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Target Corporation Third Quarter 2004 Earnings Per Share $0.60

From: ASAP


Target Corporation (NYSE: TGT) today reported net income of $537 million, or $0.60 per share, for the third quarter ended October 30, 2004, compared with $302 million, or $0.33 per share, in the third quarter ended November 1, 2003. These results include earnings from continuing operations of $330 million, or $0.37 per share, in the current year, compared with $271 million, or $0.30 per share, in the prior year. Current year results also include earnings from discontinued operations of $4 million, and a gain of $203 million, or $0.23 per share, related to the sale of Mervyn's. Earnings from continuing operations in 2004 were reduced by a pre-tax adjustment of $18 million, or $0.01 per share, related to accounting for certain store leases. Discontinued operations include the results of Mervyn's for the month of August. All earnings per share figures refer to diluted earnings per share.

"We are pleased with our strong growth and continued market share gains during the third quarter, particularly in light of last year's solid sales and earnings performance," said Bob Ulrich, chairman and chief executive officer of Target Corporation. "We remain confident in Target's strategy and believe that we will continue to delight our guests and deliver superior value to our shareholders throughout the remainder of 2004 and for many years to come."

Analysis of Continuing Operations

Total revenues in the third quarter increased 11.0 percent to $10.909 billion from $9.827 billion in 2003, driven by a 4.5 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 quarter, earnings before interest and income taxes increased 14.4 percent to $644 million, compared with $563 million in the third quarter 2003. The contribution from the company's credit card operations to pre-tax earnings in the quarter was $120 million, an increase of $13 million, or 13.0 percent.

In the third quarter, the company's gross margin rate improved from the prior year primarily due to improvement in markup, while the company's expense rate was unfavorable to prior year primarily due to the 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.)

Other Factors

Net interest expense for the quarter decreased $18 million compared with third quarter 2003, reflecting the benefit of lower average funded balances partially offset by higher average portfolio rate.

For the third quarter, the company's effective income tax rate was 37.8 percent in the current year compared with 37.3 percent a year ago. The company's annual effective income tax rate was 37.8 percent in both years.

In June 2004, the company announced a $3 billion share repurchase program. Under this program, the company repurchased $503 million of its common stock during the third quarter, acquiring 11.4 million shares at an average price of $44.16 per share. Cumulatively under this program, the company has acquired 22.4 million shares of its common stock, reflecting a total investment of $975 million. The company continues to expect that this share repurchase program will be completed within two to three years of its inception.

Status of Mervyn's Transactions

During the third quarter, Target Corporation completed the sale of its Mervyn's retail subsidiary, including 257 stores and four distribution centers, to an investment group comprised of Sun Capital Inc., Cerberus Capital Management, and Lubert-Adler/Klaff and Partners, and all of Mervyn's credit card receivables to GE Consumer Finance, a unit of GE Capital, for an aggregate price of approximately $1.65 billion.

Separately, while the transaction related to the sale of Marshall Field's to The May Department Store Company was completed in the second quarter ended July 31, 2004, the transaction to sell Mervyn's Minnesota stores to The May Department Store Company was completed in the third quarter.


Target Corporation will webcast its third quarter 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 (click on "investors/webcasts"). A telephone replay of the call will be available beginning at approximately 11:30am CST today through the end of business on November 12, 2004. The replay number is (402) 220-9657.

Forward-looking statements in this release should be read in conjunction with the cautionary statements in Exhibit (99)C to the company's 2003 Form 10-K.

Target Corporation's continuing operations include large, general merchandise discount stores, as well as an on-line business called Target.com. The company currently operates 1,313 Target stores in 47 states.

November 2004

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