Financial News Release

Target Corporation Announces First Quarter Earnings
05/19/10
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MINNEAPOLIS, May 19, 2010 (BUSINESS WIRE) --Target Corporation (NYSE:TGT) today reported net earnings of $671 million for the quarter ended May 1, 2010, compared with $522 million in the quarter ended May 2, 2009. Earnings per share in the first quarter increased 30 percent to 90 cents from 69 cents in the same period a year ago. This was the highest EPS from continuing operations in Target's history, excluding holiday-driven fourth quarter results. All earnings per share figures refer to diluted earnings per share.

"We're very pleased with our first quarter financial results, which were the result of disciplined execution by our teams in a stronger-than-expected economic environment," said Gregg Steinhafel, chairman, president, and chief executive officer of Target Corporation. "Our retail segment delivered results well above our expectations, as sales of higher margin discretionary items were particularly strong, especially in apparel. Profitability in our credit card segment was also well above expectations, as declining risk levels led to a sharp reduction in bad debt expense compared with a year ago. Going forward, we will continue our relentless focus on delighting our guests by delivering the right fashion, great quality at low prices, and a superior guest experience in our stores and online."

Retail Segment Results
Sales increased 5.5 percent in the first quarter to $15.2 billion in 2010 from $14.4 billion in 2009, due to a 2.8 percent increase in comparable-store sales and the contribution from new stores. Retail segment earnings before interest expense and income taxes (EBIT) were $1,108 million in the first quarter of 2010, an increase of 15.2 percent from $962 million in 2009.

First quarter gross margin rate was 31.3 percent, up from 30.8 percent in 2009, due to gross margin rate improvements within categories. The impact of sales mix on gross margin rate was essentially neutral, as sales increased at a similar pace in both higher-margin and lower-margin categories.

First quarter selling, general and administrative (SG&A) expense rate was 20.6 percent, down from 20.9 percent in 2009. This improvement was driven by continued strong productivity improvements in our stores, combined with disciplined expense control throughout the company.

Credit Card Segment Results
First quarter segment profit increased 188 percent to $111 million from $39 million a year ago, as bad debt expense declined 33 percent from $296 million in first quarter 2009 to $197 million this year.

First quarter average receivables decreased 13.2 percent to $7.5 billion in 2010 from $8.7 billion in 2009. Average receivables directly funded by Target declined 26 percent in the first quarter to $2.4 billion from $3.2 billion in 2009.

Annualized segment pre-tax return on invested capital was 18.8 percent in the first quarter 2010, compared with 4.8 percent a year ago.

Interest Expense and Taxes
Net interest expense for the quarter decreased $15 million from first quarter 2009, driven by lower average debt balances partially offset by a higher average portfolio interest rate.

The company's effective income tax rate for the first quarter was 36.4 percent in 2010, down from 36.7 percent in 2009.

Share Repurchase
In the first quarter, under the share repurchase program originally announced in November 2007 and resumed in January 2010, the company repurchased 7.5 million shares of its common stock at an average price of $52.27, for a total investment of $394 million.

Program-to-date through the end of the first quarter, the company has acquired 111 million shares of its common stock at an average price per share of $51.42, reflecting a total investment of $5.7 billion.

Miscellaneous
Target Corporation will webcast its first quarter earnings conference call at 9:30am CDT today. Investors and the media are invited to listen to the call through the company's website at www.target.com/investors (click on "events + presentations" and then "archives + webcasts"). A telephone replay of the call will be available beginning at approximately 11:30am CDT today through the end of business on May 21, 2010. The replay number is (800) 642-1687 (passcode: 49641294).

Target Corporation's retail segment includes large general merchandise and food discount stores and Target.com, a fully integrated on-line business. In addition, the company operates a credit card segment that offers branded proprietary credit card products. The company currently operates 1,740 Target stores in 49 states.

Target Corporation news releases are available at www.target.com.

