Target Annual Report 2019

FY2019 Annual Report · Target

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Target
Annual
Report

Welcome to our
2019 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

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
$

2
1
,1
8
7
$

5
3
5
,
4
$

8
7
8
,
4
$

4
6
8
,
4
$

4
2
2
,
4
$

0
1
,1
4
$

8
5
6
,
4
$

9
4
4
,
2
$

1
2
3
,
3
$

6
6
6
,
2
$

8
0
9
,
2
$

0
3
9
,
2
$

9
6
2
,
3
$

3
8
.
3
$

5
2
.
5
$

8
5
.
4
$

9
2
.
5
$

0
5
.
5
$

4
3
.
6
$

’14

’15

’16

’17

’18

’19

’14

’15

’16

’17

’18

’19

’14

’15

’16

’17

’18

’19

’14

’15

’16

’17

’18

’19

2019 Growth: 3.7%
Five-year CAGR: 1.5%

2019 Growth: 13.3%
Five-year CAGR: 0.5%

2019 Growth: 11.6%
Five-year CAGR: 5.9%

2019 Growth: 15.4%
Five-year CAGR: 10.6%

Total 2019 Sales: $77,130 Million

27%

19%

16%

Beauty & Household
Essentials

Food & Beverage

Home Furnishings
& Décor

Apparel &
Accessories

Hardlines

Letter to Shareholders

By any measure, 2019 was an exceptional year for the Target team. It’s a year that stands on its own, and
a glance through this report will demonstrate why. But looking back on it now, what really stands out to
me is how 2019 prepared Target for this extraordinary moment we’re all navigating together, as our team,
guests and communities respond to COVID-19.

Usually I would provide a detailed recap of our previous year’s results in this letter. In this unprecedented
moment, that doesn’t feel right. On one hand, we’re focused entirely on the immediate needs of our team
and guests. At the same time, I’m more aware and appreciative than ever of the enduring attributes that
will help us all move safely beyond this crisis.

At Target, our strategy is an expression of our purpose and values. For years, we’ve invested to make
our proximity to guests work even harder for them. That meant adding brands, fulfillment capabilities and
expert service to our nearly 1,900 neighborhood stores, and moving into additional neighborhoods every
year. It meant a constant drive to curate the right mix of products across our multi-category assortment.
We remained convinced, sometimes against conventional thinking, that stores would continue to matter
to our guests, whether they shopped online or in-person.

While it had long been evident in our culture, we formally articulated our purpose a few years ago: To help
all families discover the joy of everyday life. Today, with the coronavirus outbreak, everyday life has started
to look different for everyone—and our guests have turned to us more than ever.

When they needed to stock up for their families, they came to Target. When they wanted items right away,
they looked to us for same-day pickup or delivery. When families were anxious to minimize trips, they found
comfort and confidence in a familiar and friendly place—for food, medicine and essentials, but also office
supplies and technology to work from home, school items for distance learning, and games, puzzles,
electronics and comfort-wear for long weeks in quarantine.

In the best of times, our team meets the world with optimism, inclusivity, connection, inspiration and drive.
In the hardest days of this crisis, those values never wavered.

So, while I know there’s a lot of work ahead to put this chapter behind us, I also know the Target team will
remain steadfast. Our financial strength gives us the ability to keep investing in our team and to shift quickly
in response to guest needs. And the same values that have made Target a trusted brand and community
resource for decades will be a source of continuity and calm as we all pull together—for each other and for
a future that will certainly be brighter than recent days.

Sincerely,

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

PER SHARE

Basic earnings per share

Continuing operations

Discontinued operations

Net earnings per share

Diluted earnings per share

Continuing operations

Discontinued operations

Net earnings per share

Cash dividends declared

FINANCIAL POSITION (in millions)

Total assets

Capital expenditures

Long-term debt, including current portion

Net debt (g)

Shareholders’ investment

FINANCIAL RATIOS

Comparable sales growth (h)

Gross margin (% of sales)

SG&A expenses (% of total revenue)

Operating income margin (% of total revenue)

OTHER

2019

2018

As Adjusted (a)

2017

2016
As Adjusted

2015

As Adjusted (b)

77,130

74,433

$ 71,786

$ 69,414

73,717

982

78,112

54,864

16,233

2,357

4,658

477

(9)

4,190

921

3,269

923

75,356

53,299

15,723

2,224

4,110

461

(27)

3,676

746

2,930

928

72,714

51,125

15,140

2,225

4,224

653

(59)

3,630

722

2,908

857

70,271

49,145

14,217

2,045

4,864

991

(88)

3,961

1,295

2,666

777

74,494

52,241

15,406

1,969

4,878

607

(652)

4,923

1,602

3,321

3,281

2,937

2,914

2,734

3,363

6.39

0.02

6.42

6.34

0.02

6.36

2.62

5.54

0.01

5.55

5.50

0.01

5.51

2.54

42,779

$ 41,290

3,027

11,499

9,689

11,833

3.4%

28.9%

20.8%

6.0%

3,516

11,275

$ 10,506

11,297

5.0%

28.4%

20.9%

5.5%

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%

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%

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%

Common shares outstanding (in millions)

504.2

517.8

541.7

556.2

602.2

Operating cash flow provided by continuing
operations (in millions)

Revenue per square foot (i)

Retail square feet (in thousands)

Square footage growth

Total number of stores

Total number of distribution centers

7,099

326

240,516

0.4%

1,868

5,970

314

6,861

298

239,581

239,355

0.1%

1,844

(0.1)%

1,822

5,337

293

239,502

—%

1,802

5,254

310

239,539

(0.2)%

1,792

(a) Consisted of 53 weeks.
(b) The financial summary data for fiscal year 2015 does not reflect adoption of Accounting Standards Update (ASU) No. 2016-02—Leases (Topic 842).
(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 sales includes $3,815 million related

to our former pharmacy and clinic businesses.

(d) Includes losses on early retirement of debt of $10 million, $123 million, and $422 million for 2019, 2017, and 2016, 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 of 2017.
(g) Including current portion of long-term debt and other borrowings, net of short-term investments of $1,810 million, $769 million, $1,131 million, $1,110 million, and $3,008 million in 2019, 2018, 2017, 2016,
and 2015, 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.

(h) See definition of comparable sales in Form 10-K, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(i) 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.

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 1, 2020
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)

(State or other jurisdiction of incorporation or organization)

Minnesota

1000 Nicollet Mall, Minneapolis, Minnesota
(Address of principal executive offices)

41-0215170
(I.R.S. Employer Identification No.)

55403

(Zip Code)

Registrant’s telephone number, including area code: 612/304-6073
Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0833 per share

TGT

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 x No o

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 o No x

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 x No o

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 x No o

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. x

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 x

Accelerated filer o

Non-accelerated filer o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
The aggregate market value of the voting stock held by non-affiliates of the registrant as of August 2, 2019, was $41,576,546,635 based on the
closing price of $81.52 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 as of March 5, 2020, were 500,961,951.

Portions of Target's Proxy Statement for the Annual Meeting of Shareholders to be held on June 10, 2020, are incorporated into Part III.

DOCUMENTS INCORPORATED BY REFERENCE

Table of Contents

Index to Financial Statements

TABLE OF CONTENTS

PART I

Item 1

Business

Item 1A

Risk Factors

Item 1B

Unresolved Staff Comments

Item 2

Item 3

Item 4

Properties

Legal Proceedings

Mine Safety Disclosures

Item 4A

Executive Officers

PART II

Item 5

Item 6

Item 7

Item 7A

Item 8

Item 9

Item 9A

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
Quantitative and Qualitative Disclosures About Market Risk

Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures

Item 9B

Other Information

PART III

Item 10

Directors, Executive Officers and Corporate Governance

Item 11

Executive Compensation

Item 12

Item 13

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence

Item 14

Principal Accountant Fees and Services

PART IV

Item 15

Exhibits, Financial Statement Schedules

SIGNATURES

TARGET CORPORATION

2019 Form 10-K

BUSINESS

PART I

Table of Contents

Index to Financial Statements

Item 1. Business

General

Target Corporation (Target, the Corporation or the Company) was incorporated in Minnesota in 1902. We offer to
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 Part II, Item 6, Selected Financial Data, and Part II, 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 2019 sales was
related to our owned and exclusive brands, including but not limited to the following:

Owned Brands
A New Day™
All in Motion™
Archer Farms®
Art Class™
Auden™
Ava & Viv®
Boots & Barkley®
Cat & Jack™
Cloud Island™
Colsie™
Everspring™
Good & Gather™
Goodfellow & Co™
Hearth & Hand™ with Magnolia
heyday™

Exclusive Brands
California Roots™
Defy & Inspire™
Fieldcrest®
Hand Made Modern®

Hyde & EEK! Boutique™
JoyLab™
Kona Sol™
Made By Design™
Market Pantry®
More Than Magic™
Opalhouse™
Open Story™
Original Use™
Pillowfort™
Project 62™
Prologue™
Room Essentials®
Shade & Shore™
Simply Balanced™

Smartly™
Smith & Hawken®
Sonia Kashuk®
Spritz™
Stars Above™
Sun Squad™
Sutton & Dodge®
Threshold™
Universal Thread™
up & up®
Wild Fable™
Wondershop™
Xhilaration®

Isabel Maternity™ by Ingrid & Isabel® The Collection
Just One You® made by carter's®
Kristin Ess
Rosé Bae™

Wine Cube®
Who What Wear™

TARGET CORPORATION

2019 Form 10-K

BUSINESS

Table of Contents

Index to Financial Statements

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.

Customer Loyalty Programs

Our 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® (collectively, RedCards™). We also seek
to drive customer loyalty and trip frequency through our Target Circle program, where members earn 1 percent
rewards on nearly all non-RedCard purchases and other benefits.

Distribution

The vast majority of merchandise is distributed to our stores through our network of distribution centers. Common
carriers ship 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. Our stores fulfill the
majority of the digitally originated sales, which allows improved product availability, faster delivery times, and
reduced shipping costs.

Employees

As of February 1, 2020, we employed approximately 368,000 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 department stores, off-price general merchandise
retailers, wholesale clubs, category-specific retailers, drug stores, supermarkets, and other
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.

forms of

Intellectual Property

Our brand image is a critical element of our business strategy. Our principal trademarks, including Target, our
"Expect More. Pay Less." brand promise, 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.

TARGET CORPORATION

2019 Form 10-K

Geographic Information

BUSINESS

Table of Contents

Index to Financial Statements

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.

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.

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, team members, and vendors choose Target is the positive 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
In addition, our ability to create a
our promotions are among the factors that affect our ability to compete.
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.

TARGET CORPORATION

2019 Form 10-K

RISK FACTORS

Table of Contents

Index to Financial Statements
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.

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
multiple fulfillment options and implementing new technology is complex and may not meet expectations for
accurate order fulfillment, faster and guaranteed delivery times, low-cost or free shipping, and desired payment
methods. Even when we are successful in meeting expectations for fulfillment, if we are unable to offset increased
in-store channel with efficiencies, cost-savings or expense
costs of
reductions, our results of operations could be adversely affected.

fulfilling orders outside of our traditional

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 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. 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 making, and expect to continue to make, significant investments in technology and selective acquisitions to
improve guest experiences across multiple channels and improve the speed, accuracy, and cost efficiency of 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.

TARGET CORPORATION

2019 Form 10-K

Index to Financial Statements
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.

RISK FACTORS

Table of Contents

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 computer systems throughout our business. 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, catastrophic events,
and implementation errors. If our systems are damaged, disrupted 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. For example,
during the past year we experienced disruptions in our point-of-sale system that prevented our ability to process
debit or credit transactions, negatively impacted some guests’ experiences, and generated negative publicity.

