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Alexis

Gevry Target Financial Statement Analysis Spring 2017




Target shows their inventories as an asset in their 10-K.

In a section titled Working Capital they share, 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.

Under Inventory their increase is accredited to, investments to drive growth in certain merchandise
categories, improve in-stocks, and earlier receipts of certain merchandise.

Finally Inventory and Cost of Sales states the following:
We use the retail inventory method to account for the majority of our inventory and the related cost of
sales. Under this method, inventory is stated at cost using the last-in, first-out (LIFO) method as
determined by applying a cost-to-retail ratio to each merchandise grouping's ending retail value. The
cost of our inventory includes the amount we pay to our suppliers to acquire inventory, freight costs
incurred in connection with the delivery of product to our distribution centers and stores, and import
costs, reduced by vendor income and cash discounts. The majority of our distribution center operating
costs, including compensation and benefits, are expensed to cost of sales in the period incurred. Since
inventory value is adjusted regularly to reflect market conditions, our inventory methodology reflects
the lower of cost or market. We reduce inventory for estimated losses related to shrink and
markdowns. Our shrink estimate is based on historical losses verified by physical inventory counts.
Historically, our actual physical inventory count results have shown our estimates to be reliable.
Markdowns designated for clearance activity are recorded when the salability of the merchandise has
diminished. Inventory is at risk of obsolescence if economic conditions change, including changing
consumer demand, guest preferences, changing consumer credit markets, or increasing competition.
We believe these risks are largely mitigated because our inventory typically turns in less than three
months. Inventory was $8,601 million and $8,282 million at January 30, 2016 and January 31, 2015,
respectively, and is further described in Note 12 of the Financial Statements.