10-Q 1 tgt-20211030.htm 10-Q tgt-20211030
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) 
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 30, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 1-6049
 
tgt-20211030_g1.jpg
TARGET CORPORATION
(Exact name of registrant as specified in its charter)

Minnesota
(State or other jurisdiction of incorporation or organization)

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


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

55403
(Zip Code)
Registrant’s telephone number, including area code: 612/304-6073
Former name, former address and former fiscal year, if changed since last report: N/A
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0833 per shareTGTNew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer  Accelerated filer Non-accelerated filer
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                 Yes  No ☒
Indicate the number of shares outstanding of each of registrant’s classes of common stock, as of the latest practicable date. Total shares of common stock, par value $0.0833, outstanding at November 19, 2021, were 479,123,918.



TARGET CORPORATION

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
   
 
   
 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations    
 Three Months EndedNine Months Ended
(millions, except per share data) (unaudited)October 30, 2021October 31, 2020October 30, 2021October 31, 2020
Sales$25,290 $22,336 $73,995 $64,403 
Other revenue362 296 1,014 819 
Total revenue25,652 22,632 75,009 65,222 
Cost of sales 18,206 15,509 52,202 45,692 
Selling, general and administrative expenses4,859 4,647 14,217 13,167 
Depreciation and amortization (exclusive of depreciation included in cost of sales) 577 541 1,739 1,660 
Operating income2,010 1,935 6,851 4,703 
Net interest expense105 632 317 871 
Net other (income) / expense(6)5 (356)16 
Earnings before income taxes1,911 1,298 6,890 3,816 
Provision for income taxes423 284 1,488 828 
Net earnings$1,488 $1,014 $5,402 $2,988 
Basic earnings per share$3.07 $2.02 $10.97 $5.97 
Diluted earnings per share$3.04 $2.01 $10.87 $5.91 
Weighted average common shares outstanding
Basic484.8 500.6 492.2 500.6 
Diluted489.4 505.4 496.8 505.2 
Antidilutive shares    

TARGET CORPORATION
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Q3 2021 Form 10-Q
1

Consolidated Statements of Comprehensive Income  
 Three Months EndedNine Months Ended
(millions) (unaudited)October 30, 2021October 31, 2020October 30, 2021October 31, 2020
Net earnings$1,488 $1,014 $5,402 $2,988 
Other comprehensive income, net of tax    
Pension benefit liabilities21 22 63 66 
Currency translation adjustment and cash flow hedges5 14 6 5 
Other comprehensive income26 36 69 71 
Comprehensive income$1,514 $1,050 $5,471 $3,059 

TARGET CORPORATION
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Q3 2021 Form 10-Q
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Consolidated Statements of Financial Position   
(millions, except footnotes) (unaudited)October 30,
2021
January 30,
2021
October 31,
2020
Assets 
Cash and cash equivalents$5,753 $8,511 $5,996 
Inventory14,958 10,653 12,712 
Other current assets1,865 1,592 1,601 
Total current assets22,576 20,756 20,309 
Property and equipment
Land6,146 6,141 6,063 
Buildings and improvements32,478 31,557 31,398 
Fixtures and equipment6,144 5,914 5,843 
Computer hardware and software2,447 2,765 2,706 
Construction-in-progress1,302 780 518 
Accumulated depreciation(20,602)(20,278)(19,755)
Property and equipment, net27,915 26,879 26,773 
Operating lease assets2,539 2,227 2,208 
Other noncurrent assets1,381 1,386 1,371 
Total assets$54,411 $51,248 $50,661 
Liabilities and shareholders’ investment
Accounts payable$16,250 $12,859 $14,203 
Accrued and other current liabilities5,925 6,122 5,023 
Current portion of long-term debt and other borrowings1,176 1,144 131 
Total current liabilities23,351 20,125 19,357 
Long-term debt and other borrowings11,586 11,536 12,490 
Noncurrent operating lease liabilities2,494 2,218 2,196 
Deferred income taxes1,246 990 1,171 
Other noncurrent liabilities1,931 1,939 2,128 
Total noncurrent liabilities17,257 16,683 17,985 
Shareholders’ investment
Common stock40 42 42 
Additional paid-in capital6,381 6,329 6,285 
Retained earnings8,069 8,825 7,789 
Accumulated other comprehensive loss(687)(756)(797)
Total shareholders’ investment13,803 14,440 13,319 
Total liabilities and shareholders’ investment$54,411 $51,248 $50,661 
Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 480,905,493, 500,877,129 and 500,754,729 shares issued and outstanding as of October 30, 2021, January 30, 2021, and October 31, 2020, respectively.