Information Security, Cybersecurity and Data Privacy Risks

If our efforts to provide information security, cybersecurity and data privacy 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, cybersecurity, and data privacy. 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 reputation, sales, and results of operations.

The legal and regulatory environment regarding information security, cybersecurity, and data privacy is increasingly
demanding and has enhanced requirements for using and treating personal data. Complying with new data
protection requirements, such as those imposed by the recently effective California data privacy laws, 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.

TARGET CORPORATION

2019 Form 10-K

Supply Chain and Third-Party Risks

RISK FACTORS

Table of Contents

Index to Financial Statements

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 to quickly move the appropriate amount of inventory at optimal operational costs
through our entire supply chain, 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.

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, between the U.S. and countries from which we source merchandise could require us to take
certain actions, including for example raising prices on products we sell and seeking alternative sources of supply
from vendors in other countries with whom we have less familiarity, which could adversely affect our reputation,
sales, and our results of operations.

instability, currency fluctuations, the outbreak of pandemics or other illnesses (such as the
Political or financial
recent coronavirus), 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. 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.

TARGET CORPORATION

2019 Form 10-K

RISK FACTORS

Table of Contents

Index to Financial Statements

Uncharacteristic or significant weather conditions, natural disasters, and other catastrophic events could
adversely affect our results of 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 or
operations are concentrated could result in significant physical damage to or closure of one or more of our stores,
distribution centers, facilities, or key vendors. In addition, natural disasters and other catastrophic events, such as
the recent coronavirus outbreak, in areas where we or our vendors have operations, could cause delays in the
distribution of merchandise from our vendors to our distribution centers, stores, and guests, affect consumer
purchasing power, or reduce consumer demand, which could adversely affect our results of operations by
increasing our costs and lowering our sales.

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 and product defects, could expose us to government enforcement action or private litigation and
result in costly product recalls and other liabilities. Our sourcing vendors, including any third parties selling through
our digital channels, 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 that perform audits on a
regular basis, but we cannot continuously monitor every vendor, so we are also dependent on our vendors to
ensure that the products we buy comply with our standards. If we need to seek alternative sources of supply from
vendors with whom we have less familiarity, the risk of our standards not being met may increase. Negative guest
perceptions regarding the safety and sourcing of the products we sell and events that give rise to actual, potential or
perceived compliance and social responsibility 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.

TARGET CORPORATION

2019 Form 10-K

Index to Financial Statements
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.

RISK FACTORS & UNRESOLVED STAFF COMMENTS

Table of Contents

Our business is subject to a wide array of laws and regulations.

Our expenses could increase and our operations could be adversely affected by law changes or adverse judicial
developments involving an employer's obligation to recognize collective bargaining units, minimum wage
requirements, advance scheduling notice requirements, health care mandates, the classification of exempt and non-
exempt employees, and the classification of workers as either employees or independent contractors (particularly as
it applies to our Shipt subsidiary, a technology company that connects Shipt members through its online
marketplace with a network of independent contractors who select, purchase, and deliver groceries and household
essentials ordered from Target and other retailers). The classification of workers as employees or independent
contractors in particular is an area that is experiencing legal challenges and legislative changes. If our Shipt
subsidiary is required to treat
in higher
compensation and benefit costs.

its independent contractor network as employees,

it could result

Changes in the legal or regulatory environment affecting information security, cybersecurity and data privacy,
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,
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.

including the Foreign Corrupt Practices Act and local anti-bribery laws, we could be subject

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.

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 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.

TARGET CORPORATION

2019 Form 10-K

PROPERTIES

Table of Contents

Index to Financial Statements

Item 2. Properties

Stores as of
February 1, 2020
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
46
9
297
42
21
3
5
124
50
7
6
95
31
20
17
14
15
5
40
47
53
73
6
35

Retail Sq. Ft.
(in thousands)

Stores as of
February 1, 2020

3,132 Montana
504 Nebraska

6,080 Nevada
1,165 New Hampshire

36,474 New Jersey
6,244 New Mexico
2,731 New York

440 North Carolina
342 North Dakota

17,053 Ohio

6,820 Oklahoma
1,111 Oregon

664 Pennsylvania
11,950 Rhode Island

4,174 South Carolina
2,835 South Dakota
2,385 Tennessee
1,571 Texas
2,120 Utah

630 Vermont
4,960 Virginia
5,467 Washington
6,286 West Virginia

10,315 Wisconsin
743 Wyoming

4,608

Total

Stores and Distribution Centers as of February 1, 2020

Owned
Leased

Owned buildings on leased land

Total

(a)

The 42 distribution centers have a total of 53.2 million square feet.

Stores
7
14
17
9
47
10
84
51
4
64
15
20
75
4
19
5
30
150
14
1
59
39
6
36
2

Retail Sq. Ft.
(in thousands)
777
2,005
2,242
1,148
5,992
1,185
10,178
6,540
554
7,829
2,167
2,312
9,094
517
2,359
580
3,816
20,919
1,979
60
7,713
4,377
755
4,427
187

1,868

240,516

Stores

1,526
185

157

1,868

Distribution
Centers (a)
33
9

—

We own our corporate headquarters buildings located in and around Minneapolis, Minnesota, and we lease and
own additional office space elsewhere in Minneapolis and the U.S. We also lease office space in other countries.
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 10 and 17 to
Part II, Item 8, Financial Statements and Supplementary Data (the Financial Statements).

TARGET CORPORATION

2019 Form 10-K

LEGAL PROCEEDINGS & MINE SAFETY DISCLOSURES

Table of Contents

Index to Financial Statements

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. The appeal has been argued before the
U.S. Court of Appeals for the Eighth Circuit (the Appeals Court), and we are awaiting a decision.

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 to the Appeals Court. The Appeals Court has
not yet heard oral arguments or issued a decision.

For a description of other legal proceedings, see Note 14 to the Financial Statements.

Item 4. Mine Safety Disclosures

Not applicable.

TARGET CORPORATION

2019 Form 10-K

Item 4A. Executive Officers

EXECUTIVE OFFICERS

Table of Contents

Index to Financial Statements

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

Brian C. Cornell

Chairman of the Board and Chief Executive Officer since August 2014.

Michael J. Fiddelke Executive Vice President and Chief Financial Officer since November 2019. Senior

Rick H. Gomez

A. Christina
Hennington

Melissa K. Kremer

Don H. Liu

Stephanie A.
Lundquist

Michael E.
McNamara

John J. Mulligan

Jill K. Sando

Mark J. Schindele

Laysha L. Ward

Vice President, Operations from August 2018 to October 2019. Senior Vice President,
Merchandising Capabilities from March 2017 to August 2018. Senior Vice President,
Financial Planning & Analysis from July 2015 to March 2017. Vice President, Pay &
Benefits from March 2013 to July 2015.
Executive Vice President and Chief Marketing, Digital & Strategy Officer since
December 2019. Executive Vice President and Chief Marketing & Digital Officer from
January 2019 to December 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 Merchandising Officer, Hardlines, Essentials and
Capabilities since January 2020. Senior Vice President, Group Merchandise Manager,
Essentials, Beauty, Hardlines and Services from January 2019 to January 2020.
Senior Vice President, Merchandising Essentials, Beauty and Wellness from April
2017 to January 2019. Senior Vice President, Merchandising Transformation and
Operations from August 2015 to April 2017. Senior Vice President, Health and Beauty
from May 2014 to August 2015.

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. Kremer held several leadership positions in Human Resources,
supporting 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.

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.

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.
Executive Vice President and Chief Operating Officer since September 2015.
Executive Vice President and Chief Financial Officer from April 2012 to August 2015.
Executive Vice President and Chief Merchandising Officer, Style and Owned Brands
since January 2020. Senior Vice President, Group Merchandise Manager, Apparel &
Accessories and Home from January 2019 to January 2020. Senior Vice President,
Home from May 2014 to January 2019.

Executive Vice President and Chief Stores Officer since January 2020. Senior Vice
President, Target Properties from January 2015 to January 2020.
Executive Vice President and Chief External Engagement Officer since January 2017.
Executive Vice President and Chief Corporate Social Responsibility Officer from
December 2014 to January 2017.

Age

TARGET CORPORATION

2019 Form 10-K

OTHER INFORMATION

PART II

Table of Contents

Index to Financial Statements

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. As of March 5, 2020, there were 14,019 shareholders of record. Dividends declared per share for
each fiscal quarter during 2019 and 2018 are disclosed in Note 25 to the Financial Statements.

On September 20, 2016, our Board of Directors authorized a $5 billion share repurchase program (2016 Program).
On September 19, 2019, our Board of Directors authorized a new $5 billion share repurchase program (2019
Program). There is no stated expiration for the share repurchase programs. Under the 2016 Program, we had
repurchased 64.5 million shares of common stock through February 1, 2020, at an average price of $75.55, for a
total
to Target common stock
purchases made during the three months ended February 1, 2020, by Target or any "affiliated purchaser" of Target,
as defined in Rule 10b-18(a)(3) under the Exchange Act.

investment of $4.9 billion. The table below presents information with respect

Share Repurchase Activity

Period

November 3, 2019 through November 30, 2019

Total Number
of Shares
Purchased (b)

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

42,836

126.41

42,836

5,274,490,965

December 1, 2019 through January 4, 2020

Open market and privately negotiated purchases

515,087

124.21

514,737

5,210,557,849

January 5, 2020 through February 1, 2020

October 2019 ASR (a)

Open market and privately negotiated purchases

Total

(a)

(b)

275,916

1,830,760

117.64

116.08

275,916

1,830,760

5,337,294,566

5,124,785,446

2,664,599

117.81

2,664,249

5,124,785,446

Represents the incremental shares received upon final settlement of the accelerated share repurchase
(ASR) arrangement initiated in third quarter 2019.
Includes shares of common stock reacquired from team members who tendered owned shares to satisfy
the exercise price and tax withholding on stock option exercises. For the three months ended February 1,
2020, 350 shares were reacquired at a weighted average price per share of $128.81 pursuant to our long-
term incentive plan.

TARGET CORPORATION

2019 Form 10-K

OTHER INFORMATION

Table of Contents

Index to Financial Statements

Fiscal Years Ended

Target
S&P 500 Index
Current Peer Group
Previous Peer Group

January 31,
2015
100.00 $
100.00
100.00
100.00

January 30,
2016
101.21 $
99.33
109.53
109.11

January 28,
2017
91.94 $

120.06
121.71
121.15

February 3,
2018
109.76 $
147.48
175.63
174.97

February 2,
2019
110.65 $
147.40
183.05
182.10

February 1,
2020
177.66
179.17
222.19
220.86

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, (ii) the peer group used in previous filings 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.) (Previous Peer Group), and (iii) a new peer group consisting of the companies in the Previous Peer
Group, plus Nordstrom, Inc., but excluding Sears Holdings Corporation, which filed for bankruptcy protection and is
no longer publicly traded, and The Gap, Inc., which announced its intention to enter a transformational period for its
brands (Current Peer Group). The Current 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 10, 2020, 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 January 30, 2015, and
reinvestment of all dividends.

