Target's Q1 2024 10-Q Filed

Ticker: TGT · Form: 10-Q · Filed: 2024-05-31T00:00:00.000Z

Sentiment: neutral

Topics: 10-Q, earnings, financials

TL;DR

Target's Q1 2024 10-Q is in. Financials and biz updates for the period ending May 4.

AI Summary

Target Corporation filed its 10-Q for the period ending May 4, 2024. The filing covers the first quarter of fiscal year 2024, detailing financial performance and operational updates. Key financial data and business segments are presented for the reporting period.

Why It Matters

This filing provides investors with a detailed look at Target's financial health and operational performance during the first quarter of 2024, influencing investment decisions.

Risk Assessment

Risk Level: low — This is a standard quarterly financial filing (10-Q) and does not inherently present new or elevated risks.

Key Players & Entities

FAQ

What is the reporting period for this 10-Q filing?

The conforming period of report is 20240504, meaning the period ending May 4, 2024.

What is Target Corporation's Standard Industrial Classification (SIC) code?

Target Corporation's SIC code is 5331, categorized under RETAIL-VARIETY STORES.

When was Target Corporation previously known as Dayton Hudson Corp?

The date of the name change from Dayton Hudson Corp to Target Corporation was 19920703.

What is the SEC file number for Target Corporation?

The SEC file number for Target Corporation is 001-06049.

What is the fiscal year end for Target Corporation?

Target Corporation's fiscal year ends on 0201.

Filing Stats: 4,761 words · 19 min read · ~16 pages · Grade level 12.5 · Accepted 2024-05-31 11:50:17

Key Financial Figures

Filing Documents

Financial Statements (unaudited)

Financial Statements (unaudited) Consolidated Statements of Operations 1 Consolidated Statements of Comprehensive Income 2 Consolidated Statements of Financial Position 3 Consolidated Statements of Cash Flows 4 Consolidated Statements of Shareholders' Investment 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 22 Item 4.

Controls and Procedures

Controls and Procedures 22 PART II OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 23 Item 1A.

Risk Factors

Risk Factors 23 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23 Item 3. Defaults Upon Senior Securities 23 Item 4. Mine Safety Disclosures 23 Item 5. Other Information 23 Item 6. Exhibits 24 Signature s 25

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents Index to Notes

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Consolidated Statements of Operations Three Months Ended (millions, except per share data) (unaudited) May 4, 2024 April 29, 2023 Sales $ 24,143 $ 24,948 Other revenue 388 374 Total revenue 24,531 25,322 Cost of sales 17,449 18,386 Selling, general and administrative expenses 5,168 5,025 Depreciation and amortization (exclusive of depreciation included in cost of sales) 618 583 Operating income 1,296 1,328 Net interest expense 106 147 Net other income ( 29 ) ( 23 ) Earnings before income taxes 1,219 1,204 Provision for income taxes 277 254 Net earnings $ 942 $ 950 Basic earnings per share $ 2.04 $ 2.06 Diluted earnings per share $ 2.03 $ 2.05 Weighted average common shares outstanding Basic 462.2 460.9 Diluted 463.9 462.9 Antidilutive shares 1.6 1.2 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q1 2024 Form 10-Q 1

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Comprehensive Income Three Months Ended (millions) (unaudited) May 4, 2024 April 29, 2023 Net earnings $ 942 $ 950 Other comprehensive (loss) / income, net of tax Pension benefit liabilities — 2 Cash flow hedges and currency translation adjustment ( 5 ) ( 5 ) Other comprehensive loss ( 5 ) ( 3 ) Comprehensive income $ 937 $ 947 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q1 2024 Form 10-Q 2

