2007 OnlineVersion

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Target Corporation Annual Report 2007
uniquely: uniquely:
Financial Highlights – Continuing Operations
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Total Revenues (millions)
2007 Growth %: 6.5%
Five-year CAGR: 11.1%
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Earnings Before Interest
Expense and Income Taxes
(EBIT) (millions)
2007 Growth %: 4.0%
Five-year CAGR: 13.4%
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Earnings from Continuing
Operations (millions)
2007 Growth %: 2.2%
Five-year CAGR: 15.7%
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Diluted EPS
2007 Growth %: 3.9%
Five-year CAGR: 17.1%
2007 Capital Expenditures
($4.4 billion)
New Stores
Remodels & Expansions
Information Technology,

Distribution & Other
71%
7%
22%
2007 Sales Mix
($61.5 billion)
Consumables & Commodities
Electronics, Entertainment,

Sporting Goods & Toys
Apparel & Accessories
Home Furnishings & Décor
Other
22%
19%
3%
34%
22%






1
uniquely: Target
Though we operate about 1,600
stores from coast to coast, our
guests understand there is only one
Target. Our Expect More. Pay Less.
brand promise means that we bring
outstanding quality and great design
together at an incredible price;
we combine innovative marketing
with clean, bright stores and friendly
team members, creating a delightful
experience for our guests every time
they walk through our doors. Add
it all up and no matter how many
stores we open, Target will remain
one of a kind.
2
uniquely: Branded
Guests expect great things from Target —a responsibility
we take seriously. Our brand’s strength shows in our iconic
Bullseye, which today is recognized by 96 percent of
Americans. But it’s about more than the Bullseye alone. We’re
constantly finding new and exciting ways to delight our guests
—in our stores, online, through our advertising campaigns
and our extensive community involvement.
3
uniquely: Innovative
Our GiftCards continue to lead the industry in creativity,
convenience and popularity. We offer a broad, seasonally
fresh assortment of distinctive GiftCard designs—
including an innovative card made of PHA, a 100 percent
biodegradable and compostable material —to help
reinforce our brand and fuel incremental sales and profit.
uniquely: Fun
The Target culture can be explained in three simple words:
Fast, Fun and Friendly. Our team members bring those words
to life in our stores by delighting our guests with great service
and helping them find the products they want and need,
whether it’s vitamins or the latest video game.
4
uniquely: Styled
We are committed to a shopping experience that constantly
evolves to fit the ever-changing wants and needs of our
guests—even our shopping carts and baskets are designed
with our guests in mind. We remain true to the fundamentals
that make us uniquely Target: clean, wide store aisles, fully
stocked shelves, friendly team members and distinctive store
exteriors thoughtfully designed to fit the local landscape.
uniquely: Engaged
As a responsible steward of the environment, we have
a solid record of making environmentally friendly decisions.
To fulfill our commitment, we engage in activities as simple
as carrying organic produce and reusing garment hangers,
and as visionary as utilizing renewable energy resources—
all because it’s the right thing to do for our communities
and our business.
5
uniquely: Value Driven
We continue to delight guests with unbeatable
values on a variety of offerings, which include:
limited-edition collections in apparel, accessories
and home, seasonal assortments that capture
the latest fashion and trends, food and basic
commodities, and exceptional values in our
front-of-store treasure trove, See.Spot.Save.
6
uniquely: Convenient
Whether they need MP3 players or prescriptions, we make
our guests’ shopping experiences convenient and fun by
delivering great value in all of our categories. We thoughtfully
edit our assortments to give our guests the specialized
content they want with the right number of choices, and offer
those assortments in easy-to-shop stores staffed by helpful
team members—all to help our guests quickly find what they
are looking for, every time they shop at Target.
uniquely: Committed
Since 1946, we have donated 5 percent of our income to
the communities we serve. Today, 5 percent in giving equals
more than $3 million every week to support education, the
arts, social services and volunteerism. Nationwide, Target
team members volunteer hundreds of thousands of hours
annually to more than 7,000 programs that strengthen
families and build healthier communities.
7
uniquely: Designed
Since opening our first store in 1962, we have understood
that value is more than just low prices. In line with our
Expect More. Pay Less. brand promise, we are committed to
differentiating ourselves as a design leader by taking fresh
and innovative approaches to everything we do—from
delivering innovative packaging solutions in Archer Farms to
introducing trend-right fashions from Converse One Star.
8
To Our Shareholders:
Our financial performance in 2007 fell short of our expectations as
the pace of sales and earnings growth in the first six months slowed
considerably in the second half of the year. Overall, revenues in
2007 grew 6.5 percent to $63.4 billion and diluted earnings per
share increased 3.9 percent to $3.33.
