TARGET CORP
For the period ended May 3, 2025. Filed May 30, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
May 3, 2025 · Filed May 30, 2025
TGT$158.41+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-11-02; filed 2024-11-27.
0000027419-24-000179
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-05-03; filed 2025-05-30.
0000027419-25-000101
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 75 previous paragraphs and 81 current paragraphs.
36 unchanged; 25 reworded; 20 added; 12 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 34 previous and 34 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
•GAAP diluted earnings per share were $2.27 and Adjusted EPS 1 were $1.30.
Current report
•Net Sales were $23.8 billion, a decrease of 2.8 percent from the comparable prior-year period.
Current report
•Operating income of $1.5 billion, including $593 million of pretax net gains related to interchange fee settlements further described in Note 3 to the Financial Statements.
Current report
Note: Amounts may not foot due to rounding.
Current report
Business Environment
Current report
Our financial results for the quarter ended May 3, 2025, reflected several challenges, including recent declines in consumer confidence, uncertainty regarding the impact of potential tariffs, the reaction to updates we shared in January on our approach to belonging, as well as the continued trend of reduced consumer spending in discretionary categories. While we believe each of these factors played a meaningful role in our first quarter performance, we can't reasonably estimate the impact of each one separately.
Current report
Recently, the United States (U.S.) imposed a range of tariffs on all products manufactured in foreign countries and jurisdictions, and subsequently imposed incremental tariffs, paused, modified, or issued specific exceptions to recently imposed tariffs, and indicated that the U.S. is actively negotiating country-specific agreements that it expects will result in changes to imposed tariff rates. Approximately one-half of the merchandise we offer is sourced from outside the U.S., either directly or indirectly, with China as our single largest source of merchandise we import.
Current report
We are closely monitoring the evolving consumer and regulatory landscape and adjusting plans as needed, including, but not limited to, vendor negotiations, assortment changes, movements in country of production, adjustments in order unit quantities and timing, and pricing strategies. Additionally, we are working closely with industry associations and government leaders, all with a goal to continue delivering the products our guests expect and minimizing the impact of tariffs on our guests. The collective interaction of tariffs, sourcing strategies, pricing actions, consumer response and behaviors, and other factors, could materially impact our sales and results of operations in future periods.
Current report
(a)Reflects the impact of a reclassification of prior year amounts, which were not material, to conform with current year presentation.
Current report
Net Sales
Current report
Net sales includes all Merchandise Sales and revenues from other sources, most notably advertising revenue and credit card profit-sharing income.
Current report
•merchandising activities, including higher markdown rates, partially offset by growth in advertising and other revenues;
Current report
•lower inventory shrink.
Current report
For the three months ended May 3, 2025, our SG&A expense rate was 19.3 percent compared with 21.0 percent for the comparable prior-year period. The decrease reflected a favorable impact of interchange fee settlements of approximately 2.5 percentage points, as further described in Note 3, partially offset by the deleveraging impact of lower Net Sales, and the net impact of other costs.
Current report
Our effective income tax rate for the three months ended May 3, 2025, was 25.0 percent compared with 22.7 percent in the comparable prior-year period. The increase primarily reflects discrete tax expense in the current year related to share-based compensation.
Current report
Note: Amounts may not foot due to rounding.
Current report
(a)Note 3 to the Financial Statements provides additional information.
Current report
(f)For the trailing twelve months ended May 3, 2025, includes the impact of after-tax net gains on interchange fee settlements, which increased after-tax ROIC by 1.4 percentage points. Note 3 to the Financial Statements provides additional information.
Current report
Cash flows provided by operating activities were $0.3 billion and $1.1 billion for the three months ended May 3, 2025, and May 4, 2024, respectively. The operating cash flows reflect the net earnings impact of gains on interchange fee settlements, offset by lower sales, as well as increased inventory levels and lower accounts payable leverage in the current year period.
