Target Corporation

    TGT ·NYSE ·Retail-Variety Stores ·Inc. in MN
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    Item 1.    Business

    General

    Target Corporation was incorporated in Minnesota in 1902. Our corporate purpose is to help all families discover the joy of everyday life. We offer our customers, referred to as "guests," fashionable, differentiated merchandise and everyday essentials at discounted prices. 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.

    When used in this report, the terms "we," "our," "us," "Target," and the "Corporation" mean Target Corporation and its subsidiaries, collectively, unless the context otherwise requires or indicates.

    Strategy

    Target’s strategy is grounded in our purpose to help all families discover the joy of everyday life and our ambition to be the most delightful experience in retail. We differentiate through design, style, and value, and a curated multi-category assortment delivered across stores and digital channels.

    Our strategy is centered on four priorities.

    Lead with Merchandising Authority. Curating design-led, trend-right assortments that combine quality, newness, and value. We focus on categories and brands where we can offer a distinctive and relevant experience for our guests.

    Elevate the Guest Experience. Elevating the guest experience by making shopping easy, inspiring, and friendly. Our stores remain central to this strategy as destination-worthy environments and fulfillment hubs, complemented by digital channels that support discovery, inspiration, and flexibility.

    Accelerate Technology to Enable Our Team and Delight Our Guests. Advancing technology, data and operational capabilities that enable personalization, improve execution, and support scalable growth.

    Strengthen Our Team and Communities. Developing a future-ready workforce through skills, leadership, and tools that amplify human performance. We are also dedicated to working with communities and partners to make life better everywhere we do business, including continuation of our long history of financial giving and volunteering.

    Through this strategy, we seek to strengthen relevance, deepen engagement, and deliver strong long-term financial performance.

    TARGET CORPORATION
    		2025 Form 10-K
    2
    The vast majority of our Net Sales are generated by the sale of merchandise to customers. Our strategy continues to leverage stores as fulfillment hubs, with stores fulfilling more than 97 percent of total Merchandise Sales in each of the last three years, which provides convenience for our guests at a reduced fulfillment cost. In addition to Merchandise Sales, we generate revenue from other sources, most notably advertising revenue and credit card profit-sharing income. Note 2 to the Financial Statements provides more information.

    Net Sales
    (in billions)
    2023
    (53 weeks)
    2024
    (52 weeks)
    2025
    (52 weeks)
    $107.4$106.6$104.8




    (a)    2023 consisted of 53 weeks. The extra week in 2023 contributed $1.7 billion of Net Sales.

    TARGET CORPORATION
    		2025 Form 10-K
    3
    Merchandise Sales by Fulfillment Channel



    Financial Highlights


    Seasonality

    A larger share of annual net sales are traditionally earned during the fourth quarter because it includes the November and December holiday sales period.

    Merchandise

    The majority of our stores offer a wide assortment of general merchandise and groceries. Most of our stores larger than 170,000 square feet offer a variety of general merchandise and a full line of groceries comparable to traditional supermarkets. Our digital channels include a wide merchandise assortment, including many items found in our stores, along with a complementary assortment sold by Target and third parties through our Target Plus digital marketplace. We manage our business across the six core merchandise categories shown below. Within categories, gross margins vary depending on the type of merchandise.

    Merchandise Sales by Category


    TARGET CORPORATION
    		2025 Form 10-K
    4


    A significant portion of our Merchandise Sales are from national brand merchandise. Approximately thirty percent of our Merchandise Sales come from our owned and exclusive brands, including, but not limited to, the brands listed below.

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    Financial statements

    data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .

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    From 10-Q filed 2026-05-29 (period ending 2026-05-02).

