TGT 10-K & 10-Q changes, risk factors and insider trading

We attempt to differentiate our guest experience through a careful combination of price, merchandise assortment, store environment, digital experiences, convenience, guest service, loyalty programs, advertising, and marketing. Our ability to successfully differentiate ourselves depends on many competitive factors, including guest perceptions regarding our shopping experience, the safety and cleanliness of our stores, our ability to offer products at affordable prices, the desirability and exclusivity of our offerings, our in-stock levels, the effectiveness of our digital channels and fulfillment options, our ability to responsibly source merchandise, and our ability to create a personalized guest experience. If we fail to differentiate our guest experience from our competitors, our results of operations and financial condition could be adversely affected.

Consumers continue to migrate to digital channels and seek out multiple fulfillment options, which has affected the ways we attempt to differentiate ourselves. Since consumers can quickly comparison shop using digital tools, they may make decisions based solely on price or convenience, which could limit our ability to differentiate from our competitors. In addition, providing multiple fulfillment options, expanding our digital channels, expanding our digital assortment through third-party sellers on our Target Plus marketplace, and implementing new technology is complex, costly, and may not meet our guests’ expectations. If we are unable to offset our investments in these or other initiatives with improved performance or efficiencies, our results of operations could be adversely affected. In addition, if we do not anticipate and adapt to consumer behavior or developments and offerings by our competitors, we may not be able to compete effectively. For example, we may be unable to match or surpass the advances in technologies and capabilities (including artificial intelligence) that our competitors implement for consumer-facing platforms or for internal operations, which could adversely affect our competitive position. As technology (including artificial intelligence) in the digital retail market continues to evolve, new competitors may emerge due to lowered barriers of entry, which could negatively impact our ability to compete. Furthermore, generative artificial intelligence presents emerging ethical issues and could negatively impact our guests and team members. If our use of generative or agentic artificial intelligence becomes controversial or is ineffective, or if the outputs generated are inaccurate or ineffective,controversial, our reputation and competitive position could be adversely affected. Consumers may also use third-party channels, devices, technologies, and capabilities (including artificial intelligence) to initiate shopping searches and place orders, which could make us dependent on the capabilities and search algorithms of those third parties to reach those consumers. Any failures or difficulties in executing our differentiation efforts or adapting to offerings by our competitors could adversely affect our results of operations and financial condition.

If we do not anticipate consumer demand accurately and respond quickly to changing consumer preferences, our results of operations and financial condition could be adversely affected.

A large part of our business is dependent on our ability to make trend-right decisions in a broad range of merchandise categories and offer those products at affordable prices. If we do not accurately predict consumer demand and quickly respond to changing consumer preferences and spending patterns, we may experience lower sales, spoilage, and increased inventory markdowns, which could adversely affect our results of operations. Our ability to accurately predict consumer demand and adapt to changing consumer preferences depends on many factors, including obtaining accurate and relevant data on guest preferences, successfully implementing new technologies and capabilities (including artificial intelligence), emphasizing relevant merchandise categories, effectively managing our inventory levels, and implementing competitive and effective pricing and promotion strategies. We have not always been able to accurately predictforecast consumer demand or react to rapid changes in consumer preferences and spending patterns, which has previously resulted in insufficient or excess inventory, increased inventory markdowns, higher costs (including for storage, transportation, labor, and other expenses), and adverse impacts on our results of operations. If we are unable to accuratelydo predictso consumer demand and effectively adapt to future changesagain in consumerthe preferences and spending patterns,future, our results of operations and financial condition could be adversely affected.

We believe that one of the reasons our shareholders, guests, team members, vendors and vendorsbusiness collaborators choose Target is the positive reputation we have built over many years for serving those constituencies and the communities in which we operate. To be successful in the future, we must continue to preserve Target's reputation. Our reputation is largely based on perceptions. It may be difficult to address negative publicity or sensationalism across media channels, regardless of its accuracy or the reputability of its source, including as a result of fictitious media content (such as content produced by generative artificial intelligence or bad actors). Negative incidents (including those based on differing perspectives or opinions) involving us, our workforce, or others with whom we do business could quickly erode trust and confidence and result in changes in consumer behavior including consumer boycotts, workforce unrest or walkouts, government investigations, and litigation. Negative reputational incidents or negative perceptions of us could adversely affect our business and results of operations, including through lower sales, the termination of existing business relationships, challenges in obtaining new vendors, third-party sellers or business collaborators, loss of new store and development opportunities, higher costs, and team member engagement, retention, and recruiting difficulties. We have previously experienced negative perceptions of our business, which have adversely affected consumer behavior and our results of operations, and we could experience similar occurrences in the future. Any of these outcomes could negatively impact our reputation, results of operations, and financial condition.

