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Welcome to our
2018 Annual Report
To explore key stories of the past year and find out what’s ahead, visit Target.com/abullseyeview.
You can view our Annual Report online at Target.com/annualreport.
Financial Highlights
(Note: Reflects amounts attributable to continuing operations. 2017 was a 53-week year.)
Total Revenue
In Millions
Operating Income
In Millions
Net Earnings
In Millions
Diluted EPS
9
7
2
,
1
7
$
8
1
6
,
2
7
$
4
9
4
,
4
7
$
1
7
2
,
0
7
$
4
1
7
,
2
7
$
6
5
3
,
5
7
$
9
7
7
,
4
$
5
3
5
,
4
$
8
7
8
,
4
$
4
6
8
,
4
$
4
2
2
,
4
$
0
1
1
,
4
$
4
9
6
,
2
$
9
4
4
,
2
$
1
2
3
,
3
$
6
6
6
,
2
$
8
0
9
,
2
$
0
3
9
,
2
$
0
2
.
4
$
3
8
.
3
$
5
2
.
5
$
8
5
.
4
$
9
2
.
5
$
0
5
.
5
$
’13
’14
’15
’16 ’17 ’18
’13
’14
’15
’16 ’17 ’18
’13
’14
’15
’16 ’17 ’18
’13
’14
’15
’16 ’17 ’18
2018 Growth: 3.6%
Five-year CAGR: 1.1%
2018 Growth: -2.7%
Five-year CAGR: -3.0%
2018 Growth: 0.8%
Five-year CAGR: 1.7%
2018 Growth: 4.0%
Five-year CAGR: 5.5%
Total 2018 Sales: $74,433 Million
24%
20%
20%
19%
17%
Beauty & Household
Essentials
Food & Beverage
Apparel &
Accessories
Home Furnishings
& Décor
Hardlines
Target 2018 Annual Report
Two years ago, we laid out an ambitious investment agenda to
transform our company – by reimagining our stores, reinventing our
supply chain and fulfillment capabilities, repositioning our owned
brand portfolio and investing in our team. And as I look back on our
performance in 2018, I could not be more proud of all that our team
accomplished.
In 2018, comparable sales rose an industry-leading 5 percent,
driven entirely by growth in traffic. We gained market share in every
major category. And we established a record high for our earnings
per share.
Today, I can say with great confidence that the strategy we laid out
two years ago is working. Our guests love what they see. And in this
intensely competitive landscape, Target is right where we want to
be: among the top performers in the industry.
But, anyone who follows retail knows that we operate in an
incredibly dynamic marketplace. So if we want to stay on top as a
brand our guests love, shop and admire, we know we have more
work to do. Rest assured, our team understands that better than
anyone. Our goal isn’t to deliver only incremental gains or to string
together a couple of strong quarters. Our goal is to build a better
company, powered by a durable and defensible business model
that delivers strong, profitable growth for years to come.
As we look to the future, that means you can expect Target to keep
investing and growing.
Last year, we said we wanted to become America’s easiest place to
shop. And our team delivered, as Target became the first retailer to
offer same-day and Drive Up fulfillment capabilities coast-to-coast.
In the year ahead, we’ll continue to invest and expand our network,
focusing on elevating our service experience and driving greater
adoption among our guests.
In the last two years, we remodeled more than 400 stores, and
we’re on track to deliver 600 additional remodels by the end of
2020. And, we’re still thoughtfully adding to our store footprint. In
2018, we opened more than two dozen small-format stores. This
year, we’re planning to add nearly 30 more – zeroing in on high-
traffic urban locations and college campuses.
Last year, we undertook an ambitious redesign of our stores-
operating model – redefining thousands of roles to deliver better
guest service. We raised our minimum wage for U.S. team members
to $12 an hour. And we raised it again in early 2019 – to $13 – as
we move toward our commitment to a minimum $15 an hour by the
end of 2020.
Digital channels continue to play a key role in our overall sales
growth. In 2018, comparable digital sales grew 36 percent, capping
the fifth-straight year in which our digital growth has topped 25
percent. Today, Target’s digital performance is delivering more than
$5 billion in annual sales – and driving additional growth across the
business. In the year ahead, you can expect that we’ll keep investing
in digital capabilities – from artificial intelligence to virtual reality –
that will elevate the shopping experience and give our guests new
reasons to choose Target.
Finally, when we introduced our investment agenda at the beginning
of 2017, we said we’d deliver more than a dozen new brands in 18
months. As of today, we’ve more than doubled that number, and
our team is still going strong. Recently, Fast Company named Target
one of the world’s most innovative companies, specifically for our
brand work. In 2019, Target will deliver a steady stream of newness
and exclusives across our assortment as we continue to launch
brands and introduce new partnerships.
Taken together, we expect these initiatives will power a financial
model that is designed to consistently generate low-single digit
sales growth, mid-single digit growth in operating income, and
high-single digit growth in earnings per share. This financial model is
also designed to generate strong cash flow and return on invested
capital that will not only sustain, but fuel our performance in the
years ahead.
So as we move into 2019, we aren’t slowing down our efforts to
adapt, create, innovate and inspire. I want to thank our teams in
stores and property management, in merchandising, in supply
chain, in marketing and communications; our product designers
and sourcing experts; our data scientists, digital and technology
teams; our teams in finance, strategy, legal and HR – everyone
across Target. This is the team that will continue serving our guests,
creating value for our shareholders and leading this industry for
many years to come.
Brian Cornell, Chairman and CEO
Financial Summary
FINANCIAL RESULTS (in millions)
Sales (c)
Other revenue
Total revenue
Cost of sales
Selling, general and administrative expenses (SG&A)
Depreciation and amortization (exclusive of depreciation included
in cost of sales)
Operating income
Net interest expense (d)
Net other (income) / expense (e)
Earnings from continuing operations before income taxes
Provision for income taxes (f)
Net earnings from continuing operations
Discontinued operations, net of tax
Net earnings / (loss)
PER SHARE
Basic earnings / (loss) per share
Continuing operations
Discontinued operations
Net earnings / (loss) per share
Diluted earnings / (loss) per share
Continuing operations
Discontinued operations
Net earnings / (loss) per share
Cash dividends declared
FINANCIAL POSITION (in millions)
Total assets
Capital expenditures (g)
Long-term debt, including current portion (g)
Net debt (g)(h)
Shareholders’ investment
FINANCIAL RATIOS (g)
Comparable sales growth (i)
Gross margin (% of sales)
SG&A (% of total revenue)
Operating income margin (% of total revenue)
OTHER
Common shares outstanding (in millions)
Operating cash flow provided by continuing operations (in millions)
Revenue per square foot (g)(j)
Retail square feet (in thousands) (g)
Square footage growth (g)
Total number of stores (g)
Total number of distribution centers (g)
2018
2017
as adjusted (a)(b)
2016
as adjusted (b)
2015
as adjusted (b)
2014 (b)
Target 2018 Annual Report
$
74,433
$
71,786
$
69,414
$
73,717
$
72,618
923
75,356
53,299
15,723
2,224
4,110
461
(27)
3,676
746
2,930
7
928
72,714
51,125
15,140
2,225
4,224
653
(59)
3,630
722
2,908
6
857
70,271
49,145
14,217
2,045
4,864
991
(88)
3,961
1,295
2,666
68
777
74,494
52,241
15,406
1,969
4,878
607
(652)
4,923
1,602
3,321
42
—
72,618
51,506
14,676
1,901
4,535
882
—
3,653
1,204
2,449
(4,085)
$
2,937
$
2,914
$
2,734
$
3,363
$
(1,636)
$
$
$
$
$
$
$
$
$
$
$
$
5.54
0.01
5.55
5.50
0.01
5.51
2.54
41,290
3,516
11,275
10,506
11,297
5.0%
28.4%
20.9%
5.5%
517.8
5,970
314
$
$
$
$
$
$
$
$
$
$
$
$
5.32
0.01
5.32
5.29
0.01
5.29
2.46
40,303
2,533
11,398
10,267
11,651
1.3%
28.8%
20.8%
5.8%
541.7
6,861
298
$
$
$
$
$
$
$
$
$
$
$
$
4.61
0.12
4.73
4.58
0.12
4.69
2.36
38,724
1,547
12,591
11,481
10,915
(0.5 )%
29.2 %
20.2 %
6.9 %
556.2
5,337
293
$
$
$
$
$
$
$
$
$
$
$
$
5.29
0.07
5.35
5.25
0.07
5.31
2.20
40,262
1,438
12,760
9,752
12,957
2.1%
29.1%
20.7%
6.5%
602.2
5,254
310
3.86
(6.44)
(2.58)
3.83
(6.38)
(2.56)
1.99
41,172
1,786
12,725
11,205
13,997
1.3%
29.1%
20.0%
6.2%
640.2
5,157
302
$
$
$
$
$
$
$
$
$
$
$
239,581
239,355
239,502
239,539
239,963
0.1%
1,844
40
(0.1)%
1,822
41
— %
1,802
40
(0.2)%
1,792
40
— %
1,790
38
(a) Consisted of 53 weeks.
(b) The financial summary data for fiscal years 2017, 2016, and 2015 reflect the adoption of Accounting Standards Update (ASU) No. 2014-09—Revenue from Contracts with Customers (Topic
606). The financial summary data for fiscal years 2017 and 2016 reflect the adoption of Accounting Standards Update (ASU) No. 2016-02—Leases (Topic 842). The financial summary data for
fiscal year 2015 does not reflect adoption of Topic 842 and the financial summary data for fiscal 2014 does not reflect adoption of Topic 606 and Topic 842. Note 2 to the Consolidated Financial
Statements in Form 10-K, Item 8, provides additional information.
(c) The 2016 sales decline is primarily due to the December 2015 sale of our pharmacy and clinic businesses (Pharmacy Transaction) to CVS Pharmacy, Inc. 2015 and 2014 sales include $3,815 million
and $4,148 million, respectively, related to our former pharmacy and clinic businesses.
(d) Includes losses on early retirement of debt of $123 million, $422 million, and $285 million for 2017, 2016, and 2014, respectively.
(e) For 2015, includes the gain on the sale of our pharmacy and clinic businesses.
(f) For 2018 and 2017, includes $36 million and $343 million, respectively, of discrete tax benefits related to the Tax Cuts and Jobs Act enacted in December 2017.
(g) Represents amounts attributable to continuing operations.
(h) Including current portion of long-term debt and other borrowings, net of short-term investments of $769 million, $1,131 million, $1,110 million, $3,008 million, and $1,520 million in 2018, 2017,
2016, 2015, and 2014, respectively. Management believes this measure is an indicator of our level of financial leverage because short-term investments are available to pay debt maturity
obligations. For 2017 and earlier, only short-term investments held by U.S. entities were used to calculate net debt because amounts held by entities located outside the U.S. were restricted for
use.
(i) See definition of comparable sales in Form 10-K, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(j) Represents revenue per square foot which is calculated using rolling four quarters average square feet. In 2017, revenue per square foot was calculated excluding the 53rd week in order to
provide a more useful comparison to other years. Using total reported revenue for 2017 (including the 53rd week) resulted in revenue per square foot of $303. The 2016 decrease is primarily due
to the Pharmacy Transaction. Our former pharmacy and clinic businesses contributed approximately $16 to 2015 revenue per square foot. Revenue per square foot for 2014 does not include
profit sharing under our credit card program agreement which was classified as a reduction of SG&A expenses prior to adoption of Topic 606.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 2, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-6049
TARGET CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of
incorporation or organization)
1000 Nicollet Mall, Minneapolis, Minnesota
(Address of principal executive offices)
41-0215170
(I.R.S. Employer
Identification No.)
55403
(Zip Code)
Securities Registered Pursuant To Section 12(B) Of The Act:
Registrant's telephone number, including area code: 612/304-6073
Title of Each Class
Common Stock, par value $0.0833 per share
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of August 4, 2018, was $42,763,636,334 based on the closing
price of $81.45 per share of Common Stock as reported on the New York Stock Exchange Composite Index.
Indicate the number of shares outstanding of each of registrant's classes of Common Stock, as of the latest practicable date. Total shares of Common
Stock, par value $0.0833, outstanding at March 7, 2019, were 516,333,213.
Portions of Target's Proxy Statement for the Annual Meeting of Shareholders to be held on June 12, 2019, are incorporated into Part III.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 4A
Executive Officers
PART II
Item 5
Item 6
Item 7
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15
Exhibits, Financial Statement Schedules
Signatures
2
5
10
11
12
12
13
14
16
17
31
32
64
64
64
65
65
65
65
65
66
70
1
Item 1. Business
General
PART I
Target Corporation (Target, the Corporation or the Company) was incorporated in Minnesota in 1902. We offer our
customers, referred to as "guests," everyday essentials and fashionable, differentiated merchandise at discounted
prices. Our ability to deliver a preferred shopping experience to our guests is supported by our supply chain and
technology, our devotion to innovation, our loyalty offerings and suite of fulfillment options, and our disciplined approach
to managing our business and investing in future growth. We operate as a single segment designed to enable guests
to purchase products seamlessly in stores or through our digital channels. Since 1946, we have given 5 percent of our
profit to communities.
Financial Highlights
For information on key financial highlights, see Item 6, Selected Financial Data, and Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations (MD&A).
Seasonality
A larger share of annual revenues and earnings traditionally occurs in the fourth quarter because it includes the
November and December holiday sales period.
Merchandise
We sell a wide assortment of general merchandise and food. The majority of our general merchandise stores offer an
edited food assortment, including perishables, dry grocery, dairy, and frozen items. Nearly all of our stores larger than
170,000 square feet offer a full line of food items comparable to traditional supermarkets. Our small format stores,
generally smaller than 50,000 square feet, offer curated general merchandise and food assortments. Our digital
channels include a wide merchandise assortment, including many items found in our stores, along with a complementary
assortment.
A significant portion of our sales is from national brand merchandise. Approximately one-third of 2018 sales is related
to our owned and exclusive brands, including but not limited to the following:
Owned Brands
A New Day™
Archer Farms®
Art Class™
Ava & Viv®
Boots & Barkley®
Bullseye's Playground™
Cat & Jack™
Cloud Island™
Embark®
Gilligan & O'Malley®
Goodfellow & Co.™
heyday™
Hyde & Eek! Boutique™
JoyLab™
Knox Rose™
Kona Sol™
Made By Design™
Market Pantry®
Opalhouse™
Original Use™
Pillowfort™
Prologue™
Project 62™
Room Essentials®
Shade & Shore™
Simply Balanced™
Smartly™
Smith & Hawken®
Sonia Kashuk®
Spritz™
Sutton & Dodge®
Threshold™
Universal Thread™
up & up®
Who What Wear™
Wild Fable™
Wine Cube®
Wondershop™
Xhilaration®
Exclusive Brands
C9 by Champion®
DENIZEN® from Levi's®
Fieldcrest®
Genuine Kids® from OshKosh®
Hand Made Modern®
Hearth & Hand™ with Magnolia
Isabel Maternity™ by Ingrid & Isabel® Oh Joy!® for Target
Umbro™ for Target
Just One You® made by carter's®
Kid Made Modern®
Nate Berkus™ for Target
2
We also sell merchandise through periodic exclusive design and creative partnerships and generate revenue from in-
store amenities such as Target Café and leased or licensed departments such as Target Optical, Starbucks, and other
food service offerings. CVS Pharmacy, Inc. (CVS) operates pharmacies and clinics in our stores under a perpetual
operating agreement from which we generate annual occupancy income.
Distribution
The vast majority of merchandise is distributed to our stores through our network of 40 distribution centers. Common
carriers ship general merchandise to and from our distribution centers. Vendors or third party distributors ship certain
food items and other merchandise directly to our stores. Merchandise sold through our digital channels is distributed
to our guests via common carriers (from stores, distribution centers, vendors, and third party distributors), delivery via
our wholly-owned subsidiary, Shipt, Inc. (Shipt), and through guest pick-up at our stores. Using our stores as fulfillment
points allows improved product availability and delivery times and also reduces shipping costs.
Employees
At February 2, 2019, we employed approximately 360,000 full-time, part-time and seasonal employees, referred to as
"team members." Because of the seasonal nature of the retail business, employment levels peak in the holiday season.
We offer a broad range of company-paid benefits to our team members. Eligibility for and the level of benefits vary
depending on team members' full-time or part-time status, compensation level, date of hire, and/or length of service.
Company-paid benefits include a 401(k) plan, medical and dental plans, disability insurance, paid vacation, tuition
reimbursement, various team member assistance programs, life insurance, a pension plan (closed to new participants,
with limited exceptions), and merchandise and other discounts. We believe our team member relations are good.
Working Capital
Effective inventory management is key to our ongoing success, and we use various techniques including demand
forecasting and planning and various forms of replenishment management. We achieve effective inventory management
by staying in-stock in core product offerings, maintaining positive vendor relationships, and carefully planning inventory
levels for seasonal and apparel items to minimize markdowns.
The Liquidity and Capital Resources section in MD&A provides additional details.
Competition
We compete with traditional and internet retailers, including off-price general merchandise retailers, apparel retailers,
wholesale clubs, category specific retailers, drug stores, supermarkets, and other forms of retail commerce. Our ability
to positively differentiate ourselves from other retailers and provide compelling value to our guests largely determines
our competitive position within the retail industry.
Intellectual Property
Our brand image is a critical element of our business strategy. Our principal trademarks, including Target, SuperTarget
and our "Bullseye Design," have been registered with the United States (U.S.) Patent and Trademark Office. We also
seek to obtain and preserve intellectual property protection for our owned brands.
Geographic Information
Nearly all of our revenues are generated within the U.S. The vast majority of our property and equipment is located
within the U.S.
3
Available Information
Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge at
investors.target.com as soon as reasonably practicable after we file such material with, or furnish it to, the U.S. Securities
and Exchange Commission (SEC). Our Corporate Governance Guidelines, Code of Ethics, Corporate Responsibility
Report, and the charters for the committees of our Board of Directors are also available free of charge in print upon
request or at investors.target.com.
4
Item 1A. Risk Factors
Our business is subject to many risks. Set forth below are the material risks we face. Risks are listed in the categories
where they primarily apply, but other categories may also apply.
Competitive and Reputational Risks
Our continued success is dependent on positive perceptions of Target which, if eroded, could adversely affect
our business and our relationships with our guests and team members.
We believe that one of the reasons our guests prefer to shop at Target, our team members choose Target as a place
of employment, and our vendors choose to do business with us is the reputation we have built over many years for
serving our four primary constituencies: guests, team members, shareholders, and the communities in which we
operate. To be successful in the future, we must continue to preserve Target's reputation. Reputational value is based
in large part on perceptions, and broad access to social media makes it easy for anyone to provide public feedback
that can influence perceptions of Target. It may be difficult to control negative publicity, regardless of whether it is
accurate. Target’s position or perceived lack of position on social, environmental, public policy or other sensitive issues,
and any perceived lack of transparency about those matters, could harm our reputation with certain groups or guests.
While reputations may take decades to build, negative incidents can quickly erode trust and confidence and can result
in consumer boycotts, governmental investigations, or litigation. In addition, vendors and others with whom we do
business may affect our reputation. For example, CVS operates clinics and pharmacies within our stores, and our
guests’ perceptions of and experiences with CVS may affect our reputation. Negative reputational incidents could
adversely affect our business through lost sales, loss of new store and development opportunities, or team member
retention and recruiting difficulties.
If we are unable to positively differentiate ourselves from other retailers, our results of operations could be
adversely affected.
In the past, we have been able to compete successfully by differentiating our guests’ shopping experience through a
careful combination of price, merchandise assortment, store environment, convenience, guest service, loyalty
programs, and marketing efforts. Guest perceptions regarding the cleanliness and safety of our stores, the functionality,
reliability, and speed of our digital channels and fulfillment options, our in-stock levels, and the value of our promotions
are among the factors that affect our ability to compete. In addition, our ability to create a personalized guest experience
through the collection and use of accurate and relevant guest data is important to our ability to differentiate from other
retailers. No single competitive factor is dominant, and actions by our competitors on any of these factors or the failure
of our strategies could adversely affect our sales, gross margins, and expenses.
Our owned and exclusive brand products help differentiate us from other retailers, generally carry higher margins than
equivalent national brand products and represent a significant portion of our overall sales. If we are unable to successfully
develop, support, and evolve our owned and exclusive brands, if one or more of these brands experiences a loss of
consumer acceptance or confidence, or if we are unable to successfully protect our intellectual property rights, our
sales and gross margins could be adversely affected.
The retail industry's continuing migration to digital channels has affected the ways we differentiate ourselves from other
retailers. In particular, consumers are able to quickly and conveniently comparison shop and determine real-time
product availability using digital tools, which can lead to decisions based solely on price or the functionality of the digital
tools. Consumers may also use third-party channels or devices, such as voice assistants and smart home devices, to
initiate shopping searches and place orders, which could sometimes make us dependent on the capabilities and search
algorithms of those third parties to reach those consumers. Any difficulties in executing our differentiation efforts, actions
by our competitors in response to these efforts, or failures by vendors in managing their own channels, content and
technology systems to support these efforts could adversely affect our sales, gross margins, and expenses.
5
If we are unable to successfully provide a relevant and reliable experience for our guests across multiple
channels, our sales, results of operations and reputation could be adversely affected.
Our business has evolved from an in-store experience to interaction with guests across multiple channels (in-store,
online, mobile, social media, voice assistants, and smart home devices, among others). Our guests are using those
channels to shop with us and provide feedback and public commentary about our business. We must anticipate and
meet changing guest expectations and counteract developments and investments by our competitors. Our evolving
retailing efforts include implementing technology, software and processes to be able to conveniently and cost-effectively
fulfill guest orders directly from any point within our system of stores and distribution centers and from our vendors.