    MANAGEMENT'S DISCUSSION AND ANALYSIS
    FINANCIAL SUMMARY
    Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

    Financial Summary

    First quarter 2026 included the following:

    •Net Sales of $25.4 billion, an increase of 6.7 percent from the comparable prior-year period, driven by:
    •A comparable sales increase of 5.6 percent, reflecting a 4.4 percent increase in traffic and a 1.1 percent increase in average transaction amount;
    •The sales contribution from new stores; and
    •Non-merchandise sales growth of 24.6 percent, primarily driven by growth in our Roundel digital advertising business offering.
    •GAAP and Adjusted operating income1 of $1.1 billion was 22.9 percent lower than prior year GAAP operating income, which included $593 million of pretax net gains on interchange fee settlements. Excluding the settlement gains, Adjusted operating income was 29.1 percent higher than $0.9 billion in the prior-year.

    Earnings Per ShareThree Months Ended
    May 2, 2026May 3, 2025Change
    GAAP diluted earnings per share$1.71 $2.27 (24.5)%
    Adjustments— (0.97)
    Adjusted diluted earnings per share1
    		$1.71 $1.30 31.6 %
    Note: Amounts may not foot due to rounding.
    1Adjusted diluted earnings per share (Adjusted EPS) and Adjusted operating income, non-GAAP metrics, exclude the impact of certain items. Management believes that Adjusted EPS and Adjusted operating income are useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 20.

    We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital allocation effectiveness over time. For the trailing twelve months ended May 2, 2026, after-tax ROIC was 12.4 percent, compared with 15.1 percent for the trailing twelve months ended May 3, 2025. The calculation of ROIC is provided on page 21.

    Business Environment

    Beginning in 2025, the U.S. imposed additional tariffs on a wide range of imported products using various legal authorities, including the International Emergency Economic Powers Act (IEEPA). These tariffs were subsequently modified through incremental increases, decreases, pauses, and limited exemptions. Approximately one-half of the merchandise we offer is sourced from outside the U.S., either directly or through our vendors, with China as the single largest source of merchandise we import.

    On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under IEEPA were not authorized by the statute. While the ruling did not establish a refund process, the U.S. Court of International Trade (CIT) subsequently ordered U.S. Customs and Border Protection (CBP) to implement a process to administer refunds, which CBP began executing with the April 20, 2026 deployment of the Consolidated Administration and Processing of Entries (CAPE) system for certain IEEPA refund claims.

    We incurred tariffs under IEEPA, and are following the established refund filing and validation process through the CAPE system, along with other importers seeking IEEPA refunds. As of May 2, 2026, no refunds had been received and no receivable was recorded. Subsequent to quarter-end, we began receiving refunds, which to date have not been material. Due to the remaining uncertainties related to the process, timing, and amount of potential refunds, as well as a potential appeal of the CIT's order to issue refunds, we are unable to estimate the ultimate financial effects of IEEPA refunds.

    After the Supreme Court ruling in February, the U.S. administration instituted new tariffs against most major trading partners, and has previewed future actions that could restore or exceed the level of the IEEPA tariffs. We continue to assess and respond to the evolving consumer, legal and regulatory environment.
    TARGET CORPORATION
    		Q1 2026 Form 10-Q
    14
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    FINANCIAL SUMMARY
    The collective interaction of tariffs, IEEPA refunds, sourcing strategies, pricing actions, consumer response and behaviors, and other factors could materially impact our sales, results of operations, and financial condition in future periods.

    Business Transformation Initiatives

    In 2025, we announced a multi-year initiative to transform various aspects of our business—including our organizational structure, processes, and technology—to enable greater agility and optimize the use of the Company's assets. We incurred costs and charges related to our business transformation initiatives in 2025, including a reduction in our headquarters workforce. Refer to Note 7 to the Financial Statements in our Form 10-K for the fiscal year ended January 31, 2026, for additional information.

    We did not incur any costs or charges related to these initiatives during the three months ended May 2, 2026, or the comparable prior-year period.

    We may incur additional costs and charges related to these initiatives in future periods, which may adversely affect our results of operations and financial condition; however, we cannot reasonably estimate the amount or timing of such costs and charges.

