TARGET CORP

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 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. 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. 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. The decrease in inventory levels primarily reflects

•improvements in the supply chain, including on-time arrivals and reduced in-transit inventory,

•alignment of inventory levels with sales trends, and

•cost decreases, primarily due to lower freight rates in 2023 compared to 2022.

The Business Environment section onpage 23 provides additional information.