TARGET CORPORATION

2019 Form 10-K

Item 6. Selected Financial Data

OTHER INFORMATION

Table of Contents

Index to Financial Statements

Selected Financial Data

For the Fiscal Year

(millions, except per share data)

2019

2017
2018 As Adjusted (a)(b)

2016
As Adjusted (b)

2015
As Adjusted (b)

Sales

Total revenue

Net Earnings

Continuing operations

Discontinued operations

Net earnings

Basic Earnings Per Share

Continuing operations

Discontinued operations

Basic earnings per share

Diluted Earnings Per Share

Continuing operations

Discontinued operations

Diluted earnings per share

Cash dividends declared per share

77,130 $

74,433 $

71,786 $

69,414 $

78,112

75,356

72,714

70,271

3,269

3,281

6.39

0.02

6.42

6.34

0.02

6.36

2.62

2,930

2,937

5.54

0.01

5.55

5.50

0.01

5.51

2.54

2,908

2,914

5.32

0.01

5.32

5.29

0.01

5.29

2.46

2,666

2,734

4.61

0.12

4.73

4.58

0.12

4.69

2.36

73,717

74,494

3,321

3,363

5.29

0.07

5.35

5.25

0.07

5.31

2.20

Total assets

Long-term debt, including current portion

February 1,
2020

February 2,
2019

42,779

11,499

41,290

11,275

As of
February 3,
2018
As Adjusted (b)
40,303

January 28,
2017
As Adjusted (b)
38,724

January 30,
2016 (b)
40,262

11,398

12,591

12,760

(b)

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.
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)
(Lease Standard). The selected financial data as of January 30, 2016, does not reflect adoption of Topic
606 or Topic 842.

TARGET CORPORATION

2019 Form 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

EXECUTIVE SUMMARY & ANALYSIS OF OPERATIONS

Index to Financial Statements

Executive Overview

Over the last several years, we have made strategic investments to build a durable operating and financial model
that further differentiates Target and is designed to drive sustainable sales and profit growth. We have done this
through an investment strategy focused on:

Elevating the shopping experiences and winning with high-touch service

•

During the past three years, we have remodeled more than 700 stores, including nearly 300 during 2019. We
plan to remodel approximately 300 in 2020.

• We have grown our stores network and now have over 100 small format stores in key urban markets and on

college campuses.

• We have redesigned our store operating model – redefining roles for hundreds of thousands of team members

to deliver better guest service.

• We have invested significantly in our team, including a $13 starting hourly wage with a commitment to $15 by

the end of 2020.

Curation at Scale

• We have delivered a steady stream of newness and exclusives across our assortment. We have introduced
over 25 new owned and exclusive brands, including the 2019 launch of our new food and beverage owned
brand, Good & Gather, which we expect will become our largest owned brand.

Delivering Ease and Convenience through Same Day Services

• We have expanded our digital fulfillment capabilities, which elevate the shopping experience and give our
guests new reasons to choose Target. During 2019, over 70% of our comparable digital sales growth was driven
by same-day fulfillment options: Order Pickup, Drive Up, and delivery via our wholly owned subsidiary, Shipt.

These investments are translating into tangible financial results summarized below.

Financial Summary

Fiscal 2019 included the following notable items:

• GAAP earnings per share from continuing operations were $6.34.
•
•
•

Adjusted earnings per share from continuing operations were $6.39.
Total revenue increased 3.7 percent, driven by a comparable sales increase and sales from new stores.
Comparable sales increased 3.4 percent, driven by a 2.7 percent increase in traffic.

◦
◦

Comparable store sales grew 1.4 percent.
Digital channel sales increased 29 percent, contributing 1.9 percentage points to comparable sales
growth.

• Operating income of $4,658 million was 13.3 percent higher than the comparable prior-year period.

Sales were $77,130 million for 2019, an increase of $2,697 million or 3.6 percent from the prior year. Operating
cash flow provided by continuing operations was $7,099 million for 2019, an increase of $1,129 million, or 18.9
percent, from $5,970 million for 2018.

TARGET CORPORATION

2019 Form 10-K

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

EXECUTIVE SUMMARY & ANALYSIS OF OPERATIONS

Index to Financial Statements

Earnings Per Share From
Continuing Operations

GAAP diluted earnings per share
Adjustments
Adjusted diluted earnings per share

2019

6.34 $
0.05
6.39 $

2018

5.50 $
(0.10)
5.39 $

Percent Change

2017 (a)

2019/2018

2018/2017

5.29
(0.60)
4.69

15.4 %

4.0 %

18.4 %

15.1 %

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.

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 1, 2020, ROIC was 16.0 percent, compared with 14.7 percent for the trailing twelve months ended
February 2, 2019. The calculation of ROIC is provided on page 22.

Analysis of Results of Operations

Summary of Operating Income

(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.

Rate Analysis

Gross margin rate

2019
77,130 $
982
78,112
54,864
16,233

2018
74,433 $
923
75,356
53,299
15,723

2,357
4,658 $

2,224
4,110 $

2017 (a)
71,786
928
72,714
51,125
15,140

2,225
4,224

Percent Change

2019/2018 2018/2017
3.7 %
(0.5)
3.6
4.3
3.9

3.6 %
6.3
3.7
2.9
3.2

6.0
13.3 %

(0.1)
(2.7)%

SG&A expense rate
Depreciation and amortization (exclusive of depreciation included in

cost of sales) expense rate

Operating income margin rate

2019

28.9 %

20.8

3.0

6.0

2018

28.4 %

20.9

3.0

5.5

2017 (a)
28.8 %

20.8

3.1

5.8

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.

A discussion regarding Results of Operations and Analysis of Financial Condition for the year ended February 2,
2019, as compared to the year ended February 3, 2018, is included in Part II, Item 7, MD&A to our Annual Report
on Form 10-K for the fiscal year ended February 2, 2019.

TARGET CORPORATION

2019 Form 10-K

Sales

MANAGEMENT'S DISCUSSION AND ANALYSIS

ANALYSIS OF OPERATIONS

Table of Contents

Index to Financial Statements

Sales include all merchandise sales, net of expected returns, and our estimate of gift card breakage. Note 2 to the
Financial Statements defines gift card "breakage." We use comparable sales to evaluate the performance of our
stores and digital channel sales by measuring the change in sales for a period over the comparable, prior-year
period of equivalent length. Comparable sales include all sales, except sales from stores open less than 13 months,
digital acquisitions we have owned less than 13 months, stores that have been closed, and digital acquisitions that
we no longer operate. Comparable sales measures vary across the retail industry. As a result, our comparable sales
calculation is not necessarily comparable to similarly titled measures reported by other companies. Digitally
originated sales include all sales initiated through mobile applications and our websites. Our stores fulfill the majority
of digitally originated sales, including shipment from stores to guests, store Order Pick Up or Drive Up, and delivery
via Shipt. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third
parties.

Sales growth – from both comparable sales and new stores – represents an important driver of our long-term
profitability. We expect that comparable sales growth will drive the majority of our total sales growth. We believe that
our ability to successfully differentiate our guests’ shopping experience through a careful combination of
merchandise assortment, price, convenience, guest experience, and other factors will over the long-term drive both
increasing shopping frequency (traffic) and the amount spent each visit (average transaction amount).

The increase in 2019 sales compared to 2018 is due to a 3.4 percent comparable sales increase and the
contribution from new stores.

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.

Contribution to Comparable Sales Change
Stores channel comparable sales change
Contribution from digitally originated sales to comparable sales change
Total comparable sales change

Note: Amounts may not foot due to rounding.

Sales by Channel

Stores originated
Digitally originated

Total

2019

3.4 %

2.7

0.7

2019
1.4 %
1.9
3.4 %

2018

5.0 %

5.0

0.1

2018
3.2 %
1.8
5.0 %

2019

91.2 %
8.8

100 %

2018

92.9 %
7.1

100 %

2017

1.3 %

1.6

(0.3)

2017
0.1 %
1.2
1.3 %

2017

94.5 %
5.5

100 %

Note 2 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.

TARGET CORPORATION

2019 Form 10-K

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

Index to Financial Statements
ANALYSIS OF OPERATIONS
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®. 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. Guests receive a 5 percent
discount on virtually all purchases when they use a RedCard at Target.

RedCard Penetration

Target Debit Card

Target Credit Cards

Total RedCard Penetration

Note: Amounts may not foot due to rounding.

Gross Margin Rate

2019

12.6 %

10.7

23.3 %

2018

13.0 %

10.9

23.8 %

2017

13.1 %

11.3

24.5 %

0.5%

0.2%

(0.2)%

Merchandising
Strategies

Mix

Supply Chain &
Digital Fulfillment

28.9%

2019
GM
Rate

28.4%

2018
GM
Rate

Our gross margin rate was 28.9 percent in 2019 and 28.4 percent in 2018. The increase reflects merchandising
efforts to optimize costs, pricing, promotions, and assortment, and favorable category sales mix, partially offset by
increased supply chain and digital fulfillment costs.

Selling, General and Administrative (SG&A) Expense Rate

Our SG&A expense rate was 20.8 percent in 2019, approximately flat to last year. Store labor productivity and lower
incentive compensation in 2019 offset pressure from wage growth.

Store Data

Change in Number of Stores
Beginning store count
Opened
Closed
Ending store count

2019
1,844
26
(2)
1,868

2018
1,822
29
(7)
1,844

TARGET CORPORATION

2019 Form 10-K

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

ANALYSIS OF OPERATIONS & RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Index to Financial Statements

Number of Stores

Retail Square Feet (a)

February 1,
2020

February 2,
2019

February 1,
2020

February 2,
2019

272

1,505

1,868

272

1,501

1,844

48,619

189,227

2,670

48,604

188,900

2,077

240,516

239,581

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)

In thousands, reflects total square feet less office, distribution center, and vacant space.

Other Performance Factors

Net Interest Expense

Net interest expense from continuing operations was $477 million and $461 million for 2019 and 2018, respectively.
The increase was primarily driven by a $10 million loss on early retirement of debt in 2019.

Provision for Income Taxes

Our 2019 effective income tax rate from continuing operations increased to 22.0 percent from 20.3 percent in 2018,
which included discrete benefits related to the Tax Cuts and Jobs Act of 2017 (Tax Act) and the resolution of certain
income tax matters unrelated to 2018 operations.

Note 18 to the Financial Statements provides additional information.

TARGET CORPORATION

2019 Form 10-K

Reconciliation of Non-GAAP Financial Measures to GAAP Measures

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Index to Financial Statements

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 in accordance
with GAAP. Other companies may calculate Adjusted EPS differently than we do, limiting the usefulness of the
measure for comparisons with other companies.

Reconciliation of Non-GAAP
Adjusted EPS

(millions, except per share data)

GAAP diluted earnings per share from

continuing operations

Adjustments

Loss on investment (b)
Tax Act (c)
Loss on debt extinguishment
Other (d)
Other income tax matters (e)

Adjusted diluted earnings per share from

continuing operations

—

(17)

—

(13)

—

2019

2018

Pretax

Net of
Tax

Per Share
Amounts

Pretax

Net of
Tax

Per Share
Amounts

Pretax

6.34

5.50

2017 (a)
Net of
Tax

Per Share
Amounts

5.29

0.06

$ — $ — $

— $ — $ — $

—

0.01

(0.02)

—

(36)

(0.07)

—

(18)

(0.03)

—

123

(5)

—

(343)

(3)

(57)

(0.62)

0.14

(0.01)

(0.10)

6.39

5.39

4.69

Note: Amounts may not foot due to rounding.
(a)

(b)

(c)

(d)

(e)

Consisted of 53 weeks.
Includes an unrealized loss on our investment in Casper Sleep, Inc., which is not core to our continuing
operations.
Represents discrete items related to the Tax Act. Refer to the Provision for Income Taxes discussion within
MD&A and Note 18 to the Financial Statements.
For 2019 and 2017, represents insurance recoveries related to the 2013 data breach.
Represents benefits from the resolution of certain income tax matters unrelated to current period
operations.

