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.

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)

Merchandise Sales

(in Billions)

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

Merchandise Sales by Fulfillment Channel

Financial Highlights

For information on key financial highlights, see Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

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

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.

We also sell merchandise through periodic exclusive design and creative partnerships, and shop-in-shop experiences, with partners such as Apple, Levi's, and Ulta Beauty, and generate revenue from in-store amenities such as Starbucks and Target Optical. CVS Pharmacy, Inc. (CVS) operates pharmacies and clinics in our stores under a perpetual operating agreement from which we generate annual occupancy income. In 2025, we reached a mutual agreement with Ulta Beauty to terminate our commercial shop-in-shop operating agreement when it expires in August 2026.

Global Sourcing, Import Operations, and Tariffs

Our global sourcing operations operate from offices in 13 countries and support the design, development, and manufacturing of merchandise sold across our stores and digital channels, with a particular focus on owned brands. These operations play critical roles in product quality and safety, cost management, and responsible sourcing practices.

Approximately one-half of the merchandise we offer is sourced from outside the United States, with China representing the largest country of origin for imported goods. We serve as the importer of record for most owned and exclusive, and certain national brand merchandise. As importer of record, we are responsible for customs compliance, including but not limited to, classification, import valuation, and payment of all applicable duties and fees.

We employ a range of tariff mitigation strategies, including supplier negotiations, sourcing diversification, and ongoing evaluation of assortment and pricing decisions. We also utilize permitted customs valuation methods, including the first sale methodology, for certain qualifying direct imports. We generally pay duties based on the price Target pays its vendors for the goods, and later seek refunds for qualifying transactions by filing first sale claims, a significant portion of which have processing and payment cycles that extend beyond one year.

Other Capabilities

We generate revenue through a variety of other sources, including Roundel, which provides advertising services to vendors and other third parties, including marketplace sellers; credit card profit sharing related to our Target Circle Card program; our third-party digital marketplace, Target Plus; membership fees; and others.

Customer Loyalty Program

We seek to drive customer loyalty and trip frequency through our Target Circle™ program, which provides benefits to guests that vary depending on their engagement with the program through one or more of the following offerings:

• a free membership providing deals and bonuses including instant discounts and Target Circle Rewards offerings redeemable on future purchases;
• Target Circle Card¹ offerings that provide a 5 percent discount on nearly all purchases, free standard and 2-day shipping on eligible items purchased through our digital channels, and extended returns; and/or
• a paid Target Circle 360™ membership that provides access to unlimited same-day delivery on eligible orders over $35 from Target and other retailers, in addition to free shipping and extended returns benefits generally consistent with our Target Circle Card offering, and exclusive member deals.

¹Target Circle Card offerings include Target Debit Card, Target Credit Card, and Target MasterCard (collectively, Target Circle Cards).

Distribution

Most 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 and beverage items and other merchandise directly to our stores. Merchandise sold through our digital channels is distributed to our guests through guest pick-up at our stores, via common carriers (from stores, supply chain facilities, vendors, and third-party distributors), and same-day delivery. Our stores fulfill the majority of digitally originated sales, which allows improved product availability, faster fulfillment times, reduced shipping costs, and allows us to offer guests a suite of same-day fulfillment options such as Order Pickup, Drive Up, and Same-Day Delivery.

Human Capital Management

In support of our purpose—to help all families discover the joy of everyday life—we invest in our team, our most important asset, by offering a rewarding experience grounded in growth, well-being, and a culture of care. As one of the largest private employers in the United States (U.S.), our workforce reflects a wide range of goals and expectations, from team members building long-term careers to students, retirees and others seeking flexible work in a supportive environment. We seek to be an employer of choice by attracting, engaging and retaining top talent who live our values and contribute to an inclusive and purpose-driven culture. To that end, we strive to foster a highly engaged team where all employees, referred to as “team members,” have fair access to opportunities, feel supported by their teams and communities, and are positioned to contribute to positive experiences for our guests and to overall business results.

