Target's Q2 2024 10-Q Filed

Ticker: TGT · Form: 10-Q · Filed: 2024-08-30T00:00:00.000Z

Sentiment: neutral

Topics: 10-Q, quarterly-filing, retail

TL;DR

Target's Q2 10-Q is in. Financials and ops details for period ending Aug 3, 2024.

AI Summary

Target Corporation filed its 10-Q for the period ending August 3, 2024. The filing details financial performance and operational updates for the second quarter of fiscal year 2024. Key financial metrics and business segment information are presented, reflecting the company's ongoing retail operations.

Why It Matters

This filing provides investors and analysts with the latest financial snapshot of Target, crucial for understanding its performance and future outlook in the retail sector.

Risk Assessment

Risk Level: low — This is a routine quarterly financial filing (10-Q) and does not contain new, significant, or unexpected risk-inducing information.

Key Players & Entities

FAQ

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

The reporting period for this 10-Q filing is the quarter ended August 3, 2024.

When was this 10-Q filed with the SEC?

This 10-Q filing was made on August 30, 2024.

What was Target Corporation's former name?

Target Corporation was formerly known as Dayton Hudson Corp.

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

Target's SIC code is 5331, which corresponds to Retail - Variety Stores.

In which state was Target Corporation incorporated?

Target Corporation was incorporated in Minnesota (MN).

Filing Stats: 4,874 words · 19 min read · ~16 pages · Grade level 11.5 · Accepted 2024-08-30 11:54:48

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 23 Item 4.

Controls and Procedures

Controls and Procedures 23 PART II OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 24 Item 1A.

Risk Factors

Risk Factors 24 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24 Item 3. Defaults Upon Senior Securities 24 Item 4. Mine Safety Disclosures 24 Item 5. Other Information 24 Item 6. Exhibits 25 Signature s 26

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 Six Months Ended (millions, except per share data) (unaudited) August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Sales $ 25,021 $ 24,384 $ 49,164 $ 49,332 Other revenue 431 389 819 763 Total revenue 25,452 24,773 49,983 50,095 Cost of sales 17,799 17,798 35,248 36,184 Selling, general and administrative expenses 5,392 5,184 10,560 10,209 Depreciation and amortization (exclusive of depreciation included in cost of sales) 626 594 1,244 1,177 Operating income 1,635 1,197 2,931 2,525 Net interest expense 110 141 216 288 Net other income ( 20 ) ( 16 ) ( 49 ) ( 39 ) Earnings before income taxes 1,545 1,072 2,764 2,276 Provision for income taxes 353 237 630 491 Net earnings $ 1,192 $ 835 $ 2,134 $ 1,785 Basic earnings per share $ 2.58 $ 1.81 $ 4.62 $ 3.87 Diluted earnings per share $ 2.57 $ 1.80 $ 4.60 $ 3.86 Weighted average common shares outstanding Basic 462.5 461.6 462.4 461.3 Diluted 463.5 462.5 463.7 462.7 Antidilutive shares 2.3 2.9 1.8 2.4 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q2 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 Six Months Ended (millions) (unaudited) August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Net earnings $ 1,192 $ 835 $ 2,134 $ 1,785 Other comprehensive (loss) / income, net of tax Pension benefit liabilities — 1 — 3 Cash flow hedges and currency translation adjustment ( 5 ) ( 4 ) ( 10 ) ( 9 ) Other comprehensive loss ( 5 ) ( 3 ) ( 10 ) ( 6 ) Comprehensive income $ 1,187 $ 832 $ 2,124 $ 1,779 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q2 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) August 3, 2024 February 3, 2024 July 29, 2023 Assets Cash and cash equivalents $ 3,497 $ 3,805 $ 1,617 Inventory 12,604 11,886 12,684 Other current assets 1,817 1,807 1,797 Total current assets 17,918 17,498 16,098 Property and equipment Land 6,645 6,547 6,504 Buildings and improvements 38,324 37,066 35,889 Fixtures and equipment 8,690 8,765 7,936 Computer hardware and software 3,437 3,428 3,178 Construction-in-progress 830 1,703 2,641 Accumulated depreciation ( 24,851 ) ( 24,413 ) ( 23,201 ) Property and equipment, net 33,075 33,096 32,947 Operating lease assets 3,545 3,362 2,840 Other noncurrent assets 1,457 1,400 1,321 Total assets $ 55,995 $ 55,356 $ 53,206 Liabilities and shareholders' investment Accounts payable $ 12,595 $ 12,098 $ 12,278 Accrued and other current liabilities 5,749 6,090 5,948 Current portion of long-term debt and other borrowings 1,640 1,116 1,106 Total current liabilities 19,984 19,304 19,332 Long-term debt and other borrowings 13,654 14,922 14,926 Noncurrent operating lease liabilities 3,444 3,279 2,798 Deferred income taxes 2,495 2,480 2,334 Other noncurrent liabilities 1,989 1,939 1,826 Total noncurrent liabilities 21,582 22,620 21,884 Shareholders' investment Common stock 38 38 38 Additional paid-in capital 6,831 6,761 6,610 Retained earnings 8,030 7,093 5,767 Accumulated other comprehensive loss ( 470 ) ( 460 ) ( 425 ) Total shareholders' investment 14,429 13,432 11,990 Total liabilities and shareholders' investment $ 55,995 $ 55,356 $ 53,206 Common Stock Authorized 6,000,000,000 shares, $ 0.0833 par value; 461,600,215 , 461,675,441 , and 461,600,640 shares issued and outstanding as of August 3, 2024, February 3, 2024, and July 29, 2023, respectively. Preferred Stock Authorized 5,000,000 shares, $ 0.01 par value; no shares were issued or outstanding during