Earnings from continuing operations before interest expense and income taxes (EBIT) and earnings from continuing
operations before interest expense, income taxes, depreciation, and amortization (EBITDA) are non-GAAP financial
measures. We believe these measures 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 to, 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 in accordance with GAAP. Other companies
may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other
companies.

EBIT and EBITDA

(dollars in millions)
Net earnings from continuing operations

+ Provision for income taxes

+ Net interest expense

EBIT
+ Total depreciation and amortization (b)
EBITDA

2019

2018

3,269 $

2,930 $

921

477

4,667 $
2,604

7,271 $

746

461

4,137 $
2,474

6,611 $

Percent Change

2019/2018 2018/2017

11.6 %

23.4

3.3

12.8 %
5.3

10.0 %

0.7 %

3.5

(29.3)

(3.4)%
(0.1)

(2.2)%

2017 (a)
2,908

722

653

4,283
2,476

6,759

(a)

(b)

Consisted of 53 weeks.
Represents total depreciation and amortization,
Amortization and within Cost of Sales.

including amounts classified within Depreciation and

TARGET CORPORATION

2019 Form 10-K

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Index to Financial Statements

We have also disclosed after-tax ROIC, which is a ratio based on GAAP information, with the exception of the add-
back of operating lease interest to operating income. 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
(dollars in millions)

Numerator

Operating income

+ Net other income / (expense)

EBIT
+ Operating lease interest (a)
- Income taxes (b)
Net operating profit after taxes

Trailing Twelve Months

February 1,
2020

February 2,
2019

4,658

4,667

1,045

3,708

4,110

4,137

856

3,364

Denominator

February 1,
2020

February 2,
2019

Current portion of long-term debt and other borrowings

161

+ Noncurrent portion of long-term debt

+ Shareholders' investment
+ Operating lease liabilities (c)
- Cash and cash equivalents

Invested capital
Average invested capital (d)

11,338

11,833

2,475

2,577

23,230

23,208

1,052

10,223

11,297

2,170

1,556

23,186

22,832

February 3,
2018

281

11,117

11,651

2,072

2,643

22,478

After-tax return on invested capital

16.0 %

14.7 %

(a)

(b)

(c)

(d)

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 22.0 percent and 20.3 percent
for the trailing twelve months ended February 1, 2020, and February 2, 2019, respectively. For the trailing
twelve months ended February 1, 2020, and February 2, 2019, includes tax effect of $1,026 million and
$839 million, respectively, related to EBIT, and $19 million and $17 million, respectively, related to operating
lease interest.
Total short-term and long-term operating lease liabilities included within Accrued and Other Current
Liabilities and Noncurrent Operating Lease Liabilities.
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.

TARGET CORPORATION

2019 Form 10-K

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

ANALYSIS OF FINANCIAL CONDITION & NEW ACCOUNTING PRONOUNCEMENTS

Index to Financial Statements

Analysis of Financial Condition

Liquidity and Capital Resources

Our period-end cash and cash equivalents balance increased to $2,577 million from $1,556 million in 2018. Our
cash and cash equivalents balance includes short-term investments of $1,810 million and $769 million as of
February 1, 2020, and February 2, 2019, 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 $7,099 million in 2019 compared with $5,970 million in
2018. The 2019 operating cash flow increase was primarily driven by higher net earnings and a reduction in
inventory during 2019. Operating cash flow in 2019 also benefited from increased accounts payable due to timing of
import inventory purchases, which have longer payment terms, compared with 2018.

Inventory

Year-end inventory was $8,992 million, compared with $9,497 million in 2018. Inventory levels were lower as of
February 1, 2020, compared with February 2, 2019, partially due to focused efforts to reduce inventory across
multiple categories where we optimized on-hand quantities and assortment. Additionally, elevated inventory levels in
the prior year reflected intentional investments in toys merchandise.

TARGET CORPORATION

2019 Form 10-K

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

ANALYSIS OF FINANCIAL CONDITION

Index to Financial Statements

Capital Expenditures

$4,000

$3,000

$2,000

)
s
n
o

i
l
l
i

(

$3,027

$811

$263

$1,000

$1,953

$3,516

$568

$249

$2,699

$2,533

$620

$282

$1,631

2019

2018

2017

Existing store investments
New stores
Information technology, supply chain, and other

Capital expenditures decreased in 2019 from the prior year primarily due to project savings in our store remodel
program and timing of certain planned expenditures. We have completed over 700 remodels since the launch of the
current program in 2017, and expect to maintain our pace of approximately 300 remodels in 2020. Beginning in
2021, we expect to moderate the annual number of remodels to a range of 150 to 200.

In addition to these cash investments, we entered into leases related to new stores in 2019, 2018, and 2017 with
total future minimum lease payments of $669 million, $473 million, and $438 million, respectively.

We expect capital expenditures in 2020 of approximately $3.5 billion as we continue the current store remodel
program, open additional small-format stores, and accelerate investments in our supply chain. We also expect to
continue to invest in new store leases.

Dividends

We paid dividends totaling $1,330 million ($2.60 per share) in 2019 and $1,335 million ($2.52 per share) in 2018, a
per share increase of 3.2 percent. We declared dividends totaling $1,345 million ($2.62 per share) in 2019 and
$1,347 million ($2.54 per share) in 2018, a per share increase of 3.1 percent. We have paid dividends every quarter
since our 1967 initial public offering and it is our intent to continue to do so in the future.

Share Repurchases

During 2019 and 2018 we returned $1,518 million and $2,067 million, respectively, to shareholders through share
repurchase. See Part II, Item 5, Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities of this Annual Report on Form 10-K and Note 20 to the Financial Statements for
more information.

TARGET CORPORATION

2019 Form 10-K

Financing

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

ANALYSIS OF FINANCIAL CONDITION

Index to Financial Statements

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 1, 2020, 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-
F1

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. Fitch raised our
commercial paper rating from F2 to F1 during 2019.

In March 2019, we issued $1.0 billion of debt, and in June 2019, we repaid $1.0 billion of debt at maturity. In
January 2020, we issued $750 million of debt and we redeemed $1.0 billion of debt before its maturity.

In both 2019 and 2018, we funded our holiday sales period working capital needs through internally generated
funds and the issuance of commercial paper.

We have additional liquidity through a committed $2.5 billion revolving credit facility obtained through a group of
banks, which expires in October 2023. No balances were outstanding at any time during 2019 and 2018.

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, as of February 1, 2020, 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.

Notes 15 and 16 to the Financial Statements provide additional information.

We believe our sources of
finance anticipated
expansion and strategic initiatives, fund debt maturities, pay dividends, and execute purchases under our share
repurchase programs for the foreseeable future. We continue to anticipate ample access to commercial paper and
long-term financing.

liquidity will continue to be adequate to maintain operations,

TARGET CORPORATION

2019 Form 10-K

Commitments and Contingencies

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

ANALYSIS OF FINANCIAL CONDITION

Index to Financial Statements

Contractual Obligations as of

Payments Due by Period

February 1, 2020

(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)

Less than

Total

1 Year

1-3

Years

3-5

Years

After 5

Years

$ 10,085 $

94 $

1,119 $

1,000 $

1,890

3,205

552

—

5,964

676

1,313

—

121

284

—

399

247

588

—

254

552

160

—

766

135

—

7,872

1,270

1,838

144

—

245

531

175

—

707

4,092

—

220

571

—

Contractual obligations

$ 23,775 $

1,896 $

3,052 $

2,820 $ 16,007

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

Represents principal payments only. See Note 15 to the Financial Statements for further information.
Finance and operating lease payments include $118 million and $901 million, respectively, related to
options to extend lease terms that are reasonably certain of being exercised. See Note 17 to 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 $188 million, including interest and penalties, 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 18 to 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 1, 2020. 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.

TARGET CORPORATION

2019 Form 10-K

Critical Accounting Estimates

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

ANALYSIS OF FINANCIAL CONDITION

Index to Financial Statements

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 (LIFO). Our inventory is valued at the lower of LIFO 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 $8,992 million and $9,497 million as of February 1,
2020 and February 2, 2019, respectively, and is further described in Note 8 to 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 historical trending and
data, this receivable is computed by forecasting vendor income collections and estimating the amount 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
$464 million and $468 million as of February 1, 2020 and February 2, 2019, respectively. Vendor income is
described further in Note 4 to 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 eventual disposition of the
asset or asset group is less than its carrying amount, and is measured as the excess of its carrying amount over
fair value. We estimate fair value by obtaining market appraisals, obtaining valuations from third-party brokers, or
using other valuation techniques. We recorded impairments of $23 million, $92 million, and $91 million in 2019,
2018, and 2017, respectively, which are described further in Note 10 to 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
based on our estimate of their net present value; other liabilities referred to above are not discounted. Our workers'
liability accrual was $465 million and $423 million as of February 1, 2020 and
compensation and general
February 2, 2019, 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 have impacted our self-insurance expense by
$23 million in 2019. Historically, adjustments to our estimates have not been material. Refer to Part II, 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.

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.

TARGET CORPORATION

2019 Form 10-K

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

Index to Financial Statements
ANALYSIS OF FINANCIAL CONDITION
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 $188 million and $334 million as of February 1, 2020 and February 2, 2019,
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 18 to
the Financial Statements.

Pension accounting: We maintain a funded qualified defined benefit pension plan, as well as nonqualified and
international pension plans that are generally unfunded, 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, compensation growth rates, mortality, and retirement age. These 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 2019 expected long-term rate of return on plan assets of 6.30 percent was determined by the portfolio
long-term investment performance, and current market conditions. A 1 percentage point
composition, historical
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 $61 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 23 to 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 14 to the Financial Statements for further
information on contingencies.

New Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-13 - Measurement of Credit Losses
losses of certain financial
on Financial
instruments. We will adopt the standard in the first quarter of 2020, as required. We do not expect the standard to
materially affect our consolidated net earnings, financial position, or cash flows.

Instruments, which modifies the measurement of expected credit

We do not expect that any other recently issued accounting pronouncements will have a material effect on our
financial statements.

TARGET CORPORATION

2019 Form 10-K

Forward-Looking Statements

MANAGEMENT'S DISCUSSION AND ANALYSIS

Table of Contents

FORWARD LOOKING STATEMENTS

Index to Financial Statements

forward-looking statements in this report

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 similar words. The principal
include: our financial
performance, statements regarding the adequacy of and costs associated with our sources of liquidity, the funding
of debt maturities, the continued execution of our share repurchase program, our expected capital expenditures and
new lease commitments, 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 return on 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 claims, litigation and the resolution of tax matters,
our expectations regarding our contractual obligations,
the expected ability to
recognize deferred tax assets and liabilities and the timing of such recognition, the expected impact of changes in
information technology systems, and changes in our assumptions and expectations.

liabilities, and vendor income,

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 included in Part I, Item 1A, Risk Factors 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As of February 1, 2020, 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). Our interest rate exposure is primarily
due to differences between our floating rate debt obligations compared to our floating rate short-term investments.
As of February 1, 2020, our floating rate short-term investments exceeded our floating rate debt by approximately
$300 million. Based on our balance sheet position as of February 1, 2020, 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 15 and 16 to the Financial Statements.

In 2017, the United Kingdom's Financial Conduct Authority announced the intent to phase out LIBOR by the end of
2021. As a result, we may amend our contracts that use LIBOR as a benchmark, but do not expect these changes
will have a material impact on our financial statements, liquidity and access to capital markets.

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 as of February 1, 2020, 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 plan. 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 $61 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 plan liabilities.

As more fully described in Note 22 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.