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Financial Position (millions, except footnotes) (unaudited) May 4, 2024 February 3, 2024 April 29, 2023 Assets Cash and cash equivalents $ 3,604 $ 3,805 $ 1,321 Inventory 11,730 11,886 12,616 Other current assets 1,744 1,807 1,836 Total current assets 17,078 17,498 15,773 Property and equipment Land 6,544 6,547 6,493 Buildings and improvements 37,587 37,066 35,198 Fixtures and equipment 8,341 8,765 7,473 Computer hardware and software 3,265 3,428 3,067 Construction-in-progress 1,538 1,703 2,822 Accumulated depreciation ( 24,161 ) ( 24,413 ) ( 22,657 ) Property and equipment, net 33,114 33,096 32,396 Operating lease assets 3,486 3,362 2,640 Other noncurrent assets 1,439 1,400 1,341 Total assets $ 55,117 $ 55,356 $ 52,150 Liabilities and shareholders' investment Accounts payable $ 11,561 $ 12,098 $ 11,935 Accrued and other current liabilities 5,684 6,090 5,732 Current portion of long-term debt and other borrowings 2,614 1,116 200 Total current liabilities 19,859 19,304 17,867 Long-term debt and other borrowings 13,487 14,922 16,010 Noncurrent operating lease liabilities 3,392 3,279 2,621 Deferred income taxes 2,543 2,480 2,289 Other noncurrent liabilities 1,996 1,939 1,758 Total noncurrent liabilities 21,418 22,620 22,678 Shareholders' investment Common stock 39 38 38 Additional paid-in capital 6,747 6,761 6,541 Retained earnings 7,519 7,093 5,448 Accumulated other comprehensive loss ( 465 ) ( 460 ) ( 422 ) Total shareholders' investment 13,840 13,432 11,605 Total liabilities and shareholders' investment $ 55,117 $ 55,356 $ 52,150 Common Stock Authorized 6,000,000,000 shares, $ 0.0833 par value; 462,635,539 , 461,675,441 , and 461,552,843 shares issued and outstanding as of May 4, 2024, February 3, 2024, and April 29, 2023, respectively. Preferred Stock Authorized 5,000,000 shares, $ 0.01 par value; no shares were issued or outstanding during any

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Cash Flows Three Months Ended (millions) (unaudited) May 4, 2024 April 29, 2023 Operating activities Net earnings $ 942 $ 950 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 718 667 Share-based compensation expense 72 43 Deferred income taxes 64 95 Noncash (gains) / losses and other, net ( 31 ) ( 11 ) Changes in operating accounts: Inventory 156 883 Other assets 43 34 Accounts payable ( 524 ) ( 1,463 ) Accrued and other liabilities ( 339 ) 67 Cash provided by operating activities 1,101 1,265 Investing activities Expenditures for property and equipment ( 674 ) ( 1,605 ) Proceeds from disposal of property and equipment 1 2 Other investments 2 1 Cash required for investing activities ( 671 ) ( 1,602 ) Financing activities Change in commercial paper, net — 90 Reductions of long-term debt ( 32 ) ( 46 ) Dividends paid ( 508 ) ( 497 ) Shares withheld for taxes on share-based compensation ( 91 ) ( 118 ) Cash required for financing activities ( 631 ) ( 571 ) Net decrease in cash and cash equivalents ( 201 ) ( 908 ) Cash and cash equivalents at beginning of period 3,805 2,229 Cash and cash equivalents at end of period $ 3,604 $ 1,321 Supplemental information Leased assets obtained in exchange for new finance lease liabilities $ 122 $ 15 Leased assets obtained in exchange for new operating lease liabilities 214 54 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q1 2024 Form 10-Q 4

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Shareholders' Investment Common Stock Additional Accumulated Other Stock Par Paid-in Retained Comprehensive (millions) (unaudited) Shares Value Capital Earnings (Loss) / Income Total January 28, 2023 460.3 $ 38 $ 6,608 $ 5,005 $ ( 419 ) $ 11,232 Net earnings — — — 950 — 950 Other comprehensive loss — — — — ( 3 ) ( 3 ) Dividends declared — — — ( 507 ) — ( 507 ) Stock options and awards 1.3 — ( 67 ) — — ( 67 ) April 29, 2023 461.6 $ 38 $ 6,541 $ 5,448 $ ( 422 ) $ 11,605 Net earnings — — — 835 — 835 Other comprehensive loss — — — — ( 3 ) ( 3 ) Dividends declared — — — ( 516 ) — ( 516 ) Stock options and awards — — 69 — — 69 July 29, 2023 461.6 $ 38 $ 6,610 $ 5,767 $ ( 425 ) $ 11,990 Net earnings — — — 971 — 971 Other comprehensive loss — — — — ( 5 ) ( 5 ) Dividends declared — — — ( 513 ) — ( 513 ) Stock options and awards 0.1 — 71 — — 71 October 28, 2023 461.7 $ 38 $ 6,681 $ 6,225 $ ( 430 ) $ 12,514 Net earnings — — — 1,382 — 1,382 Other comprehensive loss — — — — ( 30 ) ( 30 ) Dividends declared — — — ( 514 ) — ( 514 ) Stock options and awards — — 80 — — 80 February 3, 2024 461.7 $ 38 $ 6,761 $ 7,093 $ ( 460 ) $ 13,432 TARGET CORPORATION Q1 2024 Form 10-Q 5