We also need to collect accurate, relevant, and usable guest data to personalize our offerings. Providing flexible
fulfillment options and implementing new technology is complex and may not meet expectations for accurate order
fulfillment, faster and guaranteed delivery times, low-price or free shipping, and desired payment methods. Even when
we are successful in meeting expectations for fulfillment, if we are unable to offset increased costs of fulfilling orders
outside of our traditional in-store channel with efficiencies, cost-savings or expense reductions, our results of operations
could be adversely affected.
If we do not anticipate and respond quickly to changing consumer preferences, our sales and profitability
could suffer.
A large part of our business is dependent on our ability to make trend right decisions and effectively manage our
inventory in a broad range of merchandise categories, including apparel, accessories, home décor, electronics, toys,
seasonal offerings, food, and other merchandise. If we do not obtain accurate and relevant data on guest preferences,
predict changing consumer tastes, preferences, spending patterns and other lifestyle decisions, emphasize the correct
categories, implement competitive and effective pricing and promotion strategies, or personalize our offerings to our
guests, we may experience lost sales, spoilage, and increased inventory markdowns, which could adversely affect our
results of operations by reducing our profitability.
Investments and Infrastructure Risks
If our capital investments in remodeling existing stores, building new stores, and improving technology and
supply chain infrastructure do not achieve appropriate returns, our competitive position, financial condition
and results of operations could be adversely affected.
Our business depends, in part, on our ability to remodel existing stores and build new stores in a manner that achieves
appropriate returns on our capital investment. Our current store remodel program is larger than historic levels and is
being implemented using a custom approach based on the condition of each store and characteristics of the surrounding
neighborhood. When building new stores, we compete with other retailers and businesses for suitable locations for
our stores. Many of our expected new store sites are smaller, non-standard footprints located in fully developed markets,
which require changes to our supply chain practices and are generally more time-consuming, expensive and uncertain
undertakings than expansion into undeveloped suburban and ex-urban markets. Pursuing the wrong remodel or new
store opportunities and any delays, cost increases, disruptions or other uncertainties related to those opportunities
could adversely affect our results of operations.
We are currently making, and expect to continue to make, significant investments in technology and selective
acquisitions to improve guest experiences across multiple channels and improve our supply chain and inventory
management systems. The effectiveness of these investments can be less predictable than remodeling stores, and
might not provide the anticipated benefits or desired rates of return. In addition, if we are unable to successfully protect
any intellectual property rights resulting from our investments, the value received from those investments may be
eroded, which could adversely affect our financial condition.
Pursuing the wrong investment opportunities, being unable to make new concepts scalable, making an investment
commitment significantly above or below our needs, or failing to effectively incorporate acquired businesses into our
business could result in the loss of our competitive position and adversely affect our financial condition or results of
operations.
6
A significant disruption in our computer systems and our inability to adequately maintain and update those
systems could adversely affect our operations and negatively affect our guests.
We rely extensively on our computer systems to manage and account for inventory, process guest transactions, manage
and maintain the privacy of guest data, communicate with our vendors and other third parties, service Target-branded
credit and debit card accounts, and summarize and analyze results. We also rely on continued and unimpeded access
to the Internet to use our computer systems. Our systems are subject to damage or interruption from power outages,
telecommunications failures, computer viruses, malicious attacks, security breaches, and catastrophic events. If our
systems are damaged or fail to function properly or reliably, we may incur substantial repair or replacement costs,
experience data loss or theft and impediments to our ability to manage inventories or process guest transactions, and
encounter lost guest confidence, which could require additional promotional activities to attract guests and otherwise
adversely affect our results of operations.
We continually invest to maintain and update our computer systems. Implementing significant system changes
increases the risk of computer system disruption. The potential problems and interruptions associated with implementing
technology initiatives, as well as providing training and support for those initiatives, could disrupt or reduce our
operational efficiency, and could negatively impact guest experience and guest confidence.
Data Security and Privacy Risks
If our efforts to provide information security are unsuccessful or if we are unable to meet increasingly
demanding regulatory requirements, we may face additional costly government enforcement actions and
private litigation, and our reputation and results of operations could suffer.
We regularly receive and store information about our guests, team members, vendors and other third parties. We have
programs in place to detect, contain, and respond to data security incidents. However, because the techniques used
to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult
to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive
measures. In addition, hardware, software, or applications we develop or procure from third parties may contain defects
in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized
parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business,
through fraud, trickery, or other forms of deceiving our team members, contractors, and vendors.
Prior to 2013, all data security incidents we encountered were insignificant. Our 2013 data breach was significant and
went undetected for several weeks. Both we and our vendors have had data security incidents since the 2013 data
breach; however, to date these other incidents have not been material to our results of operations. Based on the
prominence and notoriety of the 2013 data breach, even minor additional data security incidents could draw greater
scrutiny. If we, our vendors, or other third parties with whom we do business experience additional significant data
security incidents or fail to detect and appropriately respond to significant incidents, we could be exposed to additional
government enforcement actions and private litigation. In addition, our guests could lose confidence in our ability to
protect their information, discontinue using our REDcards or loyalty programs, or stop shopping with us altogether,
which could adversely affect our sales, reputation and results of operations.
The legal and regulatory environment regarding information security, cybersecurity, and privacy is increasingly
demanding and has enhanced requirements for handling personal data. Complying with new data protection
requirements may cause us to incur substantial costs, require changes to our business practices, limit our ability to
obtain data used to provide a differentiated guest experience, and expose us to further litigation and regulatory risks,
each of which could adversely affect our results of operations.
Supply Chain and Third Party Risks
Changes in our relationships with our vendors, changes in tax or trade policy, interruptions in our supply
chain or increased commodity or supply chain costs could adversely affect our results of operations.
We are dependent on our vendors to supply merchandise to our distribution centers, stores, and guests. As we continue
to add capabilities, operating our fulfillment network becomes more complex and challenging. If our fulfillment network
does not operate properly or if a vendor fails to deliver on its commitments, we could experience merchandise out-of-
stocks, delivery delays or increased delivery costs, which could lead to lost sales and decreased guest confidence,
and adversely affect our results of operations.
7
A large portion of our merchandise is sourced, directly or indirectly, from outside the U.S., with China as our single
largest source, so any major changes in tax or trade policy, such as the imposition of additional tariffs or duties on
imported products, could require us to take certain actions, such as raising prices on products we sell, which could
adversely affect our results of operations.
Political or financial instability, currency fluctuations, the outbreak of pandemics, labor unrest, transport capacity and
costs, port security, weather conditions, natural disasters or other events that could slow or disrupt port activities and
affect foreign trade are beyond our control and could materially disrupt our supply of merchandise, increase our costs,
and/or adversely affect our results of operations. There have been periodic labor disputes impacting the U.S. ports
that have caused us to make alternative arrangements to continue the flow of inventory, and if these types of disputes
recur, worsen, or occur in other countries through which we source products, it may have a material impact on our
costs or inventory supply. Changes in the costs of procuring commodities used in our merchandise or the costs related
to our supply chain, could adversely affect our results of operations.
A disruption in relationships with third party service providers could adversely affect our operations.
We rely on third parties to support our business, including portions of our technology infrastructure, development and
support, our digital platforms and fulfillment operations, credit and debit card transaction processing, extensions of
credit for our 5% REDcard Rewards loyalty program, the clinics and pharmacies operated by CVS within our stores,
the infrastructure supporting our guest contact centers, aspects of our food offerings, and delivery services. If we are
unable to contract with third parties having the specialized skills needed to support those strategies or integrate their
products and services with our business, or if they fail to meet our performance standards and expectations, then our
reputation and results of operations could be adversely affected. For example, if our guests unfavorably view CVS’s
operations, our ability to discontinue the relationship is limited and our results of operations could be adversely affected.
Legal, Regulatory, Global and Other External Risks
Our earnings depend on the state of macroeconomic conditions and consumer confidence in the U.S.
Nearly all of our sales are in the U.S., making our results highly dependent on U.S. consumer confidence and the
health of the U.S. economy. In addition, a significant portion of our total sales is derived from stores located in five
states: California, Texas, Florida, Minnesota and Illinois, resulting in further dependence on local economic conditions
in these states. Deterioration in macroeconomic conditions or consumer confidence could negatively affect our business
in many ways, including slowing sales growth, reducing overall sales, and reducing gross margins.
These same considerations impact the success of our credit card program. Although we no longer own a consumer
credit card receivables portfolio, we share in the profits generated by the credit card program with TD Bank Group
(TD), which owns the receivables generated by our proprietary credit cards. Deterioration in macroeconomic conditions
or changes in consumer preferences concerning our credit card program could adversely affect the volume of new
credit accounts, the amount of credit card program balances, and the ability of credit card holders to pay their balances.
These conditions could result in us receiving lower profit sharing payments.
Uncharacteristic or significant weather conditions, alone or together with natural disasters, could adversely
affect our operations.
Uncharacteristic or significant weather conditions can affect consumer shopping patterns, particularly in apparel and
seasonal items, which could lead to lost sales or greater than expected markdowns and adversely affect our short-
term results of operations. In addition, our three largest states by total sales are California, Texas and Florida, areas
where natural disasters are more prevalent. Natural disasters in those states or in other areas where our sales are
concentrated could result in significant physical damage to or closure of one or more of our stores, distribution centers
or key vendors, and cause delays in the distribution of merchandise from our vendors to our distribution centers, stores,
and guests, which could adversely affect our results of operations by increasing our costs and lowering our sales.
8
We rely on a large, global and changing workforce of team members, contractors and temporary staffing. If
we do not effectively manage our workforce and the concentration of work in certain global locations, our
labor costs and results of operations could be adversely affected.
With over 300,000 team members, our workforce costs represent our largest operating expense, and our business is
dependent on our ability to attract, train, and retain the appropriate mix of qualified team members, contractors, and
temporary staffing and effectively organize and manage those resources as our business and strategic priorities change.
Many team members are in entry-level or part-time positions with historically high turnover rates. Our ability to meet
our changing labor needs while controlling our costs is subject to external factors such as labor laws and regulations,
unemployment levels, prevailing wage rates, benefit costs, changing demographics, and our reputation and relevance
within the labor market. If we are unable to attract and retain a workforce meeting our needs, our operations, guest
service levels, support functions, and competitiveness could suffer and our results of operations could be adversely
affected. We are periodically subject to labor organizing efforts. If we become subject to one or more collective bargaining
agreements in the future, it could adversely affect our labor costs and how we operate our business. We also have
support offices in India and China, and any extended disruption of our operations in those locations, whether due to
labor difficulties or otherwise, could adversely affect our operations and financial results.
Failure to address product safety and sourcing concerns could adversely affect our sales and results of
operations.
If our merchandise offerings do not meet applicable safety standards or Target's or our guests’ expectations regarding
safety, supply chain transparency and responsible sourcing, we could experience lost sales and increased costs and
be exposed to legal and reputational risk. All of our vendors must comply with applicable product safety laws, and we
are dependent on them to ensure that the products we buy comply with all safety standards. Events that give rise to
actual, potential or perceived product safety concerns, including food or drug contamination, could expose us to
government enforcement action or private litigation and result in costly product recalls and other liabilities. Our sourcing
vendors must also meet our expectations across multiple areas of social compliance, including supply chain
transparency and responsible sourcing. We have a social compliance audit process, but we are also dependent on
our vendors to ensure that the products we buy comply with our standards. Negative guest perceptions regarding the
safety of the products we sell and events that give rise to actual, potential or perceived compliance concerns could
hurt our reputation, result in lost sales, cause our guests to seek alternative sources for their needs, and make it difficult
and costly for us to regain the confidence of our guests.
Our failure to comply with federal, state, local, and international laws, or changes in these laws could increase
our costs, reduce our margins, and lower our sales.
Our business is subject to a wide array of laws and regulations in the U.S. and other countries in which we operate.
Our expenses could increase, and our operations could be adversely affected by significant legislative changes or
other legal developments on workforce-related issues, including an employer's obligation to recognize collective
bargaining units, the process by which collective bargaining agreements are negotiated or imposed, the classification
of exempt and non-exempt employees, the distinction between employees and contractors, minimum wage
requirements, advance scheduling notice requirements, and health care mandates. Changes in the legal or regulatory
environment affecting data privacy and information security, product safety, payment methods and related fees,
responsible sourcing, supply chain transparency, or environmental protection, among others, could cause our expenses
to increase without an ability to pass through any increased expenses through higher prices. In addition, if we fail to
comply with other applicable laws and regulations, including wage and hour laws, the Foreign Corrupt Practices Act
and local anti-bribery laws, we could be subject to reputation and legal risk, including government enforcement action
and class action civil litigation, which could adversely affect our results of operations by increasing our costs, reducing
our margins, and lowering our sales.
Financial Risks
Increases in our effective income tax rate could adversely affect our business, results of operations, liquidity,
and net income.
A number of factors influence our effective income tax rate, including changes in tax law and related regulations, tax
treaties, interpretation of existing laws, and our ability to sustain our reporting positions on examination. Changes in
any of those factors could change our effective tax rate, which could adversely affect our net income. In addition, our
operations outside of the U.S. may cause greater volatility in our effective tax rate.
9
If we are unable to access the capital markets or obtain bank credit, our financial position, liquidity, and results
of operations could suffer.
We are dependent on a stable, liquid, and well-functioning financial system to fund our operations and capital
investments. Our continued access to financial markets depends on multiple factors including the condition of debt
capital markets, our operating performance, and maintaining strong credit ratings. If rating agencies lower our credit
ratings, it could adversely affect our ability to access the debt markets, our cost of funds, and other terms for new debt
issuances. Each of the credit rating agencies reviews its rating periodically, and there is no guarantee our current credit
rating will remain the same. In addition, we use a variety of derivative products to manage our exposure to market risk,
principally interest rate and equity price fluctuations. Disruptions or turmoil in the financial markets could reduce our
ability to fund our operations and capital investments, and lead to losses on derivative positions resulting from
counterparty failures, which could adversely affect our financial position and results of operations.
Item 1B. Unresolved Staff Comments
Not applicable.
10
Item 2. Properties
Stores at
February 2, 2019
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Stores
22
3
47
9
287
42
20
3
1
123
50
7
6
94
31
20
17
13
15
5
39
46
53
73
6
35
Retail Sq. Ft.
(in thousands)
3,132 Montana
504 Nebraska
6,187 Nevada
1,165 New Hampshire
36,042 New Jersey
6,245 New Mexico
2,672 New York
440 North Carolina
179 North Dakota
17,015 Ohio
6,820 Oklahoma
1,111 Oregon
664 Pennsylvania
11,926 Rhode Island
4,174 South Carolina
2,835 South Dakota
2,385 Tennessee
1,551 Texas
2,120 Utah
630 Vermont
4,860 Virginia
5,388 Washington
6,370 West Virginia
10,315 Wisconsin
743 Wyoming
4,608
Total
Stores and Distribution Centers at February 2, 2019
Owned
Leased
Owned buildings on leased land
Total
(a)
The 40 distribution centers have a total of 51,688 thousand square feet.
Stores
7
14
17
9
47
10
82
51
4
63
15
20
75
4
19
5
30
150
14
1
59
37
6
36
2
Retail Sq. Ft.
(in thousands)
777
2,006
2,242
1,148
5,992
1,185
10,134
6,540
554
7,703
2,168
2,312
9,094
517
2,359
580
3,816
20,919
1,979
60
7,714
4,329
755
4,430
187
1,844
239,581
Stores
1,525
161
158
1,844
Distribution
Centers (a)
33
7
—
40
We own our corporate headquarters buildings located in and around Minneapolis, Minnesota, and we lease and own
additional office space elsewhere in the U.S. We also lease office space in 11 countries for various support functions.
Our properties are in good condition, well maintained, and suitable to carry on our business.
For additional information on our properties, see the Capital Expenditures section in MD&A and Notes 11 and 18 of
Item 8, Financial Statements and Supplementary Data (the Financial Statements).
11
Item 3. Legal Proceedings
The following proceedings are being reported pursuant to Item 103 of Regulation S-K:
The Federal Securities Law Class Actions and ERISA Class Actions defined below relate to certain prior
disclosures by Target about its expansion of retail operations into Canada (the Canada Disclosure). Target
intends to continue to vigorously defend these actions.
Federal Securities Law Class Actions
On May 17, 2016 and May 24, 2016, Target Corporation and certain present and former officers were named
as defendants in two purported federal securities law class actions filed in the U.S. District Court for the District
of Minnesota (the Court). The lead plaintiff filed a Consolidated Amended Class Action Complaint (First
Complaint) on November 14, 2016, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, as amended, and Rule 10b-5 relating to the Canada Disclosure and naming Target, its former
chief executive officer, its present chief operating officer, and the former president of Target Canada as
defendants. On March 19, 2018, the Court denied the plaintiff's motion to alter or amend the final judgment
issued on July 31, 2017, dismissing the Federal Securities Law Class Actions. On April 18, 2018, the plaintiff
appealed the Court's final judgment. That appeal has not yet been heard or decided.
ERISA Class Actions
On July 12, 2016 and July 15, 2016, Target Corporation, the Plan Investment Committee and Target’s current
chief operating officer were named as defendants in two purported Employee Retirement Income Security Act
of 1974 (ERISA) class actions filed in the Court. The plaintiffs filed an Amended Class Action Complaint (the
First ERISA Class Action) on December 14, 2016, alleging violations of Sections 404 and 405 of ERISA relating
to the Canada Disclosure and naming Target, the Plan Investment Committee, and seven present or former
officers as defendants. The plaintiffs sought to represent a class consisting of all persons who were participants
in or beneficiaries of the Target Corporation 401(k) Plan or the Target Corporation Ventures 401(k) Plan
(collectively, the Plans) at any time between February 27, 2013 and May 19, 2014 and whose Plan accounts
included investments in Target stock. The plaintiffs sought damages, an injunction and other unspecified
equitable relief, and attorneys’ fees, expenses, and costs, based on allegations that the defendants breached
their fiduciary duties by failing to take action to prevent Plan participants from continuing to purchase Target
stock during the class period at prices that allegedly were artificially inflated. After the Court dismissed the
First ERISA Class Action on July 31, 2017, the plaintiffs filed a new ERISA Class Action (the Second ERISA
Class Action) with the Court on August 30, 2017, which had substantially similar allegations, defendants, class
representation, and damages sought as the First ERISA Class Action, except that the class period was extended
to August 6, 2014. On June 15, 2018, the Court granted the motion by Target and the other defendants to
dismiss the Second ERISA Class Action. On July 16, 2018, the plaintiffs appealed the Court's dismissal. That
appeal has not yet been heard or decided.
The following governmental enforcement proceedings relating to environmental matters are reported pursuant to
instruction 5(C) of Item 103 of Regulation S-K because they involve potential monetary sanctions in excess of $100,000:
On February 27, 2015, the California Attorney General sent us a letter alleging, based on a series of compliance
checks, that we have not achieved compliance with California’s environmental laws and the provisions of the
injunction that was part of a settlement reached in 2011. On December 5, 2018, the Alameda County Superior
Court entered judgment approving a settlement regarding those allegations. The settlement requires Target
to pay $4.4 million for civil penalties, enforcement costs and supplemental environmental projects, and spend
$3 million on certain past and future additional internal compliance measures.
For a description of other legal proceedings, see Note 15 of the Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.
12
Item 4A. Executive Officers
Executive officers are elected by, and serve at the pleasure of, the Board of Directors. There are no family relationships
between any of the officers named and any other executive officer or member of the Board of Directors, or any
arrangement or understanding pursuant to which any person was selected as an officer.
Name
Title and Business Experience
Age
Brian C. Cornell
Rick H. Gomez
Melissa K. Kremer
Don H. Liu
Stephanie A.
Lundquist
Michael E.
McNamara
Chairman of the Board and Chief Executive Officer since August 2014. Chief Executive
Officer of PepsiCo Americas Foods, a division of PepsiCo, Inc., a multinational food and
beverage corporation, from March 2012 to July 2014.
Executive Vice President and Chief Marketing & Digital Officer since January 2019.
Executive Vice President and Chief Marketing Officer from January 2017 to January
2019. Senior Vice President, Brand and Category Marketing from April 2013 to January
2017.
Executive Vice President and Chief Human Resources Officer since January 2019.
Senior Vice President, Talent and Organizational Effectiveness from October 2017 to
January 2019. Vice President, Human Resources, Merchandising, Strategy & Innovation,
from September 2015 to October 2017. From February 2012 until September 2015, Ms.
in Human Resources, supporting
leadership positions
Kremer held several
Merchandising, Target.com & Mobile, Enterprise Strategy & Multichannel.
Executive Vice President, Chief Legal & Risk Officer and Corporate Secretary since
October 2017. Executive Vice President, Chief Legal Officer and Corporate Secretary
from August 2016 to September 2017. Executive Vice President, General Counsel and
Corporate Secretary of Xerox Corporation from July 2014 to August 2016, and Senior
Vice President, General Counsel and Corporate Secretary from March 2007 to July 2014.
Executive Vice President and President, Food & Beverage since January 2019.
Executive Vice President and Chief Human Resources Officer from February 2016 to
January 2019. Senior Vice President, Human Resources from January 2015 to February
2016. Senior Vice President, Stores and Distribution Human Resources from February
2014 to January 2015.
Executive Vice President and Chief Information Officer since January 2019. Executive
Vice President and Chief Information & Digital Officer from September 2016 to January
2019. Executive Vice President and Chief Information Officer from June 2015 to
September 2016. Officer of Tesco PLC, a multinational grocery and general merchandise
retailer, from March 2011 to May 2015.
