TARGET CORP

Notes to Consolidated Financial Statements (unaudited)

1. Accounting Policies

These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States (U.S.) generally accepted accounting principles (GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in our most recent Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements.

We operate as a single segment that includes all of our operations, which are designed to enable guests to purchase products seamlessly in stores or through our digital channels. Nearly all of our revenues are generated in the U.S. The vast majority of our long-lived assets are located within the U.S.

Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year.

2. Net Sales

Merchandise sales represent the vast majority of our revenues. We also earn revenues from a variety of other sources, most notably advertising revenue and credit card profit-sharing income.

(a)Includes apparel for women, men, young adults, kids, toddlers, and babies, as well as jewelry, accessories, and shoes.

(b)Includes skin and bath care, cosmetics, hair care, oral care, deodorant, and shaving products.

(c)Includes dry and perishable grocery, including snacks, candy, beverages, deli, bakery, meat, produce, food service (primarily Starbucks), and floral in our stores.

(d)Includes electronics, including video games and consoles, toys, trading cards, sporting goods and fan merchandise, pop culture and other entertainment, and luggage.

(e)Includes bed and bath, home décor, school/office supplies, storage, small appliances, kitchenware, greeting cards, party supplies, furniture, lighting, home improvement, and seasonal merchandise.

(f)Includes household cleaning, paper products, over-the-counter healthcare, vitamins and supplements, baby gear, and pet supplies.

Merchandise sales —We record almost all retail store revenues at the point of sale. Digitally originated sales may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Sales are recognized net of expected returns, which we estimate using historical return patterns and our expectation of future returns. As of May 2, 2026, January 31, 2026, and May 3, 2025, the liability for estimated returns was $191 million, $155 million, and $186 million, respectively.

Revenue from Target gift card sales is recognized upon gift card redemption, which is typically within one year of issuance.

(a)Included in Accrued and Other Current Liabilities.

(b)Net of estimated breakage.

Advertising revenue — Primarily represents revenue related to certain advertising services provided via our Roundel digital advertising business offering. Roundel services are classified as either Net Sales or as a reduction of Cost of Sales or Selling, General, and Administrative (SG&A) Expenses, depending on the nature of the advertising arrangement.

Credit card profit sharing — We receive payments under a credit card program agreement with TD Bank Group (TD). Under the agreement, we receive a percentage of the profits generated by the Target Circle credit card receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Circle credit card receivables, controls risk management policies, and oversees regulatory compliance.

Other — Includes commissions earned on third-party sales through our Target Plus third-party digital marketplace, Target Circle 360 membership revenue, Shipt membership and service revenues, rental income, and other miscellaneous revenues.

3. Interchange Fee Settlements

In March 2025, we entered into settlement agreements to resolve credit card interchange fee litigation matters in which we were a plaintiff. As a result of these lump-sum settlements, during the first quarter of 2025, we recorded gains within SG&A Expenses of $593 million, net of legal fees.

4. Fair Value Measurements

Fair value measurements are reported in one of three levels reflecting the significant inputs used to determine fair value.

(a)The carrying amounts of certain other current assets, commercial paper, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.

(b)The fair value of long-term debt is estimated using Level 2 inputs based on quoted prices for the instruments. Where quoted prices are not available, fair value is estimated using discounted cash flows and market-based expectations for interest rates. These amounts exclude commercial paper, fair value hedge adjustments, and lease liabilities.

5. Supplier Finance Programs

We have arrangements with several financial institutions to act as our paying agents to certain vendors. The arrangements also permit the financial institutions to provide vendors with an option, at our vendors' sole discretion, to elect to receive early payment of our payment obligations from the financial institutions at a discounted amount. A vendor’s election to receive early payment does not change the amount that we must remit to the financial institutions or our payment date, which is up to 120 days from the invoice date.

We do not pay any fees or pledge any security to these financial institutions under these arrangements. The arrangements can be terminated by either party with notice ranging up to 120 days.

Our outstanding vendor obligations eligible for early payment under these arrangements totaled $2.8 billion, $3.0 billion, and $3.3 billion as of May 2, 2026, January 31, 2026, and May 3, 2025, respectively, and are included within Accounts Payable on our Consolidated Statements of Financial Position. These outstanding vendor obligations do not represent actual early payments made under supplier finance programs, which have historically been lower.

6. Long-Term Debt and Commercial Paper

Our unsecured long-term debt repayments during the three months ended May 2, 2026, were as follows:

We obtain short-term financing from time to time under our commercial paper program. There wasno commercial paper outstanding at any time during the three months ended May 2, 2026, or May 3, 2025.

7. Derivative Financial Instruments

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 4 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

We were party to interest rate swaps with notional amounts totaling $2.45 billion as of May 2, 2026, and $2.20 billion as of January 31, 2026, and May 3, 2025. We pay a floating rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during the three months ended May 2, 2026, and May 3, 2025.

8. Share Repurchase

We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase arrangements, and other privately negotiated transactions with financial institutions.

(a) Amounts include applicable excise tax and commissions.

9. Pension Benefits

We provide pension plan benefits to eligible team members.

10. Accumulated Other Comprehensive Loss

Note: Amounts are net of tax.

11. Segment Reporting

Our Chief Operating Decision Maker (CODM)—our Chief Executive Officer—monitors our consolidated net earnings and operating income to evaluate performance and make operating decisions including whether to invest profits into capital projects, make equity or other investments, or return capital to shareholders. Consolidated assets as presented on our Consolidated Statements of Financial Position is the only view of assets regularly reviewed by our CODM. We operate as a single segment that includes all of our operations, which are designed to enable guests to purchase products seamlessly in stores or through our digital channels. Virtually all of our consolidated revenues are generated in the United States. The vast majority of our properties and equipment are located within the United States.

(a)For the three months ended May 3, 2025, includes $593 million of pretax net gains related to settlements of credit card interchange fee litigation matters. Note 3 provides additional information.