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 $4.8 billion from $3.8 billion in 2023. Our cash and cash equivalents balance includes short-term investments of $3.9 billion and $2.9 billion as of February 1, 2025, and February 3, 2024, 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 $7.4 billion in 2024 compared with $8.6 billion in 2023. The operating cash flow decrease is primarily due to higher income tax payments and the combined impact of inventory and accounts payable activity.

Inventory

Year-end inventory was $12.7 billion in 2024, compared with $11.9 billion in 2023. The increase in inventory levels reflects

•earlier inventory receipts compared to the prior year, including to support merchandising strategies; and

•inventory investments in select merchandise categories to support sales growth and an improved in-stock position.