John J. Mulligan
Executive Vice President and Chief Operating Officer since September 2015. Executive
Vice President and Chief Financial Officer from April 2012 to August 2015.
Minsok Pak
Janna A. Potts
Cathy R. Smith
Mark J. Tritton
Laysha L. Ward
Executive Vice President and Chief Strategy & Innovation Officer since August 2017.
Senior Vice President of Shopper Marketing & Channel Development, LEGO Retail,
LEGO Group, a developer and producer of toys, from April 2016 to July 2017. Partner,
Digital Transformation, McKinsey & Company, a global management consulting firm,
from April 2014 to April 2016. Managing Director, Actium Corporation, a private equity
firm, from June 2010 to April 2014.
Executive Vice President and Chief Stores Officer since January 2016. Senior Vice
President, Stores and Supply Chain Human Resources from February 2015 to January
2016. Senior Vice President, Target Canada Stores and Distribution from March 2014
to January 2015.
Executive Vice President and Chief Financial Officer since September 2015. Executive
Vice President and Chief Financial Officer of Express Scripts Holding Company, a
pharmacy benefit manager, from February 2014 to December 2014.
Executive Vice President and Chief Merchandising Officer since June 2016. President
of Nordstrom Product Group, of Nordstrom Inc., a fashion specialty retailer, from June
2009 to June 2016.
Executive Vice President and Chief External Engagement Officer since January 2017.
Chief Corporate Social Responsibility Officer from December 2014 to January 2017.
President, Community Relations and Target Foundation from July 2008 to December
2014.
60
49
41
57
43
54
53
50
51
55
55
51
13
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our common stock is listed on the New York Stock Exchange under the symbol "TGT." We are authorized to issue up
to 6,000,000,000 shares of common stock, par value $0.0833, and up to 5,000,000 shares of preferred stock, par value
$0.01. At March 7, 2019, there were 14,331 shareholders of record. Dividends declared per share for each fiscal quarter
during 2018 and 2017 are disclosed in Note 26 of the Financial Statements.
On September 20, 2016, our Board of Directors authorized a $5 billion share repurchase program. We began
repurchasing shares under this authorization during the fourth quarter of 2016. There is no stated expiration for the
share repurchase program. Under this program, we repurchased 48.6 million shares of common stock through February
2, 2019, at an average price of $69.13, for a total investment of $3.4 billion. The table below presents information with
respect to Target common stock purchases made during the three months ended February 2, 2019, by Target or any
"affiliated purchaser" of Target, as defined in Rule 10b-18(a)(3) under the Exchange Act.
Period
November 4, 2018 through December 1, 2018
Total Number
of Shares
Purchased
Average
Price
Paid per
Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
Dollar Value of
Shares that May
Yet Be Purchased
Under Publicly
Announced Programs
Open market and privately negotiated purchases
— $
—
— $
1,808,949,841
December 2, 2018 through January 5, 2019
Open market and privately negotiated purchases
October 2018 ASR (a)
1,242,920
2,224,074
January 6, 2019 through February 2, 2019
Open market and privately negotiated purchases
1,285,280
64.83
77.98
69.74
72.31
1,242,920
2,224,074
1,728,366,804
1,731,980,648
1,285,280
1,642,349,966
4,752,274
$
1,642,349,966
4,752,274
$
Total
(a)
Represents the incremental shares received upon final settlement of the accelerated share repurchase (ASR)
agreement initiated in third quarter 2018.
14
s
r
a
l
l
o
D
Comparison of Cumulative Five Year Total Return
Target
S&P 500 Index
Peer Group
2015
1/31
2016
1/30
2017
1/28
2018
2/3
2019
2/2
250
200
150
100
50
0
2014
2/1
Target
S&P 500 Index
Peer Group
Fiscal Years Ended
$
February 1,
2014
100.00 $
100.00
100.00
January 31,
2015
134.13 $
114.22
124.37
January 30,
2016
135.76 $
113.46
135.70
January 28,
2017
123.33 $
137.14
150.68
February 3,
2018
147.22 $
168.46
217.62
February 2,
2019
148.42
168.36
226.48
The graph above compares the cumulative total shareholder return on our common stock for the last five fiscal years
with (i) the cumulative total return on the S&P 500 Index and (ii) the peer group consisting of 17 online, general
merchandise, department store, food, and specialty retailers (Amazon.com, Inc., Best Buy Co., Inc., Costco Wholesale
Corporation, CVS Health Corporation, Dollar General Corporation, Dollar Tree, Inc., The Gap, Inc., The Home Depot,
Inc., Kohl's Corporation, The Kroger Co., Lowe's Companies, Inc., Macy's, Inc., Rite Aid Corporation, Sears Holdings
Corporation, The TJX Companies, Inc., Walgreens Boots Alliance, Inc., and Walmart Inc.) (Peer Group). The Peer
Group is consistent with the retail peer group used for our definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on June 12, 2019, excluding Publix Super Markets, Inc., which is not quoted on a public stock
exchange.
The peer group is weighted by the market capitalization of each component company. The graph assumes the
investment of $100 in Target common stock, the S&P 500 Index, and the Peer Group on February 1, 2014, and
reinvestment of all dividends.
15
Item 6. Selected Financial Data
(millions, except per share data)
Sales
Total revenue
Net Earnings / (Loss)
Continuing operations
Discontinued operations
Net earnings / (loss)
Basic Earnings / (Loss) Per Share
Continuing operations
Discontinued operations
Basic earnings / (loss) per share
Diluted Earnings / (Loss) Per Share
Continuing operations
Discontinued operations
Diluted earnings / (loss) per share
Cash dividends declared per share
For the Fiscal Year
2018
2017
As Adjusted (a)(b)
2016
As Adjusted (b)
2015
As Adjusted (b)
$
74,433 $
75,356
71,786 $
69,414 $
73,717 $
72,714
70,271
74,494
2,930
7
2,937
5.54
0.01
5.55
5.50
0.01
5.51
2.54
2,908
6
2,914
5.32
0.01
5.32
5.29
0.01
5.29
2.46
2,666
68
2,734
4.61
0.12
4.73
4.58
0.12
4.69
2.36
3,321
42
3,363
5.29
0.07
5.35
5.25
0.07
5.31
2.20
2014 (b)
72,618
72,618
2,449
(4,085)
(1,636)
3.86
(6.44)
(2.58)
3.83
(6.38)
(2.56)
1.99
Total assets
Long-term debt, including current portion
February 3,
2018
As Adjusted (b)
As of
January 28,
2017
As Adjusted (b)
40,303
11,398
38,724
12,591
February 2,
2019
41,290
11,275
January 30,
2016 (b)
40,262
January 31,
2015 (b)
41,172
12,760
12,725
Note: This information should be read in conjunction with MD&A and the Financial Statements. Per share amounts
may not foot due to rounding.
(a)
Consisted of 53 weeks.
(b)
The selected financial data for fiscal years 2017, 2016, and 2015 and as of February 3, 2018 and January 28,
2017, reflect the adoption of Accounting Standards Update (ASU) No. 2014-09—Revenue from Contracts with
Customers (Topic 606). The selected financial data for fiscal years 2017 and 2016 and as of February 3, 2018
and January 28, 2017, reflect the adoption of ASU No. 2016-02—Leases (Topic 842). Note 2 of the Financial
Statements provides additional information. The selected financial data for fiscal year 2014 and as of January
30, 2016, and January 31, 2015, do not reflect adoption of Topic 606 and Topic 842.
16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
Fiscal 2018 included the following notable items:
• GAAP earnings per share from continuing operations were $5.50.
• Adjusted earnings per share were $5.39.
• Total revenue increased 3.6 percent, driven by a comparable sales increase and sales from new stores, partially
offset by fiscal 2017 containing 53 weeks.
• Comparable sales increased 5.0 percent, driven by a 5.0 percent increase in traffic.
Comparable store sales grew 3.2 percent.
Comparable digital channel sales increased 36 percent, contributing 1.8 percentage points to comparable
sales growth.
• We returned $3.4 billion to shareholders through dividends and share repurchases.
As described in Note 2 to the Financial Statements, certain prior-year amounts have been adjusted to reflect the impact
of adopting Accounting Standards Update (ASU) No. 2014-09—Revenue from Contracts with Customers (Topic 606),
ASU No. 2016-02—Leases (Topic 842), and ASU No. 2017-07—Compensation – Retirement Benefits (Topic 715)
throughout this document to conform to the current year presentation.
Sales were $74,433 million for 2018, an increase of $2,647 million or 3.7 percent from the prior year, due to a comparable
sales increase of 5.0 percent and the contribution from new stores, partially offset by the impact of the extra week in
2017. Operating income in 2018 decreased by $114 million or 2.7 percent from 2017 to $4,110 million. The Analysis
of Results of Operations discussion provides more information. Operating cash flow provided by continuing operations
was $5,970 million for 2018, a decrease of $891 million, or 13.0 percent, from $6,861 million for 2017. Refer to the
Cash Flows discussion within the Liquidity and Capital Resources section of MD&A on page 24 for additional information.
Earnings Per Share From
Continuing Operations
2018
2017
As Adjusted (a)(b)
2016
As Adjusted (b)
GAAP diluted earnings per share
Adjustments
Adjusted diluted earnings per share
$
$
5.50 $
(0.10)
5.39 $
5.29 $
(0.60)
4.69 $
4.58
0.42
5.00
Percent Change
2018/2017
2017/2016
4.0%
15.5 %
15.1%
(6.3)%
Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share from continuing operations (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 continuing operations. A reconciliation of non-GAAP
financial measures to GAAP measures is provided on page 21.
(a)
Consisted of 53 weeks.
Lease standard adoption resulted in a $0.03 and $0.02 reduction in GAAP and Adjusted EPS, respectively,
for 2017, and a less than $0.01 and $0.01 reduction in GAAP and Adjusted EPS, respectively, for 2016.
(b)
We report after-tax return on invested capital (ROIC) from continuing operations because we believe ROIC provides
a meaningful measure of our capital-allocation effectiveness over time. For the trailing twelve months ended February 2,
2019, ROIC was 14.7 percent, compared with 15.4 percent for the trailing twelve months ended February 3, 2018.
Excluding the discrete impacts of the Tax Cuts and Jobs Act (Tax Act), ROIC was 14.6 percent and 13.6 percent for
the trailing twelve months ended February 2, 2019, and February 3, 2018, respectively. A reconciliation of ROIC is
provided on page 23.
17
Analysis of Results of Operations
(dollars in millions)
Sales
Other revenue
Total revenue
Cost of sales
SG&A expenses
Depreciation and amortization (exclusive of
depreciation included in cost of sales)
Operating income
(a)
Consisted of 53 weeks.
$
$
Percent Change
2018
74,433 $
923
75,356
53,299
15,723
2017
As Adjusted (a)
71,786 $
928
72,714
51,125
15,140
2016
As Adjusted 2018/2017 2017/2016
3.4 %
8.3
3.5
4.0
6.5
69,414
857
70,271
49,145
14,217
3.7 %
(0.5)
3.6
4.3
3.9
2,224
4,110 $
2,225
4,224 $
2,045
4,864
(0.1)
(2.7)%
8.8
(13.1)%
Rate Analysis
Gross margin rate
SG&A expense rate
Depreciation and amortization (exclusive of depreciation included in
cost of sales) expense rate
Operating income margin rate
2018
28.4%
20.9
3.0
5.5
2017
As Adjusted (a)
2016
As Adjusted
28.8%
20.8
3.1
5.8
29.2%
20.2
2.9
6.9
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.
(a)
Consisted of 53 weeks.
Sales
Sales include all merchandise sales, net of expected returns, and gift card breakage. Note 3 of the Financial Statements
defines gift card "breakage". Comparable sales is a measure that highlights 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. Digital channel sales include all sales
initiated through mobile applications and our websites. Our stores fulfill the majority of digital channel sales, including
through store pick up or drive up and delivery via our wholly owned subsidiary, Shipt. Digital channel sales may also
be fulfilled through our distribution centers, our vendors, or other third parties.
The increase in 2018 sales compared with 2017 is due to a 5.0 percent comparable sales increase and the contribution
from new stores, partially offset by the extra week in 2017, which contributed $1,167 million of sales, or 1.6 percent of
2017 sales. The increase in 2017 sales is due to a comparable sales increase of 1.3 percent, the extra week in 2017,
and the contribution from new stores. The extra week contributed 1.7 percentage points of increase over 2016. Inflation
did not materially affect sales in any period presented.
Comparable Sales
Comparable sales change
Drivers of change in comparable sales
Number of transactions
Average transaction amount
Note: Amounts may not foot due to rounding.
18
2018
5.0%
5.0
0.1
2017
1.3%
1.6
(0.3)
2016
(0.5)%
(0.8)
0.3
Contribution to Comparable Sales Change
Stores channel comparable sales change
Digital channel percentage points contribution to comparable sales
change
Total comparable sales change
Note: Amounts may not foot due to rounding.
Sales by Channel
Stores originated
Digitally originated
Total
2018
3.2%
1.8
5.0%
2018
92.9%
7.1
100%
2017
0.1%
1.2
1.3%
2017
94.5%
5.5
100%
2016
(1.5)%
1.0
(0.5)%
2016
95.6%
4.4
100%
Note 3 to the Financial Statements provides sales by product category. The collective interaction of a broad array of
macroeconomic, competitive, and consumer behavioral factors, as well as sales mix and transfer of sales to new stores
makes further analysis of sales metrics infeasible.
TD Bank Group (TD) offers credit to qualified guests through Target-branded credit cards: the Target Credit Card and
the Target MasterCard Credit Card (Target Credit Cards). Additionally, we offer a branded proprietary Target Debit
Card. Collectively, we refer to these products as REDcards®. Guests receive a 5 percent discount on nearly all purchases
and free shipping when they use a REDcard at Target. We monitor the percentage of purchases that are paid for using
REDcards (REDcard Penetration) because our internal analysis has indicated that a meaningful portion of incremental
purchases on our REDcards are also incremental sales for Target.
REDcard Penetration
Target Debit Card
Target Credit Cards
Total REDcard Penetration
2018
13.0%
10.9
23.8%
2017
13.1%
11.3
24.5%
2016
13.0%
11.2
24.2%
Note: Amounts may not foot due to rounding. In 2018, we refined our calculation of REDcard Penetration. The prior
period amounts have been updated to conform with the current methodology, resulting in an increase of 0.2 percentage
points to the Total REDcard Penetration for 2017 and 2016.
Gross Margin Rate
Our gross margin rate was 28.4 percent in 2018, 28.8 percent in 2017, and 29.2 percent in 2016. The 2018 decrease
was primarily due to increased digital fulfillment and supply chain costs. The benefit of merchandising strategies,
including cost savings initiatives and efforts to improve pricing and promotions, was partially offset by the impact of
our sales mix.
19
The 2017 decrease was primarily due to increased digital fulfillment costs and supply chain costs. Benefits from cost
savings initiatives were offset by net investments in pricing and promotions.
Selling, General and Administrative Expense Rate
Our SG&A expense rate was 20.9 percent in 2018, 20.8 percent in 2017, and 20.2 percent in 2016. The increase in
2018 was primarily due to higher compensation, primarily driven by store wages, partially offset by cost savings across
multiple expense categories.
The increase in 2017 was primarily due to higher compensation costs, including both bonus expense and store wages,
partially offset by cost savings primarily driven by efficiency in our technology operations.
Depreciation and Amortization Expense Rate
Our depreciation and amortization (exclusive of depreciation included in cost of sales) expense rate was 3.0 percent
in 2018, 3.1 percent in 2017, and 2.9 percent in 2016. The 2018 decrease was primarily due to the rate impact of
higher sales. The 2017 increase was primarily due to higher accelerated depreciation for planned store remodels,
partially offset by the rate impact of the 53rd week of sales.
Store Data
Change in Number of Stores
Beginning store count
Opened
Closed
Ending store count
Number of Stores and
Retail Square Feet
170,000 or more sq. ft.
50,000 to 169,999 sq. ft.
49,999 or less sq. ft.
Total
(a)
2018
1,822
29
(7)
1,844
2017
1,802
32
(12)
1,822
Number of Stores
Retail Square Feet (a)
February 2,
2019
February 3,
2018
February 2,
2019
February 3,
2018
272
1,501
71
1,844
274
1,500
48
1,822
48,604
188,900
2,077
48,966
189,030
1,359
239,581
239,355
In thousands, reflects total square feet less office, distribution center, and vacant space.
20
Other Performance Factors
Net Interest Expense
Net interest expense from continuing operations was $461 million, $653 million, and $991 million for 2018, 2017, and
2016, respectively. Net interest expense for 2017 and 2016 included losses on early retirement of debt of $123 million
and $422 million, respectively.
Provision for Income Taxes
Our 2018 effective income tax rate from continuing operations increased to 20.3 percent from 19.9 percent in 2017,
primarily due to lower discrete favorable benefits of the Tax Act, which were $36 million in 2018 compared with $343
million in 2017, and less rate benefit from our global sourcing operations in 2018 compared with 2017. The lower 2018
benefit of discrete Tax Act-related items was substantially offset by the full-year benefit of a 21 percent federal statutory
rate in 2018 compared with a 33.7 percent blended federal statutory rate in 2017.
Our 2017 effective income tax rate from continuing operations decreased to 19.9 percent, from 32.7 percent in 2016,
driven primarily by the impact of the Tax Act.
Note 19 of the Financial Statements provides additional information.
Reconciliation of Non-GAAP Financial Measures to GAAP Measures
To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share from continuing
operations (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 continuing 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 from continuing operations. Adjusted EPS should not be considered in isolation
or as a substitution for analysis of our results as reported under GAAP. Other companies may calculate Adjusted EPS
differently than we do, limiting the usefulness of the measure for comparisons with other companies.
(millions, except per share data)
Pretax
GAAP diluted earnings per share from
continuing operations
2018
Net of
Tax
Per
Share
Amounts
$
5.50
2017
As Adjusted (a)(b)
2016
As Adjusted (b)
Pretax
Net of
Tax
Per
Share
Amounts
$
5.29
Pretax
Net of
Tax
Per
Share
Amounts
$
4.58
Adjustments
Tax Act (c)
Loss on early retirement of debt
Other (d)
Other income tax matters (e)
Adjusted diluted earnings per share from
continuing operations
$
— $
(36) $
(0.07) $ — $ (343) $
(0.62) $ — $ — $
—
—
—
—
—
—
—
(18)
(0.03)
123
(5)
—
75
(3)
(57)
0.14
(0.01)
(0.10)
422
257
(4)
—
(2)
(7)
—
0.44
—
(0.01)
$
5.39
$
4.69
$
5.00
Note: Amounts may not foot due to rounding.
(a)
(b)
(c)
(d)
(e)
Consisted of 53 weeks.
Lease standard adoption resulted in a $0.03 and $0.02 reduction in GAAP and Adjusted EPS, respectively,
for 2017, and a less than $0.01 and $0.01 reduction in GAAP and Adjusted EPS, respectively, for 2016. Refer
to Note 2 to the Consolidated Financial Statements.
Represents discrete items related to the Tax Act. Refer to the Provision for Income Taxes discussion within
MD&A and Note 19 of the Financial Statements.
For 2017, represents an insurance recovery related to the 2013 data breach. For 2016, represents items related
to the 2015 sale of our pharmacy and clinic businesses.
Represents income from certain income tax matters not related to current period operations.
21
Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings before interest
expense, income taxes, depreciation and amortization (EBITDA) are non-GAAP financial measures which we believe
provide meaningful information about our operational efficiency compared with our competitors by excluding the impact
of differences in tax jurisdictions and structures, debt levels, and, for EBITDA, capital investment. These measures
are not in accordance with, or an alternative for, GAAP. The most comparable GAAP measure is net earnings from
continuing operations. EBIT and EBITDA should not be considered in isolation or as a substitution for analysis of our
results as reported under GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness
of the measure for comparisons with other companies.
EBIT and EBITDA
(dollars in millions)
Net earnings from continuing operations
+ Provision for income taxes
+ Net interest expense
EBIT (b)
+ Total depreciation and amortization (c)
EBITDA (b)
(a)
Percent Change
2018
2017
As Adjusted (a)(b)
2016
As Adjusted (b)
2018/2017 2017/2016
$
$
$
2,930 $
2,908 $
746
461
722
653
4,137 $
4,283 $
2,474
2,476
6,611 $
6,759 $
2,666
1,295
991
4,952
2,318
7,270
0.7 %
9.1 %
3.5
(29.3)
(44.3)
(34.1)
(3.4)%
(13.5)%
(0.1)
(2.2)%
6.8
(7.0)%
(b)
(c)
Consisted of 53 weeks.
Adoption of the new accounting standards resulted in a $29 million and $17 million decrease in EBIT and a
$2 million and $3 million increase in EBITDA for 2017 and 2016, respectively.
Represents total depreciation and amortization, including amounts classified within Depreciation and
Amortization and within Cost of Sales.
22
We have also disclosed after-tax ROIC, which is a ratio based on GAAP information. We believe this metric is useful
in assessing the effectiveness of our capital allocation over time. Other companies may calculate ROIC differently,
limiting the usefulness of the measure for comparisons with other companies.
