Financial News Release

Target Corporation Fourth Quarter Earnings Per Share From Continuing Operations $1.06
02/16/06

Fiscal 2005 EPS From Continuing Operations $2.71

MINNEAPOLIS, Feb. 16 /PRNewswire-FirstCall/ -- Target Corporation (NYSE: TGT) today reported earnings from continuing operations of $939 million, or $1.06 per share, for the fourth quarter ended January 28, 2006, compared with $809 million, or $0.90 per share, in the fourth quarter ended January 29, 2005. For the full year, earnings from continuing operations were $2.408 billion, or $2.71 per share, in 2005, compared with $1.885 billion, or $2.07 per share, in 2004. Including earnings from discontinued operations and the gain on disposal of discontinued operations, earnings per share for the fourth quarter and full year 2004 were 91 cents and $3.51, respectively. All earnings per share figures refer to diluted earnings per share. The attached consolidated financial statements are unaudited.

"Target produced outstanding results in 2005, surpassing $50 billion in sales and generating strong growth in earnings," said Bob Ulrich, chairman and chief executive officer of Target Corporation. "We are proud of our recent performance, remain committed to our strategic direction and believe that Target is well-positioned to continue delighting our guests and delivering superior value to our shareholders in 2006 and for years beyond."

Analysis of Continuing Operations - Full Year Results

Total revenues increased 12.3 percent to $52.620 billion from $46.839 billion in 2004, driven by a 5.6 percent increase in comparable store sales combined with the contribution from new store expansion and our credit card operations. (Total revenues include retail sales and net credit revenues. Comparable-store sales are sales from stores open longer than one year.)

For the year, earnings before interest and income taxes (EBIT) increased 20.1 percent to $4.323 billion, compared with $3.601 billion in 2004. The contribution from the company's credit card operations to EBIT was $645 million, an increase of $160 million, or 32.8 percent driven by strong underlying portfolio performance and the effect of rising interest rates on finance charge revenue. In total, 2005 EBIT increased to 8.2 percent of revenues from 7.7 percent of revenues in 2004 due to expansion of the company's gross margin rate and the increased contribution to EBIT from the company's credit card operations, partially offset by unfavorable expense rate performance.

The company's gross margin rate expansion resulted from improvements in markup and inventory shrinkage, while the unfavorability in the company's expense rate was due to several factors including lower transition services income from discontinued operations and higher utilities expense. These expense rate factors more than offset the current year favorability from last year's lease accounting adjustment. (Gross margin rate represents sales less cost of sales expressed as a percentage of sales. Expense rate represents selling, general and administrative expenses expressed as a percentage of sales.)

Net interest expense decreased $107 million to $463 million in 2005, compared with $570 million in 2004. This expense favorability in 2005 is attributable to a significantly lower loss on debt repurchase and lower average funded balances, partially offset by a higher average portfolio interest rate. Net interest expense in 2004 included $89 million of loss on debt repurchase.

Analysis of Continuing Operations - Fourth Quarter Results

Fourth quarter revenues were $16.947 billion, up 11.5 percent from $15.194 billion in the same period a year ago. Comparable store sales for the quarter rose 4.2 percent.

Fourth quarter earnings before interest and income taxes were $1.606 billion, an increase of $197 million, or 14.0 percent, from the fourth quarter of 2004. The contribution from the company's credit card operations to EBIT was $192 million, an increase of $58 million, or 43.1 percent.

The company's gross margin rate improved slightly from the prior year, while our expense rate performance was unfavorable due to several factors including lower transition services income from discontinued operations and a planned retiming of advertising expense from earlier in the year. These factors more than offset the current year favorability from last year's lease accounting adjustment.

Net interest expense increased $17 million for the quarter. This unfavorability was due to higher average funded balances, partially offset by a lower average portfolio rate.

Other Factors

The company's 2005 effective income tax rate for continuing operations was 37.6 percent, which resulted in a fourth quarter income tax rate of about 36.6 percent. The effective income tax rate in 2004 was 37.8 percent for both the full year and fourth quarter periods.

In June 2004, the company announced a $3 billion share repurchase program and in November 2005, the Board increased the share repurchase authorization by $2 billion to an aggregate $5 billion program. Under this program, the company repurchased $300 million of its common stock during the fourth quarter of 2005, acquiring 5.5 million shares at an average price of $54.41 per share. For the full year, the company invested $1.2 billion, repurchasing 23.1 million shares at an average price of $51.88, and program to-date, the company has acquired 51.6 million shares of its common stock at an average price per share of $47.95, reflecting a total investment of approximately $2.5 billion. The company expects to continue to execute this program primarily in open market transactions, subject to market conditions, and expects to complete the total program in approximately two to three years.

Miscellaneous

Target Corporation will webcast its fourth quarter and year-end earnings conference call at 9:30am CST today. Investors and the media are invited to listen to the call through the company's website at http://www.target.com (scroll down to the bottom of the Home page and click on "Investors", then click on "Events+Calendar", then click "webcasts"). A telephone replay of the call will be available beginning at approximately 11:30am CST today through the end of business on February 17, 2006. The replay number is (800) 642-1687 and the passcode is 1291483.

Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)C to the company's 2005 Third Quarter Form 10-Q.

Target Corporation's continuing operations include large, general merchandise discount stores, as well as an on-line business called Target.com. At quarter-end, the company operated 1,397 Target stores in 47 states.

Target Corporation news releases are available at http://www.target.com/investors or http://www.prnewswire.com .


                    CONSOLIDATED STATEMENTS OF OPERATIONS

                         Three Months Ended          Twelve Months Ended
    (Millions,
     except per
     share data)  January 28, January 29,   %    January 28, January 29,  %
    (Unaudited)       2006       2005     Change    2006        2005    Change


    Sales           $ 16,570   $14,877    11.4%    $51,271    $45,682   12.2%
    Net credit
     revenues            377       317    18.8       1,349      1,157   16.5


    Total revenues    16,947    15,194    11.5      52,620     46,839   12.3


    Cost of sales     11,509    10,348    11.2      34,927     31,445   11.1

    Selling,
     general and
     administrative
     expense           3,254     2,888    12.7      11,185      9,797   14.2
    Credit expense       209       205     1.9         776        737    5.3

    Depreciation and
     amortization        369       344     7.1       1,409      1,259   11.9

    Earnings from
     continuing
     operations before
     interest expense
     and income taxes  1,606     1,409    14.0       4,323      3,601   20.1


    Net interest
     expense             124       107    16.9         463        570  (18.7)


    Earnings from
     continuing
     operations before
     income taxes      1,482     1,302    13.7       3,860      3,031   27.3

    Provision for
     income taxes        543       493    10.2       1,452      1,146   26.7

    Earnings from
     continuing
     operations          939       809    15.9       2,408      1,885   27.7

    Earnings from
     discontinued
     operations,
     net of taxes
     of $46                -         -  (100.0)          -         75 (100.0)

    Gain on disposal
     of discontinued
     operations, net of
     taxes of $(21)
     and $761              -        16  (100.0)          -      1,238 (100.0)

    Net earnings        $939      $825    13.7%     $2,408     $3,198  (24.7)%


    Basic earnings
     per share:
       Continuing
        operations     $1.07     $0.91    18.3%      $2.73      $2.09   30.9%
       Discontinued
        operations         -         -       -           -       0.08 (100.0)
       Gain on disposal
        of discontinued
        operations         -      0.01  (100.0)          -       1.37 (100.0)
       Basic earnings
        per share      $1.07     $0.92    16.1%      $2.73      $3.54  (22.8)%

    Diluted earnings
     per share:
       Continuing
        operations     $1.06     $0.90    18.4%      $2.71      $2.07   31.0%
       Discontinued
        operations         -         -       -           -       0.08 (100.0)
       Gain on disposal
        of discontinued
        operations         -      0.01  (100.0)          -       1.36 (100.0)
       Diluted earnings
        per share      $1.06     $0.91    16.2%      $2.71      $3.51  (22.8)%

    Weighted average
     common shares
     outstanding:
       Basic           876.6     895.3               882.0      903.8
       Diluted         883.5     903.0               889.2      912.1



                CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

    SUBJECT TO RECLASSIFICATION
    (Millions)                                  January 28,       January 29,
    (Unaudited)                                       2006              2005

    ASSETS
    Cash and cash equivalents                       $1,648            $2,245
    Accounts receivable, net                         5,666             5,069
    Inventory                                        5,838             5,384
    Other current assets                             1,253             1,224
      Total current assets                          14,405            13,922

    Property and equipment, net                     19,038            16,860
    Other non-current assets                         1,552             1,511
    Total assets                                   $34,995           $32,293

    LIABILITIES AND SHAREHOLDERS' INVESTMENT
    Accounts payable                                $6,268            $5,779
    Current portion of long-term debt and
     notes payable                                     753               504
    Other current liabilities                        2,567             1,937
      Total current liabilities                      9,588             8,220

    Long-term debt                                   9,119             9,034
    Deferred income taxes                              851               973
    Other non-current liabilities                    1,232             1,037
    Shareholders' investment                        14,205            13,029
    Total liabilities and shareholders'
     investment                                    $34,995           $32,293

    Common shares outstanding                        874.1             890.6


                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    SUBJECT TO RECLASSIFICATION                       Twelve Months Ended
    (Millions)                                  January 28,       January 29,
    (Unaudited)                                       2006              2005