We previously established, and may continue to establish, various goals and initiatives regarding environmental, political, social, and governance matters, including with respect to sustainability and human capital management. We have modified and concluded, and may continue to modify and conclude, certain of these goals and initiatives from time to time. For example, in 2025, we recently announced that we modified and concluded certain of our initiatives related to diversity, equity, and inclusion, which resulted in adverse reactions from some of our shareholders, guests, team members, and others.others, as well as consumer boycotts organized throughout 2025. Our establishment and continuation of any goals or initiatives regarding environmental, political, social, and governance matters, any modification or termination of such goals or initiatives, or any failure or perceived failure by us to achieve them, could result in negative reactions from our shareholders, guests, team members, vendors, and other third parties (including governmental entities and officials and non-governmental organizations) and lead to adverse perceptions of our business, consumer boycotts, litigation, investigations, and regulatory proceedings. In particular, certain federal and state officials and agencies have asserted that corporate initiatives regarding environmental, social, and governance matters, including with respect to sustainabilitysustainability, belonging, and diversity, equity, and inclusion, violate various federal and state laws. Although we believe that all of our corporate initiatives have complied with applicable laws, we could still become subject to litigation, investigations, and regulatory proceedings, including as it relates to corporate initiatives that have concluded. Any of these outcomes could negatively impact our reputation, results of operations, and financial condition.

Reputational harm can also occur indirectly through companies and others with whom we do business or whose products we sell. We have consumer-facing relationships with a variety of other companies, including Apple, CVS, Disney, Levi’s, Starbucks, and Ulta Beauty. In addition, we have relationships with third-party companies that sell and ship items directly to guests through our digital channels. We also have relationships with designers, celebrities, influencers, and other individuals, including for advertising campaignscampaigns, product collaborations, and marketing programs. If consumers have negative experiences with, or view unfavorably, any of the companies or individuals with whom we have relationships, it could cause them to not shop with us and negatively impact our results of operations.

Our owned and exclusive brand products represent approximately onethirty thirdpercent of our overall merchandise sales and generally carry higher margins than equivalent national brand products. Our ability to source, develop, and market our owned and exclusive brands depends on many factors, including our ability to anticipate consumer demand and preferences and make trend-right decisions, our relationships with both established and new vendors, the availability and price of raw materials, product quality, and our ability to offer products at affordable prices. If we are unable to successfully develop, source, and market our owned and exclusive brands, or if we are unable to successfully protect our related intellectual property rights, our results of operations could be adversely affected. In addition, our reliance on owned and exclusive brand products may also amplify other risks discussed in this Item 1A, Risk Factors, because many of these products are imported and we are more involved in the development and sourcing of those products. For example, any failure of our owned brands to meet applicable safety standards or Target's or our guests' expectations regarding safety, quality, supply chain transparency, and responsible sourcing could expose us to government enforcement actions and private litigation, result in costly product recalls and other liabilities, and exacerbate our reputational risks. In addition, owned brand products generally need longer lead times between order placement and product delivery and require us to take ownership of those products earlier in the supply chain. This requires accurate longer-term forecasting of consumer demand to effectively manage our operations, including for categories where consumer preferences may change rapidly, and exposes us to enhanced risks of supply chain disruptions.disruptions and trade policy or tariff impacts. We have previously been, and may in the future be, unable to accurately predict consumer demand for our owned brand products. This has resulted, and may in the future result, in insufficient or excess inventory, increased inventory markdowns, and higher costs. Any of these outcomes could adversely affect our results of operations and financial condition.

Our business depends on our ability to effectively manage our inventory. We have historically experienced loss of inventory (also called shrink) due to damage, theft (including from organized retail crime), and other causes. In recent years, we have experienced elevated levels of inventory shrink relative to historical levels, which have adversely affected, and could continue to adversely affect, our results of operations and financial condition. To protect against rising inventory shrink, we have taken, and may continue to take, certain operational and strategic actions that could adversely affect our reputation, guest experience, and results of operations. In addition, sustained high rates of inventory shrink at certain stores have contributed, and may continue to contribute, to the closure of certain stores and the impairment of long-term assets.