As we faced the challenges posed by an increasingly difficult
economy, we remained focused on disciplined execution of the
core elements of our business and continued to invest thoughtfully
in our growth. Specifically,
• We opened 118 new stores, including 33 SuperTarget stores, to
offer more guests a uniquely relevant Target shopping experience
in convenient, attractive, easy-to-shop stores;
• We continued to invest in technology and infrastructure, including
implementation of enhanced guest-service systems and
construction of new perishable-food and general merchandise
distribution centers and our second Target.com fulfillment center;
• We positioned Target Sourcing Services as global sourcing
experts to deliver the consistently trend-forward, high-quality,
affordable merchandise that symbolizes the Target brand, and
we continued our disciplined commitment to the safety of our
guests by expanding our multistage testing process to enable
earlier testing of our owned-brand products, such as luggage,
toys and children’s products;
• We offered a broad array of products to meet our guests’ wants
and needs, including limited-time-only fashion from emerging
designers, an upgraded assortment of digital electronics, a
growing selection in food and pharmacy and a variety of
sustainable products across many categories, including certified
organic bedding and natural cleaning products;
• And, we strengthened our one-of-a-kind brand by continuing
to offer a compelling online presence through Target.com, by
offering the many benefits of REDcards which continue their
outstanding record of profitability, and by creating a succession
of uniquely innovative marketing campaigns.
While we were disappointed in our 2007 results, we remain
confident in the relevance of our strategy, the strength of our brand,
the dedication of our talented team and in our ability to continue
to deliver strong profitable growth over time. We believe we are
well-positioned for more rapid growth in 2008 and beyond.
This belief is founded in our Expect More. Pay Less. promise
to our guests, which is a guiding principle behind every decision
we make as a company. It is the expression of our commitment
to exceptional quality, accessible design at a superior value, and
doing business in a way that goes far beyond the products we sell.
Each element of our strategy is thoughtfully conceived, and every
decision we make reinforces the uniquely Target experience that
is our competitive advantage.
As we look ahead, we will remain focused on the fundamentals
of our business while continuing to pursue innovative solutions and
establish new best practices throughout the company. Specifically,
in 2008, we are diligently working to drive top-line growth and
thoughtfully manage our expenses. By prioritizing our investments
and focusing our resources on areas that increase speed and
efficiency, and reduce work and cost, while preserving our brand
and overall shopping experience for our guests, we will rise above
the current economic challenges.
We will also remain committed to providing a workplace that is
preferred by our team members and investing in the communities
where we do business to improve the quality of life. Our long history
of giving is reflected in the ways we serve our communities, including
team member volunteerism and giving more than three million
dollars a week in charitable contributions to education, the arts
and social services.
Target also has a long history of strong corporate governance,
and this disciplined stewardship and commitment to strategic
continuity is evident as Target transitions to new leadership in 2008.
Gregg Steinhafel’s tremendous experience, combined with his
passion and unwavering devotion to the Target brand, make him an
outstanding choice to be our next chief executive officer.
The strength of this company’s reputation and performance is
attributable to Target brand managers throughout the world whose
talent and dedication consistently bring our Expect More. Pay Less.
brand promise to life for our guests and sustain our unique
competitive advantage. By maintaining a steadfast commitment
to delight our guests in every store, every day, Target will continue
to grow and prosper for many years to come!
Sincerely,
Bob Ulrich, Chairman and Chief Executive Officer
9
To Our Shareholders:
Bob Ulrich’s leadership has been instrumental in defining the Target
brand, driving our growth and establishing our position as a leader
in the industry. I have been fortunate to have had the opportunity
to learn from him, and I am honored to lead the next phase of
growth at Target.
Our future success depends on our continued ability to fulfill our
Expect More. Pay Less. brand promise with passion and discipline,
and deliver outstanding value for our guests, team members,
shareholders and communities. To maintain our unique position in
the marketplace, we must consistently deliver the differentiated
brand experience that has driven our success for decades.
Our legacy of balancing continuous innovation with skillful
execution positions us well for the challenges of the future. We
know we cannot meet our guests’ needs tomorrow by providing
the same solutions we offer today. While the guardrails of our
strategy remain firm, we recognize the importance of having the
flexibility and foresight to continually adjust and refine our tactics,
and take the calculated risks that will make us faster, more efficient
and better able to offer a differentiated shopping experience that will
ensure our relevance as we grow.
We remain firmly focused on our brand promise as we strive for
continuous improvement in everything we do.
• To ensure we are offering the right products when and where
our guests want them, we are working to balance our overall
efficiency with the unique needs of our guests by
effectively segmenting our supply chain and assortments with
localized strategies.
• To drive continued profitable market share growth, we are
committed to efficient expense management with focused
attention on both delivering results today and preparing for
our future.
• And to provide a consistent flowof fresh, unexpected merchandise
at incredible values, we continue to enhance our exclusive owned
brands, signature national brands and designer assortments.
As we move into the next chapter of our growth, we remain proud
of our heritage and excited about our future. We know we have
the right strategy for Target. We value the strength of our brand,
and the talent of our team. Our collective passion for our guests,
team members, shareholders and communities makes us uniquely
Target —and will guide us toward a successful future built on our
successful past.
