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Target Corporation Fourth Quarter Earnings Per Share $0.91, Fiscal 2003 EPS $2.01

From: ASAP

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Target Corporation (NYSE: TGT) today reported earnings per share for the fourth quarter ended January 31, 2004 of 91 cents, compared with 75 cents in the fourth quarter ended February 1, 2003. Fourth quarter net earnings were $832 million, an increase of 21.1 percent compared with $688 million in 2002. All earnings per share figures refer to diluted earnings per share.

For the full year, earnings per share were $2.01, an increase of 11.0 percent compared with $1.81 in 2002. Net earnings were $1.841 billion, up 11.4 percent compared with $1.654 billion in the prior year.

"We are pleased with our overall financial results for 2003. As expected, we delivered much stronger growth in the fourth quarter than in our first nine months," said Bob Ulrich, chairman and chief executive officer of Target Corporation. "In 2004 and beyond, our efforts will remain intently focused on strengthening our offering to our guests, achieving profitable market share growth and creating substantial value for our shareholders."

Full Year Results

Total revenues in 2003 were $48.163 billion, an increase of 9.7 percent compared with $43.917 billion in 2002, driven by contribution from new stores, a 2.9 percent increase in comparable-store sales and growth in net credit revenues. (Total revenues include sales and net credit revenues. Comparable- store sales are sales from stores open longer than one year.)

For the year, pre-tax segment profit was $3.734 billion, an increase of 7.9 percent compared with $3.461 billion in 2002. Pre-tax segment profit at Target Stores increased $379 million, or 12.3 percent. Pre-tax segment profit at Marshall Field's declined $28 million and pre-tax segment profit at Mervyn's declined $78 million. (Pre-tax segment profit is the company's core measure of profitability, and is a required disclosure for segment reporting under generally accepted accounting principles.)

As required, the company adopted EITF No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor" during 2003, resulting in a financial statement reclassification of certain consideration received from vendors. The primary effect of this reclassification was to reduce cost of goods sold and to increase selling, general, and administrative expenses by a similar amount. This reclassification had no impact on sales, cash flows or financial position for any period, and had a slight negative impact on net earnings.

The company's full year gross margin rate increased compared with the prior year, primarily due to the effect of the adoption of EITF 02-16. (Gross margin rate represents sales less cost of sales, expressed as a percentage of sales.)

The full year expense rate was unfavorable to the prior year rate, primarily due to the effect of the adoption of EITF 02-16. A lack of sales leverage at both Mervyn's and Marshall Field's also contributed to a higher expense rate this year. (Expense rate represents selling, general and administrative expense, expressed as a percentage of sales.)

Results of the company's credit card operations continued to develop in line with expectations. The full year contribution of consolidated credit card operations to pre-tax segment profit was $641 million, an increase of $109 million, or 20.5 percent, compared with last year, consistent with the 21.2 percent growth in average receivables. Year-end gross receivables were $6.195 billion, up 3.9 percent from $5.964 billion a year ago, as the portfolio has now fully cycled its earlier periods of substantial growth. Results of the company's credit card operations are reflected in the pre-tax segment profit of each of our three business segments because our credit card programs strategically support our core retail operations and are an integral component of each business segment.

Fourth Quarter Results

Fourth quarter revenues were $15.571 billion, up 10.7 percent from $14.061 billion in the same period a year ago. Comparable store sales for the quarter increased 4.9 percent.

Fourth quarter 2003 pre-tax segment profit was $1.513 billion, an increase of $222 million, or 17.3 percent, from the fourth quarter of 2002, primarily due to an increase of $215 million, or 18.5 percent, at Target Stores. Marshall Field's pre-tax segment profit increased $8 million, or 15.6 percent, in the quarter, while Mervyn's pre-tax segment profit fell $1 million, or 0.3 percent.

The company's fourth quarter gross margin rate was favorable to the prior year due to the effect of the adoption of EITF 02-16 and due to strong improvement in other components of gross margin rate at all three divisions. Fourth quarter and full year gross margin results also include a pretax LIFO credit of $27 million in 2003 compared with a $12 million credit in 2002. The expense rate in the quarter was unfavorable compared with the prior year period principally due to the effect of the adoption of EITF 02-16. A lack of sales leverage at Mervyn's and Marshall Field's and higher corporate expenses also contributed to the increase in expense rate.

The fourth quarter contribution of consolidated credit card operations to pre-tax segment profit was $168 million, an increase of $18 million, or 11.7 percent from a year ago.

Other Factors

Net interest expense for the quarter and full year decreased $24 million and $29 million, respectively. For each period these improvements reflected the benefit of a lower average portfolio interest rate and a smaller loss on debt repurchase, partially offset by the effect of higher average borrowings.

The company's annual effective income tax rate was 37.8 percent, compared with 38.2 percent last year.

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