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents Index to Notes Consolidated Statements of Cash Flows Six Months Ended (millions) (unaudited) August 3, 2024 July 29, 2023 Operating activities Net earnings $ 2,134 $ 1,785 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 1,461 1,350 Share-based compensation expense 149 107 Deferred income taxes 16 141 Noncash losses / (gains) and other, net 22 11 Changes in operating accounts: Inventory ( 718 ) 815 Other assets ( 53 ) 62 Accounts payable 522 ( 1,137 ) Accrued and other liabilities ( 194 ) 264 Cash provided by operating activities 3,339 3,398 Investing activities Expenditures for property and equipment ( 1,313 ) ( 2,825 ) Proceeds from disposal of property and equipment 2 6 Other investments 6 ( 2 ) Cash required for investing activities ( 1,305 ) ( 2,821 ) Financing activities Reductions of long-term debt ( 1,076 ) ( 72 ) Dividends paid ( 1,017 ) ( 996 ) Repurchase of stock ( 155 ) — Shares withheld for taxes on share-based compensation ( 94 ) ( 121 ) Cash required for financing activities ( 2,342 ) ( 1,189 ) Net decrease in cash and cash equivalents ( 308 ) ( 612 ) Cash and cash equivalents at beginning of period 3,805 2,229 Cash and cash equivalents at end of period $ 3,497 $ 1,617 Supplemental information Leased assets obtained in exchange for new finance lease liabilities $ 304 $ 20 Leased assets obtained in exchange for new operating lease liabilities 362 337 See accompanying Notes to Consolidated Financial Statements . TARGET CORPORATION Q2 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 Q2 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 Net earnings — — — 1,192 — 1,192 Other comprehensive loss — — — — ( 5 ) ( 5 ) Dividends declared — — — ( 527 ) — ( 527 ) Repurchase of stock ( 1.1 ) ( 1 ) — ( 154 ) — ( 155 ) Stock options and awards 0.1 — 84 — — 84 August 3, 2024 461.6 $ 38 $ 6,831 $ 8,030 $ ( 470 ) $ 14,429 We declared $ 1.12 and $ 1.10 dividends per share for the three months ended August 3, 2024, and July 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 Q2 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 Property and Equipment 11 Note 5 Supplier Finance Programs 11 Note 6 Commercial Paper and Long-Term Debt 11 Note 7 Derivative Financial Instruments 11 Note 8 Share Repurchase 12 Note 9 Pension Benefits 12 Note 10 Accumulated Other Comprehensive Income (Loss) 12 TARGET CORPORATION Q2 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 Q2 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 Six Months Ended (millions) August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Apparel & accessories (a) $ 4,261 $ 4,101 $ 8,158 $ 8,068 Beauty (b) 3,384 3,085 6,503 6,101 Food & beverage (c) 5,538 5,392 11,391 11,389 Hardlines (d) 3,322 3,383 6,482 6,774 Home furnishings & dcor (e) 3,908 3,955 7,427 7,810 Household essentials (f) 4,564 4,428 9,113 9,094 Other 44 40 90 96 Sales 25,021 24,384 49,164 49,332 Credit card profit sharing 144 169 286 343 Other 287 220 533 420 Other revenue 431 389 819 763 Total revenue $ 25,452 $ 24,773 $ 49,983 $ 50,095 (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, w