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

TARGET CORPORATION
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Q3 2021 Form 10-Q
3

Consolidated Statements of Cash Flows  
 Nine Months Ended
(millions) (unaudited)October 30, 2021October 31, 2020
Operating activities  
Net earnings$5,402 $2,988 
Adjustments to reconcile net earnings to cash provided by operating activities:  
Depreciation and amortization1,952 1,848 
Share-based compensation expense187 161 
Deferred income taxes233 26 
Gain on Dermstore sale(335) 
Loss on extinguishment of debt 512 
Noncash losses / (gains) and other, net
18 124 
Changes in operating accounts: 
Inventory(4,305)(3,720)
Other assets(117)(174)
Accounts payable3,284 4,287 
Accrued and other liabilities(722)992 
Cash provided by operating activities5,597 7,044 
Investing activities  
Expenditures for property and equipment(2,483)(2,009)
Proceeds from disposal of property and equipment23 27 
Proceeds from Dermstore sale356  
Other investments14 (3)
Cash required for investing activities(2,090)(1,985)
Financing activities  
Additions to long-term debt 2,480 
Reductions of long-term debt(112)(2,395)
Dividends paid(1,116)(1,002)
Repurchase of stock(5,042)(741)
Stock option exercises5 18 
Cash required for financing activities(6,265)(1,640)
Net (decrease) / increase in cash and cash equivalents(2,758)3,419 
Cash and cash equivalents at beginning of period 8,511 2,577 
Cash and cash equivalents at end of period $5,753 $5,996 
Supplemental information
Leased assets obtained in exchange for new finance lease liabilities$234 $344 
Leased assets obtained in exchange for new operating lease liabilities482 186 
 
TARGET CORPORATION
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Q3 2021 Form 10-Q
4

Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
February 1, 2020504.2 $42 $6,226 $6,433 $(868)$11,833 
Net earnings— — — 284 — 284 
Other comprehensive income— — — — 14 14 
Dividends declared— — — (333)— (333)
Repurchase of stock(5.7)— — (609)— (609)
Stock options and awards1.4 — (20)— — (20)
May 2, 2020499.9 $42 $6,206 $5,775 $(854)$11,169 
Net earnings— — — 1,690 — 1,690 
Other comprehensive income— — — — 21 21 
Dividends declared— — — (344)— (344)
Stock options and awards0.4 — 42 — — 42 
August 1, 2020500.3 $42 $6,248 $7,121 $(833)$12,578 
Net earnings— — — 1,014 — 1,014 
Other comprehensive income— — — — 36 36 
Dividends declared— — — (346)— (346)
Stock options and awards0.5 — 37 — — 37 
October 31, 2020500.8 $42 $6,285 $7,789 $(797)$13,319 
Net earnings— — — 1,380 — 1,380 
Other comprehensive income— — — — 41 41 
Dividends declared— — — (344)— (344)
Stock options and awards0.1 — 44 — — 44 
January 30, 2021500.9 $42 $6,329 $8,825 $(756)$14,440 

TARGET CORPORATION
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Q3 2021 Form 10-Q
5