After-Tax Return on Invested Capital
Numerator
(dollars in millions)
Operating income
+ Net other income / (expense)
EBIT
+ Operating lease interest (b)
- Income taxes (c)(d)
Net operating profit after taxes
Trailing Twelve Months
February 2,
2019
$
4,110
$
27
4,137
83
856
February 3,
2018
As Adjusted (a)
4,224
59
4,283
79
867
$
3,364
$
3,495
Denominator
(dollars in millions)
Current portion of long-term debt and other borrowings
February 2,
2019
February 3,
2018
As Adjusted
January 28,
2017
As Adjusted
$
1,052
$
281
$
1,729
+ Noncurrent portion of long-term debt
+ Shareholders' equity
+ Operating lease liabilities (e)
- Cash and cash equivalents
- Net assets of discontinued operations (f)
Invested capital
Average invested capital (g)
10,223
11,297
2,170
1,556
—
$
$
23,186
22,831
$
$
After-tax return on invested capital (d)(h)
After-tax return on invested capital excluding discrete impacts
of Tax Act (d)
14.7%
14.6%
10,862
10,915
1,970
2,512
62
$
22,902
11,117
11,651
2,072
2,643
2
22,476
22,689
15.4%
13.6%
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Consisted of 53 weeks.
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 SG&A Expenses. 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.
Calculated using the effective tax rates for continuing operations, which were 20.3 percent and 19.9 percent
for the trailing twelve months ended February 2, 2019, and February 3, 2018, respectively. For the trailing
twelve months ended February 2, 2019, and February 3, 2018, includes tax effect of $839 million and $851
million, respectively, related to EBIT, and $17 million and $16 million, respectively, related to operating lease
interest.
The effective tax rate for the trailing twelve months ended February 2, 2019, and February 3, 2018, includes
discrete tax benefits of $36 million and $343 million, respectively, related to the Tax Act.
Total short-term and long-term operating lease liabilities included within Accrued and Other Current Liabilities
and Noncurrent Operating Lease Liabilities on the Consolidated Statements of Financial Position.
Included in Other Assets and Liabilities on the Consolidated Statements of Financial Position.
Average based on the invested capital at the end of the current period and the invested capital at the end of
the comparable prior period.
Adoption of the new lease standard reduced ROIC by approximately 0.5 percentage points for all periods
presented.
23
Analysis of Financial Condition
Liquidity and Capital Resources
Our period-end cash and cash equivalents balance decreased to $1,556 million from $2,643 million in 2017 primarily
because we repatriated cash previously held by entities located outside the U.S. and deployed it during 2018 in support
of our business objectives. Our cash and cash equivalents balance includes short-term investments of $769 million
and $1,906 million as of February 2, 2019, and February 3, 2018, 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.
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.
Operating Cash Flows
Operating cash flow provided by continuing operations was $5,970 million in 2018 compared with $6,861 million in
2017 and $5,337 million in 2016. The 2018 operating cash flow decrease was primarily due to a larger increase in
inventory in 2018 compared with 2017, partially offset by lower income tax payments in 2018 due to the Tax Act.
The 2017 operating cash flow increase was due to increased payables leverage primarily driven by changes in vendor
payment terms in 2017, partially offset by an inventory increase in 2017 compared with a decrease during 2016. The
operating cash flow increase was also partially due to the payment of approximately $500 million of taxes during 2016
related to the sale of our pharmacy and clinic businesses.
Inventory
Year-end inventory was $9,497 million, compared with $8,597 million in 2017. We increased inventory in 2018 to
support higher sales, including market share opportunities in toys and baby-related merchandise. In addition, inventory
levels were increased to support new brand launches and our efforts to improve in-stock levels.
24
Capital Expenditures
Capital expenditures increased in 2018 from the prior year primarily due to increased investments in existing stores
as we further accelerated our current store remodel program. This investment acceleration follows an increase in 2017
as we accelerated our store remodel program.
In addition to these cash investments, we entered into leases related to new stores in 2018, 2017, and 2016 with
total future minimum lease payments of $473 million, $438 million, and $550 million, respectively.
We expect capital expenditures in 2019 at a level consistent with 2018 as we continue the current store remodel
program, open additional small-format stores, and make other investments in our business. We also expect to continue
our current rate of investment in store leases.
Dividends
We paid dividends totaling $1,335 million ($2.52 per share) in 2018 and $1,338 million ($2.44 per share) in 2017, a
per share increase of 3.3 percent. We declared dividends totaling $1,347 million ($2.54 per share) in 2018, a per share
increase of 3.3 percent over 2017. We declared dividends totaling $1,356 million ($2.46 per share) in 2017, a per share
increase of 4.2 percent over 2016. 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.
Share Repurchases
During 2018, 2017, and 2016 we returned $2,067 million, $1,026 million, and $3,686 million, respectively, to
shareholders through share repurchase. See Part II, Item 5 of this Annual Report on Form 10-K and Note 21 to the
Financial Statements for more information.
25
Financing
Our financing strategy is to ensure liquidity and access to capital markets, to maintain a balanced spectrum of debt
maturities, and to manage our net exposure to floating interest rate volatility. Within these parameters, we seek to
minimize our borrowing costs. Our ability to access the long-term debt and commercial paper markets has provided
us with ample sources of liquidity. Our continued access to these markets depends on multiple factors, including the
condition of debt capital markets, our operating performance, and maintaining strong credit ratings. As of February 2,
2019, our credit ratings were as follows:
Credit Ratings
Long-term debt
Commercial paper
Moody's
A2
P-1
Standard and Poor's
A
A-1
Fitch
A-
F2
If our credit ratings were lowered, our ability to access the debt markets, our cost of funds, and other terms for new
debt issuances could be adversely impacted. Each of the credit rating agencies reviews its rating periodically and there
is no guarantee our current credit ratings will remain the same as described above.
In 2018, we funded our holiday sales period working capital needs through internally generated funds and the issuance
of commercial paper. In 2017, we funded our holiday sales period working capital needs through internally generated
funds.
We have additional liquidity through a committed $2.5 billion revolving credit facility obtained through a group of banks.
In October 2018, we extended this credit facility by one year to October 2023. No balances were outstanding at any
time during 2018, 2017, or 2016.
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt
level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance
with these covenants. Additionally, at February 2, 2019, no notes or debentures contained provisions requiring
acceleration of payment upon a credit rating downgrade, except that certain outstanding notes allow the note holders
to put the notes to us if within a matter of months of each other we experience both (i) a change in control and (ii) our
long-term credit ratings are either reduced and the resulting rating is non-investment grade, or our long-term credit
ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating
is non-investment grade.
Note 16 of the Financial Statements provides more information about financing activities.
We believe our sources of liquidity will continue to be adequate to maintain operations, finance anticipated expansion
and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share repurchase
program for the foreseeable future. We continue to anticipate ample access to commercial paper and long-term
financing.
26
Commitments and Contingencies
Contractual Obligations as of
Payments Due by Period
February 2, 2019
(millions)
Recorded contractual obligations:
Long-term debt (a)
Finance lease liabilities (b)
Operating lease liabilities (b)
Deferred compensation (c)
Real estate liabilities (d)
Tax contingencies (e)
Unrecorded contractual obligations:
Interest payments – long-term debt
Purchase obligations (f)
Real estate obligations (g)
Future contributions to retirement plans (h)
Contractual obligations
(a)
Less than
Total
1 Year
1-3
Years
3-5
Years
After 5
Years
$ 10,336 $
1,002 $
2,150 $
63 $
7,121
1,461
2,904
518
121
—
5,893
992
1,013
—
98
245
59
121
—
407
532
487
—
196
470
116
—
—
724
170
59
—
193
443
111
—
—
974
1,746
232
—
—
628
4,134
75
67
—
215
400
—
$ 23,238 $
2,951 $
3,885 $
1,580 $ 14,822
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Represents principal payments only. See Note 16 of the Financial Statements for further information.
Finance and operating lease payments include $127 million and $778 million, respectively, related to options
to extend lease terms that are reasonably certain of being exercised. See Note 18 of the Financial Statements
for further information.
The timing of deferred compensation payouts is estimated based on payments currently made to former
employees and retirees and the projected timing of future retirements.
Real estate liabilities include costs incurred but not paid related to the construction or remodeling of real estate
and facilities.
Estimated tax contingencies of $334 million, including interest and penalties and primarily related to continuing
operations, are not included in the table above because we are not able to make reasonably reliable estimates
of the period of cash settlement. See Note 19 of the Financial Statements for further information.
Purchase obligations include all legally binding contracts such as firm minimum commitments for inventory
purchases, merchandise royalties, equipment purchases, marketing-related contracts, software acquisition/
license commitments, and service contracts. We issue inventory purchase orders in the normal course of
business, which represent authorizations to purchase that are cancelable by their terms. We do not consider
purchase orders to be firm inventory commitments; therefore, they are excluded from the table above. If we
choose to cancel a purchase order, we may be obligated to reimburse the vendor for unrecoverable outlays
incurred prior to cancellation. We also issue trade letters of credit in the ordinary course of business, which
are excluded from this table as these obligations are conditioned on terms of the letter of credit being met.
Real estate obligations include legally binding minimum lease payments for leases signed but not yet
commenced, and commitments for the purchase, construction, or remodeling of real estate and facilities.
We have not included obligations under our pension plans in the contractual obligations table above because
no additional amounts are required to be funded as of February 2, 2019. Our historical practice regarding these
plans has been to contribute amounts necessary to satisfy minimum pension funding requirements, plus
periodic discretionary amounts determined to be appropriate.
Off Balance Sheet Arrangements: Other than the unrecorded contractual obligations noted above, we do not have
any arrangements or relationships with entities that are not consolidated into the financial statements.
27
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates
and apply judgments that affect the reported amounts. In the Notes to Consolidated Financial Statements, we describe
the significant accounting policies used in preparing the consolidated financial statements. Our management has
discussed the development, selection, and disclosure of our critical accounting estimates with the Audit & Finance
Committee of our Board of Directors. The following items require significant estimation or judgment:
Inventory and cost of sales: The vast majority of our inventory is accounted for under the retail inventory accounting
method using the last-in, first-out method. Our inventory is valued at the lower of cost or market. We reduce inventory
for estimated losses related to shrink and markdowns. Our shrink estimate is based on historical losses verified by
physical inventory counts. Historically, our actual physical inventory count results have shown our estimates to be
reliable. Market adjustments for markdowns are recorded when the salability of the merchandise has diminished. We
believe the risk of inventory obsolescence is largely mitigated because our inventory typically turns in less than three
months. Inventory was $9,497 million and $8,597 million at February 2, 2019 and February 3, 2018, respectively, and
is further described in Note 9 of the Financial Statements.
Vendor income: We receive various forms of consideration from our vendors (vendor income), principally earned as
a result of volume rebates, markdown allowances, promotions, and advertising allowances. Substantially all vendor
income is recorded as a reduction of cost of sales.
We establish a receivable for vendor income that is earned but not yet received. Based on the agreements in place,
this receivable is computed by estimating when we have completed our performance and when the amount is earned.
The majority of the year-end vendor income receivables are collected within the following fiscal quarter, and we do not
believe there is a reasonable likelihood that the assumptions used in our estimate will change significantly. Historically,
adjustments to our vendor income receivable have not been material. Vendor income receivable was $468 million and
$416 million at February 2, 2019 and February 3, 2018, respectively. Vendor income is described further in Note 5 of
the Financial Statements.
Long-lived assets: Long-lived assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts may not be recoverable. The evaluation is performed at the lowest level of identifiable
cash flows independent of other assets, which is primarily at the store level. An impairment loss would be recognized
when estimated undiscounted future cash flows from the operation and/or disposition of the assets are less than their
carrying amount. Measurement of an impairment loss would be based on the excess of the carrying amount of the
asset group over its fair value. Fair value is measured using discounted cash flows or independent opinions of value,
as appropriate. We recorded impairments of $92 million, $91 million, and $43 million in 2018, 2017, and 2016,
respectively, which are described further in Note 11 of the Financial Statements.
We applied the hindsight practical expedient for measurement of lease assets and liabilities, and associated leasehold
improvement assets, in our adoption of ASU No. 2016-02—Leases (Topic 842), which required significant judgment
to determine the reasonably certain lease term for existing leases in transition to the new standard. Using hindsight
shortened lease terms for many leases. Operating lease assets and liabilities were $1,965 million and $2,170 million,
respectively, at February 2, 2019. Finance lease assets and liabilities were $872 million and $1,021 million, respectively,
at February 2, 2019. Leases are described further in Notes 2 and 18 of the Financial Statements.
Insurance/self-insurance: We retain a substantial portion of the risk related to certain general liability, workers'
compensation, property loss, and team member medical and dental claims. However, we maintain stop-loss coverage
to limit the exposure related to certain risks. Liabilities associated with these losses include estimates of both claims
filed and losses incurred but not yet reported. We use actuarial methods which consider a number of factors to estimate
our ultimate cost of losses. General liability and workers' compensation liabilities are recorded at our estimate of their
net present value; other liabilities referred to above are not discounted. Our workers' compensation and general liability
accrual was $423 million and $419 million at February 2, 2019 and February 3, 2018, respectively. We believe that the
amounts accrued are appropriate; however, our liabilities could be significantly affected if future occurrences or loss
developments differ from our assumptions. For example, a 5 percent increase or decrease in average claim costs
would impact our self-insurance expense by $21 million in 2018. Historically, adjustments to our estimates have not
been material. Refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, for further disclosure of
the market risks associated with these exposures. We maintain insurance coverage to limit our exposure to certain
events, including network security matters.
28
Income taxes: We pay income taxes based on the tax statutes, regulations, and case law of the various jurisdictions
in which we operate. Significant judgment is required in determining the timing and amounts of deductible and taxable
items, and in evaluating the ultimate resolution of tax matters in dispute with tax authorities.
We recognized the income tax effects of the Tax Act in our 2018 and 2017 financial statements in accordance with
Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income
Taxes. Note 19 of the Financial Statements provides additional information.
The benefits of uncertain tax positions are recorded in our financial statements only after determining it is likely the
uncertain tax positions would withstand challenge by taxing authorities. We periodically reassess these probabilities
and record any changes in the financial statements as appropriate. Liabilities for uncertain tax positions, including
interest and penalties, were $334 million and $363 million at February 2, 2019 and February 3, 2018, respectively, and
primarily relate to continuing operations. We believe the resolution of these matters will not have a material adverse
impact on our consolidated financial statements. Income taxes are described further in Note 19 of the Financial
Statements.
Pension accounting: We maintain a funded, qualified defined benefit pension plan, as well as several smaller and
unfunded nonqualified plans for certain current and retired team members. The costs for these plans are determined
based on actuarial calculations using the assumptions described in the following paragraphs. Eligibility and the level
of benefits varies depending on team members' full-time or part-time status, date of hire, age, and/or length of service.
The benefit obligation and related expense for these plans are determined based on actuarial calculations using
assumptions about the expected long-term rate of return, the discount rate, and compensation growth rates. The
assumptions, with adjustments made for any significant plan or participant changes, are used to determine the period-
end benefit obligation and establish expense for the next year.
Our 2018 expected long-term rate of return on plan assets of 6.30 percent is determined by the portfolio composition,
historical long-term investment performance, and current market conditions. A 1 percentage point decrease in our
expected long-term rate of return would increase annual expense by $39 million.
The discount rate used to determine benefit obligations is adjusted annually based on the interest rate for long-term
high-quality corporate bonds, using yields for maturities that are in line with the duration of our pension liabilities. Our
benefit obligation and related expense will fluctuate with changes in interest rates. A 1 percentage point decrease to
the weighted average discount rate would increase annual expense by $68 million.
Based on our experience, we use a graduated compensation growth schedule that assumes higher compensation
growth for younger, shorter-service pension-eligible team members than it does for older, longer-service pension-
eligible team members.
Pension benefits are further described in Note 24 of the Financial Statements.
Legal and other contingencies: We believe the accruals recorded in our consolidated financial statements properly
reflect loss exposures that are both probable and reasonably estimable. We do not believe any of the currently identified
claims or litigation may materially affect our results of operations, cash flows, or financial condition. However, litigation
is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may
cause a material adverse impact on the results of operations, cash flows, or financial condition for the period in which
the ruling occurs, or future periods. Refer to Note 15 of the Financial Statements for further information on contingencies.
New Accounting Pronouncements
Refer to Note 2, Note 3, and Note 18, of the Financial Statements for a description of new accounting pronouncements
related to revenues, leases, and pension expense. We do not expect any other recently issued accounting
pronouncements will have a material effect on our financial statements.
29
Forward-Looking Statements
This report contains forward-looking statements, which are based on our current assumptions and expectations. These
statements are typically accompanied by the words "expect," "may," "could," "believe," "would," "might," "anticipates,"
or words of similar import. The principal forward-looking statements in this report include: our financial performance,
statements regarding the adequacy of and costs associated with our sources of liquidity, the continued execution of
our share repurchase program, our expected capital expenditures and new lease commitments, the impact of changes
in the expected effective income tax rate on net income, including those resulting from the Tax Act, the expected
compliance with debt covenants, the expected impact of new accounting pronouncements, our intentions regarding
future dividends, contributions and payments related to our pension plan, the expected returns on pension plan assets,
the expected timing and recognition of compensation expenses, the effects of macroeconomic conditions, the adequacy
of our reserves for general liability, workers' compensation and property loss, the expected outcome of, and adequacy
of our reserves for investigations, inquiries, claims and litigation, expected changes to our contractual obligations and
liabilities, the expected ability to recognize deferred tax assets and liabilities and the timing of such recognition, the
resolution of tax matters, the expected impact of changes in information technology systems, and changes in our
assumptions and expectations.
All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there
is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most
important factors which could cause our actual results to differ from our forward-looking statements are set forth on
our description of risk factors in Item 1A to this Form 10-K, which should be read in conjunction with the forward-looking
statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake
any obligation to update any forward-looking statement.
30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
At February 2, 2019, our exposure to market risk was primarily from interest rate changes on our debt obligations,
some of which are at a London Interbank Offered Rate (LIBOR)-plus floating-rate. Our interest rate exposure is primarily
due to differences between our floating rate debt obligations compared to our floating rate short-term investments. At
February 2, 2019, our floating rate debt exceeded our floating rate short-term investments by approximately $700
million. Based on our balance sheet position at February 2, 2019, the annualized effect of a 0.1 percentage point
increase in floating interest rates on our floating rate debt obligations, net of our floating rate short-term investments,
would not be significant. In general, we expect our floating rate debt to exceed our floating rate short-term investments
over time, but that may vary in different interest rate environments. See further description of our debt and derivative
instruments in Notes 16 and 17 to the Financial Statements.
We record our general liability and workers' compensation liabilities at net present value; therefore, these liabilities
fluctuate with changes in interest rates. Based on our balance sheet position at February 2, 2019, the annualized effect
of a 0.5 percentage point decrease in interest rates would be to decrease earnings before income taxes by $6 million.
In addition, we are exposed to market return fluctuations on our qualified defined benefit pension plans. The value of
our pension liabilities is inversely related to changes in interest rates. A 1 percentage point decrease to the weighted
average discount rate would increase annual expense by $68 million. To protect against declines in interest rates, we
hold high-quality, long-duration bonds and interest rate swaps in our pension plan trust. At year-end, we had hedged
60 percent of the interest rate exposure of our funded status.
As more fully described in Notes 12 and 23 to the Financial Statements, we are exposed to market returns on
accumulated team member balances in our nonqualified, unfunded deferred compensation plans. We control the risk
of offering the nonqualified plans by making investments in life insurance contracts and prepaid forward contracts on
our own common stock that substantially offset our economic exposure to the returns on these plans.
There have been no other material changes in our primary risk exposures or management of market risks since the
prior year.
31
Item 8. Financial Statements and Supplementary Data
Report of Management on the Consolidated Financial Statements
Management is responsible for the consistency, integrity, and presentation of the information in the Annual Report. The consolidated financial
statements and other information presented in this Annual Report have been prepared in accordance with accounting principles generally accepted
in the United States and include necessary judgments and estimates by management.
To fulfill our responsibility, we maintain comprehensive systems of internal control designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with established procedures. The concept of reasonable assurance is based upon
recognition that the cost of the controls should not exceed the benefit derived. We believe our systems of internal control provide this reasonable
assurance.
The Board of Directors exercised its oversight role with respect to the Corporation's systems of internal control primarily through its Audit Committee,
which is comprised of independent directors. The Committee oversees the Corporation's systems of internal control, accounting practices, financial
reporting and audits to assess whether their quality, integrity, and objectivity are sufficient to protect shareholders' investments.
In addition, our consolidated financial statements have been audited by Ernst & Young LLP, independent registered public accounting firm, whose
report also appears on this page.
Brian C. Cornell
Chairman and Chief Executive Officer
March 13, 2019
Cathy R. Smith
Executive Vice President and
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Target Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Target Corporation (the Corporation) as of February 2, 2019
and February 3, 2018, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for each
of the three years in the period ended February 2, 2019, and the related notes (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation at February 2,
2019 and February 3, 2018, and the results of its operations and its cash flows for each of the three years in the period ended February 2, 2019,
in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Corporation's internal control over financial reporting as of February 2, 2019, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 13, 2019,
expressed an unqualified opinion thereon.
Adoption of New Accounting Standards
ASU No. 2014-09
As discussed in Note 2 to the consolidated financial statements, the Corporation changed its method for recognizing revenue in 2018 due to the
adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, effective February 4, 2018, using the full
retrospective approach.
ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Corporation changed its method of accounting for leases in 2018 due to the
adoption of ASU No. 2016-02, Leases (Topic 842), as amended, effective February 4, 2018, using the modified retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation's
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
32
We have served as the Corporation's auditor since 1931.
Minneapolis, Minnesota
March 13, 2019
33
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our chief executive officer and chief
financial officer, we assessed the effectiveness of our internal control over financial reporting as of February 2, 2019, based on the framework in
Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework). Based on our assessment, we conclude that the Corporation's internal control over financial reporting is effective based on those criteria.