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

INDEX

Table of Contents

Index to Financial Statements

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Financial Position

Consolidated Statements of Cash Flows

Consolidated Statements of Shareholders' Investment

Notes to Consolidated Financial Statements

Note 1

Note 2

Note 3

Note 4

Note 5

Note 6

Note 7

Note 8

Note 9

Note 10

Note 11

Note 12

Note 13

Note 14

Note 15

Note 16

Note 17

Note 18

Note 19

Note 20

Note 21

Note 22

Note 23

Note 24

Note 25

Summary of Accounting Policies

Revenues

Cost of Sales and Selling, General and Administrative Expenses

Consideration Received from Vendors

Advertising Costs

Fair Value Measurements

Cash and Cash Equivalents

Inventory

Other Current Assets

Property and Equipment

Other Noncurrent Assets

Goodwill and Intangible Assets

Accrued and Other Current Liabilities

Commitments and Contingencies

Commercial Paper and Long-Term Debt

Derivative Financial Instruments

Leases

Incomes Taxes

Other Noncurrent Liabilities

Share Repurchase

Share-Based Compensation

Defined Contribution Plans

Pension Plans

Accumulated Other Comprehensive Income

Quarterly Results (Unaudited)

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

REPORTS

Table of Contents

Index to Financial Statements

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,
to protect shareholders'
investments.

financial reporting and audits to assess whether their quality,

integrity, and objectivity are sufficient

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 11, 2020

Michael J. Fiddelke
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 1, 2020
and February 2, 2019, the related consolidated statements of operations, comprehensive income, cash flows and shareholders' investment for
each of the three years in the period ended February 1, 2020, 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 1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the three years in the period ended
February 1, 2020, 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 1, 2020, 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
11, 2020 expressed an unqualified opinion thereon.

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of
the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

REPORTS

Table of Contents

Index to Financial Statements

Valuation of Inventory and related Cost of Sales

Description of
the Matter

At February 1, 2020, the Corporation's inventory was $8,992 million. As described in Note 8 to the consolidated financial
statements, the Corporation accounts for the vast majority of its inventory under the retail inventory accounting method (RIM)
using the last-in, first-out (LIFO) method. RIM is an averaging method that has been widely used in the retail industry due to its
practicality. Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the
inventory retail value.

Auditing inventory requires extensive audit effort including significant involvement of more experienced audit team members,
including the involvement of our information technology (IT) professionals, given the relatively higher level of automation
impacting the inventory process including the involvement of multiple information systems used to capture the high volume of
transactions processed by the Corporation. Further, the inventory process is supported by a number of automated and IT
dependent controls that elevate the importance of the IT general controls that support the underlying information systems
utilized to process transactions.

How We
Addressed the
Matter in Our
Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Corporation’s
inventory process, including the underlying IT general controls. For example, we tested automated controls performed by the
Corporation’s information systems and controls over the completeness of data transfers between information systems used in
performing the Corporation’s RIM calculation. Our audit procedures included, among others, testing the processing scenarios
of the automated controls by evaluating configuration settings and performing a transaction walkthrough for each scenario.

Our audit procedures also included, among others, testing the key inputs into the RIM calculation, including purchases, sales,
shortage, and price changes (markdowns) by comparing the key inputs back to source information such as third-party vendor
invoices, third-party inventory count information and cash receipts. In addition, we performed extensive analytical procedures.
For example, we performed store square footage analytics to predict ending inventory values at each store location, as well as
predictive markdown analytics based on inquiries held with members of the merchant organization to assess the level of price
changes within a category.

Valuation of Vendor Income Receivables

Description of
the Matter

At February 1, 2020, the Corporation’s vendor income receivables totaled $464 million. As discussed in Note 4 of the
consolidated financial statements, the Corporation receives consideration for a variety of vendor-sponsored programs, which
are primarily recorded as a reduction of cost of sales when earned. The Corporation records a receivable for amounts earned
but not yet received.

Auditing the Corporation's vendor income receivables was complex due to the estimation required in measuring the
receivables. The estimate was sensitive to significant assumptions, such as forecasted vendor income collections, and
estimating the time period over which the collections have been earned, which is primarily based on historical trending and
data.

How We
Addressed the
Matter in Our
Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Corporation’s
vendor income receivable process, including controls over management’s review of the significant assumptions described
above.

To test the estimated vendor income receivables, we performed audit procedures that included, among others, assessing the
estimation methodology used by management and evaluating the forecasted vendor income collections and the time period
over which collections have been earned as used in the receivable estimation model. For a sample of the vendor rebates and
concessions, we evaluated the nature and source of the inputs used and the terms of the contractual agreements. We
recalculated the amount of the vendor income earned based on the inputs and the terms of the agreements. In addition, we
recalculated the time period over which the vendor income collection had been earned to assess the accuracy of
management’s estimates. We also performed sensitivity analyses of significant assumptions to evaluate the significance of
changes in the receivables that would result from changes in assumptions.

We have served as the Corporation's auditor since 1931.

Minneapolis, Minnesota
March 11, 2020

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

REPORTS

Table of Contents

Index to Financial Statements

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 1, 2020, based on the
framework in Internal Control—Integrated Framework (2013),
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.

issued by the Committee of Sponsoring Organizations of

Our internal control over financial reporting as of February 1, 2020, 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 11, 2020

Michael J. Fiddelke
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 1, 2020, 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 1, 2020, 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 1, 2020 and February 2, 2019, the related consolidated
statements of operations, comprehensive income, cash flows and shareholders' investment for each of the three years in the period ended
February 1, 2020, and the related notes and our report dated March 11, 2020 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 11, 2020

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements

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.

2019

2018

2017

77,130 $

74,433 $

71,786

982

78,112

54,864

16,233

2,357

4,658

477

(9)

4,190

921

3,269

923

75,356

53,299

15,723

2,224

4,110

461

(27)

3,676

746

2,930

928

72,714

51,125

15,140

2,225

4,224

653

(59)

3,630

722

2,908

3,281 $

2,937 $

2,914

6.39 $

0.02

6.42 $

6.34 $

0.02

6.36 $

5.54 $

0.01

5.55 $

5.50 $

0.01

5.51 $

510.9

515.6

—

528.6

533.2

—

5.32

0.01

5.32

5.29

0.01

5.29

546.8

550.3

4.1

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements

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.

2019

2018

3,281 $

2,937 $

2017

2,914

(65)

(63)

(52)

(6)

(58)

3,218 $

2,879 $

2,922

TARGET CORPORATION

2019 Form 10-K

Consolidated Statements of Financial Position

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements

(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 1,
2020

February 2,
2019

2,577 $

8,992

1,333

12,902

6,036

30,603

6,083

2,692

533

(19,664)

26,283

2,236

1,358

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

42,779 $

41,290

9,920 $

4,406

161

14,487

11,338

2,275

1,122

1,724

16,459

6,226

6,433

(868)

11,833

9,761

4,201

1,052

15,014

10,223

2,004

972

1,780

14,979

6,042

6,017

(805)

11,297

41,290

Total liabilities and shareholders' investment

42,779 $

Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 504,198,962 shares issued and outstanding
as of February 1, 2020; 517,761,600 shares issued and outstanding as of February 2, 2019.

Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any
period presented.

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements

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.

2019

2018

2017

3,281 $

2,937 $

3,269

2,930

2,604

2,474

147

178

505

140

199

7,099

7,117

132

322

—

(900)

(299)

1,127

5,970

5,973

2,914

2,908

2,476

112

(188)

123

208

(348)

(156)

1,307

419

6,861

6,935

(3,027)

(3,516)

(2,533)

—

(518)

(55)

(2,944)

(3,416)

(3,075)

1,739

(2,069)

(1,330)

(1,565)

(3,152)

1,021

1,556

—

(281)

(1,335)

(2,124)

(3,644)

(1,087)

2,643

2,577 $

1,556 $

492 $

476 $

696

379

464

373

130

246

739

(2,192)

(1,338)

(1,046)

108

(3,729)

131

2,512

2,643

678

934

139

212

TARGET CORPORATION

2019 Form 10-K

Consolidated Statements of Shareholders' Investment

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements

(millions)

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

Net earnings

Other comprehensive loss

Dividends declared

Repurchase of stock

Stock options and awards

February 1, 2020

Common
Stock
Shares

Stock
Par
Value

Additional
Paid-in
Capital

Retained
Earnings

Accumulated Other
Comprehensive
(Loss) / Income

Total

556.2 $

46 $

5,661 $

5,846 $

(638) $ 10,915

—

(17.6)

3.1

—

(1)

—

197

—

2,914

—

(1,356)

(1,026)

—

117

541.7 $

45 $

5,858 $

6,495 $

—

(27.2)

3.3

—

(2)

—

184

2,937

—

(1,347)

(2,068)

—

2,914

— (1,356)

— (1,027)

—

197

(117)

—

(747) $ 11,651

—

(58)

2,937

(58)

— (1,347)

— (2,070)

—

184

517.8 $

43 $

6,042 $

6,017 $

(805) $ 11,297

—

(16.0)

2.4

—

(1)

—

184

3,281

—

(1,345)

(1,520)

—

(63)

3,281

(63)

— (1,345)

— (1,521)

—

184

504.2 $

42 $

6,226 $

6,433 $

(868) $ 11,833

We declared $2.62, $2.54, and $2.46 dividends per share for the twelve months ended February 1, 2020,
February 2, 2019, and February 3, 2018, respectively.

See accompanying Notes to Consolidated Financial Statements.

TARGET CORPORATION

2019 Form 10-K

Notes to Consolidated Financial Statements

1. Summary of Accounting Policies

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

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 2019 and 2018 ended February 1,
2020, and February 2, 2019, respectively, and consisted of 52 weeks. Fiscal 2017 ended February 3, 2018, and
consisted of 53 weeks. Fiscal 2020 will end January 30, 2021, 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.

TARGET CORPORATION

2019 Form 10-K

2. Revenues

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

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).

Revenues
(millions)
Apparel and accessories (a)(f)
Beauty and household essentials (b)(f)
Food and beverage (c)
Hardlines (d)
Home furnishings and décor (e)
Other

Sales

Credit card profit sharing

Other

Other revenue

2019

2018

14,304 $

13,434 $

20,616

15,039

12,595

14,430

146

77,130

680

302

982

19,296

14,585

12,709

14,298

111

74,433

673

250

923

2017

13,323

18,364

14,256

12,062

13,672

109

71,786

694

234

928

Total revenue

78,112 $

75,356 $

72,714

(a)

(b)

(c)

(d)

(e)

(f)

toddlers,

for women, men, boys, girls,

infants and newborns, as well as jewelry,

Includes apparel
accessories, and shoes.
Includes beauty and personal care, baby gear, cleaning, paper products, and pet supplies.
Includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and food
service in our stores.
Includes electronics (including video game hardware and software), toys, entertainment, sporting goods,
and luggage.
Includes furniture, lighting, storage, kitchenware, small appliances, home décor, bed and bath, home
improvement, school/office supplies, greeting cards and party supplies, and other seasonal merchandise.
We reclassified certain baby gear sales totaling $1,570 million and $1,339 million for the fiscal years ended
February 2, 2019, and February 3, 2018, respectively,
from Apparel and Accessories to Beauty and
Household Essentials.

Merchandise sales – We record almost all retail store revenues at the point of sale. Digitally originated sales may
include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. 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 1, 2020, February 2, 2019, and
February 3, 2018, the liability for estimated returns was $117 million, $116 million, and $110 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 because the purchase and sale of this
inventory are virtually simultaneous.

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements
NOTES
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.

Gift Card Liability Activity

(millions)
Gift card liability (a)
(a)

(b)

Included in Accrued and Other Current Liabilities.
Net of estimated breakage.