Our business experiences some seasonality, with a larger portion of our sales traditionally occurring in the fourth quarter because it includes the November and December holiday sales period. In addition to the November and December holiday sales period, we also see increased sales activity during the back-to-school and back-to-college period and other seasonal moments throughout the year. As a result, any factors negatively impacting us during any of these periods, including weather conditions, natural disasters, macroeconomic conditions, consumer preferences, technological disruptions, and political or economic uncertainty or instability, could adversely affect our results of operations and financial condition.condition to a greater degree.

We offer our guests a multi-category assortment of everyday essentials and differentiated merchandise. However, we depend on sales of our higher-margin merchandise to drive net earnings growth. As a result, flat sales and sales declines of our higher-margin merchandise have previously limited, and may in the future limit, our ability to drive net earnings growth.growth or result in a decline in our gross margin rate. Furthermore, we are subject to cyclical trends in consumer spending, which may disproportionately impact sales of certain merchandise and result in lower sales for our higher-margin merchandise. Such trends have previously adversely affected, and could in the future adversely affect, our results of operations.

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. When building new stores, we compete with other retailers and businesses for suitable locations for our stores.stores and available labor and materials. Pursuing the wrong remodel or new store opportunities and any delays, cost increases, or other difficulties related to those projects could adversely affect our results of operations and financial condition. Furthermore, remodels and new store projects have previously been, and may in the future be, delayed or cancelled based on changes in macroeconomic conditions, changes in expected project benefits, the timing for required permit issuances or other regulatory clearances, and other factors, which could result in the inefficient deployment of our capital and adversely affect our results of operations and financial condition.

We rely extensively on technology systems throughout our business, including systems that we develop internally. We also rely on continued and unimpeded access to the Internet to use our technology systems. These systems are subject to possible damage or interruption from many events, including power and other outages, telecommunications failures, third-party failures, malicious attacks, security breaches, unplanned downtime, program transitions, and implementation errors. Any damage or disruption to our technology systems could severely interrupt our business operations, including our ability to process guest transactions and manage inventories, which could adversely affect our reputation, results of operations, and financial condition. For example, in the past, we have experienced disruptions to the order fulfillment capabilities on our digital platforms and in our point-of-sale system that prevented our ability to process debit or credit transactions, which negatively impacted some guests’ experiences and generated negative publicity. We have invested, and expect to continue to invest, in maintaining and updating our technology systems, but implementing significant changes increases the risk of system disruption. Furthermore, the technology systems that we develop internally may become outdated or ineffective and may be unable to match or surpass third-party systems. Problems and interruptions associated with implementing technology initiatives could adversely affect our operational efficiency and negatively impact our guests and their confidence in us. Any of these outcomes could adversely affect our results of operations and financial condition.

As part of our business, we receive and store information about our guests, team members, vendors, and other third parties. We also rely extensively on information systems throughout our business. We have programs in place to detect, contain, and respond to information security, cybersecurity, and data privacy incidents. However, we may be unable to anticipate security incidents, detect attacks, or implement adequate preventive measures as cyber threats continue to evolve and cyberattacks become more sophisticated and frequent, including through the introduction of viruses and malware (such as ransomware) and the use of enhanced and rapidly advancing technologies and capabilities (including artificial intelligence) by threat actors. Cyberattacks are being carried out by groups and individuals with a wide range of expertise and motives. In addition, hardware or software that we develop or obtain from third parties may contain defects that could compromise information security, cybersecurity, or data privacy. Unauthorized parties may also attempt to gain access to our information systems or facilities, or those of third parties with whom we do business, through fraud, deception, social engineering, or other bad acts. Errors or malicious actions by our team members or contractors, faulty password management, and other vulnerabilities or irregularities could also overcome our security measures or those of third parties with whom we do business and result in a compromise or breach of our or their information systems. The utilization of hybrid and remote work by our team members, vendors, independent contractors, and other third parties has amplified our already extensive reliance on computing and information systems and unimpeded Internet access. Furthermore, the training we conduct as part of our information security, cybersecurity, and data privacy efforts may not be effective in preventing or limiting successful attacks.