Our internal control over financial reporting as of February 2, 2019, has been audited by Ernst & Young LLP, the independent registered public
accounting firm who has also audited our consolidated financial statements, as stated in their report which appears on this page.
Brian C. Cornell
Chairman and Chief Executive Officer
March 13, 2019
Cathy R. Smith
Executive Vice President and
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Target Corporation
Opinion on Internal Control over Financial Reporting
We have audited Target Corporation’s internal control over financial reporting as of February 2, 2019, based on criteria established in Internal Control
—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
In our opinion, Target Corporation (the Corporation) maintained, in all material respects, effective internal control over financial reporting as of
February 2, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated statements of financial position of the Corporation as of February 2, 2019 and February 3, 2018, the related consolidated statements
of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended February 2, 2019,
and the related notes and our report dated March 13, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Minneapolis, Minnesota
March 13, 2019
34
Consolidated Statements of Operations
(millions, except per share data)
Sales
Other revenue
Total revenue
Cost of sales
Selling, general and administrative expenses
Depreciation and amortization (exclusive of depreciation included in cost
of sales)
Operating income
Net interest expense
Net other (income) / expense
Earnings from continuing operations before income taxes
Provision for income taxes
Net earnings from continuing operations
Discontinued operations, net of tax
Net earnings
Basic earnings per share
Continuing operations
Discontinued operations
Net earnings per share
Diluted earnings per share
Continuing operations
Discontinued operations
Net earnings per share
Weighted average common shares outstanding
Basic
Diluted
Antidilutive shares
Note: Per share amounts may not foot due to rounding.
See accompanying Notes to Consolidated Financial Statements.
2018
2017
As Adjusted (a)
2016
As Adjusted (a)
$
74,433 $
71,786 $
69,414
923
75,356
53,299
15,723
2,224
4,110
461
(27)
3,676
746
2,930
7
928
72,714
51,125
15,140
2,225
4,224
653
(59)
3,630
722
2,908
6
857
70,271
49,145
14,217
2,045
4,864
991
(88)
3,961
1,295
2,666
68
$
$
$
$
$
2,937 $
2,914 $
2,734
5.54 $
0.01
5.55 $
5.50 $
0.01
5.51 $
5.32 $
0.01
5.32 $
5.29 $
0.01
5.29 $
528.6
533.2
—
546.8
550.3
4.1
4.61
0.12
4.73
4.58
0.12
4.69
577.6
582.5
0.1
(a)
Refer to Note 2 regarding the adoption of new accounting standards for revenue recognition, leases, and
pensions.
35
Consolidated Statements of Comprehensive Income
(millions)
Net earnings
Other comprehensive (loss) / income, net of tax
Pension and other benefit liabilities, net of tax
Currency translation adjustment and cash flow hedges, net of tax
Other comprehensive (loss) / income
Comprehensive income
See accompanying Notes to Consolidated Financial Statements.
2018
2017
As Adjusted (a)
2016
As Adjusted (a)
$
2,937 $
2,914 $
2,734
(52)
(6)
(58)
2
6
8
(13)
4
(9)
$
2,879 $
2,922 $
2,725
(a)
Refer to Note 2 regarding the adoption of new accounting standards for revenue recognition, leases, and
pensions.
36
Consolidated Statements of Financial Position
(millions, except footnotes)
Assets
Cash and cash equivalents
Inventory
Other current assets
Total current assets
Property and equipment
Land
Buildings and improvements
Fixtures and equipment
Computer hardware and software
Construction-in-progress
Accumulated depreciation
Property and equipment, net
Operating lease assets
Other noncurrent assets
Total assets
Liabilities and shareholders' investment
Accounts payable
Accrued and other current liabilities
Current portion of long-term debt and other borrowings
Total current liabilities
Long-term debt and other borrowings
Noncurrent operating lease liabilities
Deferred income taxes
Other noncurrent liabilities
Total noncurrent liabilities
Shareholders' investment
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders' investment
February 2,
2019
February 3,
2018
As Adjusted (a)
$
1,556 $
9,497
1,466
12,519
6,064
29,240
5,912
2,544
460
(18,687)
25,533
1,965
1,273
2,643
8,597
1,300
12,540
6,095
28,131
5,623
2,645
440
(18,398)
24,536
1,884
1,343
41,290 $
40,303
$
$
9,761 $
4,201
1,052
15,014
10,223
2,004
972
1,780
14,979
43
6,042
6,017
(805)
11,297
8,677
4,094
281
13,052
11,117
1,924
693
1,866
15,600
45
5,858
6,495
(747)
11,651
40,303
Total liabilities and shareholders' investment
$
41,290 $
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 517,761,600 shares issued and outstanding
at February 2, 2019; 541,681,670 shares issued and outstanding at February 3, 2018.
Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding at February 2,
2019 or February 3, 2018.
See accompanying Notes to Consolidated Financial Statements.
(a)
Refer to Note 2 regarding the adoption of new accounting standards for revenue recognition, leases, and
pensions.
37
Consolidated Statements of Cash Flows
(millions)
Operating activities
Net earnings
Earnings from discontinued operations, net of tax
Net earnings from continuing operations
Adjustments to reconcile net earnings to cash provided by operations:
Depreciation and amortization
Share-based compensation expense
Deferred income taxes
Loss on debt extinguishment
Noncash losses / (gains) and other, net
Changes in operating accounts:
Inventory
Other assets
Accounts payable
Accrued and other liabilities
Cash provided by operating activities—continuing operations
Cash provided by operating activities—discontinued operations
Cash provided by operations
Investing activities
Expenditures for property and equipment
Proceeds from disposal of property and equipment
Cash paid for acquisitions, net of cash assumed
Other investments
Cash required for investing activities
Financing activities
Additions to long-term debt
Reductions of long-term debt
Dividends paid
Repurchase of stock
Stock option exercises
Cash required for financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental information
Interest paid, net of capitalized interest
Income taxes paid
Leased assets obtained in exchange for new finance lease liabilities
Leased assets obtained in exchange for new operating lease liabilities
See accompanying Notes to Consolidated Financial Statements.
2018
2017
As Adjusted (a)
2016
As Adjusted (a)
$
2,937 $
7
2,930
2,914 $
6
2,908
2,474
132
322
—
95
(900)
(299)
1,127
89
5,970
3
5,973
(3,516)
85
—
15
(3,416)
—
(281)
(1,335)
(2,124)
96
(3,644)
(1,087)
2,643
1,556 $
476 $
373
130
246
2,476
112
(188)
123
208
(348)
(156)
1,307
419
6,861
74
6,935
(2,533)
31
(518)
(55)
(3,075)
739
(2,192)
(1,338)
(1,046)
108
(3,729)
131
2,512
2,643 $
678 $
934
139
212
$
$
2,734
68
2,666
2,318
113
40
422
(11)
293
56
(166)
(394)
5,337
107
5,444
(1,547)
46
—
28
(1,473)
1,977
(2,649)
(1,348)
(3,706)
221
(5,505)
(1,534)
4,046
2,512
999
1,514
252
148
(a)
Refer to Note 2 regarding the adoption of new accounting standards for revenue recognition, leases, and
pensions.
38
Consolidated Statements of Shareholders' Investment
(millions)
January 30, 2016
Adoption of ASC Topic 842 (Leases)
Net earnings
Other comprehensive loss
Dividends declared
Repurchase of stock
Stock options and awards
January 28, 2017
Net earnings
Other comprehensive income
Dividends declared
Repurchase of stock
Stock options and awards
Reclassification of tax effects to
retained earnings
February 3, 2018
Net earnings
Other comprehensive loss
Dividends declared
Repurchase of stock
Stock options and awards
February 2, 2019
Common
Stock
Shares
Stock
Par
Value
Additional
Paid-in
Capital
Retained
Earnings
As Adjusted (a)
Accumulated Other
Comprehensive
(Loss) / Income
Total
602.2 $
—
50 $
—
—
—
—
(50.9)
4.9
556.2 $
—
—
—
(17.6)
3.1
—
541.7 $
—
—
—
(27.2)
3.3
517.8 $
—
—
—
(4)
—
46 $
—
—
—
(1)
—
—
45 $
—
—
—
(2)
—
43 $
5,348 $
8,196 $
(629) $ 12,965
—
—
—
—
—
313
(43)
2,734
—
(1,359)
(3,682)
—
—
—
(9)
(43)
2,734
(9)
— (1,359)
— (3,686)
—
313
5,661 $
5,846 $
(638) $ 10,915
—
—
—
—
197
—
2,914
—
(1,356)
(1,026)
—
117
5,858 $
6,495 $
—
—
—
—
184
2,937
—
(1,347)
(2,068)
—
—
8
2,914
8
— (1,356)
— (1,027)
—
197
(117)
—
(747) $ 11,651
—
(58)
2,937
(58)
— (1,347)
— (2,070)
—
184
6,042 $
6,017 $
(805) $ 11,297
We declared $2.54, $2.46, and $2.36 dividends per share for the twelve months ended February 2, 2019, February 3,
2018, and January 28, 2017, respectively.
See accompanying Notes to Consolidated Financial Statements.
(a)
Refer to Note 2 regarding the adoption of new accounting standards for revenue recognition, leases, and
pensions.
39
Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
Organization We are a general merchandise retailer selling products to our guests through our stores and digital
channels.
We operate as a single segment that includes all of our continuing 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 United States (U.S.). The vast majority of our long-lived assets are located within the U.S.
Consolidation The consolidated financial statements include the balances of Target and its subsidiaries after
elimination of intercompany balances and transactions. All material subsidiaries are wholly owned. We consolidate
variable interest entities where it has been determined that Target is the primary beneficiary of those entities' operations.
Use of estimates The preparation of our consolidated financial statements in conformity with U.S. generally accepted
accounting principles (GAAP) requires management to make estimates and assumptions affecting reported amounts
in the consolidated financial statements and accompanying notes. Actual results may differ significantly from those
estimates.
Fiscal year Our fiscal year ends on the Saturday nearest January 31. Unless otherwise stated, references to years
in this report relate to fiscal years, rather than to calendar years. Fiscal 2018 ended February 2, 2019, and consisted
of 52 weeks. Fiscal 2017 ended February 3, 2018, and consisted of 53 weeks. Fiscal 2016 ended January 28, 2017,
and consisted of 52 weeks. Fiscal 2019 will end February 1, 2020, and will consist of 52 weeks.
Accounting policies Our accounting policies are disclosed in the applicable Notes to the Consolidated Financial
Statements. Certain prior-year amounts have been reclassified to conform to the current year presentation. Note 2
provides information about our adoption of new accounting standards for revenue recognition, leases, and pensions.
2. Accounting Standards Adopted
Revenue Recognition
We adopted Accounting Standards Update (ASU) No. 2014-09—Revenue from Contracts with Customers (Topic 606),
as amended, as of February 4, 2018, using the full retrospective approach. The new standard did not materially affect
our consolidated net earnings, financial position, or cash flows. The new standard resulted in minor changes to the
timing of recognition of revenues for certain promotional gift card programs.
For 2017 and 2016, we reclassified profit-sharing income under our credit card program agreement to Other Revenue
from Selling, General and Administrative Expenses (SG&A Expenses). In addition, we reclassified certain advertising,
rental, and other miscellaneous revenues, none of which was individually significant, from Sales and SG&A Expenses
to Other Revenue.
Leases
We adopted ASU No. 2016-02—Leases (Topic 842), as amended, as of February 4, 2018, using the modified
retrospective approach. The modified retrospective approach provides a method for recording existing leases at
adoption and in comparative periods that approximates the results of a full retrospective approach. In addition, we
elected the package of practical expedients permitted under the transition guidance within the new standard, which
among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient
related to land easements, allowing us to carry forward our accounting treatment for land easements on existing
agreements.
In addition, we elected the hindsight practical expedient to determine the lease term for existing leases. Our election
of the hindsight practical expedient resulted in the shortening of lease terms for certain existing leases and the useful
lives of corresponding leasehold improvements. In our application of hindsight, we evaluated the performance of the
leased stores and the associated markets in relation to our overall real estate strategies, which resulted in the
determination that most renewal options would not be reasonably certain in determining the expected lease term.
40
Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately
$1.3 billion and $1.4 billion respectively, as of February 4, 2018. The difference between the additional lease assets
and lease liabilities, net of the deferred tax impact, was recorded as an adjustment to retained earnings. The standard
did not materially impact our consolidated net earnings and had no impact on cash flows.
Pensions
In 2018, we adopted ASU No. 2017-07—Compensation – Retirement Benefits (Topic 715) using the full retrospective
approach. The new standard requires employers to disaggregate and present separately the current service cost
component from the other components of net benefit cost within the Consolidated Statement of Operations. For 2017
and 2016, we reclassified $(59) million and $(88) million, respectively, of non-service cost components of net benefit
cost to Net Other (Income) / Expense from SG&A Expenses on our Consolidated Statements of Operations.
Effect of Accounting Standards Adoption on Consolidated Statement of Operations
Effect of the Adoption of
(millions, except per share data) (unaudited)
2017
As
Previously
Reported
ASC
Topic 606
(Revenue
Recognition)
ASC
Topic 842
(Leases)
ASU
2017-07
(Pension)
(a)
(a)
(a)
(93)
928
835
—
835
—
—
—
—
—
(2)
2
—
2
$
$
(b)
(b)
(b)
—
—
—
—
(2)
31
(29)
(13)
—
(16)
6
(22)
—
(22)
$
$
(c)
(c)
—
—
—
—
59
—
(59)
—
(59)
—
—
—
—
—
Sales
Other revenue
Total revenue
Cost of sales
Selling, general and administrative expenses
Depreciation and amortization (exclusive of
depreciation included in cost of sales)
Operating income
Net interest expense
Net other (income) / expense
Earnings from continuing operations before income
taxes
Provision for income taxes
Net earnings from continuing operations
Discontinued operations, net of tax
Net earnings
Basic earnings per share
Continuing operations
Discontinued operations
Net earnings per share
Diluted earnings per share
Continuing operations
Discontinued operations
Net earnings per share
$
71,879 $
—
71,879
51,125
14,248
2,194
4,312
666
—
3,646
718
2,928
6
2,934 $
5.35
0.01
5.36
5.32
0.01
5.33
$
$
$
$
$
2017
As Adjusted
$
71,786
928
72,714
51,125
15,140
2,225
4,224
653
(59)
3,630
722
2,908
6
2,914
5.32
0.01
5.32
5.29
0.01
5.29
$
$
$
$
$
Note: 2017 was a 53-week year. Per share amounts may not foot due to rounding. The sum of "As Previously Reported"
amounts and effects of the adoption of the new standards may not equal "As Adjusted" amounts due to rounding.
Footnote explanations are provided on page 42.
41
Effect of Accounting Standards Adoption on Consolidated Statement of Operations
Effect of the Adoption of
(millions, except per share data) (unaudited)
2016
As
Previously
Reported
ASC
Topic 606
(Revenue
Recognition)
ASC
Topic 842
(Leases)
ASU
2017-07
(Pension)
(a)
(a)
(a)
(80)
857
777
—
777
—
—
—
—
—
—
—
—
—
$
$
(b)
(b)
(b)
—
—
—
—
(4)
20
(16)
(13)
—
(3)
(1)
(2)
—
(2)
$
$
(c)
(c)
—
—
—
—
88
—
(88)
—
(88)
—
—
—
—
—
Sales
Other revenue
Total revenue
Cost of sales
Selling, general and administrative expenses
Depreciation and amortization (exclusive of
depreciation included in cost of sales)
Operating income
Net interest expense
Net other (income) / expense
Earnings from continuing operations before income
taxes
Provision for income taxes
Net earnings from continuing operations
Discontinued operations, net of tax
Net earnings
Basic earnings per share
Continuing operations
Discontinued operations
Net earnings per share
Diluted earnings per share
Continuing operations
Discontinued operations
Net earnings per share
$
69,495 $
—
69,495
49,145
13,356
2,025
4,969
1,004
—
3,965
1,296
2,669
68
2,737 $
4.62
0.12
4.74
4.58
0.12
4.70
$
$
$
$
$
2016
As Adjusted
$
69,414
857
70,271
49,145
14,217
2,045
4,864
991
(88)
3,961
1,295
2,666
68
2,734
4.61
0.12
4.73
4.58
0.12
4.69
$
$
$
$
$
Note: Per share amounts may not foot due to rounding. The sum of "As Previously Reported" amounts and effects of
the adoption of the new standards may not equal "As Adjusted" amounts due to rounding.
(a)
(b)
(c)
For 2017 and 2016, we reclassified $694 million and $663 million, respectively, of profit-sharing income under
our credit card program agreement to Other Revenue from SG&A Expenses. In addition, we reclassified certain
advertising, rental, and other miscellaneous revenues, none of which was individually significant, from Sales
and SG&A Expenses to Other Revenue.
Relates to lease-term changes under the hindsight practical expedient.
Relates to non-service cost components reclassified to Net Other (Income) / Expense from SG&A Expenses.
42
Effect of Accounting Standards Adoption on Consolidated Statement of Financial Position
(millions) (unaudited)
Assets
Cash and cash equivalents
Inventory
Other current assets
Total current assets
Property and equipment
Land
Buildings and improvements
Fixtures and equipment
Computer hardware and software
Construction-in-progress
Accumulated depreciation
Property and equipment, net
Operating lease assets
Other noncurrent assets
Total assets
Liabilities and shareholders’ investment
Accounts payable
Accrued and other current liabilities
Current portion of long-term debt and other
borrowings
Total current liabilities
Long-term debt and other borrowings
Noncurrent operating lease liabilities
Deferred income taxes
Other noncurrent liabilities
Total noncurrent liabilities
Shareholders’ investment
Common stock
Additional paid-in capital
Effect of the Adoption of
February 3,
2018
As Previously
Reported
ASC
Topic 606
(Revenue
Recognition)
ASC
Topic 842
(Leases)
February 3,
2018
As Adjusted
$
2,643 $
8,657
1,264
12,564
6,095
28,396
5,623
2,645
440
(18,181)
25,018
—
1,417
$
$
38,999 $
8,677 $
4,254
270
13,201
11,317
—
713
2,059
14,089
45
5,858
6,553
(747)
11,709
38,999 $
—
(60) (a)
60 (a)
—
—
—
—
—
—
—
—
—
—
—
—
(14) (k)
—
(14)
—
—
4
—
4
—
—
10 (k)
—
10
—
$
—
$
$
$
$
$
—
(24) (b)
(24)
—
(265) (c)
—
—
—
(217) (c)
(482)
1,884 (d)
(74) (e)
1,304
—
(146) (f)
11 (g)
(135)
(200) (g)
1,924 (h)
(24)
(192) (i)
1,508
—
—
(69) (j)
—
(69)
$
1,304
$
2,643
8,597
1,300
12,540
6,095
28,131
5,623
2,645
440
(18,398)
24,536
1,884
1,343
40,303
8,677
4,094
281
13,052
11,117
1,924
693
1,866
15,600
45
5,858
6,495
(747)
11,651
40,303
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ investment
Total liabilities and shareholders’ investment
$
Note: The sum of "As Previously Reported" amounts and effects of the adoption of the new standards may not equal
"As Adjusted" amounts due to rounding.
(a)
Represents estimated merchandise returns, which were reclassified from Inventory to Other Current Assets.
Represents prepaid rent reclassified to Operating Lease Assets.
Represents impact of changes in finance lease terms and related leasehold improvements (net of accumulated
depreciation) under the hindsight practical expedient and derecognition of approximately $135 million of non-
Target owned properties that were consolidated under previously existing build-to-suit accounting rules.
Represents capitalization of operating lease assets and reclassification of leasehold acquisition costs, straight-
line rent accrual, and tenant incentives.
(b)
(c)
(d)
43
(e)
(f)
(g)
(h)
(i)
(j)
(k)
Represents reclassification of leasehold acquisition costs to Operating Lease Assets.
Represents reclassification of straight-line rent accrual to Operating Lease Assets, partially offset by recognition
of the current portion of operating lease liabilities.
Represents the impact of changes in financing lease terms for certain leases due to the election of the hindsight
practical expedient.
Represents recognition of operating lease liabilities.
Represents derecognition of approximately $135 million of liabilities related to non-Target owned properties
that were consolidated under previously existing build-to-suit accounting rules and reclassification of tenant
incentives to Operating Lease Assets.
Represents the retained earnings impact of lease-term changes due to the use of hindsight, primarily from the
shortening of lease terms for certain existing leases and useful lives of corresponding leasehold improvements.
Primarily represents the impact of a change in timing of revenue recognition for certain promotional gift card
programs.
3. Revenues
General merchandise sales represent the vast majority of our revenues. We also earn revenues from a variety of other
sources, most notably credit card profit sharing income from our arrangement with TD Bank Group (TD).
During 2018, we reclassified certain income streams, including credit card profit sharing income, to Other Revenue
on our Consolidated Statements of Operations and conformed prior periods. Note 2 provides additional information.
Revenues
(millions)
Apparel and accessories
Beauty and household essentials
Food and beverage
Hardlines
Home furnishings and décor
Other
Sales
Credit card profit sharing
Other
Other revenue
2018
2017
$
15,004 $
14,662 $
17,726
14,585
12,709
14,298
111
74,433
673
250
923
17,025
14,256
12,062
13,672
109
71,786
694
234
928
2016
14,304
16,550
13,831
11,507
13,130
92
69,414
663
194
857
Total revenue
$
75,356 $
72,714 $
70,271
Merchandise sales – We record almost all retail store revenues at the point of sale. Digital channel originated sales
may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Total
revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales taxes.