Current report
Inventory was $13.0 billion as of May 3, 2025, compared with $12.7 billion and $11.7 billion as of February 1, 2025, and May 4, 2024, respectively. The balance as of May 3, 2025, reflects the impact of lower-than-expected sales across all core merchandise categories, with the most significant impacts within Apparel & Accessories, Hardlines, and Home Furnishings & Décor.
Removed paragraphs (12)
Previous report
•Total revenue was $25.7 billion, an increase of 1.1 percent from the comparable prior-year period, reflecting a total sales increase of 0.9 percent and a 11.5 percent increase in other revenue.
Previous report
•Operating income of $1.2 billion was 11.2 percent lower than the comparable prior-year period.
Previous report
Sales
Previous report
Year-to-Date
Previous report
•higher digital fulfillment & supply chain costs due to
Previous report
•costs of managing elevated inventory levels during the third quarter, including the impact of receipt timing;
Previous report
•lower book to physical inventory adjustments compared to the prior-year period; and
Previous report
•merchandising activities, including cost improvements which more than offset higher promotional and clearance markdown rates.
Previous report
For the three months ended November 2, 2024, our SG&A expense rate was 21.4 percent compared with 20.9 percent for the comparable prior-year period. For the nine months ended November 2, 2024, our SG&A expense rate was 21.2 percent compared with 20.6 percent for the comparable prior-year period. The increases reflected the net impact of cost increases across our business, including higher team member pay and benefits and higher general liability expenses, partially offset by the benefit of lower store remodel-related expenses.
Previous report
Our effective income tax rates for the three and nine months ended November 2, 2024, were 21.7 percent and 22.5 percent, respectively, compared with 21.3 percent and 21.5 percent in the comparable prior-year periods. The increase in both periods reflects the impact of lower discrete tax benefits compared to the prior-year.
Previous report
Cash flows provided by operating activities were $4.1 billion and $5.3 billion for the nine months ended November 2, 2024, and October 28, 2023, respectively. The operating cash flow decrease is primarily due to increased inventory levels and slightly lower accounts payable leverage, in addition to higher income tax and incentive compensation payments.
Previous report
Inventory was $15.2 billion as of November 2, 2024, compared with $11.9 billion and $14.7 billion as of February 3, 2024, and October 28, 2023, respectively. The increase from February 3, 2024, primarily reflects the seasonal inventory build ahead of the November and December holiday sales period. The increase from October 28, 2023, primarily reflects the impact of lower-than-expected sales in certain discretionary categories during the three months ended November 2, 2024, as well as an improved in-stock position.
Reworded paragraphs (25)
Previous wording
Third quarter 2024 included the following notable items:
Current wording
First quarter 2025 included the following notable items:
Previous wording
•Comparable sales increased 0.3 percent, reflecting a 2.4 percent increase in traffic and a 2.0 percent decrease in average transaction amount.
Current wording
•Comparable sales decreased 3.8 percent, reflecting a 2.4 percent decrease in traffic and a 1.4 percent decrease in average transaction amount.
Previous wording
◦Comparable stores-originated sales declined 1.9 percent.
Current wording
◦Comparable stores-originated sales declined 5.7 percent.
Previous wording
◦Comparable digitally-originated sales increased 10.8 percent.
Current wording
◦Comparable digitally-originated sales increased 4.7 percent.
Previous wording
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 providedon page 19.
Current wording
1 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 providedon page 19.
Previous wording
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 November 2, 2024, after-tax ROICwas 15.9 percent, compared with 13.9 percent for the trailing twelve months ended October 28, 2023. The calculation of ROIC isprovided on page 20.
Current wording
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 3, 2025, after-tax ROICwas 15.1 percent, compared with 15.4 percent for the trailing twelve months ended May 4, 2024. The calculation of ROIC isprovided on page 20.
Previous wording
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.
Current wording
Note: Gross margin (GM) is calculated as Net Sales less Cost of Sales. All rates are calculated by dividing the applicable amount by Net Sales. We updated the prior period gross margin rate to conform to the current year calculation, which resulted in an approximate 1 percentage point increase in our gross margin rate for the 2024 period presented.