We and our vendors face attempts by others to gain unauthorized access to, sabotage, take control of, and corrupt, our information systems and data. As a result of these types of attempts, both we and our vendors have experienced information security, cybersecurity, and data privacy incidents. None of these incidents has recently had a material impact on our business strategy, results of operations, or financial condition. SinceBut as we previously experienced a prominent data breach, additional information security, cybersecurity, or data privacy incidents could draw greater scrutiny. If we, our vendors, or other third parties with whom we do business experience additional significant information security, cybersecurity, or data privacy incidents or fail to detect and appropriately respond to significant incidents, our business operations could be severely disrupted and we could be exposed to costly government enforcement actions and private litigation. In addition, our guests could lose confidence in our ability to protect their information, stop using our Target-branded payment cards or loyalty programs, or stop shopping with us altogether. Any of these outcomes could adversely affect our reputation, results of operations, and financial condition.

The legal and regulatory environment regarding information security, cybersecurity, and data privacy is dynamic and has strict requirements, including for the use and treatment of personal data.information. Complying with current or contemplated information security, cybersecurity, data privacy, data protection, and data processing laws and regulations (including reporting and disclosure regimes), or any actual or alleged failure to comply, could cause us to incur substantial costs, require changes to our business practices, and expose us to litigation and regulatory risks, each of which could adversely affect our reputation, results of operations, and financial condition.

We are dependent on our vendors, independent contractors, and other third parties (including common carriers) to supply merchandise to our distribution centers, stores, and guests. If our replenishment and fulfillment network does not operate properly, if we are unable to timely import certain merchandise, if a vendor fails to deliver on its commitments, or if common carriers have difficulty providing capacity to meet demands for their services likeas theyhas experiencedhappened in recentthe years,past, we could experience merchandise out-of-stocks, delays in shipping and receiving merchandise, and increased costs, which could adversely affect our reputation and results of operations. In addition, we have consumer-facing relationships with a variety of other companies, including Apple, CVS, Disney, Levi’s, Starbucks, and Ulta Beauty. Any termination of, or adverse change in, our relationship with any of these companies could decrease our sales, increase our costs, and negatively impact our reputation and results of operations.

AU.S. significanttrade portionpolicy is changing rapidly and remains subject to uncertainty. In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were not authorized by the statute. The U.S. government then imposed additional, non-IEEPA global Section 122 tariffs. Any trade disputes or further changes in tax or trade policy, including the imposition of additional tariffs or duties on imported products or changes in tariff levels, between the U.S. and countries from which we source merchandise directly or indirectly through vendors could require us to take certain actions, including raising prices on products we sell and seeking alternative sources of supply from vendors in other countries. Approximately one-half of the merchandise that we offer is sourced, directly or indirectly, from outside the U.S., with China as our single largest source of merchandise we import. Any trade disputes or changes in tax or trade policy between the U.S. and countries from which we source merchandise, such as the imposition of additional tariffs or duties on imported products, could require us to take certain actions, including raising prices on products we sell and seeking alternative sources of supply from vendors in other countries. In particular, recent U.S. tariffs imposed or threatened to be imposed on several countries in 2025, including China, Mexico,India, Canada,Vietnam and other countriesBangladesh, and any retaliatory actions taken by such countries have resulted, and could resultcontinue to result, in us incurring substantial additional costs to procure a large portion of the merchandise we offer and mayimpact requirethe usmargin torate raisefor certain products, raising prices on certain products.products, and starting new vendor relationships in other countries. Many of these tariffs were imposed under IEEPA and were subsequently impacted by the February 2026 ruling, though the process, timing, and amount of any potential refund recovery for such tariffs remain uncertain. We continue to closely monitor these developments and their ultimate impact on our business, results of operations, and financial condition, all of which may be adversely impacted. In addition, if our competitors do not keep pace with any such price increases or are able to offset the impact of tariffs through other actions, such as diversification in their mix of vendors, our competitive position may be adversely affected. Any of these outcomes could adversely affect our reputation, results of operations, and financial condition.

We rely on third parties to support our business operations, including portions of our technology infrastructure,infrastructure (including certain generative artificial intelligence services), digital platforms, replenishment and fulfillment operations, store and supply chain infrastructure, delivery services (including by independent contractors via our Shipt subsidiary), guest contact centers, payment processing, digital advertising offerings, and extensions of credit for our Target-branded payment card program. If we are unable to contract with third parties having the specialized skills needed to support our operations (including as a result of any labor disputes or labor unavailability at such third parties), if any third-party services are interrupted, or if they fail to meet our performance standards, then our reputation and results of operations could be adversely affected.