Sincerely,
Gregg Steinhafel, President
Board of Directors Changes
During the past year, Warren Staley, Chairman and Chief Executive Officer of Cargill, Inc. retired from our board of directors. We thank Warren for his
contributions during his six years of service. Also during the past year, we welcomed to our board Mary Dillon, Executive Vice President & Global Chief
Marketing Officer of McDonald’s Corp., and Derica Rice, Senior Vice President & Chief Financial Officer of Eli Lilly & Company.
10
uniquely:
Uniquely Relevant
In this increasingly competitive retail landscape, we strive to remain
relevant to our guests by surprising and delighting them with
a constant flow of affordable new merchandise, an evolving
store design that meets their changing shopping needs, and a
convenient array of products and services that includes food,
pharmacy and Starbucks.
Throughout our stores, guests continue to discover a wide
assortment of signature national brands, unique owned brands
and new design partnerships that are unmistakably Target and
make great design more accessible:
• Our 2007 limited-time-only GO International designers included
Proenza Schouler, Patrick Robinson, Libertine, Alice Temperley
and Erin Fetherston. In accessories, we introduced exclusive
assortments by Devi Kroell, Dominique Cohen and Holly Dunlap.
• Further raising the bar on great fashion at an exceptional price,
we formed an innovative, exclusive partnership with Converse.
Converse One Star is aimed at the 25–35-year-old guest who
has great personal style and wants an authentic brand. The line
includes clothing and shoes for men and women, and shoes
for kids.
• In home, we offer guests decorating and entertaining solutions
that match their styles and budgets. We offer great basics as
well as the right balance of quality, trend-right products through
partnerships with designers like Thomas O’Brien, Victoria Hagan
and DwellStudio for Target. Our signature brands like Fieldcrest
offer high quality at exceptional values.
• In early 2008, we launched mix-and-match patio furniture in
Garden Place. With a wide selection of coordinating chairs, tables,
umbrellas and accessories, this innovative concept allows our
guests to build personalized patio collections that satisfy individual
lifestyle needs at the right price.
• In electronics in 2008, we will continue to expand our assortment
of digital TVs and accessories, offering more features, sizes and
price points. And as social gaming continues to grow in popularity,
we’ll make sure we have the latest in interactive gaming selections
that fit our guests’ needs.
Whether in home, apparel, accessories or electronics, we continue
to delight our guests with offerings they will only find at Target.
11
What’s good for our guests
We know our guests value natural and organic offerings, and our
Long Live Happy campaign positions Target as a resource for our
guests’ health and wellness needs throughout the entire store.
In early 2008, we intensified our focus on providing food solutions
that are simple to understand, contribute to health and wellness
and are easy for our guests to shop. In addition to organics, we
highlight key health and wellness categories, including natural,
fat modified, sugar modified, whole grain, portion controlled and
“super foods,” like Archer Farms dried blueberries, believed to
provide important health benefits because of their unique nutritional
value. Our guests can also rely on all Archer Farms products to
contain zero grams of added trans fat.
Naturals will continue to grow as an important part of our
business. In early 2008, Target introduced new lines in Health &
Beauty, including Kiss My Face, J/A/S/O/N, and Pure & Natural in
addition to expanding our existing relationships with Method, Tom’s
of Maine and Burt’s Bees.
Tastefully original
When it comes to food, we have the same commitment to innovation
and value as we do in our general merchandise categories.
Throughout our assortment, we continue to feature premium
ingredients, unique flavor profiles and innovative packaging—giving
guests even more reasons to make Target their preferred grocery
destination and continuing to drive more frequent visits.
Our team of food scientists and chefs design and develop our
innovative food products, working together from start to finish
creating products that delight our guests.
In addition to healthy food offerings, our guests have come to
expect convenience and innovation in our food selection, such as:
• Nearly all Archer Farms appetizers cook at the same temperature,
making it more convenient to entertain friends and family with
delicious food.
• Archer Farms chips are packaged in easy-to-use, resealable
chip bags.
• Archer Farms cereal boxes contain an innovative easy-to-open
canister, the first of its kind in the breakfast aisle.
Remaining relevant to our guests means
anticipating their needs and providing innovative
solutions for their busy lives.
To get these products to our stores, we already distribute virtually
all dry grocery products through our own distribution network. In
2008 and 2009, we will open two perishable-food distribution
centers. By controlling our food distribution, we can improve
profitability, provide greater supply chain efficiencies and have more
direct control on our overall food strategy. In addition, we’ll be able
to grow our owned-brand foods even faster and provide even
better product freshness.
Owning our business
Target-owned brands provide solutions that meet or exceed the
quality of national brand products at a better value.
Archer Farms leads the industry with innovative premium offerings,
and we offer exceptional value with Market Pantry. We also continue
to expand Choxie, our premium chocolate brand that satisfies
guests with even the most discriminating palates.
In addition to food, our owned-brand apparel and home collections
set us apart from other retailers. We deliver exceptional quality and
great design with brands like Merona, Xhilaration, Target Home
and Room Essentials.
In pharmacy and commodities, guests can locate our Target
brand products right next to the national brands, allowing our busy
guests to easily compare our great quality, assortment and price.
