TARGET CORPORATION

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TARGET CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/24/2021 | 03:58pm EDT

Financial Summary

Third quarter 2021 included the following notable items:


•GAAP diluted earnings per share were $3.04.
•Adjusted diluted earnings per share were $3.03.
•Total revenue increased 13.3 percent, driven by an increase in comparable
sales.
•Comparable sales increased 12.7 percent, driven primarily by a 12.9 percent
increase in traffic.
•Comparable stores originated sales grew 9.7 percent.
•Comparable digitally originated sales increased 28.9 percent.
•Operating income of $2.0 billion was 3.9 percent higher than for the comparable
prior-year period.

Sales were $25.3 billion for the three months ended October 30, 2021, an
increase of $3.0 billion, or 13.2 percent, from the comparable prior-year
period. Cash flow provided by operating activities was $5.6 billion for the nine
months ended October 30, 2021, a decrease of $1.4 billion, or (20.5) percent,
from $7.0 billion for the nine months ended October 31, 2020. The drivers of the
operating cash flow decrease are described on   page 21  .

Earnings Per Share                        Three Months Ended                                               Nine Months Ended
                                                          October 31,                                                      October 31,
                                 October 30, 2021            2020                  Change        October 30, 2021             2020                  Change
GAAP diluted earnings per share $     3.04               $     2.01               51.6  %       $       10.87             $     5.91               83.9

%

Adjustments                          (0.01)                    0.78                                     (0.50)                  0.83
Adjusted diluted earnings per
share                           $     3.03               $     2.79                8.7  %       $       10.37             $     6.75               53.7  %


Note: Amounts may not foot due to rounding. 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 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 October 30, 2021, after-tax ROIC was 31.3
percent, compared with 19.9 percent for the trailing twelve months ended
October 31, 2020. The calculation of ROIC is provided on   page 20  .

COVID-19

Since the onset of the COVID-19 pandemic, we have experienced strong comparable sales growth and significant volatility in our sales category and channel mix.

Supply Chain Disruptions


In recent months, we have seen increasing supply chain disruptions, including
country of origin production and port delays. Additionally, trucker and
dockworker shortages, a broad-based surge in consumer demand, and other factors
have led to industry-wide U.S. port and ground transportation delays. In
response, we have taken various actions, including ordering merchandise earlier,
securing ocean freight routes, and increased use of air transport for certain
merchandise. While our inventory position is over $2 billion higher than a year
ago, if we are unable to continue to source enough inventory and move it through
our supply chain to our stores on a timely basis, we may experience increased
out-of-stocks and lost sales. Some of these supply chain disruptions and
resulting actions have resulted in increased costs. The Gross Margin Rate
analysis on   page     16   provides additional information.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 13

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

Analysis of Results of Operations


Summary of Operating Income                  Three Months Ended                                             Nine Months Ended
                                                              October 31,                            October 30,         October 31,
(dollars in millions)                October 30, 2021             2020                 Change            2021                2020                 Change
Sales                              $          25,290          $  22,336               13.2  %       $    73,995          $  64,403               14.9  %
Other revenue                                    362                296               22.3                1,014                819               23.9
Total revenue                                 25,652             22,632               13.3               75,009             65,222               15.0
Cost of sales                                 18,206             15,509               17.4               52,202             45,692               14.2
Selling, general and
administrative expenses                        4,859              4,647                4.6               14,217             13,167                8.0
Depreciation and amortization
(exclusive of depreciation
included in cost of sales)                       577                541                6.4                1,739              1,660                4.8
Operating income                   $           2,010          $   1,935                3.9  %       $     6,851          $   4,703               45.7  %



Rate Analysis                                             Three Months Ended                             Nine Months Ended
                                                October 30, 2021       October 31, 2020       October 30, 2021       October 31, 2020
Gross margin rate                                        28.0  %                30.6  %                29.5  %                29.1  %
SG&A expense rate                                        18.9                   20.5                   19.0                   20.2
Depreciation and amortization expense rate
(exclusive of depreciation included in cost of
sales)                                                    2.2                    2.4                    2.3                    2.5
Operating income margin rate                              7.8                    8.5                    9.1                    7.2


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 our wholly owned subsidiary, Shipt.
Digitally originated sales may also be fulfilled through our distribution
centers, our vendors, or other third parties.

Sales growth-from both comparable sales and new stores-represents an important
driver of our long-term profitability. We expect that comparable sales growth
will drive the majority of our total sales growth. 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
(traffic) and the amount spent each visit (average transaction amount).