Nearly all of our sales are in the U.S., making our results highly dependent on the health of the U.S. economy and U.S. consumer behavior, confidence, and spending, which can be affected by a variety of factors, including inflation, interest rates, housing prices, unemployment rates, legal and regulatory actions (including through executive orders),actions, immigration policies and trends, household debt and wage levels, credit usage, and crime rates. In addition, the interconnected nature of the global economy means that events occurring domestically or internationally, such as geopolitical conflicts, social unrest, terrorist attacks, armed conflicts, public health crises, legal and regulatory actions, immigration policies and trends, energy availability, trade policies, disputes, or sanctions, and market volatility can all affect macroeconomic conditions in the U.S. A deterioration in U.S. macroeconomic conditions or consumer confidence or spending could adversely affect our business in many ways, such as negatively impacting consumer demand (which may disproportionately affect demand for certain merchandise), reducing sales (including our credit card profit-sharing revenue), reducing gross margins, and increasing our expenses, each of which could adversely affect our results of operations and financial condition.

Uncharacteristic or significant weather conditions, including the physical impacts of a changing climate, and other catastrophic events can affect consumer shopping patterns, particularly in apparel and seasonal items, which could lead to lower sales or greater than expected markdowns and adversely affect our results of operations. In addition, we have significant operations in certain states where natural disasters (including hurricanes, tropical storms, floods, fires, and earthquakes) are more prevalent. Natural disasters in those states or in other areas where we operate has previously resulted, and could in the future result, in significant physical damage to, or closure of, one or more of our stores, distribution centers, facilities, or key vendors. Furthermore, weather conditions, natural disasters, and other catastrophic events in areas where we or our vendors operate, or depend upon for continued operations, have adversely affected, and could in the future adversely affect, the availability and cost of certain products within our supply chain, consumer purchasing power, and consumer demand. Additionally, acts of violence and other crimes, including active shooter situations, at or around our stores, distribution centers, or other facilities have, and may in the future, negatively impact the safety and security of our workforce and guests, damage our facilities, andor harm our reputation. Any of these events could adversely affect our results of operations and financial condition.

The potential impacts of a changing climate may be widespread and unpredictable and present a variety of risks in the short-term and long-term. The physical effects of a changing climate, such as natural disasters, extreme weather conditions, drought,drought or water scarcity, and rising sea levels, could adversely affect our results of operations, including by increasing our energy costs, disrupting our supply chain, negatively impacting our workforce, damaging our stores, distribution centers, and inventory, and threatening the habitability of the locations in which we operate. In addition to physical risks, the potential impacts of a changing climate also present transition risks, including regulatory and reputational risks. For example, we use commodities and energy inputs in our operations that may face increased regulation due to a changing climate or other environmental concerns, which could increase our costs. Furthermore, our establishment and continuation of our goals and initiatives to create a more resilient business, or any modification, conclusion, failure, or perceived failure by us to achieve them, or to otherwise meet evolving, varied, and sometimes conflicting expectations from our shareholders, guests, team members, vendors, and other third parties (including governmental entities and officials and non-governmental organizations) regarding the environment and our goals and initiatives to create a more resilient business, could lead to adverse perceptions of our business, consumer boycotts, litigation, investigations, and regulatory proceedings. Any of these outcomes could adversely affect our reputation, results of operations, and financial condition.

With over 400,000 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. Many team members are in entry-level or part-time positions with high turnover rates historically. In addition, the continuous advancements in automation and artificial intelligence capabilities will continue to impact the skills required in our workforce, and our recruiting and training needs must evolve to maintain pace. Our ability to meet our changing labor needs while controlling our costs is subject to external factors such as labor laws and regulations, labor availability, unemployment levels, prevailing wage rates, benefit costs, changing demographics, immigration laws and regulations (including through executive orders),regulations, and our reputation within the labor market. If we are unable to attractattract, train and retain a workforce meeting our needs (including for specialized roles with significant competition for talent) or are unable to successfully execute on succession planning at all levels of the organization, our operations, strategy, guest service levels, support functions, and competitiveness could suffer. Any of these outcomes could adversely affect our reputation, results of operations, and financial condition. We are periodically subject to labor organizing efforts and activism, which could negatively impact how we are perceived by team members and our overall reputation. If we become subject to one or more collective bargaining agreements in the future, it could adversely affect our labor costs, how we operate our business, and our results of operations. In addition to our U.S. operations, we perform additional administrative functions in Bangalore, India, and perform global sourcing operations from offices in 12 countries, predominantly in Asia and Central America, and any extended disruption of our operations in our different locations, whether due to labor difficulties or otherwise, could adversely affect our results of operations. In particular, we rely on our administrative functions in India for various business operations and any events that negatively impact the availability or effectiveness of our administrative functions in India, including political or economic uncertainty or instability, the outbreak of pandemics or other illnesses, labor shortages, labor unrest or strikes, weather conditions, natural disasters, geopolitical conflicts, social unrest, terrorist attacks, and armed conflicts, could adversely affect our results of operations and financial condition.