    OPERATING ACTIVITIES
    Net earnings                                    $2,408            $3,198
    Earnings from and gain on disposal of
     discontinued operations, net of tax                 -            (1,313)
    Earnings from continuing operations              2,408             1,885
    Reconciliation to cash flow:
      Depreciation and amortization                  1,409             1,259
      Stock based compensation expense                  93                60
      Deferred income tax                             (122)              233
      Bad debt provision                               466               451
      Loss on disposal of fixed assets, net             70                59
      Other non-cash items affecting earnings          (50)               73
      Changes in operating accounts
       providing/(requiring) cash:
         Accounts receivable originated at Target     (244)             (209)
         Inventory                                    (454)             (853)
         Other current assets                          (28)              (37)
         Other non-current assets                      (24)             (147)
         Accounts payable                              489               823
         Accrued liabilities                           351               319
         Income taxes payable                           70               (91)
      Other                                             17               (17)
    Cash Flow Provided by Operations                 4,451             3,808

    INVESTING ACTIVITIES
    Expenditures for property and equipment         (3,388)           (3,068)
    Proceeds from disposal of fixed assets              58                56
    Change in accounts receivable originated at
     third parties                                    (819)             (690)
    Proceeds from sale of discontinued operations        -             4,881
    Cash Flow (Required) / Provided by
     Investing Activities                           (4,149)            1,179

    FINANCING ACTIVITIES
    Additions to long-term debt                        913                10
    Reductions of long-term debt                      (527)           (1,487)
    Dividends paid                                    (318)             (272)
    Repurchase of stock                             (1,197)           (1,290)
    Stock option exercises                             172               146
    Stock option tax benefit                            59                69
    Other                                               (1)                -
    Cash Flow Required by Financing Activities        (899)           (2,824)

    Net Cash Required by Discontinued
     Operations                                          -              (626)
    Net (Decrease) / Increase in Cash and
     Cash Equivalents                                 (597)            1,537

    Cash and Cash Equivalents at Beginning of
     Period                                          2,245               708
    Cash and Cash Equivalents at End of
     Period                                         $1,648            $2,245


                                                            Target Corporation
                                                                    (Millions)
                                                                   (Unaudited)

    NUMBER OF STORES, RETAIL SQUARE FEET and COMPARABLE STORE SALES
    Retail square feet in thousands; reflects total square feet less office,
    distribution center and vacant space.


                        Number of Stores         Retail Square Feet
                        January  January    January   January
                            28,     29,        28,       29,       %
                           2006    2005       2006      2005    Change
    Target General
     Merchandise Stores   1,239   1,172    150,318   140,953      6.6%
    SuperTarget Stores      158     136     27,942    24,062     16.1
    Total                 1,397   1,308    178,260   165,015      8.0%

                          Three Months        Twelve Months
                             Ended               Ended
                        January  January    January    January
                            28,     29,        28,       29,
                           2006    2005       2006      2005
    Continuing Operations
     Comparable Store Sales 4.2%    5.4%       5.6%      5.3%


    CREDIT CARD CONTRIBUTION OF CONTINUING OPERATIONS
                                              Three Months     Twelve Months
                                                 Ended             Ended
                                            January  January  January January
                                               28,       29,      28,    29,
                                              2006      2005     2006   2005

    Revenues
    Finance charges, late fees and other
     revenues                                 $342      $288   $1,225 $1,059
    Merchant fees
      Intracompany                              24        22       72     65
      Third-party                               35        29      124     98
    Total revenues                             401       339    1,421  1,222
    Expenses
    Bad debt provision                         129       124      466    451
    Operations and marketing                    80        81      310    286
    Total expenses                             209       205      776    737

    Pre-tax credit card contribution to
     EBIT                                     $192      $134     $645   $485

    As a percent of average receivables
     (annualized)                             13.0%     10.2%    11.6%   9.8%


    ALLOWANCE FOR DOUBTFUL ACCOUNTS
                                               Three Months     Twelve Months
                                                  Ended             Ended
                                            January  January   January January
                                               28,       29,      28,    29,
                                              2006      2005     2006   2005


    Allowance at beginning of period          $417      $363     $387   $352
    Bad debt provision                         129       124      466    451
    Net write-offs                             (95)     (100)    (402)  (416)
    Allowance at end of period                $451      $387     $451   $387

    As a percent of period-end
     receivables                               7.4%      7.1%     7.4%   7.1%


    SUPPLEMENTAL DATA
                                            January  January
                                               28,       29,
                                              2006      2005

    Period-end receivables                  $6,117    $5,456

    Total past due as a percent of
     period-end receivables *                  2.8%      3.5%

    * Accounts with three or more
     payments past due.

                                              Three Months    Twelve Months
                                                  Ended           Ended
                                            January  January  January January
                                               28,       29,      28,    29,
                                              2006      2005     2006   2005


    Total revenues as a percent of
     average receivables (annualized):        27.1%     25.7%    25.6%  24.8%

    Net write-offs as a percent of
     average receivables (annualized):         6.5%      7.6%     7.2%   8.4%

    Average receivables                     $5,922    $5,278   $5,544 $4,927

SOURCE Target Corporation
02/16/2006

CONTACT: Susan Kahn (investor), +1-612-761-6735, or Cathy Wright (financial media), 1-612-761-6627 or 1-847-615-1538, both of Target Corporation

8944 02/16/2006 08:25 EST http://www.prnewswire.com