As of January 31, 2026, we employed approximately 415,000 full-time, part-time, and seasonal team members. Because of the seasonal nature of the retail business, employment levels peak in the holiday season. We also engage independent contractors, most notably in our Shipt subsidiary.

Our Board of Directors, through the Compensation and Human Capital Management Committee, oversees human capital management matters.

Talent Development and Engagement

We offer a compelling work environment with meaningful experiences and abundant growth and career-development opportunities. This starts with the opportunity to do challenging work and learn on the job and is supplemented by programs and continuous learning that help our team build skills at all levels, including offerings focused on specialized skill development, leadership opportunities, coaching, and mentoring. Our talent and succession planning process supports the development of a strong talent pipeline for leadership and other critical roles. We monitor our team members’ perceptions of these development and engagement programs through a number of surveys and use those insights to guide areas of focus and improvement. We are focused on making Target a destination for talent by fostering a culture grounded in inclusivity, connection and drive, where team members feel supported and engaged. We believe inclusion and belonging for all is an essential part of our team and culture, reinforcing our values and helping fuel the growth of our business.

Compensation and Benefits

Our compensation and benefits are designed to support the financial, mental, and physical well-being of our team members and their families. We believe in paying team members fairly and regularly conduct a pay audit to confirm we are doing so. We also share pay ranges and benefit offerings on all US job postings and continue to expand visibility into these offerings. Our compensation packages include a starting wage range of $15 to $24 per hour for U.S. hourly team members in our stores and supply chain facilities (who comprise the vast majority of our team), a 401(k) plan with dollar-for-dollar matching contributions up to five percent of eligible earnings, paid vacation and holidays, family leave, sick pay, merchandise and other discounts, disability insurance, life insurance, healthcare and dependent care flexible spending accounts, tuition-free education assistance, free mental health services, an annual short-term incentive program, long-term equity awards, and health insurance benefits, including free virtual health care visits. Eligibility for, and the level of, benefits vary depending on team members’ full-time or part-time status, work location, compensation level, and tenure.

Workplace Health and Safety

We strive to maintain a safe and secure work environment and have specific safety programs. This includes administering a comprehensive occupational injury- and illness-prevention program and training for team members.

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 omnichannel retailers, including department stores, off-price general merchandise retailers, wholesale clubs, category-specific retailers, drug stores, supermarkets, direct-to-consumer brands, online marketplaces, and other forms of retail commerce. Our ability to positively differentiate ourselves from other retailers and provide compelling value to our guests largely determines our competitive position within the retail industry.

Intellectual Property

Our brand image is a critical element of our business strategy. Our principal trademarks, including Target, our "Expect More. Pay Less." brand promise, and our "Bullseye Design," have been registered with the U.S. Patent and Trademark Office. We also seek to obtain and preserve intellectual property protection for our brands.

Geographic Information

Nearly all of our sales are generated within the U.S. The vast majority of our property and equipment is located within the U.S. In addition to our administrative operations headquartered in the U.S., we perform additional administrative functions in Bangalore, India, and perform global sourcing operations from offices in 13 countries, predominantly in Asia and Central America.

Available Information

Our corporate internet website is corporate.target.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are available free of charge on the Investors section of our website (corporate.target.com/investors) as soon as reasonably practicable after we file such material with, or furnish it to, the U.S. Securities and Exchange Commission (SEC). In addition, the SEC maintains a website (sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Investors should note that we currently announce material information to our investors and others using filings with the SEC, press releases, public conference calls, webcasts, or our corporate website (corporate.target.com). Information that we post on our corporate website could be deemed material to investors. We encourage investors, the media, and others interested in us to review the information we post on these channels. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.

Information About Our Executive Officers

Executive officers are elected by, and serve at the pleasure of, the Board of Directors. There are no family relationships between any of the officers named and any other executive officer or member of the Board of Directors, or any arrangement or understanding pursuant to which any person was selected as an officer.