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Shareholders' Investment Common Stock Additional Accumulated Other Stock Par Paid-in Retained Comprehensive (millions) (unaudited) Shares Value Capital Earnings (Loss) / Income Total February 3, 2024 461.7 $ 38 $ 6,761 $ 7,093 $ ( 460 ) $ 13,432 Net earnings — — — 942 — 942 Other comprehensive loss — — — — ( 5 ) ( 5 ) Dividends declared — — — ( 516 ) — ( 516 ) Stock options and awards 0.9 1 ( 14 ) — — ( 13 ) May 4, 2024 462.6 $ 39 $ 6,747 $ 7,519 $ ( 465 ) $ 13,840 We declared $ 1.10 and $ 1.08 dividends per share for the three months ended May 4, 2024, and April 29, 2023, respectively, and $ 4.38 per share for the fiscal year ended February 3, 2024. See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q1 2024 Form 10-Q 6

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents INDEX Index to Notes INDEX TO NOTES

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8 Note 1 Accounting Policies 8 Note 2 Revenue 9 Note 3 Fair Value Measurements 10 Note 4 Supplier Finance Programs 10 Note 5 Commercial Paper and Long-Term Debt 11 Note 6 Derivative Financial Instruments 11 Note 7 Pension Benefits 11 Note 8 Accumulated Other Comprehensive Income (Loss) 12 TARGET CORPORATION Q1 2024 Form 10-Q 7

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 1. Accounting Policies These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (U.S. GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in our most recent Form 10-K. We use the same accounting policies in preparing quarterly and annual financial statements. We operate as a single segment that is designed to enable guests to purchase products seamlessly in stores or through our digital channels. Nearly all of our revenues are generated in the U.S. The vast majority of our long-lived assets are located within the U.S. Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year. TARGET CORPORATION Q1 2024 Form 10-Q 8

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes 2. Revenue Merchandise sales represent the vast majority of our revenues. We also earn revenues from a variety of other sources, most notably credit card profit-sharing income from our arrangement with TD Bank Group (TD). Revenue Three Months Ended (millions) May 4, 2024 April 29, 2023 Apparel & accessories (a) $ 3,897 $ 3,967 Beauty (b) 3,119 3,016 Food & beverage (c) 5,853 5,997 Hardlines (d) 3,160 3,391 Home furnishings & dcor (e) 3,519 3,855 Household essentials (f) 4,549 4,666 Other 46 56 Sales 24,143 24,948 Credit card profit sharing 142 174 Other 246 200 Other revenue 388 374 Total revenue $ 24,531 $ 25,322 (a) Includes apparel for women, men, young adults, kids, toddlers, and babies, as well as jewelry, accessories, and shoes. (b) Includes skin and bath care, cosmetics, hair care, oral care, deodorant, and shaving products. (c) Includes dry and perishable grocery, including snacks, candy, beverages, deli, bakery, meat, produce and food service (primarily Starbucks) in our stores. (d) Includes electronics, including video games and consoles, toys, sporting goods, entertainment, and luggage. (e) Includes bed and bath, home dcor, school/office supplies, storage, small appliances, kitchenware, greeting cards, party supplies, furniture, lighting, home improvement, and seasonal merchandise. (f) Includes household cleaning, paper products, over-the-counter healthcare, vitamins and supplements, baby gear, and pet supplies . Merchandise sales — We record almost all retail store revenues at the point of sale. Digitally originated sales may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Sales are recognized net of expected returns, which we estimate using historical return patterns and our expectation of future returns. As of May 4, 2024, February 3, 2024, and April 29, 2023, the accrual for estimated returns was $ 1