Previous wording
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 originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.
Current wording
Merchandise Sales are net of expected returns, and our estimate of gift card breakage. Comparable sales include all Merchandise Sales, except sales from stores open less than 13 months or that have been closed. We use comparable sales to evaluate the performance of our stores and digital channels by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. 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 Merchandise 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 Same Day Delivery. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.
Previous wording
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 (number of transactions, or "traffic") and the amount spent each visit (average transaction amount).
Current wording
Merchandise 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 a significant portion 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 (number of transactions, or "traffic") and the amount spent each visit (average transaction amount).
Previous wording
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.
Current wording
Note: Merchandise 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 Same Day Delivery.
Previous wording
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. Guests receive a 5 percent discount on virtually all purchases when they use a Target Circle Card at Target. For the three months ended November 2, 2024 and October 28, 2023, total Target Circle Card Penetration was 17.7 percent and 18.3 percent, respectively. For the nine months ended November 2, 2024 and October 28, 2023, total Target Circle Card Penetration was 17.8 percent and 18.6 percent, respectively.
Current wording
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 our Target Circle Cards are also incremental sales for Target. 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 3, 2025 and May 4, 2024, total Target Circle Card Penetration was 17.4 percent and 18.0 percent, respectively.
Previous wording
For the three months ended November 2, 2024, our gross margin rate was 27.2 percent compared with 27.4 percent in the comparable prior-year period. For the nine months ended November 2, 2024, our gross margin rate was 27.9 percent compared with 26.9 percent in the comparable prior-year period. For both the three and nine months ended November 2, 2024, the changes reflected the net impact of
Current wording
For the three months ended May 3, 2025, our gross margin rate was 28.2 percent compared with 28.8 percent in the comparable prior-year period. For the three months ended May 3, 2025, the changes reflected the net impact of
Previous wording
•an increase in digital volume; and
Current wording
•higher supply chain and digital fulfillment costs due to new supply chain facilities coming online and an increase in digital penetration; and
Previous wording
(a)In thousands; reflects total square feet less office, supply chain facilities, and vacant space.
Current wording
(a)In thousands; reflects total square feet less office, supply chain facility, and vacant space.
Previous wording
Net interest expense was $105 million and $321 million for the three and nine months ended November 2, 2024, respectively, compared with $107 million and $395 million in the comparable prior-year periods. The decrease in net interest expense was primarily due to an increase in interest income.
Current wording
For the three months ended May 3, 2025, net interest expense was $116 million compared with $106 million in the comparable prior-year period. The increase was primarily due to a decrease in interest income.
Previous wording
To provide additional transparency, we disclose non-GAAP Adjusted EPS. When applicable, this metric excludes certain discretely managed items. However, there are no adjustments in any period presented. 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.
Current wording
To provide additional transparency, we disclose 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, generally accepted accounting principles in the 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.
Previous wording
(a)The trailing twelve months ended November 2, 2024, consisted of 53 weeks compared with 52 weeks in the prior-year period.
Current wording
(a)The trailing twelve months ended May 4, 2024, consisted of 53 weeks compared with 52 weeks in the current-year period.
Previous wording
(b)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 Operating Income. 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.
Current wording
(b)Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases was owned or accounted for under finance leases. Calculated using the discount rate for each lease and recorded as a component of rent expense within Operating Income. 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.
Previous wording
(c)Calculated using the effective tax rates, which were 22.5 percent and 20.3 percent for the trailing twelve months ended November 2, 2024 and October 28, 2023, respectively. For the trailing twelve months ended November 2, 2024 and October 28, 2023, includes tax effect of $1.4 billion and $1.0 billion, respectively, related to EBIT and $35 million and $22 million, respectively, related to operating lease interest.