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 Circle Credit Card and Target MasterCard receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Circle 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 August 3, 2024 February 3, 2024 July 29, 2023 Assets Short-term investments Cash and Cash Equivalents Level 1 $ 2,465 $ 2,897 $ 739 Prepaid forward contracts Other Current Assets Level 1 24 25 23 Interest rate swaps Other Noncurrent Assets Level 2 3 — — Liabilities Interest rate swaps Other Current Liabilities Level 2 — 3 6 Interest rate swaps Other Noncurrent Liabilities Level 2 82 123 130 Significant Financial Instruments Not Measured at Fair Value (a) (millions) August 3, 2024 February 3, 2024 July 29, 2023 Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value Long-term debt, including current portion (b) $ 13,157 $ 12,578 $ 14,151 $ 13,467 $ 14,147 $ 13,344 (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

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes 4. Property and Equipment We review long-lived assets for impairment when store performance expectations, events, or changes in circumstances—such as a decision to relocate or close a store, office, or distribution center, discontinue a project, or make significant software changes—indicate that the asset's carrying value may not be recoverable. We recognized impairment charges of $ 36 million for the three and six months ended August 3, 2024, and $ 33 million for the three and six months ended July 29, 2023. These impairment charges are included in Selling, General and Administrative (SG&A) Expenses. 5. Supplier Finance Programs We have arrangements with several financial institutions to act as our paying agents to certain vendors. The arrangements also permit the financial institutions to provide vendors with an option, at our vendors' sole discretion, to sell their receivables from Target to the financial institutions. A vendor's election to receive early payment at a discounted amount from the financial institutions does not change the amount that we must remit to the financial institutions or our payment date, which is up to 120 days from the invoice date. We do not pay any fees or pledge any security to these financial institutions under these arrangements. The arrangements can be terminated by either party with notice ranging up to 120 days. Our outstanding vendor obligations eligible for early payment under these arrangements totaled $ 3.7 billion, $ 3.4 billion, and $ 3.7 billion as of August 3, 2024, February 3, 2024, and July 29, 2023, respectively, and are included within Accounts Payable on our Consolidated Statements of Financial Position. Our outstanding vendor obligations do not represent actual receivables sold by our vendors to the financial institutions, which have historically been lower. 6. Commercial Paper and Long-Term Debt In July 2024, we repaid $ 1.0 billion of 3.