Consolidated Statements of Shareholders’ Investment
 CommonStockAdditional Accumulated Other 
 StockParPaid-inRetainedComprehensive 
(millions) (unaudited)SharesValueCapitalEarnings
(Loss) / Income
Total
January 30, 2021500.9 $42 $6,329 $8,825 $(756)$14,440 
Net earnings— — — 2,097 — 2,097 
Other comprehensive income— — — — 31 31 
Dividends declared— — — (343)— (343)
Repurchase of stock(6.1)(1)— (1,207)— (1,208)
Stock options and awards1.3 — (58)— — (58)
May 1, 2021496.1 $41 $6,271 $9,372 $(725)$14,959 
Net earnings— — — 1,817 — 1,817 
Other comprehensive income— — — — 12 12 
Dividends declared— — — (445)— (445)
Repurchase of stock(6.6)— — (1,544)— (1,544)
Stock options and awards0.2 — 61 — — 61 
July 31, 2021489.7 $41 $6,332 $9,200 $(713)$14,860 
Net earnings— — — 1,488 — 1,488 
Other comprehensive income— — — — 26 26 
Dividends declared— — — (439)— (439)
Repurchase of stock(8.8)(1)— (2,180)— (2,181)
Stock options and awards — 49 — — 49 
October 30, 2021480.9 $40 $6,381 $8,069 $(687)$13,803 

We declared $0.90 and $0.68 dividends per share for the three months ended October 30, 2021, and October 31, 2020, respectively, and $2.70 per share for the fiscal year ended January 30, 2021.


TARGET CORPORATION
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Q3 2021 Form 10-Q
6

FINANCIAL STATEMENTS
INDEX

TARGET CORPORATION
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Q3 2021 Form 10-Q
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FINANCIAL STATEMENTS
NOTES
Notes to Consolidated Financial Statements (unaudited)

1. Accounting Policies

These unaudited condensed consolidated financial statements are prepared in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (U.S. GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statement disclosures in our 2020 Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements.

We operate as a single segment that is designed to enable guests to purchase products seamlessly in stores or through our digital channels. Nearly all of our revenues are generated in the U.S. The vast majority of our long-lived assets are located within the U.S.

Due to the seasonal nature of our business, quarterly revenues, expenses, earnings, and cash flows are not necessarily indicative of the results that may be expected for the full year.

2. Coronavirus (COVID-19)

The novel coronavirus (COVID-19) pandemic continues to evolve. In 2020, states and cities took various measures in response to COVID-19, including mandating the closure of certain businesses and encouraging or requiring citizens to avoid large gatherings. To date, virtually all of our stores, digital channels, and distribution centers have remained open.

Since the onset of the COVID-19 pandemic, we have experienced strong comparable sales growth and significant volatility in our sales category and channel mix, including same-day fulfillment options. Note 4 presents sales by category. We have taken various actions, including accelerating purchases of certain merchandise in our core categories and, early in the pandemic, slowing or canceling purchase orders, primarily for Apparel and Accessories. As a result, during the quarter ended May 2, 2020, we recorded $216 million of purchase order cancellation fees in Cost of Sales.

3. Dermstore Sale

In February 2021, we sold our wholly owned subsidiary Dermstore LLC (Dermstore) for $356 million in cash and recognized a $335 million pretax gain, which is included in Net Other (Income) / Expense. Dermstore has historically represented less than 1 percent of our consolidated revenues, operating income, and net assets.

TARGET CORPORATION
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Q3 2021 Form 10-Q
8

FINANCIAL STATEMENTS
NOTES
4. Revenues

General merchandise sales represent the vast majority of our revenues. We also earn revenues from a variety of other sources, most notably credit card profit-sharing income from our arrangement with TD Bank Group (TD).

RevenuesThree Months EndedNine Months Ended
(millions)October 30, 2021October 31, 2020October 30, 2021October 31, 2020
Apparel and accessories (a)
$4,364 $3,927 $13,384 $10,630 
Beauty and household essentials (b)
6,980 6,103 20,070 18,172 
Food and beverage (c)
5,074 4,397 14,617 13,158 
Hardlines (d)
3,841 3,377 11,654 9,959 
Home furnishings and décor (e)
4,989 4,506 14,147 12,395 
Other42 26 123 89 
Sales25,290 22,336 73,995 64,403 
Credit card profit sharing184 164 527 488 
Other178 132 487 331 
Other revenue362 296 1,014 819 
Total revenue$25,652 $22,632 $75,009 $65,222 
(a)Includes apparel for women, men, boys, girls, toddlers, infants and newborns, as well as jewelry, accessories, and shoes.
(b)Includes beauty and personal care, baby gear, cleaning, paper products, and pet supplies.
(c)Includes dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and food service in our stores.
(d)Includes electronics (including video game hardware and software), toys, entertainment, sporting goods, and luggage.
(e)Includes furniture, lighting, storage, kitchenware, small appliances, home décor, bed and bath, home improvement, school and office supplies, greeting cards and party supplies, and other seasonal merchandise.