Uniquely Innovative
From local events, such as fireworks displays, to national opportunities
like film festival sponsorships and pop-up stores, our goal is to
present our brand in an unexpected way, building equity and
deepening loyalty with our guests and the communities we serve.
Each week, guests in more than 53 million households read our
weekly circular, which reinforces our Expect More. Pay Less. brand
promise and drives increased traffic to our stores and Target.com.
In addition, we continue to expand the use of new formats, including
e-mail and online versions of the circular.
At Target.com, the services we offer our guests help differentiate
our brand from other online retail sites. Recently, we added several
new features to engage our guests, making both their online and
in-store shopping experiences more enjoyable:
12
In the same way that our guests see Target as
a destination for great, affordable design, we see
an opportunity to position Target as the place to
choose healthy solutions for the entire family.
• Guests can simplify their in-store shopping experience by using
the “Find It at a Target Store” function, which provides item
availability at nearby Target stores.
• Our Target Baby and Club Wedd gift registries remain among
the most popular in the country. Registries can be created and
updated at any time at Target.com, where guests can also find
special items like planning guides and personalized stationery.
• TargetLists, a unique gift and shopping list service, helps guests
create, organize and share gift lists for any special occasion,
and the Gift Finder offers a variety of gift suggestions and prices.
• Target pharmacy guests can manage prescription medications
online for their family —transferring and refilling prescriptions,
locating the nearest Target pharmacy or learning about products
and services to improve their health.
We’re continually looking for fresh ways to make our brand relevant,
fun and iconic, whether online, in stores or in the center of pop culture:
• During Paris Fashion Week, we introduced GO International
design duo Proenza Schouler at one of the most influential and
exclusive fashion boutiques in Europe.
• Without models or a runway, Target pulled off a first-of-its-kind,
two-day holographic Model-less Fashion Show in New York’s
Grand Central Terminal. The event featured men’s, women’s
and maternity collections from designers such as Keanan Duffty,
Erin Fetherston, Liz Lange and Mossimo Giannulli, and handbags
and shoes from limited-time-only accessories designers
Dominique Cohen and Holly Dunlap.
In 2007, we took our commitment to innovation one step further
by offering a GiftCard made of PHA, a 100 percent biodegradable
and compostable material.
As our pipeline of new, bold, surprising ideas continues to
flourish, we will continue to strive for the right balance of innovative
and affordable design and astonishing everyday values.
Uniquely Consistent
In addition to offering affordable design and top-quality products,
the integrity of our brand also relies on our store experience. To
ensure the Target shopping experience is exciting and enjoyable
for our guests on each visit, we work diligently to differentiate
ourselves through a Fast, Fun and Friendly team, reliable in-stocks,
exceptional service and clean, convenient, easy-to-shop stores.
Our ability to deliver an outstanding shopping experience begins
with enthusiastic team members. We offer opportunities for
continuous growth and development, and equip teams with tools
and technology that keep our sales floor well stocked and help
guests find the items they want. We’re also passionate about
delivering superior service by asking our guests, “Can I help you
find something?” and providing a fast checkout experience. Beyond
guest service, we create an inviting shopping environment that
features bright lighting, innovative signing and spacious aisles
inside an aesthetically pleasing exterior design that complements
the local architecture.
We’ve told our guests to expect more from Target, and they do
—on every visit, and in every store. That’s why every element of
the Target shopping experience is designed to satisfy our guests,
deliver on our Expect More. Pay Less. brand promise and reinforce
our unique competitive advantage.
Uniquely Disciplined
Our strategic approach to growth focuses on delivering stores with
the greatest long-term value for the company, while also pursuing
one-of-a-kind opportunities that are essential to extending our
brand presence. By being more selective about the sites we acquire,
Target is not just growing—we are growing smarter.
In 2007, we opened 70 net new general merchandise stores and
33 new SuperTarget locations, bringing the total number of stores
at year end to 1,591. Going forward, we plan to continue to invest
strategically in locations that increase our presence and drive
profitable market share growth.
As we acquire new real estate, our vision will continue to focus
on how to best reach our guests and support our bottom line. With
our flexible approach to design, we enable our stores to fit into the
current surroundings of the community. This flexibility allows us to
pursue an increasing number of sites located in dense urban
markets. Our ongoing refinements to our store prototype grant us
even greater flexibility to meet the needs of our diverse communities.
Given the continued potential for domestic growth, we are not
currently pursuing opportunities for international expansion. We
remain focused on executing our U.S. strategy and are excited to
enter two new markets—Alaska, where two stores are expected
to open in October 2008, and Hawaii, where two stores are planned
to open in March 2009.
13
Supporting our growth
As our store count grows, we’ll continue to deliver a differentiated
shopping experience for our guests by investing in our supply chain,
technology and global workforce. In addition to Target Sourcing
Services, our global sourcing organization, we leverage Target India,
our headquarters extension office in Bangalore, to maximize efficiency
in areas such as systems development, analysis, reporting, auditing
and marketing.