Current wording
(c)Calculated using the effective tax rates, which were 22.8 percent and 22.2 percent for the trailing twelve months ended May 3, 2025 and May 4, 2024, respectively. For the trailing twelve months ended May 3, 2025, and May 4, 2024, includes tax effect of $1.3 billion related to EBIT and $38 million and $30 million, respectively, related to operating lease interest.
Previous wording
Our cash and cash equivalents balance was $3.4 billion, $3.8 billion, and $1.9 billion as of November 2, 2024, February 3, 2024, and October 28, 2023, respectively. Our cash and cash equivalents balance includes short-term investments of $2.5 billion, $2.9 billion, and $1.0 billion as of November 2, 2024, February 3, 2024, and October 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.
Current wording
Our cash and cash equivalents balance was $2.9 billion, $4.8 billion, and $3.6 billion as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively. Our cash and cash equivalents balance includes short-term investments of $2.0 billion, $3.9 billion, and $2.7 billion as of May 3, 2025, February 1, 2025, and May 4, 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.
Previous wording
Cash required for investing activities decreased to $1.9 billion for the nine months ended November 2, 2024, compared to $3.9 billion for the nine months ended October 28, 2023, due to lower capital investments.
Current wording
Cash required for investing activities increased to $0.8 billion for the three months ended May 3, 2025, compared to $0.7 billion for the three months ended May 4, 2024, due to higher capital investments.
Previous wording
We paid dividends totaling $516 million ($1.12 per share) and $1.5 billion ($3.32 per share) for the three and nine months ended November 2, 2024, respectively, and $507 million ($1.10 per share) and $1.5 billion ($3.26 per share) for the three and nine months ended October 28, 2023, respectively, a per share increase of 1.8 percent. We declared dividends totaling $521 million ($1.12 per share) during the third quarter of 2024 and $513 million ($1.10 per share) during the third quarter of 2023, a per share increase of 1.8 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.
Current wording
We paid dividends totaling $510 million ($1.12 per share) for the three months ended May 3, 2025, and $508 million ($1.10 per share) for the three months ended May 4, 2024, a per share increase of 1.8 percent. We declared dividends totaling $515 million ($1.12 per share) during the first quarter of 2025 and $516 million ($1.10 per share) during the first quarter of 2024, a per share increase of 1.8 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.
Previous wording
We deployed $509 million to repurchase shares during the nine months ended November 2, 2024. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 8 to the Financial Statements for more information.
Current wording
We deployed $251 million to repurchase shares during the three months ended May 3, 2025. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 8 to the Financial Statements for more information.
Previous wording
In September 2024, we issued $750 million of debt. Note 6 to the Financial Statements provides additional information.
Current wording
In March 2025, we issued $1.0 billion of debt, and in April 2025, we repaid $1.5 billion of debt. Note 6 to the Financial Statements provides additional information.
Previous wording
We have the ability to obtain short-term financing from time to time under our commercial paper program and credit facilities. In October 2024, we obtained a new committed $1.0 billion 364-day unsecured revolving credit facility that will expire in October 2025 and terminated our prior 364-day credit facility. This credit facility and our $3.0 billion unsecured revolving credit facility that will expire in October 2028 backstop our commercial paper program. No balances were outstanding under either credit facility at any time during 2024 or 2023. There was no commercial paper outstanding as of either November 2, 2024 or October 28, 2023. Note 6 to the Financial Statements provides additional information.
Current wording
We have the ability to obtain short-term financing from time to time under our commercial paper program and credit facilities. Our committed $1.0 billion 364-day and $3.0 billion unsecured revolving credit facilities that will expire in October 2025 and October 2028, respectively, provide a liquidity backstop to our commercial paper program. No balances were outstanding under either credit facility at any time during 2025 or 2024. There was no commercial paper outstanding as of either May 3, 2025, or May 4, 2024. Note 6 to the Financial Statements provides additional information.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
•GAAP and adjusted diluted earnings per share (Adjusted EPS) were $1.85.
Previous report — wording carried elsewhere
•new supply chain facilities coming online;