Merchandise sales — We record almost all retail store revenues at the point of sale. Digitally originated sales may include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Sales are recognized net of expected returns, which we estimate using historical return patterns. As of October 30, 2021, January 30, 2021, and October 31, 2020, the accrual for estimated returns was $210 million, $139 million, and $182 million, respectively.

Revenue from Target gift card sales is recognized upon gift card redemption, which is typically within one year of issuance.

Gift Card Liability ActivityJanuary 30,
2021
Gift Cards Issued During Current Period But Not Redeemed (b)
Revenue Recognized From Beginning LiabilityOctober 30,
2021
(millions)
Gift card liability (a)
$1,035 $502 $(631)$906 
(a)Included in Accrued and Other Current Liabilities.
(b)Net of estimated breakage.

Credit card profit sharing — We receive payments under a credit card program agreement with TD. Under the agreement, we receive a percentage of the profits generated by the Target Credit Card and Target MasterCard receivables in exchange for performing account servicing and primary marketing functions. TD underwrites, funds, and owns Target Credit Card and Target MasterCard receivables, controls risk management policies, and oversees regulatory compliance.

TARGET CORPORATION
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Q3 2021 Form 10-Q
9

FINANCIAL STATEMENTS
NOTES
5. Fair Value Measurements

Fair value measurements are reported in one of three levels reflecting the valuation techniques used to determine fair value.

 
Financial Instruments Measured On a Recurring BasisFair Value
(millions)ClassificationPricing CategoryOctober 30, 2021January 30, 2021October 31, 2020
Assets   
Short-term investmentsCash and Cash EquivalentsLevel 1$4,818 $7,644 $5,089 
Prepaid forward contracts Other Current AssetsLevel 144 38 32 
Equity securitiesOther Current AssetsLevel 1  19 
Interest rate swapsOther Current AssetsLevel 212   
Interest rate swapsOther Noncurrent AssetsLevel 2116 188 205 
Liabilities   
Interest rate swapsOther Noncurrent LiabilitiesLevel 2  3 

Significant Financial Instruments Not Measured at Fair Value (a)

(millions)
October 30, 2021January 30, 2021October 31, 2020
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt, including current portion (b)
$10,605 $12,300 $10,643 $12,787 $10,641 $12,787 
(a)The carrying amounts of certain other current assets, commercial paper, accounts payable, and certain accrued and other current liabilities approximate fair value due to their short-term nature.
(b)The fair value of debt is generally measured using a discounted cash flow analysis based on current market interest rates for the same or similar types of financial instruments and would be classified as Level 2. These amounts exclude commercial paper, unamortized swap valuation adjustments, and lease liabilities.

6. Property and Equipment

We review long-lived assets for impairment when store performance expectations, events, or changes in circumstances—such as a decision to relocate or close a store, office, or distribution center, discontinue a project, or make significant software changes—indicate that the asset’s carrying value may not be recoverable. We recognized impairment charges of $3 million and $84 million during the three and nine months ended October 30, 2021, respectively. We recognized impairment charges of $2 million and $62 million during the three and nine months ended October 31, 2020, respectively. These impairment charges are included in Selling, General and Administrative Expenses (SG&A).

7. Commercial Paper and Long-Term Debt

In October 2021, we obtained a committed $3.0 billion unsecured revolving credit facility that will expire in October 2026. This new facility replaced our $2.5 billion unsecured revolving credit facility that was set to expire in October 2023. No balances were outstanding under either credit facility at any time during 2021 or 2020.