In our supply chain, we continually work to control costs and
ensure our stores are in stock with the products our guests want
and need. In 2007, we opened two distribution centers, and
operated a total of 32 facilities at year end.
To support our growing food business, we are opening two
perishable-food distribution centers —one in Lake City, Florida
(August 2008), and one in Cedar Falls, Iowa (2009) —in addition
to maintaining productive partnerships with key vendors and
wholesalers.
We are also expanding our Target.com online fulfillment
capabilities. In 2009, we expect to complete construction of our
second Target.com fulfillment center in Tucson, Arizona.
Card-carrying guests
The disciplined and strategic approach of the Target Financial
Services team continues to deepen relationships with our guests
and drive profitable sales.
In 2007, we introduced the Target Check Card, a Target-branded
debit-based financial product that provides guests with many of the
same rewards and conveniences enjoyed by our credit card holders.
All Target REDcards—the Target Visa Credit Card, Target Credit
Card and Target Check Card—offer compelling reasons for guests
to shop our stores more often and to spend more on each visit.
Whether it’s the savings our guests receive through Target Rewards
and Target Pharmacy Rewards or the opportunity to contribute to
schools through our Take Charge of Education (TCOE) program,
our REDcards help Target strengthen our relationship with our
guests and reward them for their loyalty while driving sales for our
company. In fact, the average transaction amount for transactions
involving redemption of a Rewards certificate is approximately four
times greater than our average transaction amount.
The full integration of our financial services operation and core
retail business helps ensure that we’re focusing our efforts on
financial products that deliver the most value for our guests and
the company. We remain committed to maintaining our brand
standards and the valuable relationship we have with our guests
through our REDcard programs.
Uniquely Strategic
Delivering the products our guests expect to find in our stores
requires collaborative partnership throughout the company, including
marketing, merchandising, product design and development,
sourcing and store teams. We continue to invest in Target Sourcing
Services to locate the most qualified vendors across the globe,
who can reliably deliver high-quality goods that live up to our guests’
expectations. Our sourcing infrastructure requires continuous
innovation to fulfill our Expect More. Pay Less. brand promise to
our guests while giving us greater control of our brand. We are
leveraging our product design and development processes to
reduce cycle times, increase our speed to market, improve quality
and make great design affordable and accessible to everyone.
Product safety
Target’s vendors around the world are expected to operate efficient,
safe and ethical factories that produce high-quality products. We
continually seek to enhance our product safety and vendor education
efforts, and work closely with our partners to ensure compliance
with our vendor policies and local laws. We have enhanced our
product testing program by implementing multistage testing for
several owned-brand categories, which allows us to test products
earlier and throughout the product life cycle. In addition, we have
shared our knowledge with public officials and key stakeholders
to assist with their efforts to improve overall public safety.
14
Uniquely Responsible
Target is committed to the pursuit of profitable and sustainable
growth, consistent with our unwavering dedication to the social,
environmental and economic well-being of the global community in
which our guests, team members and shareholders live and work.
This commitment reflects a conscious, company-wide dedication
to constant innovation and improvement in everything we do. We
strive to strengthen our communities by giving more than $3 million
each week and hundreds of thousands of volunteer hours in
support of education, the arts and social services. We show respect
for our physical environment through the products we offer, the
facilities we build, the vendors we work with, and the resources
and materials we use.
We are committed to consistently delighting our guests, providing
a workplace that is preferred by our team members and investing
in the communities where we do business to improve the quality of
life. The team members in our stores reflect our local, diverse
communities, and the products on our shelves reflect the many
tastes, cultures and lifestyles of our guests. Our success as a national
retailer comes from strong local roots, and we are committed to
serving and celebrating our communities. Diversity has been one
of our strengths as a company and will continue to be an important
part of our business strategy as we expand into new markets.
Our environmental commitment extends from the products on
our shelves to partnerships with national environmental organizations.
Beyond ensuring compliance with all environmental regulations, we
work to understand our impact and continuously improve our business
practices. For example, in early 2008, Target launched reusable
shopping bags in all of our stores. In 2007, we were named as one
of the 32 participants in the U.S. Green Building Council’s Portfolio
Program pilot, a major step forward for our sustainability efforts.
Since 1946, we have contributed 5 percent of our income to
programs that serve our communities, which today equals more
than $3 million each week. As we grow, we continue to differentiate
ourselves through our commitment to 5 percent giving.
Signature programs include:
• Take Charge of Education, a school fundraising initiative that
has contributed more than $200 million to more than 108,000
schools across the country since its inception in 1997
• Target Field Trips, which fosters learning beyond the classroom
by awarding grants to 1,600 educators nationwide to cover
costs for a field trip related to their curriculum
• Book festivals, local grants for early childhood reading programs,
and partnerships with celebrity authors help raise awareness of
the importance of early childhood reading as a foundation for
lifelong learning
• Sponsorship of more than 1,500 free or reduced-admission days
annually at major cultural institutions across the country, such
as the Brooklyn Museum of Art, the California African American
Museum and The John F. Kennedy Center for the Performing
Arts in Washington, D.C.