Generally, guests may return national brand merchandise within 90 days of purchase and owned and exclusive brands
within one year of purchase. Sales are recognized net of expected returns, which we estimate using historical return
patterns and our expectation of future returns. As of February 2, 2019, February 3, 2018, and January 28, 2017, the
liability for estimated returns was $116 million, $110 million, and $103 million, respectively. We have not historically
had material adjustments to our returns estimates.
We routinely enter into arrangements with vendors whereby we do not purchase or pay for merchandise until the
merchandise is ultimately sold to a guest. Under the vast majority of these arrangements, which represent less than
5 percent of consolidated sales, we record revenue and related costs gross. We concluded that we are the principal
in these transactions for a number of reasons, most notably because we 1) control the overall economics of the
transactions, including setting the sales price and realizing the majority of cash flows from the sale, 2) control the
relationship with the customer, and 3) are responsible for fulfilling the promise to provide goods to the customer.
Merchandise received under these arrangements is not included in Inventory in our Consolidated Statements of
Financial Position because the purchase and sale of this inventory are virtually simultaneous.
44
Revenue from Target gift card sales is recognized upon gift card redemption, which is typically within one year of
issuance. Our gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage
of gift cards will never be redeemed, referred to as "breakage." Estimated breakage revenue is recognized over time
in proportion to actual gift card redemptions.
(millions)
Gift card liability
(a) Net of estimated breakage.
Gift Cards
Issued During
Current Period
But Not
Redeemed (a)
Revenue
Recognized
From
Beginning
Liability
February 3,
2018
February 2,
2019
$
727 $
645 $
(532) $
840
Guests receive a 5 percent discount on nearly all purchases and receive free shipping at Target.com when they use
their Target Debit Card, Target Credit Card, or Target MasterCard (REDcards). The discount is included as a sales
reduction in our Consolidated Statements of Operations and was $953 million, $933 million, and $899 million in 2018,
2017, and 2016, respectively.
Credit card profit sharing – We receive payments under a credit card program agreement with TD. Under the agreement,
we receive a percentage of the profits generated by the Target Credit Card and Target MasterCard receivables in
exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target
Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory
compliance.
Other – Includes rental income, advertising, membership fees, and other miscellaneous revenues, none of which are
individually significant.
4. Cost of Sales and Selling, General and Administrative Expenses
The following table illustrates the primary items classified in each major expense category:
Cost of Sales
Total cost of products sold including
• Freight expenses associated with moving
merchandise from our vendors to and between our
distribution centers and our retail stores
• Vendor income that is not reimbursement of
specific, incremental, and identifiable costs
Inventory shrink
Markdowns
Outbound shipping and handling expenses
associated with sales to our guests
Payment term cash discounts
Distribution center costs, including compensation
and benefits costs and depreciation
Import costs
Selling, General and Administrative Expenses
Compensation and benefit costs for stores and
headquarters
Occupancy and operating costs of retail and
headquarters facilities
Advertising, offset by vendor income that is a
reimbursement of specific, incremental, and
identifiable costs
Pre-opening and exit costs of stores and other facilities
Credit cards servicing expenses
Costs associated with accepting 3rd party bank issued
payment cards
Litigation and defense costs and related insurance
recovery
Other administrative costs
Note: The classification of these expenses varies across the retail industry.
45
5. Consideration Received from Vendors
We receive consideration for a variety of vendor-sponsored programs, such as volume rebates, markdown allowances,
promotions, and advertising allowances and for our compliance programs, referred to as "vendor income." Additionally,
under our compliance programs, vendors are charged for merchandise shipments that do not meet our requirements
(violations), such as late or incomplete shipments. Substantially all consideration received is recorded as a reduction
of Cost of Sales.
We establish a receivable for vendor income that is earned but not yet received. Based on provisions of the agreements
in place, this receivable is computed by estimating the amount earned when we have completed our performance. We
perform detailed analyses to determine the appropriate level of the receivable in the aggregate. The majority of year-
end receivables associated with these activities are collected within the following fiscal quarter. We have not historically
had significant write-offs for these receivables.
6. Advertising Costs
Advertising costs, which primarily consist of newspaper circulars, digital advertisements, and media broadcast, are
generally expensed at first showing or distribution of the advertisement.
Advertising Costs
(millions)
Gross advertising costs
Vendor income
Net advertising costs
7. Fair Value Measurements
2018
1,494 $
—
1,494 $
2017
1,476 $
(19)
1,457 $
2016
1,503
(38)
1,465
$
$
Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1
(unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in
Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).
Fair Value Measurements - Recurring Basis
Classification
Fair Value at
Pricing
Category
February 2,
2019
February 3,
2018
(millions)
Assets
Short-term investments (a)
Prepaid forward contracts (b)
Interest rate swaps (c)
Liabilities
Interest rate swaps (c)
Interest rate swaps (c)
Cash and Cash Equivalents
Level 1 $
769 $
1,906
Other Current Assets
Other Noncurrent Assets
Other Current Liabilities
Other Noncurrent Liabilities
Level 1
Level 2
Level 2
Level 2
19
10
3
—
23
—
—
6
(a)
(b)
(c)
Carrying value approximates fair value because maturities are less than three months.
Initially valued at transaction price. Subsequently valued by reference to the market price of Target common
stock.
Valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads). See
Note 17 for additional information on interest rate swaps.
46
Significant Financial Instruments not Measured at Fair Value (a)
2018
2017
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$ 10,247 $ 10,808 $ 10,440 $ 11,155
(millions)
Long-term debt, including current portion (b)
(a)
(b)
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.
The fair value of debt is generally measured using a discounted cash flow analysis based on current market
interest rates for the same or similar types of financial instruments and would be classified as Level 2. These
amounts exclude commercial paper, unamortized swap valuation adjustments, and lease liabilities.
8. Cash and Cash Equivalents
Cash equivalents include highly liquid investments with an original maturity of three months or less from the time of
purchase. Cash equivalents also include amounts due from third-party financial institutions for credit and debit card
transactions. These receivables typically settle in five days or less.
(millions)
Cash
Short-term investments
Receivables from third-party financial institutions for credit and debit card transactions
Cash and cash equivalents (a)
(a)
We have access to these funds without any significant restrictions, taxes or penalties.
February 2,
2019
February 3,
2018
$
$
359 $
769
428
1,556 $
337
1,906
400
2,643
At February 2, 2019 and February 3, 2018, we reclassified book overdrafts of $242 million and $358 million, respectively,
to Accounts Payable and $25 million and $29 million, respectively, to Accrued and Other Current Liabilities.
9. Inventory
The vast majority of our inventory is accounted for under the retail inventory accounting method (RIM) using the last-
in, first-out (LIFO) method. Inventory is stated at the lower of LIFO cost or market. Inventory cost includes the amount
we pay to our suppliers to acquire inventory, freight costs incurred to deliver product to our distribution centers and
stores, and import costs, reduced by vendor income and cash discounts. Distribution center operating costs, including
compensation and benefits, are expensed in the period incurred. Inventory is also reduced for estimated losses related
to shrink and markdowns. The LIFO provision is calculated based on inventory levels, markup rates, and internally
measured retail price indices.
Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the
inventory retail value. RIM is an averaging method that has been widely used in the retail industry due to its practicality.
The use of RIM will result in inventory being valued at the lower of cost or market because permanent markdowns are
taken as a reduction of the retail value of inventory.
10. Other Current Assets
Other Current Assets
(millions)
Income tax and other receivables
Vendor income receivable
Prepaid expenses
Other
Total
February 2,
2019
February 3,
2018
As Adjusted
632 $
468
157
209
513
416
157
214
1,466 $
1,300
$
$
47
11. Property and Equipment
Property and equipment, including assets acquired under finance leases, is depreciated using the straight-line method
over estimated useful lives or lease terms if shorter. We amortize leasehold improvements purchased after the beginning
of the initial lease term over the shorter of the assets' useful lives or a term that includes the original lease term, plus
any renewals that are reasonably certain at the date the leasehold improvements are acquired. Depreciation expense
for 2018, 2017, and 2016 was $2,460 million, $2,462 million, and $2,305 million, respectively, including depreciation
expense included in Cost of Sales. For income tax purposes, accelerated depreciation methods are generally used.
Repair and maintenance costs are expensed as incurred. Facility pre-opening costs, including supplies and payroll,
are expensed as incurred.
Estimated Useful Lives
Buildings and improvements
Fixtures and equipment
Computer hardware and software
Life (Years)
8-39
2-15
2-7
We review long-lived assets for impairment when events or changes in circumstances—such as a decision to relocate
or close a store or distribution center, make significant software changes or discontinue projects—indicate that the
asset's carrying value may not be recoverable. We recognized impairment losses of $92 million, $91 million, and $43
million during 2018, 2017, and 2016, respectively. The impairment losses primarily resulted from planned or completed
store closures, and for 2017, supply chain changes. For asset groups classified as held for sale, the carrying value is
compared with the fair value less cost to sell. We estimate fair value by obtaining market appraisals, valuations from
third party brokers, or other valuation techniques. Impairments are recorded in SG&A Expenses on the Consolidated
Statements of Operations.
12. Other Noncurrent Assets
Other Noncurrent Assets
(millions)
Goodwill and intangible assets
Company-owned life insurance investments, net of loans
Pension asset
Other
Total
13. Goodwill and Intangible Assets
February 2,
2019
February 3,
2018
As Adjusted
699 $
380
11
183
709
383
46
205
1,273 $
1,343
$
$
Goodwill totaled $633 million and $630 million at February 2, 2019 and February 3, 2018, respectively. In December
2017, we acquired Shipt, Inc., an online same-day delivery service platform, for approximately $550 million. We identified
intangible assets of $40 million, primarily related to the tradename, customer relationships, and shopper lists, net
tangible assets of $10 million, and goodwill of $500 million. The goodwill recorded primarily represents the value of
significantly accelerating our ability to provide same-day delivery services to our guests.
No impairments were recorded in 2018, 2017, or 2016 as a result of the annual goodwill impairment tests performed.
Intangible assets, net of accumulated amortization, totaled $66 million and $79 million as of February 2, 2019, and
February 3, 2018, respectively, primarily related to trademarks and customer relationships. We use both accelerated
and straight-line methods to amortize definite-lived intangible assets over 4 to 15 years. The weighted average life of
intangible assets was 8 years at February 2, 2019. Amortization expense was $14 million, $14 million, and $13 million
in 2018, 2017, and 2016, respectively, and is estimated to be less than $15 million annually through 2023.
48
14. Accrued and Other Current Liabilities
Accrued and Other Current Liabilities
(millions)
Wages and benefits
Gift card liability, net of estimated breakage
Real estate, sales, and other taxes payable
Dividends payable
Current portion of operating lease liabilities
Workers' compensation and general liability (a)
Interest payable
Other
Total
(a)
February 2,
2019
1,229 $
$
February 3,
2018
As Adjusted
1,209
840
601
331
166
142
62
830
727
670
336
148
141
67
796
$
4,201 $
4,094
We retain a substantial portion of the risk related to general liability and workers' compensation claims. We
estimate our ultimate cost based on analysis of historical data and actuarial estimates. General liability and
workers' compensation liabilities are recorded at our estimate of their net present value.
15. Commitments and Contingencies
Contingencies
We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve
these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When
a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of
loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose
the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a
range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide
a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically,
adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial
statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified
claims or litigation will be material to our results of operations, cash flows, or financial condition.
Commitments
Purchase obligations, which include all legally binding contracts such as firm commitments for inventory purchases,
merchandise royalties, equipment purchases, marketing-related contracts, software acquisition/license commitments,
and service contracts, were $992 million and $1,225 million at February 2, 2019 and February 3, 2018, respectively.
These purchase obligations are primarily due within three years and recorded as liabilities when goods are received
or services rendered. Real estate obligations, which include legally binding minimum lease payments for leases signed
but not yet commenced, and commitments for the purchase, construction, or remodeling of real estate and facilities,
were $1,134 million and $1,110 million at February 2, 2019 and February 3, 2018, respectively. Over half of these real
estate obligations are due within five years, a portion of which are recorded as liabilities.
We issue letters of credit and surety bonds in the ordinary course of business. Trade letters of credit totaled $1,746
million and $1,757 million at February 2, 2019 and February 3, 2018, respectively, a portion of which are reflected in
accounts payable. Standby letters of credit and surety bonds, relating primarily to insurance and regulatory
requirements, totaled $403 million and $372 million at February 2, 2019 and February 3, 2018, respectively.
49
16. Commercial Paper and Long-Term Debt
At February 2, 2019, the carrying value and maturities of our debt portfolio were as follows:
Debt Maturities
(dollars in millions)
Due 2019-2023
Due 2024-2028
Due 2029-2033
Due 2034-2038
Due 2039-2043
Due 2044-2048
Total notes and debentures
Swap valuation adjustments
Finance lease liabilities
Less: Amounts due within one year
Long-term debt and other borrowings
(a)
Reflects the weighted average stated interest rate as of year-end.
February 2, 2019
Rate (a)
Balance
3.4% $
3.3
6.6
6.8
4.0
3.7
4.1
3,207
2,179
561
1,109
1,465
1,726
10,247
7
1,021
(1,052)
$
10,223
Required Principal Payments
(millions)
Total required principal payments
2019
1,002 $
$
2020
2021
2022
1,094 $
1,056 $
63 $
2023
—
In October 2017, we issued unsecured fixed rate debt of $750 million at 3.9 percent that matures in November 2047.
In addition to debt repaid at its maturity during 2017, during October 2017, we repurchased $344 million of debt before
its maturity at a market value of $463 million. We recognized a loss on early retirement of approximately $123 million,
which was recorded in Net Interest Expense in our Consolidated Statements of Operations.
In April 2016, we issued unsecured fixed rate debt of $1 billion at 2.5 percent that matures in April 2026 and $1 billion
at 3.625 percent that matures in April 2046. In addition to debt repaid at its maturity during 2016, during the first half
of 2016, we repurchased $1,389 million of debt before its maturity at a market value of $1,800 million. We recognized
a loss on early retirement of approximately $422 million, which was recorded in Net Interest Expense in our Consolidated
Statements of Operations.
We obtain short-term financing from time to time under our commercial paper program.
Commercial Paper
(dollars in millions)
2018
2017
2016
Maximum daily amount outstanding during the year
$
658
$
— $
Average amount outstanding during the year
Amount outstanding at year-end
Weighted average interest rate
63
—
—
—
2.00%
—%
0.43%
89
1
—
In October 2018, we extended a committed $2.5 billion revolving credit facility by one year to October 2023. No balances
were outstanding under our credit facility at any time during 2018, 2017, or 2016.
Substantially all of our outstanding borrowings are senior, unsecured obligations. Most of our long-term debt obligations
contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also
contains a debt leverage covenant. We are, and expect to remain, in compliance with these covenants, which have
no practical effect on our ability to pay dividends.
50
17. Derivative Financial Instruments
Our derivative instruments primarily consist of interest rate swaps, which we use to mitigate interest rate risk. As a
result of our use of derivative instruments, we have counterparty credit exposure to large global financial institutions.
We monitor this concentration of counterparty credit risk on an ongoing basis. Note 7 provides the fair value and
classification of these instruments.
During 2018, we entered into two interest rate swaps, each with a notional amount of $250 million, under which we
pay a variable rate and receive a fixed rate. We designated these swaps as fair value hedges. Under the swap
agreements, we pay a floating rate equal to 1-month London Interbank Offered Rate (LIBOR) and receive a weighted
average fixed rate of 2.9 percent. The agreements have a weighted average remaining maturity of 6.3 years. Under
the two previously existing swap agreements, which mature during 2019, we pay a floating rate equal to 3-month
LIBOR and receive a weighted average fixed rate of 1.8 percent. With the addition of the two swaps entered into during
2018, as of February 2, 2019, four interest rate swaps with notional amounts totaling $1,500 million were designated
as fair value hedges. As of February 3, 2018, two interest rate swaps with notional amounts totaling $1,000 million
were designated as fair value hedges. No ineffectiveness was recognized in 2018 or 2017.
$10 million of interest rate swap-related assets were classified within Other Noncurrent Assets and $3 million of interest
rate swap-related liabilities were classified within Other Current Liabilities as of February 2, 2019. $6 million of
designated interest rate swap-related liabilities were classified within Other Noncurrent Liabilities as of February 3,
2018.
We recorded expense of $3 million during 2018 and income of $9 million and $24 million during 2017 and 2016,
respectively, within Net Interest Expense on our Consolidated Statements of Operations related to periodic payments,
valuation adjustments, and amortization of gains or losses on our interest rate swaps.
18. Leases
We lease certain retail stores, warehouses, distribution centers, office space, land, and equipment. Leases with an
initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases
on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of
Topic 842, we combine lease and nonlease components.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 50
years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to
purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected
lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Certain of our lease agreements include rental payments based on a percentage of retail sales over contractual levels
and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material
residual value guarantees or material restrictive covenants.
We rent or sublease certain real estate to third parties. Our lease and sublease portfolio consists mainly of operating
leases with CVS Pharmacy Inc. (CVS) for space within our stores.
51
Leases
(millions)
Assets
Operating
Finance
Total leased assets
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Classification
Operating Lease Assets
Buildings and Improvements, net of Accumulated
Depreciation (a)
Accrued and Other Current Liabilities
Current Portion of Long-term Debt and Other Borrowings
Noncurrent Operating Lease Liabilities
Long-term Debt and Other Borrowings
$
$
$
February 2,
2019
February 3,
2018
1,965 $
872
1,884
836
2,837 $
2,720
166 $
53
2,004
968
148
80
1,924
885
3,037
Total lease liabilities
$
3,191 $
Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the
information available at commencement date in determining the present value of lease payments. We use the
incremental borrowing rate on January 31, 2016, for operating leases that commenced prior to that date.
(a)
Finance lease assets are recorded net of accumulated amortization of $371 million and $317 million as of
February 2, 2019 and February 3, 2018, respectively.
Lease Cost
(millions)
Operating lease cost (a)
Finance lease cost
Classification
SG&A Expenses
Amortization of leased assets
Interest on lease liabilities
Depreciation and Amortization (b)
Net Interest Expense
Other Revenue
Sublease income (c)
Net lease cost
(a)
2018
251 $
2017
221 $
2016
199
65
42
(11)
347 $
63
42
(9)
87
36
(7)
317 $
315
$
$
(b)
(c)
Includes short-term leases and variable lease costs, which are immaterial.
Supply chain-related amounts are included in Cost of Sales.
Sublease income excludes rental income from owned properties of $47 million for 2018, 2017, and 2016,
which is included in Other Revenue.
52
Maturity of Lease Liabilities
(millions)
2019
2020
2021
2022
2023
After 2023
Total lease payments
Less: Interest
Present value of lease liabilities
(a)
Operating
Leases (a)
Finance
Leases (b)
$
245 $
98 $
238
232
226
217
1,746
98
98
99
94
974
$
$
2,904 $
1,461 $
734
440
2,170 $
1,021
Total
343
336
330
325
311
2,720
4,365
(b)
Operating lease payments include $778 million related to options to extend lease terms that are reasonably
certain of being exercised and exclude $341 million of legally binding minimum lease payments for leases
signed but not yet commenced.
Finance lease payments include $127 million related to options to extend lease terms that are reasonably
certain of being exercised and exclude $193 million of legally binding minimum lease payments for leases
signed but not yet commenced.
Lease Term and Discount Rate
Weighted average remaining lease term (years)
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
Other Information
(millions)
February 2,
2019
February 3,
2018
14.2
15.4
3.91%
4.64%
15.2
15.4
3.88%
4.64%
2018
2017
2016
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
$
231 $
198 $
Operating cash flows from finance leases
Financing cash flows from finance leases
45
80
42
45
188
36
94
19. Income Taxes
In December 2017, the U.S. government enacted the Tax Cuts and Jobs Act tax reform legislation (the Tax Act), which
among other matters reduced the U.S. corporate income tax rate from 35 percent to 21 percent effective January 1,
2018.
In 2017, we recorded a provisional $343 million net tax benefit primarily related to the remeasurement of certain deferred
tax assets and liabilities, including $372 million of benefit from the new lower rate, partially offset by $29 million of
deferred income tax expense from our foreign operations. During 2018, we completed our Tax Act accounting and
recorded adjustments to previously-recorded provisional amounts, resulting in a $36 million tax benefit primarily related
to the remeasurement of deferred tax assets and liabilities.
Beginning with 2018, we are subject to a new tax on global intangible low-taxed income that is imposed on foreign
earnings. We have made an accounting election to record this tax as a period cost and thus have not adjusted any
of the deferred tax assets or liabilities of our foreign subsidiaries for the new tax. Net impacts of this new tax were
immaterial and are included in our provision for income taxes for 2018.
53
Earnings from continuing operations before income taxes were $3,676 million, $3,630 million, and $3,961 million during
2018, 2017, and 2016, respectively, including $734 million, $722 million, and $336 million earned by our foreign entities
subject to tax outside of the U.S.
Tax Rate Reconciliation – Continuing Operations
Federal statutory rate
State income taxes, net of the federal tax benefit
International
Tax Act (a)
Excess tax benefit related to share-based payments
Federal tax credits
Other
Effective tax rate
(a)
2018
21.0%
2017
As Adjusted
2016
As Adjusted
33.7%
35.0%
3.6
(1.3)
(1.0)
(0.3)
(1.1)
(0.6)
2.2
(4.6)
(9.5)
(0.1)
(0.8)
(1.0)
2.7
(2.6)
—
(0.6)
(0.7)
(1.1)
20.3%
19.9%
32.7%
Represents the discrete benefit of remeasuring our net deferred tax liabilities at the new lower U.S. corporate
income tax rate.