TARGET CORPORATION
Consolidated Statements of Operations
Three Months Ended
May 1, May 2,
(millions, except per share data) 2010 2009 Change
(unaudited) (unaudited)
Sales $ 15,158 $ 14,361 5.5 %
Credit card revenues 435 472 (7.9 )
Total revenues 15,593 14,833 5.1
Cost of sales 10,412 9,936 4.8
Selling, general and administrative expenses 3,143 3,015 4.2
Credit card expenses 280 384 (27.0 )
Depreciation and amortization 516 472 9.3
Earnings before interest expense and income taxes 1,242 1,026 21.0
Net interest expense
Nonrecourse debt collateralized
by credit card receivables 23 26 (12.6 )
Other interest expense 165 177 (7.0 )
Interest income (1 ) (1 ) (54.2 )
Net interest expense 187 202 (7.4 )
Earnings before income taxes 1,055 824 28.0
Provision for income taxes 384 302 26.9
Net earnings $ 671 $ 522 28.6 %
Basic earnings per share $ 0.91 $ 0.69 30.7 %
Diluted earnings per share $ 0.90 $ 0.69 29.8 %
Weighted average common shares outstanding
Basic 739.9 752.2
Diluted 745.7 753.0

Subject to reclassification

TARGET CORPORATION
Consolidated Statements of Financial Position
May 1, Jan. 30, May 2,
(millions) 2010 2010 2009
Assets (unaudited) (unaudited)
Cash and cash equivalents, including marketable securities of $1,015, $1,617 and $849 $ 1,578 $ 2,200 $ 1,371
Credit card receivables, net of allowance of $930, $1,016 and $1,005 6,330 6,966 7,452
Inventory 7,249 7,179 6,993
Other current assets 2,065 2,079 1,735
Total current assets 17,222 18,424 17,551
Property and equipment
Land 5,803 5,793 5,775
Buildings and improvements 22,332 22,152 20,994
Fixtures and equipment 4,597 4,743 4,295
Computer hardware and software 2,428 2,575 2,504
Construction-in-progress 497 502 1,427
Accumulated depreciation (10,445 ) (10,485 ) (9,195 )
Property and equipment, net 25,212 25,280 25,800
Other noncurrent assets 889 829 861
Total assets $ 43,323 $ 44,533 $ 44,212
Liabilities and shareholders' investment
Accounts payable $ 6,150 $ 6,511 $ 6,004
Accrued and other current liabilities 3,183 3,120 2,990
Unsecured debt and other borrowings 797 796 1,255
Nonrecourse debt collateralized by credit card receivables 67 900 -
Total current liabilities 10,197 11,327 10,249
Unsecured debt and other borrowings 10,642 10,643 12,012
Nonrecourse debt collateralized by credit card receivables 4,152 4,475 5,502
Deferred income taxes 916 835 487
Other noncurrent liabilities 1,819 1,906 1,843
Total noncurrent liabilities 17,529 17,859 19,844
Shareholders' investment
Common stock 62 62 63

Additional paid-in-capital

3,010 2,919 2,788
Retained earnings 13,098 12,947 11,821
Accumulated other comprehensive loss (573 ) (581 ) (553 )
Total shareholders' investment 15,597 15,347 14,119
Total liabilities and shareholders' investment $ 43,323 $ 44,533 $ 44,212
Common shares outstanding 738.9 744.6 752.0