• Disaster preparedness and relief through partnerships with
the American Red Cross, The Salvation Army and America’s
Second Harvest
• Target & BLUE, our innovative partnership with law enforcement,
reduces crime and builds safer communities through initiatives
such as National Night Out, and through shared resources and
expertise such as forensic analysis that assists law enforcement
agencies in investigations unrelated to Target
• Target House, which provides free long-term housing for families
whose children are receiving life-saving treatment at St. Jude
Children’s Research Hospital in Memphis, Tennessee
• Local grants through each of our stores that support local early
childhood reading, arts and family violence prevention programs,
and grants through our International Giving Program that help
create accessible, quality educational opportunities for children
worldwide
• Team members across the country regularly offer hands-on help
to more than 7,000 community projects, volunteering hundreds
of thousands of hours of their time and talent each year
Our commitment to social, environmental and economic responsibility
has been integral to our success as a company since we opened
our first Target store in 1962. And while our record of responsibility
is strong, we recognize that there is always more work that can
be done. As we grow, we will continue to find more ways to uniquely
deliver value to our guests, team members, shareholders and
communities for years to come.
No. of Retail Sq. Ft.
Sales per Capita Group Stores (in thousands)
$101–$150
Alabama 18 2,554
Idaho 6 664
Louisiana 13 1,853
New York 58 7,718
Ohio 63 7,798
Oklahoma 10 1,455
Pennsylvania 47 6,039
Rhode Island 3 378
South Carolina 18 2,224
Group Total 236 30,683
$0–$100
Alaska 0 0
Arkansas 6 745
Hawaii 0 0
Kentucky 12 1,383
Maine 4 503
Mississippi 4 489
Vermont 0 0
West Virginia 5 626
Wyoming 2 187
Group Total 33 3,933
Total 1,591 207,945
15
No. of Retail Sq. Ft.
Sales per Capita Group Stores (in thousands)
Over $300
Colorado 38 5,615
Minnesota 71 10,032
North Dakota 4 554
Group Total 113 16,201
$201–$300
Arizona 45 5,800
California 225 28,836
Florida 115 15,701
Illinois 82 11,035
Iowa 21 2,855
Kansas 18 2,450
Maryland 32 4,082
Montana 7 780
Nebraska 14 1,934
Nevada 15 1,863
New Hampshire 8 1,023
Texas 136 18,580
Virginia 49 6,425
Group Total 767 101,364
$151–$200
Connecticut 16 2,093
Delaware 2 268
Georgia 51 6,845
Indiana 32 4,207
Massachusetts 30 3,803
Michigan 57 6,690
Missouri 33 4,321
New Jersey 38 4,925
New Mexico 9 1,024
North Carolina 45 5,852
Oregon 18 2,166
South Dakota 4 417
Tennessee 28 3,464
Utah 11 1,679
Washington 34 3,968
Wisconsin 34 4,042
Group Total 442 55,764
YEAR-END STORE COUNT AND SQUARE FOOTAGE BY STATE
Sales per capita is defined as sales by state divided by state population.
2007 Sales Per Capita
16
2007 2006(a) 2005 2004 2003 2002
Financial Results: (in millions)
Sales $61,471 $57,878 $51,271 $45,682 $40,928 $36,519
Credit card revenues 1,896 1,612 1,349 1,157 1,097 891
Total revenues 63,367 59,490 52,620 46,839 42,025 37,410
Cost of sales 41,895 39,399 34,927 31,445 28,389 25,498
Selling, general and administrative expenses (b) 13,704 12,819 11,185 9,797 8,657 7,505
Credit card expenses 837 707 776 737 722 629
Depreciation and amortization 1,659 1,496 1,409 1,259 1,098 967
Earnings from continuing operations
before interest expense and income taxes (c) 5,272 5,069 4,323 3,601 3,159 2,811
Net interest expense 647 572 463 570 556 584
Earnings from continuing operations before income taxes 4,625 4,497 3,860 3,031 2,603 2,227
Provision for income taxes 1,776 1,710 1,452 1,146 984 851
Earnings from continuing operations $ 2,849 $ 2,787 $ 2,408 $ 1,885 $ 1,619 $ 1,376
Per Share:
Basic earnings per share $ 3.37 $ 3.23 $ 2.73 $ 2.09 $ 1.78 $ 1.52
Diluted earnings per share $ 3.33 $ 3.21 $ 2.71 $ 2.07 $ 1.76 $ 1.51
Cash dividends declared $ .54 $ .46 $ .38 $ .31 $ .27 $ .24
Financial Position: (in millions)
Total assets $44,560 $37,349 $34,995 $32,293 $27,390 $24,506
Capital expenditures $ 4,369 $ 3,928 $ 3,388 $ 3,068 $ 2,738 $ 3,040
Long-term debt, including current portion $16,590 $10,037 $ 9,872 $ 9,538 $11,018 $11,090
Net debt (d) $15,238 $ 9,756 $ 8,700 $ 7,806 $10,774 $10,733
Shareholders’ investment $15,307 $15,633 $14,205 $13,029 $11,132 $ 9,497
Financial Ratios:
Revenues per square foot (e)(f) $ 318 $ 316 $ 307 $ 294 $ 287 $ 281
Comparable-store sales growth (g) 3.0% 4.8% 5.6% 5.3% 4.4% 2.2%
Gross margin rate (% of sales) 31.8% 31.9% 31.9% 31.2% 30.6% 30.2%
SG&A rate (% of sales) 22.3% 22.2% 21.8% 21.4% 21.2% 20.5%
EBIT margin (% of revenues) 8.3% 8.5% 8.2% 7.7% 7.5% 7.5%
Other:
Common shares outstanding (in millions) 818.7 859.8 874.1 890.6 911.8 909.8
Cash flow provided by operations (in millions) $ 4,125 $ 4,862 $ 4,451 $ 3,808 $ 3,188 $ 2,703
Retail square feet (in thousands) 207,945 192,064 178,260 165,015 152,563 140,294
Square footage growth 8.3% 7.7% 8.0% 8.2% 8.8% 11.9%
Total number of stores 1,591 1,488 1,397 1,308 1,225 1,147
General merchandise 1,381 1,311 1,239 1,172 1,107 1,053
SuperTarget 210 177 158 136 118 94
Total number of distribution centers 32 29 26 25 22 16
(a) Consisted of 53 weeks.