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes Other Revenue Credit card profit sharing — We receive payments under a credit card program agreement with TD. Under the agreement, we receive a percentage of the profits generated by the Target Credit Card and Target MasterCard receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance. Other — Includes advertising revenue, commissions earned on third-party sales through Target.com, Shipt membership and service revenues, rental income, and other miscellaneous revenues. 3. Fair Value Measurements Fair value measurements are reported in one of three levels reflecting the significant inputs used to determine fair value. Financial Instruments Measured On a Recurring Basis Fair Value (millions) Classification Measurement Level May 4, 2024 February 3, 2024 April 29, 2023 Assets Short-term investments Cash and Cash Equivalents Level 1 $ 2,726 $ 2,897 $ 408 Prepaid forward contracts Other Current Assets Level 1 27 25 25 Interest rate swaps Other Noncurrent Assets Level 2 — — 7 Liabilities Interest rate swaps Other Current Liabilities Level 2 3 3 — Interest rate swaps Other Noncurrent Liabilities Level 2 154 123 72 Significant Financial Instruments Not Measured at Fair Value (a) (millions) May 4, 2024 February 3, 2024 April 29, 2023 Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value Long-term debt, including current portion (b) $ 14,155 $ 13,123 $ 14,151 $ 13,467 $ 14,144 $ 13,672 (a) The carrying amounts of certain other current assets, commercial paper, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature. (b) The fair value of debt is generally measured using a discounted cash flow analysis based on

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes 5. Commercial Paper and Long-Term Debt We obtain short-term financing from time to time under our commercial paper program. There was no commercial paper outstanding at any time during the three months ended May 4, 2024, For the three months ended April 29, 2023, the maximum amount outstanding was $ 90 million, and the average daily amount outstanding was $ 2 million, at a weighted average annual interest rate of 4.8 percent. As of April 29, 2023, $ 90 million was outstanding and is classified within Current Portion of Long-Term Debt and Other Borrowings on our Consolidated Statements of Financial Position. 6. Derivative Financial Instruments Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 3 to the Consolidated Financial Statements provides the fair value and classification of these instruments. We were party to interest rate swaps with notional amounts totaling $ 2.45 billion as of May 4, 2024, February 3, 2024, and April 29, 2023. We pay a floating rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during the three months ended May 4, 2024 and April 29, 2023. Effect of Hedges on Debt (millions) May 4, 2024 February 3, 2024 April 29, 2023 Long-term debt and other borrowings Carrying amount of hedged debt $ 2,285 $ 2,316 $ 2,376 Cumulative hedging adjustments, included in carrying amount ( 157 ) ( 126 ) ( 65 ) Effect of Hedges on Net Interest Expense Three Months Ended (millions) May 4, 2024 April 29, 2023 Gain (loss) on fair value hedges recognized in Net Interest Expense Interest rate swaps designated as fair value hedges $ ( 31 ) $ 9 Hedged debt 31 ( 9 ) Ga

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes 8. Accumulated Other Comprehensive Income (Loss) Change in Accumulated Other Comprehensive Income (Loss) Cash Flow Hedges Currency Translation Adjustment Pension Total (millions) February 3, 2024 $ 283 $ ( 24 ) $ ( 719 ) $ ( 460 ) Amounts reclassified from AOCI, net of tax ( 5 ) — — ( 5 ) May 4, 2024 $ 278 $ ( 24 ) $ ( 719 ) $ ( 465 ) TARGET CORPORATION Q1 2024 Form 10-Q 12

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Summary First quarter 2024 included the following notable items: GAAP and adjusted diluted earnings per share were $2.03. Total revenue was $24.5 billion, a decrease of 3.1 percent from the comparable prior-year period, reflecting a total sales decrease of 3.2 percent and a 3.9 percent increase in other revenue. Comparable sales decreased 3.7 percent, reflecting a 1.9 percent decrease in both traffic and average transaction amount. Comparable stores-originated sales declined 4.8 percent. Comparable digitally-originated sales increased 1.4 percent. Operating income of $1.3 billion was 2.4 percent lower than the comparable prior-year period. Cash flow provided by operating activities was $1.1 billion for the three months ended May 4, 2024, compared with $1.3 billion for the three months ended April 29, 2023. The drivers of the operating cash flow decrease are described on page 20 . Earnings Per Share Three Months Ended May 4, 2024 April 29, 2023 Change GAAP and adjusted diluted earnings per share $ 2.03 $ 2.05 (1.0) % Note: Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items when applicable. However, there are no adjustments in either period presented. 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 provid ed on page 18 . We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital allocation effectiveness over time. For the trailing twelve months ended May 4, 2024, after-tax ROIC was 15.4 percent , compared with 11.4 percent for the trailing twelve months ended April 29, 2023. The calculation of ROIC is provided on page 19 . TARGET CORPORATION Q1 2024 Form 10-Q 13