8. Derivative Financial Instruments

Our derivative instruments consist of interest rate swaps used to mitigate interest rate risk. As a result, we have counterparty credit exposure to large global financial institutions, which we monitor on an ongoing basis. Note 5 to the Consolidated Financial Statements provides the fair value and classification of these instruments.

As of October 30, 2021, January 30, 2021, and October 31, 2020, we were party to interest rate swaps with notional amounts totaling $1.5 billion. We pay a floating rate and receive a fixed rate under each of these agreements. All of the agreements are designated as fair value hedges, and all were considered to be perfectly effective under the shortcut method during the three and nine months ended October 30, 2021, and October 31, 2020.

TARGET CORPORATION
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Q3 2021 Form 10-Q
10

FINANCIAL STATEMENTS
NOTES
As of October 30, 2021, we were party to forward-starting interest rate swaps with notional amounts totaling $1.25 billion. As of January 30, 2021, and October 31, 2020, we were party to forward-starting interest rate swaps with notional amounts totaling $250 million. We use these derivative financial instruments, which have been designated as cash flow hedges, to hedge the interest rate exposure of anticipated future debt issuances during the next three years. As of October 30, 2021, Accumulated Other Comprehensive Loss (AOCI) included a gain of $15 million that will be reclassified and reduce Net Interest Expense as we record interest expense on the associated debt.

Effect of Hedges on Debt
(millions)
October 30, 2021January 30, 2021October 31, 2020
Long-term debt and other borrowings
Carrying amount of hedged debt$1,609 $1,677 $1,696 
Cumulative hedging adjustments, included in carrying amount114 183 203 

Effect of Hedges on Net Interest ExpenseThree Months EndedNine Months Ended
(millions)October 30, 2021October 31, 2020October 30, 2021October 31, 2020
Gain (loss) on fair value hedges recognized in Net Interest Expense
Interest rate swap designated as fair value hedges$(40)$(36)$(69)$66 
Hedged debt40 36 69 (66)
Total$ $ $ $ 

9. Share Repurchase

We periodically repurchase shares of our common stock under a board-authorized repurchase program through a combination of open market transactions, accelerated share repurchase arrangements, and other privately negotiated transactions with financial institutions.

Share Repurchase ActivityThree Months EndedNine Months Ended
(millions, except per share data)October 30, 2021October 31, 2020October 30, 2021October 31, 2020
Number of shares purchased8.8  21.5 5.7 
Average price paid per share$246.80 $ $226.93 $107.58 
Total investment$2,184 $ $4,884 $609 

10. Pension Benefits

We provide pension plan benefits to eligible team members.

Net Pension Benefits ExpenseThree Months EndedNine Months Ended
(millions)ClassificationOctober 30, 2021October 31, 2020October 30, 2021October 31, 2020
Service cost benefits earnedSG&A $25 $25 $73 $76 
Interest cost on projected benefit obligationNet Other (Income) / Expense24 30 72 89 
Expected return on assetsNet Other (Income) / Expense(60)(61)(178)(182)
Amortization of lossesNet Other (Income) / Expense28 32 85 96 
Amortization of prior service costNet Other (Income) / Expense2 (3)1 (9)
Settlement chargesNet Other (Income) / Expense 1  1 
Total$19 $24 $53 $71 
 
TARGET CORPORATION
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Q3 2021 Form 10-Q
11

FINANCIAL STATEMENTS
NOTES
11. Accumulated Other Comprehensive Loss

 
Change in Accumulated Other Comprehensive LossCash Flow
Hedges
Currency Translation AdjustmentPensionTotal
(millions)
January 30, 2021$(3)$(18)$(735)$(756)
Other comprehensive income (loss) before reclassifications, net of tax7 (1) 6 
Amounts reclassified from AOCI, net of tax  63 63 
October 30, 2021$4 $(19)$(672)$(687)

TARGET CORPORATION
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Q3 2021 Form 10-Q
12

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

Financial Summary

Third quarter 2021 included the following notable items:

GAAP diluted earnings per share were $3.04.
Adjusted diluted earnings per share were $3.03.
Total revenue increased 13.3 percent, driven by an increase in comparable sales.
Comparable sales increased 12.7 percent, driven primarily by a 12.9 percent increase in traffic.
Comparable stores originated sales grew 9.7 percent.
Comparable digitally originated sales increased 28.9 percent.
Operating income of $2.0 billion was 3.9 percent higher than for the comparable prior-year period.