Subject to reclassification

TARGET CORPORATION
Consolidated Statements of Cash Flows
Three Months Ended
May 1, May 2,
(millions) 2010 2009
Operating activities (unaudited) (unaudited)
Net earnings $ 671 $ 522
Reconciliation to cash flow
Depreciation and amortization 516 472
Share-based compensation expense 25 24
Deferred income taxes 109 69
Bad debt expense 197 296
Loss/impairment of property and equipment, net 8 18
Other non-cash items affecting earnings 22 10
Changes in operating accounts providing/(requiring) cash:
Accounts receivable originated at Target 201 160
Inventory (70 ) (288 )
Other current assets (94 ) 27
Other noncurrent assets (38 ) --
Accounts payable (361 ) (333 )
Accrued and other current liabilities 63 113
Other noncurrent liabilities (91 ) (91 )
Cash flow provided by operations 1,158 999
Investing activities
Expenditures for property and equipment (407 ) (540 )
Proceeds from disposal of property and equipment 12 6
Change in accounts receivable originated at third parties 238 175
Other investments (18 ) (13 )
Cash flow required for investing activities (175 ) (372 )
Financing activities
Reductions of long-term debt (1,170 ) (1 )
Dividends paid (126 ) (121 )
Repurchase of stock (378 ) --
Stock option exercises and related tax benefit 69 2

Cash flow required for financing activities

(1,605 ) (120 )
Net increase/(decrease) in cash and cash equivalents (622 ) 507
Cash and cash equivalents at beginning of period 2,200 864
Cash and cash equivalents at end of period $ 1,578 $ 1,371

Subject to reclassification

TARGET CORPORATION

Retail Segment

Retail Segment Results Three Months Ended
May 1, May 2,
(millions) (unaudited) 2010 2009 Change
Sales $ 15,158 $ 14,361 5.5 %
Cost of sales 10,412 9,936 4.8
Gross margin 4,746 4,425 7.3
SG&A expenses(a) 3,126 2,995 4.4
EBITDA 1,620 1,430 13.3
Depreciation and amortization 512 468 9.4
EBIT $ 1,108 $ 962 15.2 %

EBITDA is earnings before interest expense, income taxes, depreciation and amortization.
EBIT is earnings before interest expense and income taxes.
(a) New account and loyalty rewards redeemed by our guests reduce reported sales. Our Retail Segment charges these discounts to our Credit Card Segment, and the reimbursements of $17 million for the three months ended May 1, 2010 and $20 million for the three months ended May 2, 2009 are recorded as a reduction to SG&A expenses within the Retail Segment.

Retail Segment Rate Analysis Three Months Ended
May 1, May 2,
(unaudited) 2010 2009
Gross margin rate 31.3 % 30.8 %
SG&A expense rate 20.6 % 20.9 %
EBITDA margin rate 10.7 % 10.0 %
Depreciation and amortization expense rate 3.4 % 3.3 %
EBIT margin rate 7.3 % 6.7 %

Retail Segment rate analysis metrics are computed by dividing the applicable amount by sales.

Comparable-Store Sales Three Months Ended
May 1, May 2,
(unaudited) 2010 2009
Comparable-store sales 2.8 % (3.7 )%
Drivers of changes in comparable-store sales:
Number of transactions 2.2 % (1.3 )%
Average transaction amount 0.7 % (2.4 )%
Units per transaction 1.3 % (3.2 )%
Selling price per unit (0.7 )% 0.8 %

The comparable-store sales increases or decreases above are calculated by comparing sales in fiscal year periods with comparable prior year periods of equivalent length.

Number of Stores and Retail Square Feet Number of Stores Retail Square Feet(a)
May 1, Jan. 30, May 2, May 1, Jan. 30, May 2,
(unaudited) 2010 2010 2009 2010 2010 2009
Target general merchandise stores 1,489 1,489 1,453 187,449 187,449 182,087
SuperTarget stores 251 251 245 44,492 44,492 43,385
Total 1,740 1,740 1,698 231,941 231,941 225,472

(a) In thousands; reflects total square feet, less office, distribution center and vacant space.