Comparable Sales                                                 Three Months Ended                                  Nine Months Ended
                                                       October 30, 2021            October 31, 2020       October 30, 2021       October 31, 2020
Comparable sales change                                              12.7  %                20.7  %                14.4  %                18.7  %
Drivers of change in comparable sales
Number of transactions                                               12.9                    4.5                   14.0                    2.6
Average transaction amount                                           (0.2)                  15.6                    0.3                   15.7



   TARGET CORPORATION  [[Image Removed: tgt-20211030_g2.jpg]]   Q3 2021 Form 10-Q      14


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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS



Comparable Sales by Channel                                  Three Months Ended                                  Nine Months Ended
                                                   October 30, 2021         

October 31, 2020 October 30, 2021 October 31, 2020 Stores originated comparable sales change

                         9.7  %                 9.9  %                11.9  %                 7.3  %
Digitally originated comparable sales change                     28.9                  154.5                   27.8                  163.9



Sales by Channel                                                  Three Months Ended                                  Nine Months Ended
                                                        October 30, 2021            October 31, 2020       October 30, 2021       October 31, 2020
Stores originated                                                     82.4  %                84.3  %                82.3  %                83.9  %
Digitally originated                                                  17.6                   15.7                   17.7                   16.1
Total                                                                  100  %                 100  %                 100  %                 100  %



Sales by Fulfillment Channel                                 Three Months Ended                                  Nine Months Ended
                                                   October 30, 2021            October 31, 2020       October 30, 2021       October 31, 2020
Stores                                                           96.7  %                96.1  %                96.5  %                96.2  %
Other                                                             3.3                    3.9                    3.5                    3.8
Total                                                             100  %                 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.


Sales by Product Category                              Three Months Ended                             Nine Months Ended
                                             October 30, 2021       October 

31, 2020 October 30, 2021 October 31, 2020 Apparel and accessories

                                 17  %                  18  %                  18  %                  17  %
Beauty and household essentials                         28                     27                     27                     28
Food and beverage                                       20                     20                     20                     20
Hardlines                                               15                     15                     16                     16
Home furnishings and décor                              20                     20                     19                     19
Total                                                  100  %                 100  %                 100  %                 100  %



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 RedCards (RedCard
Penetration) because our internal analysis has indicated that a meaningful
portion of the incremental purchases on RedCards are also incremental sales for
Target. Guests receive a 5 percent discount on virtually all purchases when they
use a RedCard at Target. RedCard sales increased for the three and nine months
ended October 30, 2021, and October 31, 2020; however, RedCard penetration
declined as total Sales increased at a faster pace.

RedCard Penetration                                             Three Months Ended                             Nine Months Ended
                                                      October 30, 2021       October 31, 2020       October 30, 2021       October 31, 2020
Target Debit Card                                              11.7  %                12.2  %                11.8  %                12.2  %
Target Credit Cards                                             8.9                    9.3                    8.7                    9.2
Total RedCard Penetration                                      20.7  %                21.5  %                20.5  %                21.4  %


Note: Amounts may not foot due to rounding.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 15

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS

Gross Margin Rate

                     [[Image Removed: tgt-20211030_g3.jpg]]

For the three months ended October 30, 2021, our gross margin rate was 28.0 percent compared with 30.6 percent in the comparable prior-year period. This decrease reflected the net impact of


•pressure from higher merchandise and freight costs and higher inventory shrink,
partially offset by the benefit of historically low promotional and clearance
markdown rates;
•supply chain pressure related to increased compensation and headcount in our
distribution centers; and
•favorable mix in the relative growth rates of higher and lower margin
categories.

                     [[Image Removed: tgt-20211030_g4.jpg]]

For the nine months ended October 30, 2021, our gross margin rate was 29.5 percent compared with 29.1 percent in the comparable prior-year period. This increase reflected the net impact of


•favorable mix in the relative growth rates of higher and lower margin
categories;
•higher merchandise and freight costs partially offset by historically low
promotional and clearance markdown rates; and
•supply chain pressure related to increased compensation and headcount in our
distribution centers, partially offset by the small net benefit of a higher
percentage of digital sales fulfilled through our lower-cost same-day
fulfillment options.

