Running head: TARGET 1

Target Corporation

Ashley North

Arizona State University

OGL 260: Resource Allocation in Organizations, Module 3

July 19, 2021

TARGET 2

Target Corporation

It is a running joke across America that women who walk into a Target not only go

missing for a few hours, they also tend to deplete their checking account. Well, as I walked

through the aisles of Target today, I noticed that I had loaded my basket with a surplus of items

that were not on my shopping list. As a matter of fact, only one of the six items was on that list.

As I chuckled to myself, it had me wondering, what do the financial statements of Target

Corporation look like?

According to Michael Fiddelke, the chief financial officer of Target Corporation, “2020

was a record-breaking year” (Conroy & Hulbert, 2021, para. 2). Their net income has been on

the rise for 4 years straight. Target’s financial results from 2019 to 2020 exhibit a significant

increase in sales, gross profit, and operating income. Total revenue made a dramatic climb

reaching just shy of $15.5 billion (“Target Corporation”, 2021, p. 35). Operating income raised

by $1.8 billion and before income taxes, the earning from continued operation expanded by $1.3

billion. Taking into consideration a $12 million dollar loss in 2019 due to discontinued

operations, net of taxes, the corporation’s overall net earnings increased by nearly $1.1 billion in

2020 (“Target Corporation”, 2021, p. 35). As Arthur Keown, John Martin, and J. William Petty

(2020) stated in Foundations of Finance: The Logic and Practice of Financial Management, the

net income refers to the “earnings available to common stockholders, which represent income

that may be reinvested in the firm or distributed to its owners—provided, of course, the cash is

available to do so” (p. 57).

Keown et al., (2020) stated that “an income statement is not a measure of cash flows

because it is calculated on an accrual basis rather than a cash basis” (p. 69). Thus, while the
TARGET 3

company may present a positive income, it may not necessarily be generating positive cash flow

(Keown et al., 2020, p. 57). Financial managers utilize cash flow measurement to determine a

company’s return (Keown et al., 2020, p. 188). In looking at Target Corporations 2020, 10-K

report we can determine targets after-tax cash flows from operations. Target Corporation had net

earnings from continued operations of $4.368 billion. As Keown et al. (2020) stated, once

“changes (investments) in operating working capital, and … changes (investments) in long-term

assets” are considered, the free cash flow can be determined. Thus, Target Corporation had free

cash flows for the year 2020 that was positive in the amount of $10.525 billion (“Target

Corporation”, 2021, p. 38). By assessing a corporation’s financial statements, it makes it easier

for investors to determine their required rate of return. Keown et al. (2020) define the required

rate of return “as the minimum rate of return necessary to attract an investor to purchase or hold

a security” (p. 213). According to Target Corporation, their “2020 expected long-term rate of

return on plan assets of 6.10 percent was determined by the portfolio composition, historical

long-term investment performance, and current market conditions” (“Target Corporation”, 2021,

p. 28). They also determined there would be “A 1 percentage point decrease in [Target’s]

expected long-term rate of return would increase annual expense by $40 million” (“Target

Corporation”, 2021, p. 28).

According to Jamie Grill-Goodman (2021), to maintain growth throughout the company,

Target Corporation has invested billions in opening new store locations, remodeling existing

stores, improving fulfillment services, and enhancing its supply chain (para. 11). Taking it a step

further, at the end of 2020, Target Corporation announced its strategic partnership with Ulta

Beauty. With a plan to shake up their beauty department, Ulta Beauty at Target will offer

prestige brands both online and in select Target stores starting this year (“Target and Ulta
TARGET 4

Beauty”, 2020, para. 1). While I can only assume this will spark higher sales for Target

Corporation, this will lead me and many others to spend more money on items that were not on

our shopping list.

Altogether, while many businesses and corporations faced a gruesome year in 2020,

Target Corporation seemed to have only profited. With sales over $15 billion, Target

Corporation had one of its strongest years in over a decade. Using their positive cash flow to

their advantage, Target Corporation has developed a variety of ways to boost their customer’s

shopping experience. Together these plans will surely have a positive impact on Target

Corporation’s stakeholders as well as the company’s cash flow and profit.

TARGET 5

References

Conroy, E., & Hulbert, J. (2021, March 2). Target Builds on Momentum, Announces 2021

Strategic Investments. Target Corporate.

https://corporate.target.com/press/releases/2021/03/Target-Builds-on-Momentum-

Announces-2021-Strategic.

Download the 2020 Target Annual Report: Target Corporate. Download the 2020 Target

Annual Report | Target Corporate. (n.d.). https://corporate.target.com/annual-

reports/2020/download.

Grill-Goodman Senior Editor, J. (2021, March 3). The Decision that Changed Target's

Trajectory and Its Annual $4B Plan for the Future. RIS News.

https://risnews.com/decision-changed-targets-trajectory-and-its-annual-4b-plan-future.

Keown, A. J., Martin, J. D., & Petty, J. W. (2020). Foundations of finance: The logic and

practice of financial management (10th ed). New York, NY: Pearson.

Target and Ulta Beauty Announce Strategic Partnership. Target Corporate. (2020, November

10). https://corporate.target.com/press/releases/2020/11/target-and-ulta-beauty-announce-

strategic-partners.

Target Corporation. (2021). 10-K. Minneapolis. https://corporate.target.com/annual-

reports/2020/download/pdf?parts=part6