally, we offer a branded proprietary Target Debit Card and RedCard Reloadable Account. Collectively, we refer to these products as RedCards™.
TARGET CORPORATION 2023 Form 10-K 25 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF OPERATIONS Index to Financial Statements 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). Additionally, we offer a branded proprietary Target Debit Card and RedCard Reloadable Account.
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 .
For the trailing twelve months ended February 3, 2024, after-tax ROIC was 16.1 percent, compared with 12.6 percent for the trailing twelve months ended January 28, 2023. The calculation of ROIC is provided on page 29 .
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.
We expect capital expenditures in 2024 of approximately $3.0 billion to $4.0 billion to support new stores, remodels and other existing store investments, and supply chain projects. We expect to open about 20 new stores and add additional Ulta Beauty shop-in-shops during 2024. We also expect to continue to invest in new store and supply chain 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.
After-Tax Return on Invested Capital (dollars in millions) Trailing Twelve Months Numerator February 3, 2024 (a) January 28, 2023 Operating income $ 5,707 $ 3,848 + Net other income 92 48 EBIT 5,799 3,896 + Operating lease interest (b) 120 93 - Income taxes (c) 1,295 744 Net operating profit after taxes $ 4,624 $ 3,245 Denominator February 3, 2024 January 28, 2023 January 29, 2022 Current portion of long-term debt and other borrowings $ 1,116 $ 130 $ 171 + Noncurrent portion of long-term debt 14,922 16,009 13,549 + Shareholders' investment 13,432 11,232 12,827 + Operating lease liabilities (d) 3,608 2,934 2,747 - Cash and cash equivalents 3,805 2,229 5,911 Invested capital $ 29,273 $ 28,076 $ 23,383 Average invested capital (e) $ 28,674 $ 25,729 After-tax return on invested capital 16.1 % 12.6 % (a) 2023 consisted of 53 weeks compared with 52 weeks in the prior-year period.
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.
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.
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.
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 former team members.
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.
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.
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.
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. We have the ability to obtain short-term financing from time to time under our commercial paper program and credit facilities.
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.
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.
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 October 2023, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2024 and terminated our prior 364-day credit facility. We also exercised our option to extend our existing five-year unsecured revolving credit facility, which has a maximum committed capacity of $3.0 billion and now expires in October 2028.
Provision for Income Taxes Our 2022 effective income tax rate was 18.7 percent compared with 22.0 percent in 2021. The decrease reflects lower pretax earnings in the current year and the impacts of discrete tax benefits.
Provision for Income Taxes Our 2023 effective income tax rate was 21.9 percent compared with 18.7 percent in 2022. The increase primarily reflects higher pretax earnings in the current year, as well as lower discrete tax benefits related to share-based compensation compared to the prior year. Note 19 to the Financial Statements provides additional information.
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.
Other Performance Factors Net Interest Expense Net interest expense was $502 million for 2023, compared with $478 million for 2022. The increase in net interest expense was primarily due to higher average debt levels and the impact of higher floating interest rates on our interest rate swaps in 2023 compared with 2022, partially offset by an increase in interest income.
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).
Business Environment In 2023, we experienced sales declines across our business, primarily in each of our Discretionary categories (Apparel & Accessories, Hardlines, and Home Furnishings & Decor) partially offset by growth in Frequency categories (Beauty & Household Essentials and Food & Beverage). This trend of decreased Discretionary category sales began in 2022.
For the years ended January 28, 2023, January 29, 2022, and January 30, 2021, total RedCard Penetration was 19.8 percent, 20.5 percent, and 21.5 percent, respectively.
For the years ended February 3, 2024, January 28, 2023, and January 29, 2022, total RedCard Penetration was 18.6 percent, 19.8 percent, and 20.5 percent, respectively. See the Customer Loyalty Programs section within Item 1. Business on page 5 for information about the rebranding of RedCards.
Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A Expenses. Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors.
(b) Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within SG&A Expenses.
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.
Vendor income receivable was $513 million and $526 million as of February 3, 2024, and January 28, 2023, respectively. Vendor income is described further in Note 5 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.