Gift Cards
Issued During
Current Period
But Not
Redeemed (b)

Revenue
Recognized
From
Beginning
Liability

February 2,
2019

February 1,
2020

840 $

719 $

(624) $

935

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 and was $962 million, $953 million, and $933 million in 2019, 2018, and 2017, respectively.

Target Circle program members earn 1 percent rewards on nearly all non-RedCard purchases. Revenue related to
reward redemptions and deferred revenue under this loyalty program were immaterial to our Consolidated Financial
Statements for the year ended February 1, 2020.

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.

3. 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
Compensation and benefit costs associated with
shipment of merchandise from stores
Import costs

Selling, General and Administrative Expenses
Compensation and benefit costs for stores and
headquarters, except ship from store costs classified
as cost of sales
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.

TARGET CORPORATION

2019 Form 10-K

4. Consideration Received from Vendors

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

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 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 historical trending and
data, this receivable is computed by forecasting vendor income collections, and estimating the amount earned. The
majority of the year-end vendor income receivables are collected within the following fiscal quarter, and we do not
the assumptions used in our estimate will change significantly.
believe there is a reasonable likelihood that
Historically, adjustments to our vendor income receivable have not been material.

5. 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

6. Fair Value Measurements

2019
1,647 $
—
1,647 $

2018
1,494 $
—
1,494 $

2017
1,476
(19)
1,457

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

(millions)
Assets

Short-term investments (a)
Prepaid forward contracts (b)
Interest rate swaps (c)

Liabilities

Classification

Other Current Assets

Other Noncurrent Assets

Interest rate swaps (c)

Other Current Liabilities

Fair Value as of

Pricing
Category

February 1,
2020

February 2,
2019

Level 1

Level 2

137

—

769

Cash and Cash Equivalents

Level 1 $

1,810 $

(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 16 for additional information on interest rate swaps.

We recorded a $41 million pretax impairment charge within Net Other (Income) / Expense related to our investment
in Casper Sleep Inc. for which we determined the fair value had declined to $39 million as of February 1, 2020.

TARGET CORPORATION

2019 Form 10-K

Significant Financial Instruments not Measured at Fair Value (a)

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

As of February 1,
2020
Fair
Value

Carrying
Amount

As of February 2,
2019
Fair
Value

Carrying
Amount

$ 9,992 $ 11,864 $ 10,247 $ 10,808

(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.

7. 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.

Cash and Cash Equivalents
(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 1,
2020
326 $

1,810
441

February 2,
2019
359
769
428

2,577 $

1,556

As of February 1, 2020 and February 2, 2019, we reclassified book overdrafts of $209 million and $242 million,
respectively, to Accounts Payable and $23 million and $25 million, respectively, to Accrued and Other Current
Liabilities.

8. 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.

9. Other Current Assets

Other Current Assets
(millions)

Income tax and other receivables

Vendor income receivable

Prepaid expenses

Other

Total

February 1,
2020

February 2,
2019

498 $

464

154

217

632

468

157

209

1,333 $

1,466

TARGET CORPORATION

2019 Form 10-K

10. Property and Equipment

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

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 2019, 2018, and 2017 was $2,591 million, $2,460 million, and $2,462 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 store performance expectations, events, or changes in
circumstances—such as a decision to relocate or close a store or distribution center, discontinue a project, or make
significant software changes—indicate that the asset's carrying value may not be recoverable. We recognized
impairment losses of $23 million, $92 million, and $91 million during 2019, 2018, and 2017, respectively. The
impairment losses primarily resulted from store impairments and planned or completed store closures, and for 2017,
also included supply chain changes. For asset groups classified as held for sale, measurement of an impairment
loss is based on the excess of the carrying amount of the asset group over its fair value. We estimate fair value by
obtaining market appraisals, obtaining valuations from third-party brokers, or using other valuation techniques.
Impairments are recorded in Selling, General and Administrative Expenses.

11. Other Noncurrent Assets

Other Noncurrent Assets
(millions)

Goodwill and intangible assets

Company-owned life insurance investments, net of loans

Other

Total

12. Goodwill and Intangible Assets

February 1,
2020

February 2,
2019

686 $

418

254

699

380

194

1,358 $

1,273

Goodwill totaled $633 million as of February 1, 2020 and February 2, 2019. No impairments were recorded in 2019,
2018, or 2017 as a result of the annual goodwill impairment tests performed.

Intangible assets, net of accumulated amortization, totaled $53 million and $66 million as of February 1, 2020, and
February 2, 2019, 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 as of February 1, 2020. Amortization expense was $13 million, $14 million, and
$14 million in 2019, 2018, and 2017, respectively, and is estimated to be less than $15 million annually through
2024.

TARGET CORPORATION

2019 Form 10-K

13. 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)

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

February 1,
2020

February 2,
2019

1,158 $

1,229

935

601

333

200

155

955

840

601

331

166

142

830

4,406 $

4,201

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.

14. 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

royalties,

equipment

purchases, marketing-related

Purchase obligations, which include all legally binding contracts such as firm commitments for inventory purchases,
merchandise
acquisition/license
commitments, and service contracts, were $676 million and $992 million as of February 1, 2020 and February 2,
2019, 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 $1,403 million and $1,134 million as of February 1, 2020 and
February 2, 2019, respectively. Over half of these real estate obligations are due within five years, a portion of which
are recorded as liabilities.

contracts,

software

We issue letters of credit and surety bonds in the ordinary course of business. Trade letters of credit totaled $1,544
million and $1,746 million as of February 1, 2020 and February 2, 2019, 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 $468 million and $403 million as of February 1, 2020 and February 2, 2019,
respectively.

TARGET CORPORATION

2019 Form 10-K

15. Commercial Paper and Long-Term Debt

As of February 1, 2020, the carrying value and maturities of our debt portfolio were as follows:

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Debt Maturities

(dollars in millions)

Due 2020-2024

Due 2025-2029

Due 2030-2034

Due 2035-2039

Due 2040-2044

Due 2045-2049

Total notes and debentures

Swap valuation adjustments

Finance lease liabilities

Less: Amounts due within one year

Long-term debt and other borrowings

February 1, 2020
Rate (a)

Balance

3.8 % $

3.3

4.2

6.8

4.0

3.7

4.1

2,205

2,180

1,305

1,109

1,466

1,727

9,992

137

1,370

(161)

11,338

(a)

Reflects the dollar weighted average stated interest rate as of year-end.

Required Principal Payments
(millions)

Total required principal payments

2020

2021

2022

2023

94 $

1,056 $

63 $

— $

2024

1,000

In January 2020, we issued $750 million of 10-year unsecured fixed rate debt at 2.350 percent, and separately, we
redeemed $1,000 million of 3.875 percent unsecured fixed rate debt before its maturity. We recognized a loss on
early retirement of approximately $10 million, which was recorded in Net Interest Expense.

In March 2019, we issued $1,000 million of 10-year unsecured fixed rate debt at 3.375 percent, and in June 2019,
we repaid $1,000 million of 2.3 percent unsecured fixed rate debt at maturity.

In October 2017, we issued $750 million of 30-year unsecured fixed rate debt at 3.9 percent. In addition to debt
repaid at its maturity during 2017, during October 2017, we redeemed $344 million of debt before its maturity at a
value of $463 million. We recognized a loss on early retirement of approximately $123 million, which was recorded
in Net Interest Expense.

We obtain short-term financing from time to time under our commercial paper program.

Commercial Paper
(dollars in millions)

2019

2018

2017

Maximum daily amount outstanding during the year

744 $

658 $

Average amount outstanding during the year

Amount outstanding at year-end

Weighted average interest rate

—

2.36 %

2.00 %

— %

—

We have a committed $2.5 billion revolving credit
outstanding under our credit facility at any time during 2019, 2018, or 2017.

facility that expires in October 2023. No balances were

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.

TARGET CORPORATION

2019 Form 10-K

16. Derivative Financial Instruments

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have
counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 6
provides the fair value and classification of these instruments.

During 2019, we entered into interest rate swaps with a total notional amount of $1,000 million. 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 2.5 percent. The agreements have a weighted average remaining maturity of 9.2
years. Under the two previously existing swap agreements, each with a notional of $250 million, which mature
during 2024 and 2026, respectively, we pay a floating rate equal to 1-month LIBOR and receive a weighted average
fixed rate of 2.9 percent. As of February 1, 2020 and February 2, 2019, interest rate swaps with notional amounts
totaling $1,500 million were designated as fair value hedges, and all were perfectly effective during 2019 and 2018.

Effect of Hedges on Debt
(millions)

Current portion of long-term debt and other borrowings

Carrying amount of hedged debt

Cumulative hedging adjustments, included in carrying amount

Long-term debt and other borrowings

Carrying amount of hedged debt

Cumulative hedging adjustments, included in carrying amount

Effect of Hedges on Net Interest Expense
(millions)

Gain (loss) on fair value hedges recognized in Net Interest Expense

Interest rate swap designated as fair value hedges

Hedged debt

Total

17. Leases

February 1,
2020

February 2,
2019

— $

—

1,630

137

996

(3)

508

2019

2018

2017

130 $

(130)

— $

13 $

(13)

— $

(10)

—

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. We combine lease and nonlease components for new and
reassessed leases.

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.

TARGET CORPORATION

2019 Form 10-K

166
53

2,004

968

3,191

2017

221

(9)

Leases
(millions)

Assets

Operating
Finance

Total leased assets

Liabilities

Current

Operating
Finance

Noncurrent

Operating

Finance

FINANCIAL STATEMENTS

NOTES

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

Table of Contents

Index to Financial Statements

February 1,
2020

February 2,
2019

2,236 $
1,180

1,965
872

3,416 $

2,837

200 $
67

2,275

1,303

Total lease liabilities

3,845 $

Note: We use our incremental borrowing rate based on the information available at commencement date in
determining the present value of lease payments.
(a)

Finance lease assets are recorded net of accumulated amortization of $441 million and $371 million as of
February 1, 2020 and February 2, 2019, respectively.

Lease Cost
(millions)
Operating lease cost (a)
Finance lease cost

Classification

SG&A Expenses

2019

2018

287 $

251 $

Amortization of leased assets

Interest on lease liabilities

Depreciation and Amortization (b)
Net Interest Expense

Sublease income (c)
Net lease cost

Other Revenue

(13)

(11)

407 $

347 $

317

(a)

(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 $48 million, $47 million, and $47 million
for 2019, 2018, and 2017, respectively, which is included in Other Revenue.

TARGET CORPORATION

2019 Form 10-K

Maturity of Lease Liabilities
(millions)

2020

2021

2022

2023

2024

After 2024

Total lease payments

Less: Interest

Present value of lease liabilities

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Operating
Leases (a)

Finance
Leases (b)

284 $

121 $

278

274

270

261

127

125

120

1,838

1,270

3,205 $

1,890 $

730

520

2,475 $

1,370

Total

405

401

395

381

3,108

5,095

(a)

(b)

Operating lease payments include $901 million related to options to extend lease terms that are reasonably
certain of being exercised and exclude $275 million of legally binding minimum lease payments for leases
signed but not yet commenced.
Finance lease payments include $118 million related to options to extend lease terms that are reasonably
certain of being exercised and exclude $462 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 1,
2020

February 2,
2019

13.2

15.4

14.2

15.4

3.71 %

4.23 %

3.91 %

4.64 %

2019

2018

2017

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

254 $

231 $

Operating cash flows from finance leases

Financing cash flows from finance leases

198

TARGET CORPORATION

2019 Form 10-K

18. Income Taxes

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Earnings from continuing operations before income taxes were $4,190 million, $3,676 million, and $3,630 million
during 2019, 2018, and 2017, respectively, including $653 million, $565 million, and $566 million earned by our
foreign entities subject to tax outside of the U.S. During 2019, we reached an agreement with the IRS on certain tax
positions related to our global sourcing operations, and as a result, we reclassified $169 million and $156 million of
previously disclosed 2018 and 2017 earnings, respectively, from foreign to domestic to conform to the current period
classification.

