TARGET CORP
For the period ended Aug 2, 2025. Filed Aug 29, 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.
Aug 2, 2025 · Filed Aug 29, 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 2025-05-03; filed 2025-05-30.
0000027419-25-000101
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-08-02; filed 2025-08-29.
0000027419-25-000118
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsGross Margin RateThe 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 81 previous paragraphs and 88 current paragraphs.
52 unchanged; 24 reworded; 10 added; 5 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 34 previous and 39 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 (10)
Current report
•Operating income of $1.3 billion was 19.4 percent lower than the comparable prior-year period.
Current report
For the six months ended August 2, 2025, our gross margin rate was 28.6 percent compared with 29.4 percent in the comparable prior-year period. The decrease reflected the net impact of
Current report
1 The Business Environment section provides additional information.
Current report
For the three months ended August 2, 2025, our SG&A expense rate was 21.3 percent compared with 21.1 percent for the comparable prior-year period, reflecting the deleveraging impact of lower Net Sales. Higher remodel-related expenses during the three months ended August 2, 2025, were offset by the net impact of cost savings.
Current report
On July 4, 2025, the U.S. enacted new legislation that includes several U.S. corporate tax provisions, including restoring immediate deductibility of certain capital expenditures, restoring full expensing of domestic research and development costs, and changes in the computations of U.S. taxation on international earnings. We expect the provisions of the legislation to result in a favorable timing shift in our U.S. cash tax payments, with no material impact on our income tax expense.
Current report
Inventory was $12.9 billion as of August 2, 2025, compared with $12.7 billion and $12.6 billion as of February 1, 2025, and August 3, 2024, respectively. The increase compared to August 3, 2024, reflects higher merchandise costs and continued investment in frequency categories.
Removed paragraphs (5)
Previous 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.
Previous report
Note: Amounts may not foot due to rounding.
Previous 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.
Previous report
Note: Amounts may not foot due to rounding.
Previous 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.
Reworded paragraphs (24)
Previous wording
First quarter 2025 included the following notable items:
Current wording
Second quarter 2025 included the following notable items:
Previous wording
•GAAP diluted earnings per share were $2.27 and Adjusted EPS 1 were $1.30.
Current wording
•GAAP diluted earnings per share and Adjusted EPS 1 were $2.05.
Previous wording
•Net Sales were $23.8 billion, a decrease of 2.8 percent from the comparable prior-year period.
Current wording
•Net Sales were $25.2 billion, a decrease of 0.9 percent from the comparable prior-year period.
Previous 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.
Current wording
•Comparable sales decreased 1.9 percent, reflecting a 1.3 percent decrease in traffic and a 0.6 percent decrease in average transaction amount.
Previous wording
◦Comparable stores-originated sales declined 5.7 percent.
Current wording
◦Comparable stores-originated sales declined 3.2 percent.
Previous wording
◦Comparable digitally-originated sales increased 4.7 percent.
Current wording
◦Comparable digitally-originated sales increased 4.3 percent.
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 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.
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 August 2, 2025, after-tax ROICwas 14.3 percent, compared with 16.6 percent for the trailing twelve months ended August 3, 2024. The calculation of ROIC isprovided on page 22.
Previous wording
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 wording
In April 2025, the U.S. imposed a range of tariffs on the vast majority of 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.
Previous wording
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 wording
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.
Previous 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.
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 periods presented.
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 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.
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 August 2, 2025, and August 3, 2024, total Target Circle Card Penetration was 16.9 percent and 17.7 percent, respectively. For the six months ended August 2, 2025, and August 3, 2024, total Target Circle Card Penetration was 17.1 percent and 17.9 percent, respectively.
Previous 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
Current wording
For the three months ended August 2, 2025, our gross margin rate was 29.0 percent compared with 30.0 percent in the comparable prior-year period. The decrease reflected the net impact of
Previous wording
•merchandising activities, including higher markdown rates, partially offset by growth in advertising and other revenues;
Current wording
•merchandising activities, including higher markdown rates and purchase order cancellation costs 1, partially offset by growth in advertising and other revenues;
Previous wording
•higher supply chain and digital fulfillment costs due to new supply chain facilities coming online and an increase in digital penetration; and
Current wording
•higher supply chain and digital fulfillment costs, partially due to to new supply chain facilities;
Previous wording
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 wording
For the six months ended August 2, 2025, our SG&A expense rate was 20.3 percent compared with 21.0 percent for the comparable prior-year period. The decrease reflected a favorable impact of interchange fee settlements during the first quarter of 2025 of approximately 1.2 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.
Previous 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.
Current wording
Net interest expense was$116 million and $232 million for the three and six months ended August 2, 2025, respectively, compared with $110 million and $216 million in the comparable prior-year periods. The increase was primarily due to higher average debt levels.
Previous wording
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 wording
Our effective income tax rates for the three and six months ended August 2, 2025, were 23.2 percent and 24.2 percent, respectively, compared with 22.9 percent and 22.8 percent in the comparable prior-year periods. For the three month period, the increase is driven by the impact of Pillar Two global minimum taxes. For the six month period, the increase reflects discrete tax expense in the current year, primarily related to share-based compensation, and the impact of Pillar Two global minimum taxes.
Previous 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.
Current wording
(c)Calculated using the effective tax rates, which were 22.9 percent and 22.4 percent for the trailing twelve months ended August 2, 2025, and August 3, 2024, respectively. For the trailing twelve months ended August 2, 2025, and August 3, 2024, includes tax effect of $1.3 billion and $1.4 billion, respectively, related to EBIT and $38 million and $33 million, respectively, related to operating lease interest.
Previous 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.
Current wording
Our cash and cash equivalents balance was $4.3 billion, $4.8 billion, and $3.5 billion as of August 2, 2025, February 1, 2025, and August 3, 2024, respectively. Our cash and cash equivalents balance includes short-term investments of $3.3 billion, $3.9 billion, and $2.5 billion as of August 2, 2025, February 1, 2025, and August 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.
Previous wording
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 wording
Cash flows provided by operating activities were $2.4 billion and $3.3 billion for the six months ended August 2, 2025, and August 3, 2024, respectively. The decrease reflects lower accounts payable leverage and the net earnings impact of lower sales, partially offset by gains on interchange fee settlements discussed in Note 3 to the Financial Statements.
Previous 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.
Current wording
Cash required for investing activities increased to $1.9 billion for the six months ended August 2, 2025, compared to $1.3 billion for the six months ended August 3, 2024, due to higher capital expenditures.
Previous 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.
Current wording
We paid dividends totaling $509 million ($1.12 per share) and $1,019 million ($2.24 per share) for the three and six months ended August 2, 2025, respectively, and $509 million ($1.10 per share) and $1,017 million ($2.20 per share) for the three and six months ended August 3, 2024, respectively, a per share increase of 1.8 percent. We declared dividends totaling $529 million ($1.14 per share) during the second quarter of 2025 and $527 million ($1.12 per share) during the second 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 $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.
Current wording
We deployed $251 million to repurchase shares during the six months ended August 2, 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 9 to the Financial Statements for more information.
Previous 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.
Current wording
We issued $1.0 billion of unsecured debt in both March and June 2025, and repaid $1.5 billion of unsecured debt in April 2025. Note 7 to the Financial Statements provides additional information.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
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. The Gross Margin Rate section below provides additional information about the impact of such actions.
Current report — wording carried from elsewhere
•merchandising, including higher markdown rates and purchase order cancellation costs 1, partially offset by growth in advertising and other revenues;