    Analysis of Results of Operations

    Summary of Operating Income Three Months Ended 
    (dollars in millions)May 2, 2026May 3, 2025Change
    Net sales$25,443 $23,846 6.7 %
    Cost of sales18,061 17,128 5.4 
    SG&A expenses5,562 4,591 21.1 
    Depreciation and amortization (exclusive of depreciation included in cost of sales)685 655 4.6 
    Operating income$1,135 $1,472 (22.9)%
    Adjusted SG&A expenses (a)
    		$5,562 $5,183 7.3 %
    Adjusted operating income (a)
    		1,135 879 29.1 

    Rate AnalysisThree Months Ended
    May 2, 2026May 3, 2025
    Gross margin rate29.0 %28.2 %
    SG&A expense rate21.9 19.3 
    Adjusted SG&A expense rate (a)
    		21.9 21.7 
    Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)2.7 2.7 
    Operating income margin rate4.5 6.2 
    Adjusted operating income margin rate (a)
    		4.5 3.7 
    Note: Gross margin (GM) is calculated as Net Sales less Cost of Sales. All rates are calculated by dividing the applicable amount by Net Sales.
    (a)Adjusted SG&A expenses, Adjusted SG&A expense rate, Adjusted operating income, and Adjusted operating income margin rate, which are non-GAAP measures, exclude the impact of certain items. Management believes that these measures are useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 20.

    Net Sales

    Net sales includes all Merchandise Sales and revenues from other sources, most notably advertising revenue and credit card profit-sharing income.
    TARGET CORPORATION
    		Q1 2026 Form 10-Q
    15
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    ANALYSIS OF RESULTS OF OPERATIONS

    Merchandise Sales are net of expected returns, and our estimate of gift card breakage. Comparable sales include all Merchandise Sales, except sales from stores open less than 13 months or that have been closed. We use comparable sales to evaluate the performance of our stores and digital channels by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales measures vary across the retail industry. As a result, our comparable sales calculation is not necessarily comparable to similarly titled measures reported by other companies. Digitally originated sales include all Merchandise Sales initiated through mobile/computer applications and our websites. Our stores fulfill the majority of digitally originated sales, including shipment from stores to guests, store Order Pickup or Drive Up, and Same Day Delivery. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.

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

    Comparable SalesThree Months Ended
     May 2, 2026May 3, 2025
    Comparable sales change5.6 %(3.8)%
    Drivers of change in comparable sales  
    Number of transactions (traffic)4.4 (2.4)
    Average transaction amount1.1 (1.4)

    Comparable Sales by ChannelThree Months Ended
     May 2, 2026May 3, 2025
    Stores originated comparable sales change4.7 %(5.7)%
    Digitally originated comparable sales change8.9 4.7 

    Merchandise Sales by ChannelThree Months Ended
     May 2, 2026May 3, 2025
    Stores originated79.7 %80.2 %
    Digitally originated20.3 19.8 
    Total100 %100 %

    Merchandise Sales by Fulfillment ChannelThree Months Ended
     May 2, 2026May 3, 2025
    Stores 97.6 %97.6 %
    Other2.4 2.4 
    Total100 %100 %
    Note: Merchandise Sales fulfilled by stores include in-store purchases and digitally originated sales fulfilled by shipping merchandise from stores to guests, Order Pickup, Drive Up, and Same Day Delivery.

    TARGET CORPORATION
    		Q1 2026 Form 10-Q
    16
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    ANALYSIS OF RESULTS OF OPERATIONS
    Merchandise Sales by Product CategoryThree Months Ended
    May 2, 2026May 3, 2025
    Apparel & accessories16 %16 %
    Beauty14 13 
    Food & beverage25 25 
    Hardlines (Fun 101)14 13 
    Home furnishings & décor13 14 
    Household essentials18 19 
    Total100 %100 %

    Note 2 to the Financial Statements provides additional product category sales information. The collective interaction of a broad array of macroeconomic, competitive, and consumer behavioral factors, as well as sales mix and the transfer of sales to new stores, makes further analysis of sales metrics infeasible.