If any of 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 be exposed to legal and reputational risks and our results of operations could be adversely affected. Our vendors and third-party sellers must comply with applicable product safety laws, and we are dependent on them to ensure that the products we buy or offer, respectively, comply with all safety standards. Events that give rise to actual or perceived product safety concerns, including food or drug contamination and product defects, could expose us to government enforcement actions and 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 and comply with applicable laws and regulations across multiple areas of social compliance, including supply chain transparency and responsible sourcing. We have a social compliance audit process that performs audits regularly, but we cannot continuously monitor every vendor,vendor and third-party seller, so we are also dependent on our vendorsthem to ensure that the products we buy or offer comply with applicable standards. If we need to seek alternative sources of supply from vendors with whom we have less familiarity, including to diversify the geographic locations of our vendors to mitigate the impacts of tariffs or other trade policies, the risk of these standards not being met may increase. Negative guest perceptions regarding the safety and sourcing of the products we sell could harm our reputation and adversely affect our results of operations.

Our business is subject to a wide variety of complex foreign, national, state, and local laws and regulations.

There have been, and may continue to be, changes in the legal or regulatory environment (including as a result of executive orders) affecting many areas related to our business, including merchandise costs and availability, customs and trade policy (including the impacts of our first sale declaration program), workforce availability, transport costs and capacity, information security, cybersecurity, and data privacy, supply chain requirements, product safety, product quality, payment methods, environmental, social, and governance matters (including sustainabilitysustainability, belonging, and diversity, equity, and inclusion), and climate and emissions disclosure. Changes in the environment may occur rapidly. The ultimate impact of any changes in the legal or regulatory environment (including as a result of executive orders) is not possible to predict and could negatively affect our results of operations and financial condition, including by increasing our expenses, reducing consumer demand for our products and services, limiting workforce availability for us and our vendors, and resulting in litigation, investigations, and regulatory proceedings against us. In addition, if we are unable or perceived to be unable to comply with any changes in the legal or regulatory environment (including as a result of executive orders),environment, our reputation, results of operations, and financial condition could be adversely affected. Furthermore, if we fail to comply with other applicable laws and regulations, including the Foreign Corrupt Practices Act and other anti-bribery laws, anti-money laundering laws, import restrictions, responsible sourcing laws, and sanctions programs, we could be subject to legal and reputational risks, including government enforcement actions and private litigation, which could adversely affect our results of operations and financial condition.

Several factors influence our effective income tax rate, including domestic and international tax laws and regulations, the related interpretations, the continued availability of purchased tax credits, 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 earnings. In addition, changes in our operations both in and outside of the U.S. may cause greater volatility in our effective tax rate. Furthermore, we are subject to regular reviews and ongoing audits by both domestic and international tax authorities. For example, the IRS is auditing certain aspects of our intercompany transfer pricing for fiscal years 2021 and 2022. Although we believe our tax positions and estimates are reasonable,reasonable and we review and maintain adequate reserves, the ultimate tax outcome could differ significantly from our recorded tax amounts and could adversely affect our results of operations and financial condition.

If we fail to achieve our projected results or otherwise fail to meet market expectations regarding our financial performance, the price and volatility of our stock could be volatile or adversely affected.

•GAAP and Adjusted diluted earnings per share were $8.86.$8.13 and Adjusted EPS1 were $7.57.

•Net Sales were $106.6$104.8 billion, a decrease of $0.8$1.8 billion, or 0.81.7 percent, from the prior year, driven by one less week in the current year.

•Comparable sales increaseddecreased 0.12.6 percent, driven by a 1.42.2 percent increasedecrease in traffic and partially offset by a 1.30.4 percent decrease in average transaction amount.

•Operating income of $5.6$5.1 billion wasand 2.5Adjusted operating income1 of $4.8 billion were 8.1 percent lowerand 14.2 percent lower, respectively, than the 53-week prior-year period.prior-year.

