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Target Corporation Second Quarter Earnings 2003

From: ASAP

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Target Corporation (NYSE: TGT) reported earnings per share for the second quarter ended August 2, 2003 of 39 cents, compared with 38 cents in the second quarter ended August 3, 2002. All earnings per share figures refer to diluted earnings per share. Second quarter net earnings increased 4.1 percent to $358 million, compared with $344 million in 2002.

"We are pleased with our second quarter performance for the corporation overall, driven by strong results at Target Stores despite a difficult comparison to a year ago," said Bob Ulrich, chairman and chief executive officer of Target Corporation. "We remain focused on achieving profitable market share growth by delivering both a clearly differentiated shopping experience and exceptional value to our guests."

Total revenues in the second quarter increased 9.1 percent to $10.984 billion from $10.068 billion in 2002, driven by an 11.3 percent revenue increase at Target Stores, principally resulting from new store expansion and the growth in our credit card operations. Comparable-store sales for the corporation in the second quarter 2003 rose 1.5 percent. (Total revenues include retail sales and net credit revenues. Comparable-store sales are sales from stores open longer than one year.)

For the quarter, pre-tax segment profit increased 1.0 percent to $793 million, compared with $785 million in the second quarter 2002. Pre-tax profit at Target Stores increased $41 million, or 5.7 percent. Pre-tax profit declined at both Mervyn's and Marshall Field's by $28 million and $5 million, respectively. (Pre-tax segment profit is earnings before LIFO, interest, other expense and unusual items.)

In the second quarter, the company's gross margin rate was unfavorable to the prior year, principally due to the mix impact of more rapid growth at Target, our lowest gross margin rate division. (Gross margin rate represents gross margin as a percentage of sales.) Expense rate, excluding credit card operations, was also unfavorable to prior year due to a lack of sales leverage at all three divisions. (Expense rate represents selling, general and administrative expenses as a percentage of sales. It includes buying and occupancy, advertising, start-up and other expense, and excludes depreciation and expenses associated with credit card operations.)

Contribution to pre-tax segment profit from the company's credit card operations increased to $160 million in the second quarter from $129 million a year ago. At quarter-end, gross receivables were $5.754 billion, a slight increase from $5.682 billion in balances at the end of first quarter 2003, and a significant increase from the $4.636 billion in receivables at the end of second quarter a year ago, due to the continued growth in issuance and usage of the Target Visa card. The provision for bad debt expense exceeded write- offs by $4 million in the quarter. Results of credit card operations are included in the pre-tax segment profit for each of the company's three business segments.

Other Factors

Net interest expense for the quarter increased $2 million compared with second quarter 2002 reflecting higher average funded balances, partially offset by the benefit of a lower average portfolio interest rate.

The company's annual effective income tax rate was 38.0 percent, compared with 38.2 percent last year.

Miscellaneous

Target Corporation will webcast its second 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 (click on "company/Target Corporation/investor information/webcasts"). A telephone replay of the call will be available beginning at approximately 11:30am CDT today through the end of business on August 15, 2003. The replay number is (800) 679-9662.

Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)C to the company's 2002 Form 10-K.

Target Corporation operates large-store general merchandise formats, including discount stores, moderate-priced promotional and traditional department stores, as well as a direct mail and on-line business called target.direct. The company currently operates 1,519 stores in 47 states. This included 1,191 Target stores, 266 Mervyn's stores and 62 Marshall Field's stores.

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