(b) Also referred to as SG&A.
(c) Also referred to as EBIT.
(d) Including current portion and short-term notes payable, net of marketable securities of $1,851, $281, $1,172, $1,732, $244 and $357, respectively. Management believes this
measure is a more appropriate indicator of our level of financial leverage because marketable securities are available to pay debt maturity obligations.
(e) Thirteen-month average retail square feet.
(f) In 2006, revenues per square foot were calculated with 52 weeks of revenues (the 53rd week of revenues was excluded) because management believes that these numbers provide a
more useful analytical comparison to other years. Using our revenues for the 53-week year under generally accepted accounting principles, 2006 revenues per square foot were $322.
(g) See definition of comparable-store sales in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Financial Summary – Continuing Operations
10MAR200717463587
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
፤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 2, 2008
OR
អ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6049
TARGET CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-0215170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Nicollet Mall, Minneapolis, Minnesota 55403
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 612/304-6073
Securities Registered Pursuant To Section 12(B) Of The Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, par value $.0833 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ፤ No អ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes អ No ፤
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the
Exchange Act from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ፤ No អ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ፤
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company (as defined in Rule 12b-2 of the Act).
Large accelerated filer ፤ Accelerated filer អ Non-accelerated filer អ Smaller reporting company អ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes អ No ፤
Aggregate market value of the voting stock held by non-affiliates of the registrant on August 4, 2007 was $51,215,093,935,
based on the closing price of $60.51 per share of Common Stock as reported on the New York Stock Exchange-Composite
Index.
Indicate the number of shares outstanding of each of registrant’s classes of Common Stock, as of the latest practicable date.
Total shares of Common Stock, par value $.0833, outstanding at March 11, 2008 were 813,034,094.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Target’s Proxy Statement to be filed on or about April 7, 2008 are incorporated into Part III.
(This page has been left blank intentionally.)
TABL E OF CONT E NT S
PART I
Item 1 Business 4
Item 1A Risk Factors 6
Item 1B Unresolved Staff Comments 6
Item 2 Properties 6
Item 3 Legal Proceedings 7
Item 4 Submission of Matters to a Vote of Security Holders 7
Item 4A Executive Officers 8
PART I I
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities 9
Item 6 Selected Financial Data 10
Item 7 Management’s Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 7A Quantitative and Qualitative Disclosures About Market Risk 21
Item 8 Financial Statements and Supplementary Data 22
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 48
Item 9A Controls and Procedures 48
Item 9B Other Information 48
PART I I I
Item 10 Directors, Executive Officers and Corporate Governance 49
Item 11 Executive Compensation 49
Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 49
Item 13 Certain Relationships and Related Transactions, and Director
Independence 49
Item 14 Principal Accountant Fees and Services 49
PART I V
Item 15 Exhibits and Financial Statement Schedules 50
Signatures 52
Schedule II – Valuation and Qualifying Accounts 53
Exhibit Index 54
Exhibit 12 – Computations of Ratios of Earnings to Fixed Charges for each of the Five
Years in the Period Ended February 2, 2008 55
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PART I
Item 1. Business
General
Target Corporation (the Corporation or Target) was incorporated in Minnesota in 1902. We operate large-
format general merchandise and food discount stores in the United States, which include Target and
SuperTarget stores. We offer both everyday essentials and fashionable, differentiated merchandise at
exceptional prices. Our ability to deliver a shopping experience that is preferred by our guests is supported by
our strong supply chain and technology infrastructure, a devotion to innovation that is ingrained in our
organization and culture, and our disciplined approach to managing our current business and investing in
future growth. We operate as a single business segment.