    Store Data

    Change in Number of StoresThree Months Ended
    May 2, 2026May 3, 2025
    Beginning store count1,995 1,978 
    Opened7 3 
    Ending store count2,002 1,981 

    Number of Stores andNumber of Stores
    Retail Square Feet (a)
    Retail Square FeetMay 2, 2026January 31, 2026May 3, 2025May 2, 2026January 31, 2026May 3, 2025
    170,000 or more sq. ft.274 273 273 49,045 48,824 48,824 
    50,000 to 169,999 sq. ft.1,581 1,576 1,562 197,978 197,274 195,436 
    49,999 or less sq. ft.147 146 146 4,460 4,420 4,404 
    Total2,002 1,995 1,981 251,483 250,518 248,664 
    (a)In thousands; reflects total square feet less office, supply chain facility, and vacant space.
     
    TARGET CORPORATION
    		Q1 2026 Form 10-Q
    17
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    ANALYSIS OF RESULTS OF OPERATIONS
    Gross Margin Rate

    Quarter-to-Date
    For the three months ended May 2, 2026, our gross margin rate was 29.0 percent compared with 28.2 percent in the comparable prior-year period. The increase reflected net benefits from:
    •merchandising, primarily due to lower markdown rates and growth in advertising and other revenues, partially offset by higher product costs; and
    •supply chain and digital fulfillment, including productivity improvements in supply chain facilities, and the leveraging impact of higher sales.

    Selling, General, and Administrative Expense Rate

    For the three months ended May 2, 2026, our SG&A expense rate was 21.9 percent compared with 19.3 percent for the comparable prior-year period. Our comparable prior-period rate included a 2.5 percentage point benefit from interchange fee settlements, which are further described in Note 3 to the Financial Statements. Excluding this item, our Adjusted SG&A expense rate was 21.7 percent. The remaining 0.2 percentage point increase in 2026 reflected higher compensation expense, including stores payroll and incentive compensation, new store and remodel-related expenses, and the net impact of other cost increases. These cost increases more than offset the leverage benefit of higher sales.

    TARGET CORPORATION
    		Q1 2026 Form 10-Q
    18
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    OTHER PERFORMANCE FACTORS
    Other Performance Factors

    Net Interest Expense

    For the three months ended May 2, 2026, net interest expense was $117 million compared with $116 million in the comparable prior-year period.

    Provision for Income Taxes
     
    Our effective income tax rate for the three months ended May 2, 2026, was 24.4 percent compared with 25.0 percent in the comparable prior-year period. The decrease reflects lower discrete tax expense in the current year, primarily related to share-based compensation.
    TARGET CORPORATION
    		Q1 2026 Form 10-Q
    19
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
    Reconciliation of Non-GAAP Financial Measures to GAAP Measures

    To provide additional transparency, we have disclosed non-GAAP adjusted diluted earnings per share (Adjusted EPS), adjusted SG&A expenses, adjusted SG&A expense rate, adjusted operating income, and adjusted operating income margin rate. These measures exclude certain items presented below. We believe this information is useful in providing period-to-period comparisons of the results of our operations. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the U.S. (GAAP). The most comparable GAAP measures are diluted earnings per share, SG&A expenses, SG&A expense rate, operating income, and operating income margin rate. Adjusted EPS, adjusted SG&A expenses, adjusted SG&A expense rate, adjusted operating income, and adjusted operating income margin rate 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 these measures differently, or not provide similar measures, limiting the usefulness of the measures for comparisons with other companies.