Provision for Income Taxes
(millions)
Current:
Federal
State
International
Total current
Deferred:
Federal
State
International
Total deferred
Total provision
2018
2017
As Adjusted
2016
As Adjusted
$
257 $
746 $
1,108
116
51
424
263
57
2
322
105
59
910
(229)
27
14
(188)
141
6
1,255
20
21
(1)
40
$
746 $
722 $
1,295
54
Net Deferred Tax Asset / (Liability)
(millions)
Gross deferred tax assets:
Accrued and deferred compensation
Accruals and reserves not currently deductible
Self-insured benefits
Deferred occupancy income
Leased assets
Other
Total gross deferred tax assets
Gross deferred tax liabilities:
Property and equipment
Inventory
Other
Total gross deferred tax liabilities
Total net deferred tax liability
February 2,
2019
February 3,
2018
As Adjusted
$
248 $
181
114
157
92
40
832
262
162
109
164
87
42
826
(1,557)
(1,264)
(140)
(95)
(1,792)
$
(960) $
(130)
(91)
(1,485)
(659)
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted income tax rates in effect for the year the temporary differences
are expected to be recovered or settled. Tax rate changes affecting deferred tax assets and liabilities are recognized
at the enactment date. We recognized a net tax benefit of $36 million and $372 million in 2018 and 2017, respectively,
primarily because we remeasured our net deferred tax liabilities using the new lower U.S. corporate tax rate.
Beginning in 2017, due to changes effected by the Tax Act and other reasons, we have not asserted indefinite
reinvestment in our foreign operations. Because of this change, we recorded a deferred tax charge of $29 million during
2017.
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. The U.S.
Internal Revenue Service has completed exams on the U.S. federal income tax returns for years 2015 and prior. With
few exceptions, we are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for
years before 2009.
Reconciliation of Liability for Unrecognized Tax Benefits
(millions)
Balance at beginning of period
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at end of period
2018
2017
$
325 $
153 $
58
10
(91)
(2)
112
142
(71)
(11)
$
300 $
325 $
2016
153
12
6
(16)
(2)
153
If we were to prevail on all unrecognized tax benefits recorded, $252 million of the $300 million reserve would benefit
the effective tax rate. In addition, the reversal of accrued penalties and interest would also benefit the effective tax
rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. During
the years ended February 2, 2019, February 3, 2018, and January 28, 2017, we recorded an expense / (benefit) from
accrued penalties and interest of $3 million, $(12) million, and $1 million, respectively. As of February 2, 2019,
February 3, 2018, and January 28, 2017 total accrued interest and penalties were $32 million, $29 million, and $45
million, respectively.
55
It is reasonably possible that the amount of the unrecognized tax benefits with respect to our other unrecognized tax
positions will increase or decrease during the next twelve months; however, an estimate of the amount or range of the
change cannot be made at this time.
20. Other Noncurrent Liabilities
Other Noncurrent Liabilities
(millions)
Deferred occupancy income (a)
Deferred compensation
Income tax
Workers' compensation and general liability
Pension benefits
Other
Total
(a)
To be amortized evenly through 2038.
21. Share Repurchase
February 2,
2019
$
570 $
472
312
281
40
105
February 3,
2018
As Adjusted
600
503
332
278
41
112
$
1,780 $
1,866
We periodically repurchase shares of our common stock under a board-authorized repurchase program through a
combination of open market transactions, accelerated share repurchase (ASR) arrangements and other privately
negotiated transactions with financial institutions.
In an ASR arrangement, in exchange for an up-front payment, we receive an initial delivery of shares of our common
stock and at settlement may receive additional shares, cash, or a combination of both. The total number of shares
ultimately repurchased and, therefore, the average repurchase price paid per share, is determined upon settlement of
the ASR based on the volume-weighted average price of our common stock during the term of the contract, less an
agreed-upon discount. We retire shares in the period they are received and account for the up-front payment as a
reduction to shareholders’ equity.
Share Repurchases
(millions, except per share data)
Total number of shares purchased
Average price paid per share
Total investment
22. Share-Based Compensation
2018
27.2
75.88 $
2,067 $
2017
17.6
58.44 $
1,026 $
2016
50.9
72.35
3,686
$
$
We maintain a long-term incentive plan (the Plan) for key team members and non-employee members of our Board
of Directors. The Plan allows us to grant equity-based compensation awards, including stock options, stock appreciation
rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively,
share-based awards). The number of unissued common shares reserved for future grants under the Plan was 19.3
million and 24.5 million at February 2, 2019 and February 3, 2018, respectively.
Compensation expense associated with share-based awards is recognized on a straight-line basis over the required
service period and reflects estimated forfeitures. Share-based compensation expense recognized in SG&A Expenses
was $134 million, $115 million, and $116 million in 2018, 2017, and 2016, respectively. The related income tax benefit
was $26 million, $26 million, and $43 million in 2018, 2017, and 2016, respectively.
56
Restricted Stock Units
We issue restricted stock units and performance-based restricted stock units generally with three-year cliff or four-year
graduated vesting from the grant date (collectively restricted stock units) to certain team members. The final number
of shares issued under performance-based restricted stock units is based on our total shareholder return relative to a
retail peer group over a three-year performance period. We also regularly issue restricted stock units to our Board of
Directors, which vest quarterly over a one-year period and are settled in shares of Target common stock upon departure
from the Board. The fair value for restricted stock units is calculated based on the stock price on the date of grant,
incorporating an analysis of the total shareholder return performance measure where applicable. The weighted average
grant date fair value for restricted stock units was $72.65, $56.19, and $74.05 in 2018, 2017, and 2016, respectively.
Restricted Stock Unit Activity
Total Nonvested Units
Represents the number of shares of restricted stock units, in thousands. For performance-based restricted
stock units, assumes attainment of maximum payout rates as set forth in the performance criteria. Applying
actual or expected payout rates, the number of outstanding restricted stock units and performance-based
restricted stock units at February 2, 2019 was 3,708 thousand.
Weighted average per unit.
(b)
The expense recognized each period is partially dependent upon our estimate of the number of shares that will ultimately
be issued. At February 2, 2019, there was $125 million of total unrecognized compensation expense related to restricted
stock units, which is expected to be recognized over a weighted average period of 2.7 years. The fair value of restricted
stock units vested and converted to shares of Target common stock was $119 million, $87 million, and $75 million in
2018, 2017, and 2016, respectively.
Performance Share Units
We issue performance share units to certain team members that represent shares potentially issuable in the future.
Issuance is based upon our performance relative to a retail peer group over a three-year performance period on certain
measures including sales growth, return on invested capital, and EPS growth. The fair value of performance share
units is calculated based on the stock price on the date of grant. The weighted average grant date fair value for
performance share units was $70.94, $55.93, and $71.37 in 2018, 2017, and 2016, respectively.
Performance Share Unit Activity
Total Nonvested Units
Restricted
Stock (a)
3,763 $
Grant Date
Fair Value (b)
64.35
2,269
(485)
(1,732)
3,815 $
72.65
66.25
68.62
66.86
Performance
Share Units (a)
Grant Date
Fair Value (b)
68.23
3,824 $
1,121
(741)
(581)
3,623 $
70.94
64.16
74.15
67.47
February 3, 2018
Granted
Forfeited
Vested
February 2, 2019
(a)
February 3, 2018
Granted
Forfeited
Vested
February 2, 2019
(a)
Represents the number of performance share units, in thousands. Assumes attainment of maximum payout
rates as set forth in the performance criteria. Applying actual or expected payout rates, the number of
outstanding performance share units at February 2, 2019 was 2,004 thousand.
Weighted average per unit.
(b)
57
The expense recognized each period is partially dependent upon our estimate of the number of shares that will ultimately
be issued. Future compensation expense for unvested awards could reach a maximum of $144 million assuming
payout of all unvested awards. The unrecognized expense is expected to be recognized over a weighted average
period of 1.2 years. The fair value of performance share units vested and converted to shares of Target common stock
was $43 million in 2018, $30 million in 2017, and $1 million in 2016.
Stock Options
In May 2017, we granted price-vested stock options (price-vested options) to certain team members, which have met
the market condition and will become exercisable in 2020 pending service condition achievement. Shares received
upon exercise, net of exercise costs and taxes, are subject to a one-year post-exercise holding period. The fair value
of the price-vested options was estimated using a lattice model.
Through 2013, we granted nonqualified stock options to certain team members. All are vested and currently exercisable.
Stock Option Activity
Stock Options
Total Outstanding
Number of
Options (a)
Exercise
Price (b)
5,938 $
—
(89)
(1,859)
3,990 $
54.53 $
—
53.85
52.53
55.49 $
Intrinsic
Value (c)
109
Number of
Options (a)
Exercisable
Exercise
Price (b)
3,913 $
53.97 $
Intrinsic
Value (c)
74
63
2,039 $
55.38 $
32
February 3, 2018
Granted
Expired/forfeited
Exercised/issued
February 2, 2019
(a)
(b)
(c)
In thousands.
Weighted average per share.
Represents stock price appreciation subsequent to the grant date, in millions.
Stock Option Exercises
(millions)
Cash received for exercise price
Intrinsic value
Income tax benefit
$
2018
96 $
50
12
2017
109 $
34
13
2016
219
103
40
At February 2, 2019, there was $5 million of total unrecognized compensation expense related to nonvested price-
vested options, which is expected to be recognized over a weighted average period of 1.3 years. The weighted average
remaining life of exercisable options is 2.8 years, and the weighted average remaining life of all outstanding options
is 4.0 years. No options vested in 2018 or 2017. The total fair value of options vested in 2016 was $9 million.
23. Defined Contribution Plans
Team members who meet eligibility requirements can participate in a defined contribution 401(k) plan by investing up
to 80 percent of their eligible earnings, as limited by statute or regulation. We match 100 percent of each team member's
contribution up to 5 percent of eligible earnings. Company match contributions are made to funds designated by the
participant, none of which are based on Target common stock.
In addition, we maintain a nonqualified, unfunded deferred compensation plan for approximately 2,100 current and
retired team members whose participation in our 401(k) plan is limited by statute or regulation. These team members
choose from a menu of crediting rate alternatives that are generally the same as the investment choices in our 401(k)
plan, but also includes a fund based on Target common stock. We credit an additional 2 percent per year to the accounts
of all active participants, excluding executive officers, in part to recognize the risks inherent to their participation in this
plan. We also maintain a frozen nonqualified, unfunded deferred compensation plan covering approximately 50
participants. Our total liability under these plans was $517 million and $542 million at February 2, 2019 and February 3,
2018, respectively.
58
We mitigate our risk of offering the nonqualified plans through investing in company-owned life insurance and prepaid
forward contracts that substantially offset our economic exposure to the returns of these plans. These investments are
general corporate assets and are marked to market with the related gains and losses recognized in the Consolidated
Statements of Operations in the period they occur. See Note 12 for additional information.
Plan Expenses
(millions)
401(k) plan matching contributions expense
Nonqualified deferred compensation plans
Benefits expense
Related investment expense (income)
Nonqualified plan net expense
24. Pension Plans
2018
2017
229 $
219 $
2016
197
18
6
83
(48)
24 $
35 $
58
(38)
20
$
$
We have qualified defined benefit pension plans covering team members who meet age and service requirements,
including date of hire in certain circumstances. Effective January 1, 2009, our U.S. qualified defined benefit pension
plan was closed to new participants, with limited exceptions. We also have unfunded nonqualified pension plans for
team members with qualified plan compensation restrictions. Eligibility for, and the level of, these benefits varies
depending on each team member's date of hire, length of service and/or team member compensation.
Funded Status
(millions)
Projected benefit obligations
Fair value of plan assets
Funded / (underfunded) status
Qualified Plans
Nonqualified Plans
2018
2017
2018
2017
$
$
3,928 $
4,092 $
3,925
4,117
(3) $
25 $
30 $
—
(30) $
32
—
(32)
Contributions and Estimated Future Benefit Payments
Our obligations to plan participants can be met over time through a combination of company contributions to these
plans and earnings on plan assets. We are not required to make any contributions to our qualified defined benefit
pension plans in 2019. However, depending on investment performance and plan funded status, we may elect to make
a contribution.
Estimated Future Benefit Payments
(millions)
2019
2020
2021
2022
2023
2024-2028
$
Pension
Benefits
284
202
211
219
226
1,235
59
Cost of Plans
Net Pension Benefits Expense
(millions)
Service cost benefits earned
Classification
SG&A Expenses
Interest cost on projected benefit obligation
Net Other (Income) / Expense
Expected return on assets
Amortization of losses
Amortization of prior service cost
Net Other (Income) / Expense
Net Other (Income) / Expense
Net Other (Income) / Expense
Settlement and special termination charges
Net Other (Income) / Expense
Total
Assumptions
Benefit Obligation Weighted Average Assumptions
Discount rate
Average assumed rate of compensation increase
Net Periodic Benefit Expense Weighted Average Assumptions
Discount rate
Expected long-term rate of return on plan assets
Average assumed rate of compensation increase
2018
2017
2016
$
95 $
86 $
146
(246)
82
(11)
4
140
(250)
61
(11)
1
$
70 $
27 $
87
134
(256)
46
(11)
2
2
2017
2018
4.28% 3.93%
3.00
3.00
2018
2017
2016
3.93% 4.40% 4.70%
6.30
3.00
6.55
3.00
6.80
3.00
The weighted average assumptions used to measure net periodic benefit expense each year are the rates as of the
beginning of the year (i.e., the prior measurement date). Based on a stable asset allocation, our most recent compound
annual rate of return on qualified plans' assets was 5.0 percent, 7.3 percent, 6.7 percent, and 6.0 percent for the 5-
year, 10-year, 15-year, and 20-year time periods, respectively.
The market-related value of plan assets, which is used in calculating expected return on assets in net periodic benefit
cost, is determined each year by adjusting the previous year's value by expected return, benefit payments, and cash
contributions. The market-related value is adjusted for asset gains and losses in equal 20 percent adjustments over
a 5-year period.
We review the expected long-term rate of return annually and revise it as appropriate. Additionally, we monitor the mix
of investments in our portfolio to ensure alignment with our long-term strategy to manage pension cost and reduce
volatility in our assets. Our 2018 expected annualized long-term rate of return assumptions were 6.5 percent for
domestic equity securities, 7.5 percent for international equity securities, 4.5 percent for long-duration debt securities,
7.5 percent for balanced funds, and 8.5 percent for other investments. These estimates are a judgmental matter in
which we consider the composition of our asset portfolio, our historical long-term investment performance, and current
market conditions.
60
Benefit Obligation
Change in Projected Benefit Obligation
(millions)
Benefit obligation at beginning of period
Service cost
Interest cost
Actuarial (gain) / loss
Participant contributions
Benefits paid
Benefit obligation at end of period (a)
(a)
Qualified Plans
Nonqualified Plans
2018
2017
2018
$
4,092 $
3,760 $
32 $
94
145
(168)
6
(241)
85
139
270
6
(168)
1
1
—
—
(4)
$
3,928 $
4,092 $
30 $
2017
32
1
1
1
—
(3)
32
Accumulated benefit obligation—the present value of benefits earned to date assuming no future salary
growth—is materially consistent with the projected benefit obligation in each period presented.
Plan Assets
Change in Plan Assets
(millions)
Qualified Plans
Nonqualified Plans
2018
2017
2018
2017
Fair value of plan assets at beginning of period
$
4,117 $
3,785 $
— $
Actual return on plan assets
Employer contributions
Participant contributions
Benefits paid
(66)
109
6
(241)
493
1
6
(168)
Fair value of plan assets at end of period
$
3,925 $
4,117 $
—
4
—
(4)
— $
—
—
3
—
(3)
—
Our asset allocation policy is designed to reduce the long-term cost of funding our pension obligations. The plan invests
with both passive and active investment managers depending on the investment. The plan also seeks to reduce the
risk associated with adverse movements in interest rates by employing an interest rate hedging program, which may
include the use of interest rate swaps, total return swaps, and other instruments.
Asset Category
Domestic equity securities (a)
International equity securities
Debt securities
Balanced funds
Other (b)
Total
(a)
Current Targeted
Actual Allocation
Allocation
14%
2018
13%
2017
16%
9
45
23
9
9
47
24
7
10
44
23
7
100%
100%
100%
(b)
Equity securities include our common stock in amounts substantially less than 1 percent of total plan assets
in both periods presented.
Other assets include private equity, mezzanine and high-yield debt, natural resources and timberland funds,
multi-strategy hedge funds, derivative instruments, and real estate.
61
Fair Value Measurements
(millions)
Cash and cash equivalents
Government securities (a)
Fixed income (b)
Derivatives
Investments valued using NAV per share (c)
Cash and cash equivalents
Common collective trusts
Fixed Income
Balanced funds
Private equity funds
Other
Total plan assets
(a)
(b)
(c)
Pricing
Category
January 31,
2019
Level 1 $
Level 2
Level 2
Level 2
Fair Value at
January 31,
2018
4
3 $
631
1,123
12
1,769
100
828
54
952
84
138
531
1,145
19
1,699
185
966
55
959
97
156
$
3,925 $
4,117
Investments in government securities and long-term government bonds.
Investments in corporate and municipal bonds.
In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset
value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The
fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to
the amounts presented in the statement of financial position.
Position
Cash and cash equivalents
Carrying value approximates fair value.
Valuation Technique
Government securities
and fixed income
Valued using matrix pricing models and quoted prices of securities with similar
characteristics.
Derivatives
Swap derivatives - Valuations are based on observable inputs to the valuation
model (e.g., interest rates and credit spreads). Model inputs are changed only
when corroborated by market data. A credit risk adjustment is made on each
swap using observable market credit spreads.
Option derivatives - Valued at transaction price initially. Subsequent valuations
are based on observable inputs to the valuation model (e.g., underlying
investments).
Amounts Included in Shareholders' Equity
Amounts in Accumulated Other Comprehensive Income
(millions)
Net actuarial loss
Prior service credits
Amounts in Accumulated Other Comprehensive Income (a)(b)
(a)
2018
1,060 $
(24)
1,036 $
2017
1,001
(35)
966
$
$
(b)
$772 million and $720 million, net of tax, at the end of 2018 and 2017, respectively.
We expect 2019 net pension expense to include amortization expense of $51 million ($38 million, net of tax)
related to net actuarial loss and prior service credit balances included in Accumulated Other Comprehensive
Income.
62
25. Accumulated Other Comprehensive Income
(millions)
February 3, 2018
Other Comprehensive Income / (Loss) before
reclassifications, net of tax
Amounts reclassified from AOCI, net of tax
February 2, 2019
Cash Flow
Hedges
Currency
Translation
Adjustment
Pension and
Other
Benefit
Total
$
$
(14)
$
(13)
$
(720)
$ (747)
—
1 (a)
(7)
—
(107)
55 (b)
(114)
56
(13)
$
(20)
$
(772)
$ (805)
(a)
(b)
Represents amortization of gains and losses on cash flow hedges, net of taxes, which is recorded in Net
Interest Expense on the Consolidated Statements of Operations.
Represents amortization of pension gains and losses, net of $19 million of taxes, which is recorded in SG&A
Expenses on the Consolidated Statements of Operations. See Note 24 for additional information.
26. Quarterly Results (Unaudited)
Due to the seasonal nature of our business, fourth quarter operating results typically represent a substantially larger
share of total year revenues and earnings because they include the November and December holiday sales period.
We follow the same accounting policies for preparing quarterly and annual financial data. The table below summarizes
quarterly results for 2018 and 2017:
Quarterly Results
(millions, except per share data)
Sales
Other revenue
Total revenue
Cost of sales
Selling, general, and administrative
expenses
Depreciation and amortization
(exclusive of depreciation
included in cost of sales)
Operating income
Net interest expense
Net other (income) / expense
Earnings from continuing operations
before income taxes
Provision for income taxes
Net earnings from continuing
operations
Discontinued operations, net of
tax
Net earnings
Basic earnings per share
Continuing operations
Discontinued operations
Net earnings per share
Diluted earnings per share
Continuing operations
Discontinued operations
Net earnings per share
Dividends declared per share
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
2018
2017
$ 16,556 $ 15,995
2018
2017
$ 17,552 $ 16,410
2018
2017
$ 17,590 $ 16,647
2018
2017 (a)
$ 22,734 $ 22,734
2018
2017 (a)
$ 74,433 $ 71,786
225
228
224
224
231
227
243
249
923
928
16,781
16,223
17,776
16,634
17,821
16,874
22,977
22,983
75,356
72,714
11,625
11,199
12,239
11,419
12,535
11,712
16,900
16,795
53,299
51,125
3,545
3,353
3,865
3,601
3,937
3,733
4,376
4,454
15,723
15,140
570
516
539
521
1,041
1,155
1,133
1,093
121
(7)
927
210
717
140
(15)
115
(4)
1,030
355
1,022
223
675
799
131
(15)
977
307
670
530
819
115
(9)
713
97
616
582
847
251
(15)
611
135
476
584
605
1,117
1,129
110
(7)
131
(14)
2,224
4,110
461
(27)
2,225
4,224
653
(59)
1,014
1,012
3,676
3,630
216
(76)
746
722
798
1,088
2,930
2,908
1
3
—
1
6
2
1
(1)
7
6
$
$
$
$
$
$
718 $
678
1.34 $
—
1.34 $
1.33 $
—
1.33 $
0.62 $
1.22
0.01
1.23
1.21
0.01
1.22
0.60
$
$
$
$
$
$
799 $
671
1.50 $
—
1.22
—
1.50 $
1.22
1.49 $
—
1.49 $
0.64 $
1.21
—
1.22
0.62
$
$
$
$
$
$
622 $
478
1.17 $
0.87
0.01
—
1.18 $
0.88
1.16 $
0.87
0.01
1.17 $
0.64 $
—
0.87
0.62
$
$
$
$
$
$
799 $ 1,087
$ 2,937 $ 2,914
1.53 $
2.01
—
—
1.54 $
2.01
1.52 $
1.99
—
1.52 $
0.64 $
—
1.99
0.62
$
$
$
$
$
5.54 $
0.01
5.55 $
5.50 $
0.01
5.51 $
2.54 $
5.32
0.01
5.32
5.29
0.01
5.29
2.46
Note: Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total year
amount due to the impact of changes in average quarterly shares outstanding and all other quarterly amounts may not equal the total year due to
rounding. 2017 amounts are adjusted to conform with current year presentation. Refer to Note 2.