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

2019

21.0 %

2018

21.0 %

2017

33.7 %

3.7

(1.4)

—

(0.4)

(0.8)

(0.1)

3.6

(1.3)

(1.0)

(0.3)

(1.1)

(0.6)

2.2

(4.6)

(9.5)

(0.1)

(0.8)

(1.0)

22.0 %

20.3 %

19.9 %

(a)

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

2019

2018

2017

536 $

257 $

169

743

150

(1)

178

921 $

116

424

263

322

746 $

746

105

910

(229)

(188)

722

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 2019 and 2018.

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

NOTES

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

Lease liabilities

Other

Total gross deferred tax assets

Gross deferred tax liabilities:

Property and equipment

Leased assets

Inventory

Other

Total gross deferred tax liabilities

Total net deferred tax liability

Table of Contents

Index to Financial Statements

February 1,
2020

February 2,
2019

264 $

169

124

148

1,000

1,763

248

181

114

157

823

1,563

(1,767)

(1,557)

(880)

(156)

(74)

(2,877)

(1,114) $

(731)

(140)

(95)

(2,523)

(960)

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 (IRS) has completed exams on the U.S. federal income tax returns for years 2017 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 2013.

Reconciliation of Liability for Unrecognized Tax Benefits
(millions)

2019

2018

2017

Balance at beginning of period

300 $

325 $

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

(69)

(112)

(91)

(2)

160 $

300 $

153

112

142

(71)

(11)

325

As a result of the 2019 agreement with the IRS on certain tax positions related to our global sourcing operations, we
reclassified $149 million of our liability for unrecognized tax benefits to taxes payable. This settlement had an
insignificant effect on 2019 income tax expense.

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements
NOTES
If we were to prevail on all unrecognized tax benefits recorded, $113 million of the $160 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 1, 2020, February 2, 2019, and February 3, 2018, we recorded an
expense / (benefit) from accrued penalties and interest of $(2) million, $3 million, and $(12) million, respectively. As
of February 1, 2020, February 2, 2019, and February 3, 2018 total accrued interest and penalties were $27 million,
$32 million, and $29 million, respectively.

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.

19. Other Noncurrent Liabilities

Other Noncurrent Liabilities
(millions)
Deferred occupancy income (a)
Deferred compensation

Workers' compensation and general liability

Income tax

Pension benefits

Other

Total

(a)

To be amortized evenly through 2038.

20. Share Repurchase

February 1,
2020

February 2,
2019

539 $

493

310

180

107

570

472

281

312

105

1,724 $

1,780

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’ Investment.

Share Repurchase Activity
(millions, except per share data)

Total number of shares purchased

Average price paid per share

Total investment

21. Share-Based Compensation

2019

16.0

95.07 $

1,518 $

2018

27.2

75.88 $

2,067 $

2017

17.6

58.44

1,026

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 16.9 million as of February 1, 2020.

TARGET CORPORATION

2019 Form 10-K

FINANCIAL STATEMENTS

Table of Contents

Index to Financial Statements
NOTES
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 Selling,
General and Administrative Expenses was $152 million, $134 million, and $115 million in 2019, 2018, and 2017,
respectively. The related income tax benefit was $27 million, $26 million, and $26 million in 2019, 2018, and 2017,
respectively.

Restricted Stock Units

We issue restricted stock units and performance-based restricted stock units generally with 3-year cliff or 4-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 3-year performance period. We also regularly issue restricted stock units to our Board of
Directors, which vest quarterly over a 1-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 $80.01, $72.65, and $56.19 in 2019, 2018, and
2017, respectively.

Restricted Stock Unit Activity

Total Nonvested Units

February 2, 2019

Granted

Forfeited

Vested

February 1, 2020

Restricted
Stock (a)

3,815 $

Grant Date
Fair Value (b)
66.86

2,157

(556)

(1,100)

4,316 $

80.01

71.74

66.76

72.93

(a)

(b)

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 as of February 1, 2020 was 4,278 thousand.

Weighted average per unit.

The expense recognized each period is partially dependent upon our estimate of the number of shares that will
ultimately be issued. As of February 1, 2020, there was $149 million of total unrecognized compensation expense
related to restricted stock units, which is expected to be recognized over a weighted average period of 2.5 years.
The fair value of restricted stock units vested and converted to shares of Target common stock was $89 million,
$119 million, and $87 million in 2019, 2018, and 2017, 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, generally relative to a retail peer group, over a 3-year performance period
on certain measures primarily including sales growth, after-tax 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 $86.81, $70.94, and $55.93 in 2019, 2018, and 2017,
respectively.

TARGET CORPORATION

2019 Form 10-K

Performance Share Unit Activity

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Total Nonvested Units

February 2, 2019

Granted

Forfeited

Vested

February 1, 2020

Performance
Share Units (a)

Grant Date
Fair Value (b)
67.47

3,623 $

1,447

(875)

(620)

3,575 $

86.81

66.64

72.32

72.80

(a)

(b)

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 as of February 1, 2020 was 1,944 thousand.

Weighted average per unit.

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 $158 million
assuming payout of all unvested awards. The unrecognized expense is expected to be recognized over a weighted
average period of 2.1 years. The fair value of performance share units vested and converted to shares of Target
common stock was $50 million in 2019, $43 million in 2018, and $30 million in 2017.

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 1-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)

3,990 $
—
(188)
(1,324)
2,478 $

55.49 $
—
55.63
55.03
55.72 $

Intrinsic
Value (c)
63

Number of
Options (a)

Exercisable
Exercise
Price (b)

2,039 $

55.38 $

Intrinsic
Value (c)
32

136

714 $

56.02 $

February 2, 2019
Granted
Expired/forfeited
Exercised/issued
February 1, 2020
(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

2019

73 $

2018

96 $

2017

109

As of February 1, 2020, there was $1 million of total unrecognized compensation expense related to price-vested
options, which is expected to be recognized over a weighted average period of 0.3 years. The weighted average
remaining life of exercisable options is 2.1 years, and the weighted average remaining life of all outstanding options
is 3.5 years. No options vested in 2019, 2018 or 2017.

TARGET CORPORATION

2019 Form 10-K

22. Defined Contribution Plans

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

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 an unfunded, nonqualified deferred compensation plan for a broad management group
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, unfunded, nonqualified deferred compensation plan covering approximately 50
participants. Our total liability under these plans was $551 million and $517 million as of February 1, 2020 and
February 2, 2019, respectively.

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 Notes 6 and 11 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

23. Pension Plans

2019

2018

237 $

229 $

2017

219

(53)

27 $

24 $

(48)

We have a U.S. qualified defined benefit pension plan covering team members who meet age and service
requirements, including date of hire in certain circumstances. Effective January 1, 2009, our 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, as well as international plans. 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 Plan

Nonqualified and
International Plans

2019

2018

2019

2018

4,492 $

3,905 $

4,430

3,915

(62) $

10 $

66 $

(55) $

(43)

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 plan in 2020. However, depending on investment performance and plan funded status, we may elect to
make a contribution.

TARGET CORPORATION

2019 Form 10-K

Estimated Future Benefit Payments
(millions)

2020

2021

2022

2023

2024

2025-2029

Cost of Plans

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Pension
Benefits

304

207

216

224

232

1,266

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

Settlement charges

Total

Assumptions

Net Other (Income) / Expense

2019

2018

2017

93 $

95 $

149

(248)

(11)

146

(246)

(11)

46 $

70 $

140

(250)

(11)

Benefit Obligation Weighted Average Assumptions

Discount rate
Average assumed rate of compensation increase

2019

2018
3.13 % 4.28 %
3.00

3.00

Net Periodic Benefit Expense Weighted Average Assumptions

Discount rate

Expected long-term rate of return on plan assets

Average assumed rate of compensation increase

2019

2018

2017

4.28 % 3.93 % 4.40 %

6.30

3.00

6.30

3.00

6.55

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). Our most recent compound annual rate of return on
qualified plan assets was 6.6 percent, 9.0 percent, 7.2 percent, and 6.3 percent for the 5-year, 10-year, 15-year, and
20-year time periods, respectively.

The market-related value of plan assets is used in calculating the expected return on assets. Historical differences
between expected and actual returns are deferred and recognized in the market-related value over a 5-year period
from the year in which they occur.

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 2019 expected annualized long-term rate of return assumptions were 6.5 percent
for domestic equity securities, 8.0 percent for international equity securities, 4.5 percent for long-duration debt
securities, 8.0 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.

for diversified funds, and 7.0 percent

TARGET CORPORATION

2019 Form 10-K

Benefit Obligation

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Change in Projected Benefit Obligation

Qualified Plan

Nonqualified and
International Plans

(millions)

2019

2018

2019

2018

Benefit obligation at beginning of period

3,905 $

4,061 $

53 $

Service cost

Interest cost

Actuarial (gain) / loss

Participant contributions

Benefits paid
Benefit obligation at end of period (a)
(a)

146

615

(275)

145

(167)

(233)

—

(4)

4,492 $

3,905 $

66 $

(1)

—

(12)

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 Plan

Nonqualified and
International Plans

2019

2018

2019

2018

Fair value of plan assets at beginning of period

3,915 $

4,107 $

10 $

Actual return on plan assets

Employer contributions

Participant contributions

Benefits paid

729

(275)

(65)

100

(233)

—

(4)

Fair value of plan assets at end of period

4,430 $

3,915 $

11 $

(1)

—

(12)

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

Current Targeted

Actual Allocation

Domestic equity securities (a)
International equity securities

Debt securities

Diversified funds
Other (b)
Total

Allocation

15 %
10

2019

14 %
10

2018

13 %
9

100 %

(a)

(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.

TARGET CORPORATION

2019 Form 10-K

Fair Value Measurements

(millions)

Cash and cash equivalents

Derivatives
Government securities (a)
Fixed income (b)

Investments valued using NAV per share (c)

Fixed income

Private equity funds

Cash and cash equivalents

Common collective trusts

Diversified funds

Other

Total plan assets

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

Fair Value at

Pricing
Category

January 31,
2020

January 31,
2019
3

12 $

Level 1 $

Level 2

604

1,330

1,964

163

961

1,109

105

631

1,123

1,769

100

828

952

138

4,441 $

3,925

(a)

(b)

(c)

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

Derivatives

Government securities
and fixed income

Carrying value approximates fair value.

Valuation Technique

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).
Valued using matrix pricing models and quoted prices of securities with similar
characteristics.

Amounts Included in Shareholders' Investment

Amounts in Accumulated Other Comprehensive Loss
(millions)

Net actuarial loss

Prior service credits
Amounts in Accumulated Other Comprehensive Loss (a)(b)
(a)

2019

1,138 $

(13)

2018

1,060

(24)

1,125 $

1,036

(b)

$837 million and $772 million, net of tax, at the end of 2019 and 2018, respectively.
We expect 2020 net pension expense to include amortization expense of $116 million ($86 million, net of
loss and prior service credit balances included in Accumulated Other
tax) related to net actuarial
Comprehensive Loss.