    Reconciliation of Non-GAAP Adjusted EPSThree Months Ended
    May 2, 2026May 3, 2025
    (millions, except per share data)PretaxNet of TaxPer SharePretaxNet of TaxPer Share
    GAAP diluted earnings per share$1.71 $2.27 
    Adjustments
    Interchange fee settlements (a)
    		$— $— $— $(593)$(441)$(0.97)
    Adjusted EPS$1.71 $1.30 

    Reconciliation of Non-GAAP Adjusted SG&A Expenses and Adjusted Operating IncomeThree Months Ended
    May 2, 2026May 3, 2025
    SG&A ExpensesOperating IncomeSG&A ExpensesOperating Income
    (dollars in millions)DollarsRate DollarsRate DollarsRateDollarsRate
    Reported, GAAP measure$5,562 21.9 %$1,135 4.5 %$4,591 19.3 %$1,472 6.2 %
    Adjustments
    Interchange fee settlements (a)
    		— — — — 593 2.5 %(593)(2.5)%
    Adjusted, Non-GAAP measure$5,562 21.9 %$1,135 4.5 %$5,183 21.7 %$879 3.7 %

    Note: Amounts may not foot due to rounding. Rates are calculated by dividing the applicable amount by Net Sales.
    (a)The adjustment removes the favorable impact of the settlement gains from prior-year SG&A Expenses and Operating Income. Note 3 to the Financial Statements provides additional information.


    TARGET CORPORATION
    		Q1 2026 Form 10-Q
    20
    MANAGEMENT'S DISCUSSION AND ANALYSIS
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
    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)
    Trailing Twelve Months
    NumeratorMay 2, 2026May 3, 2025
    Operating income$4,781 $5,742 
     + Net other income84 102 
    EBIT4,865 5,844 
     + Operating lease interest (a)
    		173 165 
      - Income taxes

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    Held by

    holders ( registered funds via N-PORT, institutional investors via 13F). Showing top by dollar value.

    Holder Type ETF MF Position ($) % of holder Δ % of holder Holder AUM

    Recent insider activity

    Last 90 days. Open-market trades (purchases & sales) by directors, officers, and 10%+ owners. 3 transactions across 3 insiders. Net: -62,053 shares, -$7,992,121.

    Date Insider Role Action Shares Price Value
    2026-05-29 SYLVESTER CARA A Executive Officer Sell -10,000 $125.89 -$1,258,905
    2026-05-27 Cornell Brian C indirect Executive Officer Sell -50,000 ×2 $129.85 -$6,492,623
    2026-03-17 LIEGEL MATTHEW A Chief Accounting Officer Sell -2,053 $117.19 -$240,593

    Source: SEC Form 4 filings.

    Next expected filings

    • ~2026-08-28 10-Q expected by 2026-09-10 (in 74 days)
    • ~2026-11-25 10-Q expected by 2026-12-08 (in 163 days)
    • ~2027-03-10 10-K expected by 2027-03-31 (in 268 days)
    • ~2027-05-28 10-Q expected by 2027-06-10 (in 347 days)

    Predicted from historical filing cadence; not an SEC commitment.

    Recent SEC filings

    • 2026-06-12 8-K Officer/Director Change; Shareholder Vote Results; Financial Statements and Exhibits
    • 2026-05-29 10-Q Quarterly Report
    • 2026-05-20 8-K Earnings Release; Financial Statements and Exhibits
    • 2026-04-27 DEF 14A Proxy Statement
    • 2026-03-11 10-K Annual Report
    • 2026-03-03 8-K Earnings Release; Financial Statements and Exhibits
    • 2026-02-11 8-K Earnings Release; Financial Statements and Exhibits
    • 2026-02-10 8-K Officer/Director Change
    • 2026-02-05 8-K Officer/Director Change
    • 2026-01-22 8-K Officer/Director Change
    • 2025-11-26 10-Q Quarterly Report
    • 2025-11-19 8-K Earnings Release; Financial Statements and Exhibits
    • 2025-10-09 8-K Material Agreement Entered; Material Agreement Terminated; Material Financial Obligation
    • 2025-08-29 10-Q Quarterly Report
    • 2025-08-20 8-K Earnings Release; Financial Statements and Exhibits