Note: Amounts may not foot due to rounding. Adjusted1Adjusted diluted earnings per share (Adjusted EPS), aand Adjusted operating income, non-GAAP metric,metrics, excludesexclude the impact of certain items. Management believes that Adjusted EPS isand 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 30.32.

We report after-tax return on invested capital (ROIC) because we believe ROIC provides a meaningful measure of our capital-allocationcapital allocation effectiveness over time. For the trailing twelve months ended FebruaryJanuary 1,31, 2025,2026, after-tax ROIC was 15.413.8 percent, compared to 16.115.4 percent for the trailing twelve months ended February 3,1, 2024.2025. The calculation of ROIC is provided on page 31.34.

(ca)2023 consisted of 53 weeks compared with 52 weeks in 20242025 and 2022.2024.

Merchandise Sales are 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 channels by measuring the change in sales for a period over the comparable, prior-year period of equivalent length. Comparable sales include all Merchandise Sales, except sales from stores open less than 13 months or that have been closed. 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 DaySame-Day Delivery. Digitally originated sales may also be fulfilled through our distribution centers, our vendors, or other third parties.

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 DaySame-Day Delivery.

Part I, Item 1, Business of this Form 10-K and 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 transfer of sales to newbetween stores and within different channels makes further analysis of sales metrics infeasible.

ThereIn have been no material changesaddition to the other information set forth in this report, you should carefully consider the risk factors describeddiscussed in in Part I, Item 1A, Risk Factors of our Form 10-K for the fiscal year ended January 31, 2026.

FirstSecond quarter 2026 included the following:

•GAAPOperating and Adjusted operating income1Income of $1.1$2.6 billionbillion, wasan 22.9increase percentof lower$1.3 thanbillion, or 94.4 percent, compared to the prior yearyear, GAAPincluding operating income, which included $593$994 million ofrelated pretaxto nettariff gainsrefunds onreceived interchangeduring feethe settlements.period. Excluding the settlementimpact gains,of Adjustedtariff operatingrefunds, incomeOperating Income growth was 29.1approximately percent19 higher than $0.9 billion in the prior-year.percent.

1Adjusted diluted earnings per share (Adjusted EPS), and Adjusted operating income,a non-GAAP metrics,metric, excludeexcludes the impact of certain items. Management believes that Adjusted EPS and Adjusted operating income areis 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 20.19.

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 MayAugust 2,1, 2026, after-tax ROIC was 12.415.4 percent, compared with 15.114.3 percent for the trailing twelve months ended MayAugust 3,2, 2025. The calculation of ROIC is provided on page 21.

We incurredcontinue tariffsto underpursue IEEPA,additional andrefund areclaims followingin accordance with the established refund filing and validation process through the CAPE system,process, along with other importers seeking IEEPAtariff refunds. AsHowever, of May 2, 2026, no refunds had been received and no receivable was recorded. Subsequentdue to quarter-end, we began receiving refunds, which to date have not been material. Due to the remaining uncertainties related to the refund process, timing, and amount of potential refunds, as well as aongoing potentiallegal appealand ofregulatory the CIT's order to issue refunds,developments, we are unable to estimate the ultimate financial effects of IEEPAany potential additional tariff refunds.

The U.S. administration has instituted new tariffs against most major trading partners. We continue to assess and respond to the evolving consumer, legal and regulatory environment. The collective interaction of tariffs, IEEPAtariff 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.

Our multi-year business transformation initiatives are discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. We did not incur any significant non-recurring costs or charges related to these initiatives during the three and six months ended MayAugust 2,1, 2026, or the comparable prior-year period.periods.

(ab)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 20.19.

Merchandise Sales are net of expected returns,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.

For the three months ended MayAugust 2,1, 2026, our gross margin rate was 29.033.7 percent compared with 28.229.0 percent in the comparable prior-year period. The increase reflected net benefits from: tariff refunds and net merchandising impacts, including lower purchase order cancellation costs compared to the prior year, as well as growth in advertising and other revenues. The Business Environment section provides additional information about tariff refunds.

•merchandising, primarily due toincluding lower purchase order cancellation costs and markdown rates compared to the prior year and growth in advertising and other revenues, partially offset by higher product costsrevenues; and

For the three months ended MayAugust 2,1, 2026, our SG&A expense rate was 21.921.6 percent compared with 19.321.3 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 morewere thanpartially offset by the leverage benefit of higher sales.