TARGET CORPORATION

2019 Form 10-K

24. Accumulated Other Comprehensive Loss

FINANCIAL STATEMENTS

NOTES

Table of Contents

Index to Financial Statements

(millions)
February 2, 2019

Other Comprehensive Income / (Loss) before

reclassifications, net of tax

Amounts reclassified from AOCL, net of tax

February 1, 2020

Cash Flow
Hedges

Currency
Translation
Adjustment

Pension

Total

(13)

(20)

(772)

$ (805)

—
1 (a)

—

(104)

39 (b)

(103)

(12)

(19)

(837)

$ (868)

(a)

(b)

Represents amortization of gains and losses on cash flow hedges, net of taxes, which is recorded in Net
Interest Expense.
Represents amortization of pension gains and losses, net of $13 million of taxes, which is recorded in Net
Other (Income)/Expense. See Note 23 for additional information.

25. 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 2019 and 2018:

Quarterly Results

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Total Year

(millions, except per share data)

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Sales

Other revenue

Total revenue

Cost of sales

$ 17,401 $ 16,556

$ 18,183 $ 17,552

$ 18,414 $ 17,590

$ 23,133 $ 22,734

$ 77,130 $ 74,433

226

225

239

224

251

231

265

243

982

923

17,627

16,781

18,422

17,776

18,665

17,821

23,398

22,977

78,112

75,356

12,248

11,625

12,625

12,239

12,935

12,535

17,056

16,900

54,864

53,299

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

3,663

3,545

3,912

3,865

4,153

3,937

4,504

4,376

16,233

15,723

581

570

561

539

1,135

1,041

1,324

1,133

126

(12)

1,021

229

792

121

(7)

927

210

717

120

(13)

115

(4)

1,217

1,022

279

938

223

799

575

1,002

113

(12)

901

195

706

530

819

115

(9)

713

616

640

584

1,198

1,117

118

110

(7)

2,357

4,658

477

(9)

2,224

4,110

461

(27)

1,051

1,014

4,190

3,676

218

833

216

798

921

746

3,269

2,930

—

795 $

718

1.54 $

1.34

—

1.54 $

1.34

1.53 $

1.33

—

1.53 $

0.64 $

—

1.33

0.62

938 $

799

1.83 $

1.50

—

1.83 $

1.50

1.82 $

1.49

—

1.82 $

0.66 $

—

1.49

0.64

714 $

622

1.38 $

0.02

1.40 $

1.37 $

0.02

1.39 $

0.66 $

1.17

0.01

1.18

1.16

0.01

1.17

0.64

834 $

799

$ 3,281 $ 2,937

1.64 $

1.53

—

1.65 $

1.54

1.63 $

1.52

—

1.63 $

0.66 $

—

1.52

0.64

6.39 $

0.02

6.42 $

6.34 $

0.02

6.36 $

2.62 $

5.54

0.01

5.55

5.50

0.01

5.51

2.54

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.

TARGET CORPORATION

2019 Form 10-K

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

SUPPLEMENTAL INFORMATION

Table of Contents

Index to Financial Statements

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 multi-year migration of many mainframe-based systems and middleware
products to a modern platform, including systems and processes 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
including our principal executive and
Exchange Act
principal
to allow timely decisions
regarding required disclosure.

financial officers, or persons performing similar functions, as appropriate,

is accumulated and communicated to our management,

For the Report of Management on Internal Control and the Report of Independent Registered Public Accounting
Firm on Internal Control over Financial Reporting, see Part II, Item 8, Financial Statements and Supplementary
Data.

Item 9B. Other Information

Not applicable.

TARGET CORPORATION

2019 Form 10-K

SUPPLEMENTAL INFORMATION

PART III

Table of Contents

Index to Financial Statements

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 10, 2020 (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 Part I, Item 4A, Executive Officers 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.
Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

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

TARGET CORPORATION

2019 Form 10-K

SUPPLEMENTAL INFORMATION

PART IV

Table of Contents

Index to Financial Statements

Item 15. Exhibits, Financial Statement Schedules

The following information required under this item is filed as part of this report:

Financial Statements

•

•
•

•

•
•

Consolidated Statements of Operations for the Years Ended February 1, 2020, February 2, 2019, and
February 3, 2018
Consolidated Statements of Comprehensive Income for the Years Ended February 1, 2020, February 2,
2019, and February 3, 2018
Consolidated Statements of Financial Position as of February 1, 2020 and February 2, 2019
Consolidated Statements of Cash Flows for the Years Ended February 1, 2020, February 2, 2019, and
February 3, 2018
Consolidated Statements of Shareholders' Investment for the Years Ended February 1, 2020, February 2,
2019, and February 3, 2018
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.

TARGET CORPORATION

2019 Form 10-K

Exhibits

SUPPLEMENTAL INFORMATION

Table of Contents

Index to Financial Statements

(3)A

(4)A

(10)A *

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 *

BB *

Amended and Restated Articles of Incorporation (as amended through June 9, 2010) (1)
Bylaws (as amended through January 8, 2020) (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.
Target Corporation Executive Officer Cash Incentive Plan (5)
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
Form of Cash Retention Award (25)
Aircraft Time Sharing Agreement as of March 13, 2015 among Target Corporation and Brian C.
Cornell (26)
Transition Agreement dated January 7, 2019 (27)
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 (28)

TARGET CORPORATION

2019 Form 10-K

SUPPLEMENTAL INFORMATION

Table of Contents

Index to Financial Statements

FF ‡

GG ‡

HH ‡

II ‡

JJ ‡

(21)

(23)

(24)

(31)A

(31)B

(32)A

(32)B

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 (29)
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 (30)
Credit Card Program Agreement dated October 22, 2012 among Target Corporation, Target
Enterprise, Inc. and TD Bank USA, N.A. (31)
First Amendment dated February 24, 2015 to Credit Card Program Agreement among Target
Corporation, Target Enterprise, Inc. and TD Bank USA, N.A. (32)
Second Amendment dated November 19, 2019 to Credit Card Program Agreement among Target
Corporation, Target Enterprise, Inc. and TD Bank USA, N.A.
Pharmacy Operating Agreement dated December 16, 2015 between Target Corporation and CVS
Pharmacy, Inc. (33)
First Amendment dated November 30, 2016 to Pharmacy Operating Agreement between Target
Corporation and CVS Pharmacy, Inc. (34)
Second Amendment dated January 9, 2018 to Pharmacy Operating Agreement between Target
Corporation and CVS Pharmacy, Inc. (35)
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
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
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
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

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

101.DEF

101.LAB

101.PRE

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)B to Target's Form 8-K Report filed January 10, 2020.
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.

TARGET CORPORATION

2019 Form 10-K

SUPPLEMENTAL INFORMATION

Table of Contents

Index to Financial Statements

(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)

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)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.

TARGET CORPORATION

2019 Form 10-K

SUPPLEMENTAL INFORMATION

SIGNATURES

Table of Contents

Index to Financial Statements

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.

By:

TARGET CORPORATION

2019 Form 10-K

Shareholder Information

Annual Meeting

Shareholder Information

The Annual Meeting of Shareholders is scheduled for June 10, 2020 at 9:00 a.m.
(Central Daylight Time) online at virtualshareholdermeeting.com/TGT2020. Due to the
public health concerns regarding the novel coronavirus disease (COVID-19) pandemic
we are holding the Annual Meeting in a virtual-only meeting format to support the health
and well-being of our team members and shareholders. You will not be able to attend the
Annual Meeting at a physical location.

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.

Directors and Management

Directors

Executive Officers

Other Senior Officers

Roxanne S. Austin*
President, Austin Investment Advisors
(3) (5)

Brian C. Cornell
Board Chairman and
Chief Executive Officer

Rich Agostino
Senior Vice President and
Chief Information Security Officer

Heath Holtz
Senior Vice President, Global Supply
Chain and Logistics Field Operations

Douglas M. Baker, Jr.
Chairman and Chief Executive Officer,
Ecolab Inc. (2) (5)

Michael J. Fiddelke
Executive Vice President and
Chief Financial Officer

Kristi Argyilan
Senior Vice President and
President, Roundel

George S. Barrett
Former Chairman and Chief Executive
Officer, Cardinal Health, Inc. (3) (5)

Brian C. Cornell
Chairman of the Board and
Chief Executive Officer,
Target Corporation

Calvin Darden
Chairman, Darden Petroleum &
Energy Solutions, LLC (2) (3)

Henrique De Castro*
Former Chief Operating Officer,
Yahoo! Inc. (1) (4)

Robert L. Edwards
Former President and
Chief Executive Officer, Safeway Inc.
(1) (5)

Melanie L. Healey
Former Group President, North
America, The Procter & Gamble
Company (2) (3)

Donald R. Knauss
Former Chairman and
Chief Executive Officer,
The Clorox Company (3) (4)

Monica C. Lozano
President and Chief Executive Officer,
The College Futures Foundation (1) (2)

Mary E. Minnick
Partner, Ocean 14 Capital (1) (4)

Kenneth L. Salazar
Partner, WilmerHale (4) (5)

Dmitri L. Stockton
Former Senior Vice President &
Special Advisor to the Chairman of
General Electric Company
(1) (4)

(1) Audit and Finance Committee
(2) Governance Committee
(3) Human Resources and

Compensation Committee

(4) Infrastructure and

Investment Committee

(5) Risk and Compliance Committee

* Ms. Austin and Mr. De Castro will not
seek re-election and will leave the
Board when their current terms end
at the Annual Meeting.

Richard H. Gomez
Executive Vice President and
Chief Marketing, Digital and
Strategy Officer

Dawn Block
Senior Vice President, Digital

Katie Boylan
Chief Communications Officer

A. Christina Hennington
Executive Vice President and
Chief Merchandising Officer,
Hardlines, Essentials and Capabilities

Steve Brophy
Senior Vice President, HR Strategy
and Operations

Melissa K. Kremer
Executive Vice President and Chief
Human Resources Officer

Frank Bruni
Senior Vice President, Food &
Beverage, Supply Chain

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

Jill K. Sando
Executive Vice President and
Chief Merchandising Officer,
Style and Owned Brands

Mark J. Schindele
Executive Vice President and
Chief Stores Officer

Laysha L. Ward
Executive Vice President and
Chief External Engagement Officer

Tim Hotze
Senior Vice President, Network
Planning, Global Intelligence and
Last Mile Transportation

Yu-Ping Kao
Senior Vice President, Stores

Gemma Kubat
Senior Vice President, Supply Chain
Engineering and Activation

Andi Marston
Senior Vice President, HQ and Global
Human Resources

Gretchen McCarthy
Senior Vice President, Global
Inventory Management

Michelle Mesenburg
Senior Vice President, Marketing

Nik Nayar
Senior Vice President,
Merchandising, Hardlines

Michael O’Neil
Senior Vice President,
Pay and Benefits

Justin Burns
Senior Vice President, Stores

Jeff Burt
Senior Vice President, Merchandising,
Food & Beverage

Kelly Caruso
Chief Executive Officer, Shipt

John Conlin
Senior Vice President, Target Properties

Joe Contrucci
Senior Vice President, Stores Operations

Ashley Petzold
Senior Vice President, Stores

Brett Craig
Senior Vice President,
Merchandising Capabilities

Paritosh Desai
Chief Data and Analytics Officer

Bill Foudy
Senior Vice President and President,
Owned Brand Sourcing and Development

Gena Fox
Senior Vice President, Merchandising,
Apparel and Accessories

Hari Govind
Senior Vice President, Infrastructure
and Operations

Julie Guggemos
Senior Vice President and
Chief Design Officer

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

Cynthia Ho
Senior Vice President, Global Sourcing

Tammy Redpath
President, Target in India

Carolyn Sakstrup
Senior Vice President, Marketing

Cara Sylvester
Senior Vice President,
Merchandising, Home

Samir Shah
Senior Vice President, Stores

Brad Taylor-White
Senior Vice President, Stores
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

Target

Annual

Report