Selling, General, and Administrative Expense Rate


For the three months ended October 30, 2021, our SG&A expense rate was 18.9
percent compared with 20.5 percent for the three months ended October 31, 2020.
For the nine months ended October 30, 2021, our SG&A expense rate was 19.0
percent compared with 20.2 percent for the nine months ended October 31, 2020.
The decreases reflect the net leverage benefit from strong revenue growth.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 16

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

ANALYSIS OF RESULTS OF OPERATIONS



Store Data

Change in Number of Stores                                   Three Months Ended                                         Nine Months Ended
                                              October 30, 2021               October 31, 2020            October 30, 2021               October 31, 2020
Beginning store count                               1,909                          1,871                       1,897                          1,868
Opened                                                 15                             27                          29                             30
Closed                                                  -                             (1)                         (2)                            (1)

Ending store count                                  1,924                          1,897                       1,924                          1,897



Number of Stores and                                     Number of Stores                                                      Retail Square Feet (a)
Retail Square Feet                October 30, 2021       January 30, 2021      October 31, 2020            October 30, 2021       January 30, 2021      October 31, 2020
170,000 or more sq. ft.                   274                    273                      273                   49,071                 48,798                   48,798
50,000 to 169,999 sq. ft.               1,515                  1,509                    1,509                  190,116                189,508                  189,508
49,999 or less sq. ft.                    135                    115                      115                    3,952                  3,342                    3,342
Total                                   1,924                  1,897                    1,897                  243,139                241,648                  241,648

(a)In thousands, reflects total square feet less office, distribution center, and vacant space.


Other Performance Factors

Net Interest Expense

Net interest expense was $105 million and $317 million for the three and nine
months ended October 30, 2021, respectively, compared with $632 million and $871
million, respectively, in the comparable prior-year period. The decrease in net
interest expense was primarily due to a loss on early retirement of debt of $512
million for the three and nine months ended October 31, 2020, compared with the
current-year periods.

Net Other (Income) / Expense


Net Other (Income) / Expense was $(6) million and $(356) million for the three
and nine months ended October 30, 2021, respectively, compared with $5 million
and $16 million, respectively, in the comparable prior-year periods. The nine
months ended October 30, 2021, included the $335 million gain on the February
2021 sale of Dermstore.   Note 3   to the Financial Statements provides
additional information.

Provision for Income Taxes

Our effective income tax rate for the three and nine months ended October 30, 2021, was 22.1 percent and 21.6 percent, respectively, compared with 21.9 percent and 21.7 percent, respectively, in the comparable prior-year periods.



   TARGET CORPORATION  [[Image Removed: tgt-20211030_g2.jpg]]   Q3 2021 Form 10-Q      17


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        MANAGEMENT'S DISCUSSION AND ANALYSIS           Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Notes

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 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, U.S. GAAP. The most comparable GAAP measure is
diluted earnings per share. Adjusted EPS should not be considered in isolation
or as a substitution for analysis of our results as reported in accordance with
GAAP. Other companies may calculate Adjusted EPS differently, limiting the
usefulness of the measure for comparisons with other companies.

Reconciliation of Non-GAAP Adjusted EPS                                                      Three Months Ended
                                                                   October 30, 2021                                         October 31, 2020
                                                                                          Per Share                                              Per Share
(millions, except per share data)                   Pretax            Net of Tax           Amounts           Pretax          Net of Tax           

Amounts

GAAP diluted earnings per share                                                          $    3.04                                              $    2.01
Adjustments
Loss on debt extinguishment                      $    -             $         -          $       -          $  512          $      379          $    0.75

Loss on investment (a)                                -                       -                  -               8                   9               0.02

Other (b)                                            (9)                     (7)             (0.01)              8                   6               0.01
Adjusted diluted earnings per share                                                      $    3.03                                              $    2.79



Reconciliation of Non-GAAP Adjusted EPS                                                       Nine Months Ended
                                                                 October 30, 2021                                          October 31, 2020
                                                                                       Per Share                                                  Per Share
(millions, except per share data)                 Pretax           Net of Tax           Amounts             Pretax            Net of Tax           

Amounts

GAAP diluted earnings per share                                                       $   10.87                                                  $    5.91
Adjustments
Gain on Dermstore sale                           $ (335)         $      (269)         $   (0.54)         $    -             $         -          $       -
Loss on debt extinguishment                           -                    -                  -             512                     379               0.75
Loss on investment (a)                                -                    -                  -              19                      18               0.03

Other (b)                                            27                   20               0.04              33                      24               0.05
Adjusted diluted earnings per share                                                   $   10.37                                                  $    

6.75



Note: Amounts may not foot due to rounding.
(a)Represented a loss on our investment in Casper Sleep Inc., which was not core
to our operations. We sold this investment during the fourth quarter of 2020.
(b)Other items unrelated to current period operations, none of which were
individually significant.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 18

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        MANAGEMENT'S DISCUSSION AND ANALYSIS           Table of Contents
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES         Index to Notes



Earnings before interest expense and income taxes (EBIT) and earnings before
interest expense, income taxes, depreciation, and amortization (EBITDA) are
non-GAAP financial measures. We believe these measures provide meaningful
information about our operational efficiency compared with our competitors by
excluding the impact of differences in tax jurisdictions and structures, debt
levels, and, for EBITDA, capital investment. These measures are not in
accordance with, or an alternative to, GAAP. The most comparable GAAP measure is
net earnings. EBIT and EBITDA should not be considered in isolation or as a
substitution for analysis of our results as reported in accordance with GAAP.
Other companies may calculate EBIT and EBITDA differently, limiting the
usefulness of the measures for comparisons with other companies.