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.
We completed 65 full-store remodels during 2023 and opened approximately 140 Ulta Beauty shop-in-shops. We have completed over 1,100 full-store remodels since the launch of the current program in 2017.
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. We believe the risk of inventory obsolescence is largely mitigated because our inventory typically turns in less than three months.
A 10% increase in our year-end inventory shrink reserve would increase cost of sales by approximately $150 million. Historically, our actual physical inventory count results have shown our estimates to be reasonably accurate. 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.
(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.
Operating lease interest is added back to operating income in the ROIC calculation to control for differences in capital structure between us and our competitors. (c) Calculated using the effective tax rates, which were 21.9 percent and 18.7 percent for the trailing twelve months ended February 3, 2024, and January 28, 2023, respectively.
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.
TARGET CORPORATION 2023 Form 10-K 24 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.
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.
For example, a 5 percent increase or decrease in average claim costs would have impacted our self-insurance expense by $33 million in 2023. 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.
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.
TARGET CORPORATION 2023 Form 10-K 27 MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Financial Statements Reconciliation of Non-GAAP Financial Measures to GAAP Measures To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS). This metric excludes certain items presented below.
We believe 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.
Our workers' compensation and general liability accrual was $650 million and $560 million as of February 3, 2024, and January 28, 2023, 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.
This 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 increase reflected the net impact of • merchandising benefit, including ◦ lower freight costs; and ◦ lower clearance and promotional markdown rates and other costs compared with the prior-year, which included the impact of inventory impairments and other actions; • lower digital fulfillment and supply chain costs due to ◦ a decrease in digital volume; ◦ an increased mix of digital sales fulfilled through lower-cost same-day services; and ◦ lower inventory levels; and • higher inventory shrink.
Historically, adjustments to our vendor income receivable have not been material. Vendor income receivable was $526 million and $518 million as of January 28, 2023, and January 29, 2022, respectively. Vendor income is described further in Note 5 to the Financial Statements.
We believe the risk of inventory obsolescence is largely mitigated because our inventory typically turns in less than three months. Inventory was $11.9 billion and $13.5 billion as of February 3, 2024, and January 28, 2023, respectively, and is further described in Note 9 to the Financial Statements.
Removed
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.
Added
(a) 2023 consisted of 53 weeks compared with 52 weeks in 2022 and 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.
Removed
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.
Added
In response, during 2022, we took actions and employed strategies to align inventories with sales trends. These actions, as well as improvements in the supply chain, have resulted in decreased inventory in 2023 compared with 2022, as well as a reduction in costs related to managing elevated inventory levels.
Removed
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.
Added
In 2023, we experienced a significant decrease in freight costs due to a decline in freight rates compared to 2022. We have also experienced lower digital fulfillment costs due to a decrease in digital sales and an increased mix of digital sales fulfilled through lower-cost same-day services.

… 22 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−1 removed1 unchanged
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.
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 February 3, 2024, 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 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.
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 16 and 17 to the Financial Statements.
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.
Based on our balance sheet position as of February 3, 2024, the annualized effect of a 1 percentage point increase in floating interest rates on our floating rate short-term investments, net of our floating rate debt obligations, would increase our earnings before income taxes by $5 million.
TARGET CORPORATION 2022 Form 10-K 32 FINANCIAL STATEMENTS Table of Contents INDEX Index to Financial Statements
TARGET CORPORATION 2023 Form 10-K 35 FINANCIAL STATEMENTS Table of Contents INDEX Index to Financial Statements
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).
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of February 3, 2024, 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 Secured Overnight Financing Rate (SOFR).
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.
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 February 3, 2024, our floating rate short-term investments exceeded our floating rate debt by approximately $450 million.
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.
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.
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.
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 $36 million.
Removed
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.
Added
To protect against declines in interest rates, we hold high-quality, long-duration bonds and derivative instruments in our pension plan trust. As of February 3, 2024, we had hedged 70 percent of the interest rate exposure of our plan liabilities.

Other TGT 10-K year-over-year comparisons