(a)
The fourth quarter and full year 2018 consisted of 13 weeks and 52 weeks, respectively, compared with 14 weeks and 53 weeks in the
comparable prior-year periods.
63
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, the following change to our information technology systems materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting:
• We are in the process of a broad migration of many mainframe-based systems and middleware products to a
modern platform, including systems supporting inventory and supply chain-related transactions.
During the most recently completed fiscal quarter, no other change in our internal control over financial reporting
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report, we conducted an evaluation, under supervision and with
the participation of management, including the chief executive officer and chief financial officer, of the effectiveness of
the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the
Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer
and chief financial officer concluded that our disclosure controls and procedures are effective at a reasonable assurance
level. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls
and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with
the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated
and communicated to our management, including our principal executive and principal financial officers, or persons
performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
For the Report of Management on Internal Control and the Report of Independent Registered Public Accounting Firm
on Internal Control over Financial Reporting, see Item 8, Financial Statements and Supplementary Data.
Item 9B. Other Information
Not applicable.
64
PART III
Certain information required by Part III is incorporated by reference from Target's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on June 12, 2019 (our Proxy Statement). Except for those portions specifically
incorporated in this Form 10-K by reference to the Proxy Statement, no other portions of the Proxy Statement are
deemed to be filed as part of this Form 10-K.
Item 10. Directors, Executive Officers and Corporate Governance
The following sections of the Proxy Statement are incorporated herein by reference:
Item one--Election of directors
•
• Stock ownership information--Section 16(a) beneficial ownership reporting compliance
• General information about corporate governance and the Board of Directors
Business ethics and conduct
Committees
• Questions and answers about our Annual Meeting and voting--Question 14
See also Item 4A, Executive Officers of Part I of this Form 10-K.
Item 11. Executive Compensation
The following sections of the Proxy Statement are incorporated herein by reference:
• Compensation Discussion and Analysis
• Compensation tables
• Human Resources & Compensation Committee Report
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following sections of the Proxy Statement are incorporated herein by reference:
• Stock ownership information--
Beneficial ownership of directors and officers
Beneficial ownership of Target’s largest shareholders
• Compensation tables--Equity compensation plan information
Item 13. Certain Relationships and Related Transactions, and Director Independence
The following sections of the Proxy Statement are incorporated herein by reference:
• General information about corporate governance and the Board of Directors--
Policy on transactions with related persons
Director independence
Committees
Item 14. Principal Accountant Fees and Services
The following section of the Proxy Statement is incorporated herein by reference:
•
Item two-- Ratification of appointment of Ernst & Young LLP as independent registered public accounting
firm-audit and non-audit fees
65
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following information required under this item is filed as part of this report:
a)
Financial Statements
• Consolidated Statements of Operations for the Years Ended February 2, 2019, February 3, 2018, and
January 28, 2017
• Consolidated Statements of Comprehensive Income for the Years Ended February 2, 2019, February 3,
2018, and January 28, 2017
• Consolidated Statements of Financial Position at February 2, 2019 and February 3, 2018
• Consolidated Statements of Cash Flows for the Years Ended February 2, 2019, February 3, 2018, and
January 28, 2017
• Consolidated Statements of Shareholders' Investment for the Years Ended February 2, 2019, February 3,
2018, and January 28, 2017
• Notes to Consolidated Financial Statements
• Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Financial Statement Schedules
None.
Other schedules have not been included either because they are not applicable or because the information is
included elsewhere in this Report.
66
b)
Exhibits
(3)A
B
(4)A
B
C
Amended and Restated Articles of Incorporation (as amended through June 9, 2010) (1)
Bylaws (as amended through November 11, 2015) (2)
Indenture, dated as of August 4, 2000 between Target Corporation and Bank One Trust Company,
N.A. (3)
First Supplemental Indenture dated as of May 1, 2007 to Indenture dated as of August 4, 2000
between Target Corporation and The Bank of New York Trust Company, N.A. (as successor in
interest to Bank One Trust Company N.A.) (4)
Target agrees to furnish to the Commission on request copies of other instruments with respect to
long-term debt.
(10)A *
Target Corporation Executive Officer Cash Incentive Plan (5)
B *
C *
D *
E *
F *
G *
H *
I *
J *
K *
L *
M *
N *
O *
P *
Q *
R *
S *
T *
U *
V *
W *
X *
Y *
AA *
Target Corporation Long-Term Incentive Plan (as amended and restated effective June 8, 2011) (6)
Amended and Restated Target Corporation 2011 Long-Term Incentive Plan (as amended and
restated effective September 1, 2017) (7)
Target Corporation SPP I (2016 Plan Statement) (as amended and restated effective April 3, 2016)
(8)
Target Corporation SPP II (2016 Plan Statement) (as amended and restated effective April 3, 2016)
(9)
Target Corporation SPP III (2014 Plan Statement) (as amended and restated effective January 1,
2014) (10)
Amendment to Target Corporation SPP III (2014 Plan Statement) (effective April 3, 2016) (11)
Target Corporation Officer Deferred Compensation Plan (as amended and restated effective
June 8, 2011) (12)
Target Corporation Officer EDCP (2017 Plan Statement) (as amended and restated effective May
1, 2017) (13)
Target Corporation Deferred Compensation Plan Directors (14)
Target Corporation DDCP (2013 Plan Statement) (as amended and restated effective December 1,
2013) (15)
Target Corporation Officer Income Continuation Plan (as amended and restated effective
September 1, 2017) (16)
Target Corporation Executive Excess Long Term Disability Plan (as restated effective January 1,
2010) (17)
Director Retirement Program (18)
Target Corporation Deferred Compensation Trust Agreement (as amended and restated effective
January 1, 2009) (19)
Amendment dated June 8, 2011 to Target Corporation Deferred Compensation Trust Agreement
(as amended and restated effective January 1, 2009) (20)
Amendment dated October 25, 2017 to Target Corporation Deferred Compensation Trust
Agreement (as amended and restated effective January 1, 2009) (21)
Form of Amended and Restated Executive Non-Qualified Stock Option Agreement (22)
Form of Restricted Stock Unit Agreement
Form of Performance-Based Restricted Stock Unit Agreement
Form of Performance Share Unit Agreement
Form of Price-Vested Stock Option Agreement (23)
Form of Non-Employee Director Non-Qualified Stock Option Agreement (24)
Form of Non-Employee Director Restricted Stock Unit Agreement (25)
Form of Cash Retention Award (26)
Aircraft Time Sharing Agreement as of March 13, 2015 among Target Corporation and Brian C.
Cornell (27)
BB *
Transition Agreement dated January 7, 2019 (28)
67
CC
DD
EE
FF ‡
GG ‡
HH ‡
II ‡
JJ
(21)
(23)
(24)
(31)A
(31)B
(32)A
(32)B
Five-Year Credit Agreement dated as of October 5, 2016 among Target Corporation, Bank of
America, N.A. as Administrative Agent and the Banks listed therein (29)
Extension Amendment dated August 7, 2017 to Five-Year Credit Agreement among Target
Corporation, Bank of America, N.A. as Administrative Agent and the Banks listed therein (30)
Second Extension Amendment dated August 6, 2018 to Five-Year Credit Agreement among Target
Corporation, Bank of America, N.A. as Administrative Agent and the Banks listed therein (31)
Credit Card Program Agreement dated October 22, 2012 among Target Corporation, Target
Enterprise, Inc. and TD Bank USA, N.A. (32)
First Amendment dated February 24, 2015 to Credit Card Program Agreement among Target
Corporation, Target Enterprise, Inc. and TD Bank USA, N.A. (33)
Pharmacy Operating Agreement dated December 16, 2015 between Target Corporation and CVS
Pharmacy, Inc. (34)
First Amendment dated November 30, 2016 to Pharmacy Operating Agreement between Target
Corporation and CVS Pharmacy, Inc. (35)
Second Amendment dated January 9, 2018 to Pharmacy Operating Agreement between Target
Corporation and CVS Pharmacy, Inc. (36)
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Powers of Attorney
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (Q1) (Q2) (Q3) (10-K)
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (Q1) (Q2) (Q3) (10-K)
Certification of the Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350 Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Q1) (Q2) (Q3) (10-K)
Certification of the Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350 Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (Q1) (Q2) (Q3) (10-K)
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
Copies of exhibits will be furnished upon written request and payment of Registrant's reasonable expenses in furnishing
the exhibits.
_____________________________________________________________________
‡
*
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the
Securities and Exchange Commission.
Management contract or compensation plan or arrangement required to be filed as an exhibit to this Form 10-K.
Incorporated by reference to Exhibit (3)A to Target's Form 8-K Report filed June 10, 2010.
Incorporated by reference to Exhibit (3)A to Target's Form 8-K Report filed November 12, 2015.
Incorporated by reference to Exhibit 4.1 to Target's Form 8-K Report filed August 10, 2000.
Incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K Report filed May 1, 2007.
Incorporated by reference to Exhibit (10)KK to Target's Form 8-K Report filed June 15, 2017.
Incorporated by reference to Exhibit (10)B to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)C to Target's Form 10-Q Report for the quarter ended July 29, 2017.
Incorporated by reference to Exhibit (10)C to Target's Form 10-Q Report for the quarter ended April 30, 2016.
Incorporated by reference to Exhibit (10)D to Target's Form 10-Q Report for the quarter ended April 30, 2016.
Incorporated by reference to Exhibit (10)E to Target's Form 10-K Report for the year ended February 1, 2014.
Incorporated by reference to Exhibit (10)NN to Target's Form 10-Q Report for the quarter ended April 30, 2016.
Incorporated by reference to Exhibit (10)F to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)I to Target's Form 10-K Report for the year ended January 28, 2017.
Incorporated by reference to Exhibit (10)I to Target's Form 10-K Report for the year ended February 3, 2007.
68
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
(36)
Incorporated by reference to Exhibit (10)I to Target's Form 10-K Report for the year ended February 1, 2014.
Incorporated by reference to Exhibit (10)L to Target's Form 10-Q Report for the quarter ended July 29, 2017.
Incorporated by reference to Exhibit (10)A to Target's Form 10-Q Report for the quarter ended October 30, 2010.
Incorporated by reference to Exhibit (10)O to Target's Form 10-K Report for the year ended January 29, 2005.
Incorporated by reference to Exhibit (10)O to Target's Form 10-K Report for the year ended January 31, 2009.
Incorporated by reference to Exhibit (10)AA to Target's Form 10-Q Report for the quarter ended July 30, 2011.
Incorporated by reference to Exhibit (10)MM to Target's Form 10-Q Report for the quarter ended October 28, 2017.
Incorporated by reference to Exhibit (10)V to Target's Form 10-K Report for the year ended January 31, 2015.
Incorporated by reference to Exhibit (10)JJ to Target's Form 10-Q Report for the quarter ended April 29, 2017.
Incorporated by reference to Exhibit (10)EE to Target's Form 8-K Report filed January 11, 2012.
Incorporated by reference to Exhibit (10)X to Target's Form 10-K Report for the year ended February 3, 2018.
Incorporated by reference to Exhibit (10)W to Target's Form 10-K Report for the year ended February 2, 2013.
Incorporated by reference to Exhibit (10)HH to Target's Form 10-K Report for the year ended January 31, 2015.
Incorporated by reference to Exhibit (10)A to Target's Form 8-K Report filed January 10, 2019.
Incorporated by reference to Exhibit (10)O to Target's Form 10-Q Report for the quarter ended October 29, 2016.
Incorporated by reference to Exhibit (10)LL to Target's Form 10-Q Report for the quarter ended October 28, 2017.
Incorporated by reference to Exhibit (10)II to Target's Form 10-Q Report for the quarter ended November 3, 2018.
Incorporated by reference to Exhibit (10)X to Target's Form 10-Q/A Report for the quarter ended May 4, 2013.
Incorporated by reference to Exhibit (10)II to Target's Form 10-Q Report for the quarter ended May 2, 2015.
Incorporated by reference to Exhibit (10)KK to Target's Form 10-K Report for the year ended January 30, 2016.
Incorporated by reference to Exhibit (10)CC to Target's Form 10-K Report for the year ended January 28, 2017.
Incorporated by reference to Exhibit (10)HH to Target's Form 10-K Report for the year ended February 3, 2018.
69
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Target has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
TARGET CORPORATION
By:
Dated: March 13, 2019
Cathy R. Smith
Executive Vice President and Chief Financial Officer
___________________________________________________________________________________________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following
persons on behalf of Target and in the capacities and on the dates indicated.
Dated: March 13, 2019
Brian C. Cornell
Chairman of the Board and Chief Executive Officer
Dated: March 13, 2019
Cathy R. Smith
Executive Vice President and Chief Financial Officer
Dated: March 13, 2019
Robert M. Harrison
Senior Vice President, Chief Accounting Officer
and Controller
ROXANNE S. AUSTIN
DOUGLAS M. BAKER, JR.
GEORGE S. BARRETT
CALVIN DARDEN
HENRIQUE DE CASTRO
ROBERT L. EDWARDS
MELANIE L. HEALEY
DONALD R. KNAUSS
MONICA C. LOZANO
MARY E. MINNICK
KENNETH L. SALAZAR
DMITRI L. STOCKTON
Constituting a majority of the Board of Directors
Cathy R. Smith, by signing her name hereto, does hereby sign this document pursuant to powers of attorney duly
executed by the Directors named, filed with the Securities and Exchange Commission on behalf of such Directors, all
in the capacities and on the date stated.
Dated: March 13, 2019
By:
70
Cathy R. Smith
Attorney-in-fact
Shareholder Information
Annual Meeting
The Annual Meeting of Shareholders is scheduled for June 12, 2019 at 9:00 a.m.
(Eastern Daylight Time) at Marriott Columbus University Area, 3100 Olentangy River
Road, Columbus, OH 43202
Shareholder Information
Quarterly and annual shareholder information (including the Form 10-Q Quarterly
Reports and Form 10-K Annual Report, which are filed with the Securities and
Exchange Commission) is available at no charge to shareholders. To obtain copies
of these materials, you may send an e-mail to investorrelations@target.com, call
1-800-775-3110, or write to: Target Corporation, Attn: John Hulbert, VP, Investor
Relations, 1000 Nicollet Mall (TPN-0841), Minneapolis, Minnesota 55403.
These documents as well as other information about Target Corporation, including
our Code of Ethics, Corporate Governance Guidelines, Corporate Responsibility
Report and Board of Director Committee Charters, are also available on the Internet
at investors.target.com.
Transfer Agent, Registrar and
Dividend Disbursing Agent
EQ Shareowner Services
Stock Exchange Listing
Trading Symbol: TGT
New York Stock Exchange
Shareholder Assistance
For assistance regarding individual stock records, lost certificates, name or address
changes, dividend or tax questions, call EQ Shareowner Services at 1-800-794-9871,
access their website at www.shareowneronline.com or write to: EQ Shareowner Services,
P.O. Box 64874, St. Paul, Minnesota 55164-0874.
Direct Stock Purchase/
Dividend Reinvestment Plan
EQ Shareowner Services administers a direct purchase plan that allows interested
investors to purchase Target Corporation stock directly, rather than through a broker, and
become a registered shareholder of the company. The program offers many features
including dividend reinvestment. For detailed information regarding this program, call EQ
Shareowner Services toll free at 1-800-794-9871 or write to: EQ Shareowner Services, P.O.
Box 64874, St. Paul, Minnesota 55164-0874.
©2018 Target Brands, Inc. The Bullseye Design, Bullseye Dog, Cartwheel, CityTarget, Expect More. Pay Less., SuperTarget and Target are trademarks of Target Brands, Inc.
Directors & Management
Directors
Roxanne S. Austin
President, Austin Investment Advisors
(2) (5)
Douglas M. Baker, Jr.
Chairman and Chief Executive Officer,
Ecolab Inc.
(4) (5)
Henrique De Castro
Former Chief Operating Officer, Yahoo! Inc.
(1) (3)
Mary E. Minnick
Former Partner, Lion Capital LLP
(1) (3)
Robert L. Edwards
Former President and Chief Executive Officer,
AB Acquisition LLC (Albertsons/Safeway)
(1) (5)
Kenneth L. Salazar
Partner, WilmerHale
(3) (5)
George S. Barrett
Former Chairman and Chief Executive Officer,
Cardinal Health, Inc.
(2) (5)
Melanie L. Healey
Former Group President, North America,
The Procter & Gamble Company
(2) (4)
Brian C. Cornell
Chairman and Chief Executive Officer,
Target Corporation
Calvin Darden
Chairman, Darden Petroleum &
Energy Solutions, LLC
(2) (4)
Donald R. Knauss
Former Chairman and Chief Executive Officer,
The Clorox Company
(2) (3)
Monica C. Lozano
President and Chief Executive Officer,
The College Futures Foundation
(1) (4)
Dmitri L. Stockton
Former Senior Vice President and Special
Advisor to the Chairman of General Electric
Company
(1) (3)
(1) Audit and Finance Committee
(2) Human Resources and Compensation
Committee
(3) Infrastructure and Investment Committee
(4) Nominating and Governance Committee
(5) Risk and Compliance Committee
Executive Officers
Brian C. Cornell
Chairman and Chief Executive Officer
Richard H. Gomez
Executive Vice President and Chief
Marketing & Digital Officer
Melissa K. Kremer
Executive Vice President and Chief
Human Resources Officer
Don H. Liu
Executive Vice President, Chief
Legal & Risk Officer and Corporate
Secretary
Stephanie A. Lundquist
Executive Vice President and
President, Food & Beverage
Mike McNamara
Executive Vice President and Chief
Information Officer
John J. Mulligan
Executive Vice President and Chief
Operating Officer
Cathy R. Smith
Executive Vice President and Chief
Financial Officer
Minsok Pak
Executive Vice President and Chief
Strategy & Innovation Officer
Mark J. Tritton
Executive Vice President and Chief
Merchandising Officer
Janna A. Potts
Executive Vice President and Chief
Stores Officer
Laysha L. Ward
Executive Vice President and Chief
External Engagement Officer
Other Senior Officers
Rich Agostino
Senior Vice President and Chief
Information Security Officer
Kristi Argyilan
Senior Vice President, Marketing,
Media and Measurement
John Bauer
Senior Vice President, Global Inventory
Management
Dawn Block
Senior Vice President, Digital
Katie Boylan
Senior Vice President and Chief
Communications Officer
Frank Bruni
Senior Vice President, Food &
Beverage, Supply Chain
Justin Burns
Senior Vice President, Stores
Jeff Burt
Senior Vice President, Food &
Beverage, Merchandising
Joe Contrucci
Senior Vice President, Stores
Brett Craig
Senior Vice President,
Merchandising Capabilities
Paritosh Desai
Chief Data & Analytics Officer
Michael Fiddelke
Senior Vice President, Transitions
Yu-Ping Kao
Senior Vice President, Stores
William Foudy
Senior Vice President and President,
Owned Brand Sourcing
Juan Galarraga
Senior Vice President, Stores
Operations
Julie Guggemos
Senior Vice President, Owned Brand
Management and Product Design
Ann Gugino
Senior Vice President, Financial
Planning and Analysis
Corey Haaland
Senior Vice President, Treasurer
Robert Harrison
Senior Vice President, Chief
Accounting Officer and Controller
Christina Hennington
Senior Vice President, General
Merchandise Manager, Essentials,
Beauty, Hardlines, and Services
Cynthia Ho
Senior Vice President, Global Sourcing
Tim Hotze
Senior Vice President, Network
Planning and Global Intelligence
Scott Kennedy
President, Financial and Retail Services
Gemma Kubat
Senior Vice President, Supply Chain
Engineering and Activation
Michelle Mesenburg
Senior Vice President, Marketing, Retail
Brand Experience
Preston Mosier
Senior Vice President, Supply Chain
Field Operations
Nik Nayar
Senior Vice President, Merchandising,
Hardlines
Michael O’Neil
Senior Vice President, Pay and Benefits
Tammy Redpath
President, Target India
Carolyn Sakstrup
Senior Vice President, Marketing
Jill Sando
Senior Vice President, General
Merchandise Manager, Apparel and
Accessories and Home
Mark Schindele
Senior Vice President, Target
Properties
Samir Shah
Senior Vice President, Stores
Cara Sylvester
Senior Vice President,
Merchandising, Home
Brad Taylor-White
Senior Vice President, Human
Resources
Arthur Valdez
Executive Vice President, Chief Supply
Chain and Logistics Officer
Todd Waterbury
Senior Vice President and Chief
Creative Officer
William White
Senior Vice President, Marketing
Kamau Witherspoon
Senior Vice President, Operations
Matt Zabel
Senior Vice President, Enterprise Risk
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