Sales were $25.3 billion for the three months ended October 30, 2021, an increase of $3.0 billion, or 13.2 percent, from the comparable prior-year period. Cash flow provided by operating activities was $5.6 billion for the nine months ended October 30, 2021, a decrease of $1.4 billion, or (20.5) percent, from $7.0 billion for the nine months ended October 31, 2020. The drivers of the operating cash flow decrease are described on page 21.

Earnings Per Share Three Months EndedNine Months Ended
October 30, 2021October 31, 2020ChangeOctober 30, 2021October 31, 2020Change
GAAP diluted earnings per share$3.04 $2.01 51.6 %$10.87 $5.91 83.9 %
Adjustments(0.01)0.78 (0.50)0.83 
Adjusted diluted earnings per share$3.03 $2.79 8.7 %$10.37 $6.75 53.7 %
Note: Amounts may not foot due to rounding. Adjusted diluted earnings per share (Adjusted EPS), a non-GAAP metric, excludes the impact of certain items. Management believes that Adjusted EPS is useful in providing period-to-period comparisons of the results of our operations. A reconciliation of non-GAAP financial measures to GAAP measures is provided on page 18.

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 October 30, 2021, after-tax ROIC was 31.3 percent, compared with 19.9 percent for the trailing twelve months ended October 31, 2020. The calculation of ROIC is provided on page 20.

COVID-19

Since the onset of the COVID-19 pandemic, we have experienced strong comparable sales growth and significant volatility in our sales category and channel mix.

Supply Chain Disruptions

In recent months, we have seen increasing supply chain disruptions, including country of origin production and port delays. Additionally, trucker and dockworker shortages, a broad-based surge in consumer demand, and other factors have led to industry-wide U.S. port and ground transportation delays. In response, we have taken various actions, including ordering merchandise earlier, securing ocean freight routes, and increased use of air transport for certain merchandise. While our inventory position is over $2 billion higher than a year ago, if we are unable to continue to source enough inventory and move it through our supply chain to our stores on a timely basis, we may experience increased out-of-stocks and lost sales. Some of these supply chain disruptions and resulting actions have resulted in increased costs. The Gross Margin Rate analysis on page 16 provides additional information.
TARGET CORPORATION
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Q3 2021 Form 10-Q
13

MANAGEMENT'S DISCUSSION AND ANALYSIS
ANALYSIS OF RESULTS OF OPERATIONS
Analysis of Results of Operations

Summary of Operating Income Three Months Ended Nine Months Ended 
(dollars in millions)October 30, 2021October 31, 2020ChangeOctober 30, 2021October 31, 2020Change
Sales$25,290 $22,336 13.2 %$73,995 $64,403 14.9 %
Other revenue362 296 22.3 1,014 819 23.9 
Total revenue25,652 22,632 13.3 75,009 65,222 15.0 
Cost of sales18,206 15,509 17.4 52,202 45,692 14.2 
Selling, general and administrative expenses4,859 4,647 4.6 14,217 13,167 8.0 
Depreciation and amortization (exclusive of depreciation included in cost of sales)577 541 6.4 1,739 1,660 4.8 
Operating income$2,010 $1,935 3.9 %$6,851 $4,703 45.7 %

Rate AnalysisThree Months EndedNine Months Ended
October 30, 2021October 31, 2020October 30, 2021October 31, 2020
Gross margin rate28.0 %30.6 %29.5 %29.1 %
SG&A expense rate18.9 20.5 19.0 20.2 
Depreciation and amortization expense rate (exclusive of depreciation included in cost of sales)2.2