Subject to reclassification

TARGET CORPORATION
Credit Card Segment
Credit Card Segment Results Three Months Ended Three Months Ended
May 1, 2010 May 2, 2009
Amount Annualized Amount Annualized
(unaudited) (in millions) Rate(d) (in millions) Rate(d)
Finance charge revenue $ 350 18.5 % $ 355 16.3 %
Late fees and other revenue 59 3.1 87 4.0
Third party merchant fees 26 1.4 30 1.4
Total revenues 435 23.0 472 21.7
Bad debt expense 197 10.5 296 13.6
Operations and marketing expenses(a) 100 5.3 107 4.9
Depreciation and amortization 4 0.2 4 0.2
Total expenses 301 16.0 407 18.7
EBIT 134 7.1 65 3.0
Interest expense on nonrecourse debt collateralized
by credit card receivables 23 26
Segment profit $ 111 $ 39
Average receivables funded by Target(b) $ 2,361 $ 3,200
Segment pretax ROIC(c) 18.8 % 4.8 %

(a) New account and loyalty rewards redeemed by our guests reduce reported sales. Our Retail Segment charges the cost of these discounts to our Credit Card Segment, and the reimbursements of $17 million for the three months ended May 1, 2010 and $20 million for the three months ended May 2, 2009 are recorded as an increase to Operations and Marketing expenses within the Credit Card Segment.
(b) Amounts represent the portion of average credit card receivables funded by Target. These amounts exclude $5,186 million for the three months ended May 1, 2010 and $5,496 million for the three months ended May 2, 2009 of receivables funded by nonrecourse debt collateralized by credit card receivables.
(c) ROIC is return on invested capital, and this rate equals our segment profit divided by average receivables funded by Target, expressed as an annualized rate.
(d) As an annualized percentage of average receivables.

Spread Analysis - Total Portfolio Three Months Ended Three Months Ended
May 1, 2010 May 2, 2009
Yield Yield
Amount Annualized Amount Annualized
(unaudited) (in millions) Rate (in millions) Rate
EBIT $ 134 7.1% (c) $ 65 3.0% (c)
LIBOR(a) 0.2% 0.5%
Spread to LIBOR(b) $ 129 6.9% (c) $ 54 2.5% (c)

(a) Balance-weighted one-month LIBOR.
(b) Spread to LIBOR is a metric used to analyze the performance of our total credit card portfolio because the vast majority of our portfolio earned finance charge revenue at rates tied to the Prime Rate, and the interest rate on all nonrecourse debt securitized by credit card receivables is tied to LIBOR.
(c) As a percentage of average receivables.

Receivables Rollforward Analysis Three Months Ended
May 1, May 2,
(millions) (unaudited) 2010 2009 Change
Beginning receivables $ 7,982 $ 9,094 (12.2 ) %
Charges at Target 719 804 (10.6 )
Charges at third parties 1,426 1,664 (14.3 )
Payments (2,989 ) (3,261 ) (8.3 )
Other 122 156 (21.9 )
Period-end receivables $ 7,260 $ 8,457 (14.2 ) %
Average receivables $ 7,547 $ 8,697 (13.2 ) %
Accounts with three or more payments (60+ days)
past due as a percentage of period-end receivables 5.3 % 6.1 %
Accounts with four or more payments (90+ days)
past due as a percentage of period-end receivables 3.8 % 4.4 %
Credit card penetration(a) 4.7 % 5.6 %

(a) Represents charges at Target (including sales taxes and gift cards) divided by sales (which excludes sales taxes and gift cards).

Allowance for Doubtful Accounts Three Months Ended
May 1, May 2,
(millions) (unaudited) 2010 2009 Change
Allowance at beginning of period $ 1,016 $ 1,010 0.6 %
Bad debt provision 197 296 (33.4 )
Net write-offs(a) (283 ) (301 ) (6.0 )
Allowance at end of period $ 930 $ 1,005 (7.5 ) %
As a percentage of period-end receivables 12.8 % 11.9 %
Net write-offs as a percentage
of average receivables (annualized) 15.0 % 13.9 %

(a) Net write-offs include the principal amount of losses (excluding most accrued and unpaid finance charges) less current period principal recoveries.

Subject to reclassification

SOURCE: Target Corporation

Target Corporation
Investors:
John Hulbert, 612-761-6627
or
Financial Media:
Eric Hausman, 612-761-2054