EBIT and EBITDA                                 Three Months Ended                                            Nine Months Ended
                                                                October 31,                             October 30,        October 31,
(dollars in millions)                  October 30, 2021             2020              Change               2021                2020              Change
Net earnings                          $       1,488             $   1,014                46.8  %       $    5,402          $   2,988                80.8  %
+ Provision for income taxes                    423                   284                48.7               1,488                828                79.7
+ Net interest expense                          105                   632               (83.2)                317                871               (63.5)
EBIT                                  $       2,016             $   1,930                 4.5  %       $    7,207          $   4,687                53.8  %
+ Total depreciation and
amortization (a)                                652                   603                 7.9               1,952              1,848                 5.6
EBITDA                                $       2,668             $   2,533                 5.3  %       $    9,159          $   6,535                40.2  %

(a)Represents total depreciation and amortization, including amounts classified within Depreciation and Amortization and within Cost of Sales.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 19

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        MANAGEMENT'S DISCUSSION AND ANALYSIS           Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Index to Notes



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. We believe this metric is useful in assessing the
effectiveness of our capital allocation over time. Other companies may calculate
ROIC differently, limiting the usefulness of the measure for comparisons with
other companies.

After-Tax Return on Invested Capital

     (dollars in millions)
                                                            Trailing Twelve Months
     Numerator                                      October 30, 2021        October 31, 2020
     Operating income                            $      8,687              $           5,901
      + Net other income / (expense)                      358                            (46)
     EBIT                                               9,045                          5,855
      + Operating lease interest (a)                       85                             87
      - Income taxes (b)                                1,947                          1,277
     Net operating profit after taxes            $      7,183              $           4,665



                                                              October 30,        October 31,        November 2,
Denominator                                                       2021               2020               2019

Current portion of long-term debt and other borrowings $ 1,176

$ 131 $ 1,159

 + Noncurrent portion of long-term debt                          11,586             12,490             10,513
 + Shareholders' investment                                      13,803             13,319             11,545
 + Operating lease liabilities (c)                                2,737              2,400              2,390
 - Cash and cash equivalents                                      5,753              5,996                969
Invested capital                                              $  23,549          $  22,344          $  24,638
Average invested capital (d)                                  $  22,947     

$ 23,491


After-tax return on invested capital                               31.3  %  

19.9 %



(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. Calculated using the discount rate for
each lease and recorded as a component of rent expense within SG&A. 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)Calculated using the effective tax rates, which were 21.3 percent and 21.5
percent for the trailing twelve months ended October 30, 2021, and October 31,
2020, respectively. For the trailing twelve months ended October 30, 2021, and
October 31, 2020, includes tax effect of $1.9 billion and $1.3 billion,
respectively, related to EBIT, and $18 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.
(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.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 20

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

      ANALYSIS OF FINANCIAL CONDITION            Index to Notes


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.

Our cash and cash equivalents balance was $5.8 billion, $8.5 billion, and $6.0
billion as of October 30, 2021, January 30, 2021, and October 31, 2020,
respectively. Our cash and cash equivalents balance includes short-term
investments of $4.8 billion, $7.6 billion, and $5.1 billion as of October 30,
2021, January 30, 2021, and October 31, 2020, respectively. Our investment
policy is designed to preserve principal and liquidity of our short-term
investments. 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 $5.6 billion for the nine
months ended October 30, 2021, compared with $7.0 billion for the nine months
ended October 31, 2020. For the nine months ended October 30, 2021, operating
cash flows reflect stronger operating results, offset by increased inventory
investment and lower accounts payable leverage, compared with the nine months
ended October 31, 2020. Additionally, operating cash flows for 2021 reflect a
$1.1 billion increase in income tax payments.

Inventory


Inventory was $15.0 billion as of October 30, 2021, compared with $10.7 billion
and $12.7 billion at January 30, 2021, and October 31, 2020, respectively. The
increase over the balance as of October 31, 2020, reflects efforts to align
inventory with sales trends.

