Target Corporation: 10-K Risk Factor Changes

We rely on third parties to support our business operations, including portions of our technology 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. In addition, we incur significant expenses related to our reliance on services from third parties. If we are unable to effectively manage these costs or if we face significant increases in any of these costs, our results of operations and financial condition could be adversely affected. In particular, for certain payment methods, including credit and debit cards, we generally pay interchange fees and other processing fees. Given the continued adoption of credit and debit cards by consumers, we have incurred, and expect to continue to incur, significant costs as a result of these fees. Any increase in these fees over time could significantly increase our expenses and adversely affect our results of operations and financial condition.

We rely on third parties to support our business operations, including portions of our technology infrastructure, 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, 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.

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 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.

10 RISK FACTORSTable of ContentsIndex to Financial Statements RISK FACTORSTable of ContentsIndex to Financial Statements Table of Contents Index to Financial Statements 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 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, 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 sustainability, 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. Our shareholders, guests, team members, vendors and business collaborators, and other third parties (including governmental entities and officials and non-governmental organizations) have evolving, varied, and sometimes conflicting expectations regarding many aspects of our business, including our operations, product and service offerings, and environmental, political, social, and governance matters. Some of these individuals and organizations have expectations that Target offer or not offer certain products and services or pursue or not pursue particular environmental, political, social, and governance initiatives, including with respect to belonging and diversity, equity, and inclusion. We have previously been unable to meet some of those conflicting expectations, which has led to negative publicity and adversely affected our reputation. For example, we experienced adverse reactions from some of our shareholders, guests, team members, and others related to our assortment of Pride Month products in 2023 and other positions we have taken with respect to social issues, including LGBTQIA+ matters, which resulted in consumer boycotts and litigation. We may in the future take actions, or be perceived to take actions, that do not meet the conflicting expectations of some or all of our shareholders, guests, team members, vendors, business collaborators, and other third parties (including governmental entities and officials and non-governmental organizations) regarding various aspects of our business, including our operations, product and service offerings, and environmental, political, social, and governance matters. As a result, we may experience adverse perceptions of our business, consumer boycotts, litigation, investigations, and regulatory proceedings. 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 campaigns, 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.

We believe that one of the reasons our shareholders, guests, team members, and vendors 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 business relationships, 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. Our shareholders, guests, team members, vendors, and other third parties (including governmental entities and officials and non-governmental organizations) have evolving, varied, and sometimes conflicting expectations regarding many aspects of our business, including our operations, product and service offerings, and environmental, social, and governance matters. Some of these individuals and organizations have expectations that Target offer or not offer certain products and services or pursue or not pursue certain environmental, social, and governance initiatives, including with respect to diversity, equity, and inclusion. We have previously been unable to meet some of those conflicting expectations, which has led to negative publicity and adversely affected our reputation. For example, we experienced adverse reactions from some of our shareholders, guests, team members, and others related to our assortment of Pride Month products in 2023 and other positions we have taken with respect to social issues, including LGBTQIA+ matters, which have previously resulted in consumer boycotts and litigation. We may in the future take actions that do not meet the conflicting expectations of some or all of our shareholders, guests, team members, vendors, and other third parties (including governmental entities and officials and non-governmental organizations) regarding various aspects of our business, including our operations, product and service offerings, and environmental, social, and governance matters. As a result, we may experience adverse perceptions of our business, consumer boycotts, litigation, investigations, and regulatory proceedings. 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, 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, 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. Our establishment and continuation of any goals or initiatives regarding environmental, 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 sustainability 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.

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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.

We attempt to differentiate our guest experience through a careful combination of price, merchandise assortment, store environment, 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, 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. Furthermore, generative artificial intelligence presents emerging ethical issues and could negatively impact our guests and team members. If our use of generative artificial intelligence becomes controversial or is inaccurate or ineffective, 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.

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 as has happened in the 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. U.S. trade policy 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. In particular, U.S. tariffs imposed or threatened to be imposed on several countries in 2025, including China, India, Vietnam and Bangladesh, and any retaliatory actions taken by such countries have resulted, and could continue to result, in us incurring substantial additional costs to procure a large portion of the merchandise we offer and impact the margin rate for certain products, raising prices on certain 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. We also utilize a first sale declaration program, which is subject to rigorous requirements, to pay duties and tariffs to U.S. Customs for merchandise on the basis of the price paid by our vendors rather than the price paid by the importer of record. Our program may be subject to inquiries, investigations, or regulatory proceedings by U.S. Customs. The amount of duties and tariffs that we pay to import merchandise could rise substantially if the U.S. government eliminates the availability of the first sale declaration methodology, if the requirements to utilize this methodology change, or if our ability to rely on this methodology is limited or eliminated. Any of these outcomes 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 like they experienced in recent years, 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. A significant portion 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 China, Mexico, Canada, and other countries and any retaliatory actions taken by such countries could result in us incurring substantial additional costs to procure a large portion of the merchandise we offer and may require us to raise prices on certain products. 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, our competitive position may be adversely affected. Any of these outcomes could adversely affect our reputation, results of operations, and financial condition. Political or economic uncertainty or instability, trade policies, disputes, or sanctions, currency fluctuations, the outbreak of pandemics or other illnesses, labor shortages, labor unrest or strikes, transport capacity and costs, inflation, port security, weather conditions, natural disasters, geopolitical conflicts, social unrest, terrorist attacks, armed conflicts, or other events that have affected, and could in the future affect, foreign trade are beyond our control. These types of events have impacted us, and could impact us in the future, including by disrupting our supply of merchandise, increasing the price and limiting the availability of raw materials, increasing our costs, and adversely affecting our results of operations. For example, there have been periodic closings and ship diversions, armed conflicts, unrest, labor disputes, and congestion disrupting railways, trucking, waterways, and ports around the world, including at major U.S. ports where we receive a significant portion of the products we source from outside the U.S. We have from time to time made alternative arrangements to continue the flow of inventory as a result of supply chain disruptions in the U.S. and other countries. If these types of events recur and impact any of the locations or modes of transportation that we depend on, it could increase our costs and adversely affect our supply of inventory. In addition, prices of fuel and other commodities on which our supply chain depends are historically volatile and subject to fluctuations based on a variety of international and domestic factors. Rapid and significant changes in commodity prices, as have occurred in recent years, could further increase our costs and adversely affect our results of operations.

12 RISK FACTORSTable of ContentsIndex to Financial Statements RISK FACTORSTable of ContentsIndex to Financial Statements Table of Contents Index to Financial Statements 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.

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14 RISK FACTORSTable of ContentsIndex to Financial Statements RISK FACTORSTable of ContentsIndex to Financial Statements Table of Contents Index to Financial Statements In addition, we incur significant expenses related to our reliance on services from third parties. If we are unable to effectively manage these costs or if we face significant increases in any of these costs, our results of operations and financial condition could be adversely affected. In particular, for certain payment methods, including credit and debit cards, we generally pay interchange fees and other processing fees. Given the continued adoption of credit and debit cards by consumers, we have incurred, and expect to continue to incur, significant costs as a result of these fees. Any increase in these fees over time could significantly increase our expenses and adversely affect our results of operations and financial condition.