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF RESULTS OF OPERATIONS Index to Notes Analysis of Results of Operations Summary of Operating Income Three Months Ended (dollars in millions) May 4, 2024 April 29, 2023 Change Sales $ 24,143 $ 24,948 (3.2) % Other revenue 388 374 3.9 Total revenue 24,531 25,322 (3.1) Cost of sales 17,449 18,386 (5.1) SG&A expenses 5,168 5,025 2.8 Depreciation and amortization (exclusive of depreciation included in cost of sales) 618 583 6.2 Operating income $ 1,296 $ 1,328 (2.4) % Rate Analysis Three Months Ended May 4, 2024 April 29, 2023 Gross margin rate 27.7 % 26.3 % SG&A expense rate 21.1 19.8 Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales) 2.5 2.3 Operating income margin rate 5.3 5.2 Note: Gross margin rate is calculated as gross margin (sales less cost of sales) divided by sales. All other rates are calculated by dividing the applicable amount by total revenue. Sales Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage. We use comparable sales to evaluate the performance of our stores and digital channel sales by measuring the change in sales for a period over the comparable prior-year period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months, digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies. Digitally originated sales include all sales initiated through mobile applications and our websites. Our stores fulfill the majority of digitally originated sales, including shipment from stores to guests, store Order Pickup or Drive Up, and delivery via Shipt. Digitally

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF RESULTS OF OPERATIONS Index to Notes Comparable Sales by Channel Three Months Ended May 4, 2024 April 29, 2023 Stores originated comparable sales change (4.8) % 0.7 % Digitally originated comparable sales change 1.4 (3.4) Sales by Channel Three Months Ended May 4, 2024 April 29, 2023 Stores originated 81.7 % 82.5 % Digitally originated 18.3 17.5 Total 100 % 100 % Sales by Fulfillment Channel Three Months Ended May 4, 2024 April 29, 2023 Stores 97.7 % 97.2 % Other 2.3 2.8 Total 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. Sales by Product Category Three Months Ended May 4, 2024 April 29, 2023 Apparel & accessories 16 % 16 % Beauty 13 12 Food & beverage 24 24 Hardlines 13 14 Home furnishings & dcor 15 15 Household essentials 19 19 Total 100 % 100 % Note 2 to the Financial Statements provides additional product category sales information. The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix and the transfer of sales to new stores, makes further analysis of sales metrics infeasible. We monitor the percentage of purchases that are paid for using Target Circle Cards (Target Circle Card Penetration) because our internal analysis has indicated that a meaningful portion of the incremental purchases on Target Circle Cards are also incremental sales for Target. Target Circle Cards were formerly branded as RedCards and their sales penetration was referred to as RedCard Penetration. Guests receive a 5 percent discount on virtually all purchases when they use a Target Circle Card at Target. For the three months ended May 4, 2024 and April 29, 2023, total Target Circle Card Penetration was 18.0 percent and 19.0 percent, respectively. TARGET CORPORATION Q1 2

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents ANALYSIS OF RESULTS OF OPERATIONS Index to Notes Gross Margin Rate Quarter-to-Date For the three months ended May 4, 2024, our gross margin rate was 27.7 percent compared with 26.3 percent in the comparable prior-year period. The increase reflected the net impact of merchandising activities, including cost improvements which more than offset higher promotional markdown rates. Our gross margin rate also benefited from favorable category mix and lower book to physical inventory adjustments compared to the prior-year period. Selling, General, and Administrative Expense Rate For the three months ended May 4, 2024, our SG&A expense rate was 21.1 percent compared with 19.8 percent for the comparable prior-year period. The increase reflected the combined impact of lower sales a

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