Investing Cash Flows

Investing cash flows included capital investments of $2.5 billion and $2.0 billion for the nine months ended October 30, 2021, and October 31, 2020, respectively. For the nine months ended October 31, 2021, investing cash flows includes $356 million of proceeds from the sale of Dermstore.

Dividends


We paid dividends totaling $440 million ($0.90 per share) and $1.1 billion
($2.26 per share) for the three and nine months ended October 30, 2021,
respectively, and $340 million ($0.68 per share) and $1.0 billion ($2.00 per
share) for the three and nine months ended October 31, 2020, respectively, a per
share increase of 32.4 percent and 13.0 percent, respectively. We declared
dividends totaling $439 million ($0.90 per share) during the third quarter of
2021 and $346 million ($0.68 per share) during the third quarter of 2020, a per
share increase of 32.4 percent. 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 Repurchase

We returned $4.9 billion to shareholders through share repurchase during the
nine months ended October 30, 2021. See   Part II  ,   Item 2  ,   Unregistered
Sales of Equity Securities and Use of Proceeds   of this Quarterly Report on
Form 10-Q and   Note 9   to the Financial Statements for more information.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 21

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MANAGEMENT'S DISCUSSION AND ANALYSIS Table of Contents

      ANALYSIS OF FINANCIAL CONDITION            Index to Notes


Financing


Our financing strategy is to ensure liquidity and access to capital markets, to
maintain a balanced spectrum of debt maturities, and to manage our net exposure
to floating interest rate volatility. Within these parameters, we seek to
minimize our borrowing costs. Our ability to access the long-term debt and
commercial paper markets has provided us with ample sources of liquidity. Our
continued access to these markets depends on multiple factors, including the
condition of debt capital markets, our operating performance, and maintaining
strong credit ratings. As of October 30, 2021, 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. 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 obtain short-term financing from time to time under our commercial paper
program. No balances were outstanding at any time during the nine months ended
October 30, 2021, and October 31, 2020. In October 2021, we obtained a committed
$3.0 billion unsecured revolving credit facility that will expire in October
2026. This new facility replaced our $2.5 billion unsecured revolving credit
facility that was set to expire in October 2023. No balances were outstanding
under either credit facility at any time during 2021 or 2020.

Most of our long-term debt obligations contain covenants related to secured debt
levels. In addition to a secured debt level covenant, our credit facility also
contains a debt leverage covenant. We are, and expect to remain, in compliance
with these covenants. Additionally, as of October 30, 2021, no notes or
debentures contained provisions requiring acceleration of payment upon a credit
rating downgrade, except that certain outstanding notes allow the note holders
to put the notes to us if within a matter of months of each other we experience
both (i) a change in control and (ii) our long-term credit ratings are either
reduced and the resulting rating is non-investment grade, or our long-term
credit ratings are placed on watch for possible reduction and those ratings are
subsequently reduced and the resulting rating is non-investment grade.

We believe our sources of liquidity will continue to be adequate to maintain
operations, finance anticipated expansion and strategic initiatives, fund debt
maturities, pay dividends, and execute purchases under our share repurchase
program for the foreseeable future. We continue to anticipate ample access to
commercial paper and long-term financing.

New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements.

TARGET CORPORATION [[Image Removed: tgt-20211030_g2.jpg]] Q3 2021 Form 10-Q 22

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS & SUPPLEMENTAL
                                         INFORMATION                                   Table of Contents
                     FORWARD LOOKING STATEMENTS & CONTROLS AND PROCEDURES                 Index to Notes


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. The principal forward-looking statements in this report include:
our financial performance, statements regarding the adequacy of and costs
associated with our sources of liquidity, the funding of debt maturities, the
continued execution of our share repurchase program, our expected capital
expenditures and new lease commitments, the expected compliance with debt
covenants, the expected impact of new accounting pronouncements, our intentions
regarding future dividends, the expected return on plan assets, the expected
outcome of, and adequacy of our reserves for, claims, litigation and the
resolution of tax matters, the expected impact of changes in information
technology systems, future responses to and effects of the COVID-19 pandemic,
and changes in our assumptions and expectations.

All such forward-looking statements are intended to enjoy the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, as amended. Although we believe there is a
reasonable basis for the forward-looking statements, our actual results could be
materially different. The most important factors which could cause our actual
results to differ from our forward-looking statements are set forth in our
description of risk factors included in   Part I  ,   Item 1A  ,   Risk
Factors   of our   Form 10-K   for the fiscal year ended January 30, 2021, which
should be read in conjunction with the forward-looking statements in this
report. Forward-looking statements speak only as of the date they are made, and
we do not undertake any obligation to update any forward-looking statement.

© Edgar Online, source Glimpses

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