FINANCIAL STATEMENTS Table of Contents

FINANCIAL STATEMENTS Table of Contents NOTES Index to Notes Effect of Hedges on Net Interest Expense Three Months Ended Six Months Ended (millions) August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Gain (loss) on fair value hedges recognized in Net Interest Expense Interest rate swaps designated as fair value hedges $ 78 $ ( 71 ) $ 47 $ ( 62 ) Hedged debt ( 78 ) 71 ( 47 ) 62 Gain on cash flow hedges recognized in Net Interest Expense 6 6 12 12 Total $ 6 $ 6 $ 12 $ 12 8. Share Repurchase We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase (ASR) arrangements, and other privately negotiated transactions with financial institutions. Share Repurchase Activity Three Months Ended Six Months Ended (millions, except per share data) August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Number of shares purchased 1.1 — 1.1 — Average price paid per share $ 145.94 $ — $ 145.94 $ — Total investment $ 155 $ — $ 155 $ — 9. Pension Benefits We provide pension plan benefits to eligible team members. Net Pension Benefits Expense Three Months Ended Six Months Ended (millions) Classification August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Service cost benefits earned SG&A Expenses $ 19 $ 19 $ 39 $ 39 Interest cost on projected benefit obligation Net Other Income 42 42 83 83 Expected return on assets Net Other Income ( 70 ) ( 67 ) ( 140 ) ( 134 ) Amortization of losses Net Other Income — 1 — 1 Prior service cost Net Other Income 8 8 8 11 Total $ ( 1 ) $ 3 $ ( 10 ) $ — 10. 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 ) Other comprehensive income (loss) before reclassifications, net of tax — ( 1 ) — ( 1 ) Amounts reclassifie

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 Second quarter 2024 included the following notable items: GAAP and adjusted diluted earnings per share (Adjusted EPS) were $2.57. Total revenue was $25.5 billion, an increase of 2.7 percent from the comparable prior-year period, reflecting a total sales increase of 2.6 percent and a 10.8 percent increase in other revenue. Comparable sales increased 2.0 percent, reflecting a 3.0 percent increase in traffic and a 0.9 percent decrease in average transaction amount. Comparable stores-originated sales grew 0.7 percent. Comparable digitally-originated sales increased 8.7 percent. Operating income of $1.6 billion was 36.6 percent higher than the comparable prior-year period. Earnings Per Share Three Months Ended Six Months Ended August 3, 2024 July 29, 2023 Change August 3, 2024 July 29, 2023 Change GAAP and Adjusted EPS $ 2.57 $ 1.80 42.4 % $ 4.60 $ 3.86 19.3 % Note: Adjusted EPS, a non-GAAP metric, excludes the impact of certain items when applicable. However, there are no adjustments in any 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 19 . 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 August 3, 2024, after-tax ROIC was 16.6 percent , compared with 13.7 percent for the trailing twelve months ended July 29, 2023. The calculation of ROIC is provided on page 20 . TARGET CORPORATION Q2 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 Six Months Ended (dollars in millions) August 3, 2024 July 29, 2023 Change August 3, 2024 July 29, 2023 Change Sales $ 25,021 $ 24,384 2.6 % $ 49,164 $ 49,332 (0.3) % Other revenue 431 389 10.8 819 763 7.4 Total revenue 25,452 24,773 2.7 49,983 50,095 (0.2) Cost of sales 17,799 17,798 0.0 35,248 36,184 (2.6) SG&A expenses 5,392 5,184 4.0 10,560 10,209 3.4 Depreciation and amortization (exclusive of depreciation included in cost of sales) 626 594 5.3 1,244 1,177 5.7 Operating income $ 1,635 $ 1,197 36.6 % $ 2,931 $ 2,525 16.1 % Rate Analysis Three Months Ended Six Months Ended August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Gross margin rate 28.9 % 27.0 % 28.3 % 26.7 % SG&A expense rate 21.2 20.9 21.1 20.4 Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales) 2.5 2.4 2.5 2.3 Operating income margin rate 6.4 4.8 5.9 5.0 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.

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 Three Months Ended Six Months Ended August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Comparable sales change 2.0 % (5.4) % (0.9) % (2.8) % Drivers of change in comparable sales Number of transactions (traffic) 3.0 (4.8) 0.6 (2.0) Average transaction amount (0.9) (0.7) (1.4) (0.8) Comparable Sales by Channel Three Months Ended Six Months Ende

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