Our effective income tax raterates for the three and six months ended MayAugust 2,1, 2026, waswere 24.423.7 percent and 23.9 percent, respectively, compared with 25.023.2 percent and 24.2 percent in the comparable prior-year period.periods. TheFor the three month period, the increase was driven by higher pretax earnings, partially offset by additional tax credit benefits. For the six month period, the decrease reflects additional tax credit benefits and lower discrete tax expense in the current year, primarilyexpenses related to share-based compensation.compensation, partially offset by higher pretax earnings.

(b)Calculated using the effective tax rates, which were 21.922.4 percent and 22.822.9 percent for the trailing twelve months ended MayAugust 2,1, 2026, and MayAugust 3,2, 2025, respectively. For the trailing twelve months ended MayAugust 2,1, 2026, and MayAugust 3,2, 2025, includes tax effect of $1.1$1.4 billion and $1.3 billion, respectively, related to EBIT, and $39 million and $38 millionmillion, respectively, related to operating lease interest.

(e)For the trailing twelve months ended MayAugust 2,1, 2026, includes the impact of tariff refunds, which increased after-tax ROIC by 2.4 percentage points, and business transformation costs incurredrecognized withinin the trailing twelve-month period, which decreased after-tax ROIC by 0.6 percentage points. For the trailing twelve months ended MayAugust 3,2, 2025, includes the impact of after-tax net gains on interchange fee settlements, which increased after-tax ROIC by 1.4 percentage points. Note 3 to the Financial Statements provides additional information.

Our cash and cash equivalents balance was $3.5$5.4 billion, $5.5 billion, and $2.9$4.3 billion as of MayAugust 2,1, 2026, January 31, 2026, and MayAugust 3,2, 2025, respectively. Our cash and cash equivalents balance includes short-term investments of $2.5$4.3 billion, $4.6 billion, and $2.0$3.3 billion as of MayAugust 2,1, 2026, January 31, 2026, and MayAugust 3,2, 2025, 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 60three daysmonths or less. We also place dollar limits on our investments in individual funds or instruments.

Cash flows provided by operating activities were $0.7$4.5 billion and $0.3$2.4 billion for the threesix months ended MayAugust 2,1, 2026, and MayAugust 3,2, 2025, respectively. The increase was primarily due to higher accounts payable leverage andthat lowermore than offset increased inventory levels.purchases Theseto benefitssupport weresales partiallygrowth, offsetas bywell loweras higher net earnings, reflecting the prior-year benefit from gains on interchange fee settlements, and higher income tax payments in the current year, reflecting timing.earnings.

Cash requiredused forin investing activities increased to $1.0$2.4 billion for the threesix months ended MayAugust 2,1, 2026, compared to $0.8$1.9 billion for the threesix months ended MayAugust 3,2, 2025, due to higher capital expenditures.

We paid dividends totaling $516$518 million ($1.14 per share) and $1,034 million ($2.28 per share) for the three and six months ended MayAugust 2,1, 2026, and $510$509 million ($1.12 per share) and $1,019 million ($2.24 per share) for the three and six months ended MayAugust 3,2, 2025, a per share increase of 1.8 percent. We declared dividends totaling $526$539 million ($1.16 per share) during the second quarter of 2026 and $529 million ($1.14 per share) during the first quarter of 2026 and $515 million ($1.12 per share) during the firstsecond quarter of 2025, a per share increase of 1.8 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.

We did not repurchase any shares during the threesix months ended MayAugust 2,1, 2026. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds of this Quarterly Report on Form 10-Q and Note 810 to the Financial Statements for more information.

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 MayAugust 2,1, 2026, our credit ratings were as follows:

We have the ability to obtain short-term financing from time to time under our commercial paper program and credit facilities. OurIn August 2026, we obtained a committed $4.0 billion unsecured revolving credit facility that will expire in August 2031. This new facility replaced our $1.0 billion 364-day and $3.0 billion unsecured revolving credit facilities that willwere set to expire in October 2026 and October 2028, respectively,respectively. These credit facilities provide a liquidity backstop to our commercial paper program. No balances were outstanding under eitherany credit facility or our commercial paper program at any time during 2026 or 2025. Note 68 to the Financial Statements provides additional information.

Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facilities also contain a debt leverage covenant. We are, and expect to remain, in compliance with these covenants. Additionally, as of MayAugust 2,1, 2026, 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.