Our credit card operations represent an integral component of our core retail business. Through our
branded proprietary credit card and debit card products (REDcards), we strengthen the bond with our guests,
drive incremental sales and contribute meaningfully to earnings. We also operate a fully integrated online
business, Target.com. Although Target.com is small relative to our overall size, its sales are growing at a much
more rapid pace than our in-store sales, and it provides important benefits to our stores and credit card
operations.
We are committed to consistently delighting our guests, providing a workplace that is preferred by our
team members and investing in the communities where we do business to improve the quality of life. We
believe that this unwavering focus, combined with disciplined execution of the fundamentals of our strategy,
will enable us to continue generating profitable market share growth and delivering superior shareholder
value for many years to come.
Financial Highlights
Our fiscal year ends on the Saturday nearest January 31. Unless otherwise stated, references to years in
this report relate to fiscal years, rather than to calendar years. Fiscal year 2007 (2007) ended February 2, 2008
and consisted of 52 weeks. Fiscal year 2006 (2006) ended February 3, 2007 and consisted of 53 weeks. Fiscal
year 2005 (2005) ended January 28, 2006 and consisted of 52 weeks.
For information on key financial highlights, see the items referenced in Item 6, Selected Financial Data,
and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this
Form 10-K.
Seasonality
Due to the seasonal nature of our business, a substantially larger share of total annual revenues and
earnings occur in the fourth quarter because it includes the peak sales period from Thanksgiving to the end of
December.
Merchandise
We operate Target general merchandise stores with a wide assortment of general merchandise and a
limited assortment of food items, as well as SuperTarget stores with a full line of food and general merchandise
items. Target.com offers a wide assortment of general merchandise including many items found in our stores
and a complementary assortment, such as extended sizes and colors, sold only online. A significant portion of
our sales is from national brand merchandise. In addition, we sell merchandise under private-label brands
including, but not limited to, Archer Farmsᓼ, Boots & Barkleyᓼ, Choxieᓼ, Circoᓼ, Durabuiltȶ, Embarkᓼ,
Gilligan & O’Malleyᓼ, Home and Bullseye Design, Kaoriȶ, Market Pantryᓼ, Meronaᓼ, Playwonderᓼ, ProSpiritᓼ,
Trutechᓼ and Xhilarationᓼ. We also sell merchandise through unique programs such as ClearRx
SM
, Global
Bazaar and GO Internationalᓼ. In addition, we also sell merchandise under licensed brands including, but not
limited to, C9 by Champion, Converse, Chefmate, Cherokee, Eddie Bauer, Fieldcrest, Genuine Kids by Osh
Kosh, Isaac Mizrahi for Target, Kitchen Essentials by Calphalon, Liz Lange for Target, Michael Graves Design,
Mossimo, Nick & Nora, Perfect Pieces by Victoria Hagan, Sean Conway, Simply Shabby Chic, Smith &
Hawken, Sonia Kashuk, Thomas O’Brien, Waverly and Woolrich. We also generate revenue from in-store
amenities such as Food Avenueᓼ, Target Clinic
SM
, Target Pharmacy
SM
, and Target Photo
SM
, and from leased or
licensed departments such as Optical, Pizza Hut, Portrait Studio and Starbucks.
4
For 2007, 2006 and 2005, percentage of sales by product category were as follows:
Percentage of Sales
Category
2007 2006 2005
Consumables and commodities 34% 32% 30%
Electronics, entertainment, sporting goods and toys 22 23 23
Apparel and accessories 22 22 22
Home furnishings and d´ ecor 19 19 20
Other 3 4 5
Total 100% 100% 100%
Distribution
The vast majority of our merchandise is distributed through a network of 32 distribution centers. General
merchandise is shipped to and from our distribution centers by common carriers. Certain food items are
distributed by third parties. Merchandise sold through Target.com is distributed through our own distribution
network, through third parties, or shipped directly from vendors.
Employees
At February 2, 2008, we employed approximately 366,000 full-time, part-time and seasonal employees,
referred to as ‘‘team members.’’ During our peak sales period from Thanksgiving to the end of December, our
employment levels peaked at approximately 396,000 team members. We consider our team member
relations to be good. We offer a broad range of company-paid benefits to our team members, including a
pension plan, 401(k) plan, medical and dental plans, a retiree medical plan, short-term and long-term
disability insurance, paid vacation, tuition reimbursement, various team member assistance programs, life
insurance and merchandise discounts. Eligibility for, and the level of, these benefits varies depending on team
members’ full-time or part-time status and/or length of service.
Working Capital
Because of the seasonal nature of our business, our working capital needs are greater in the months
leading up to our peak sales period from Thanksgiving to the end of December. The increase in working
capital during this time is typically financed with cash flow from operations and short-term borrowings.
Additional details are provided in the Liquidity and Capital Resources section in Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
Competition
Our business is conducted under highly competitive conditions. Our stores compete with national and
local department, specialty, off-price, discount, supermarket and drug store chains, independent retail stores
and Internet businesses that sell similar lines of merchandise. We also compete with other companies for new
store sites.
We believe the principal methods of competing in this industry include brand recognition, customer
service, store location, differentiated offerings, value, quality, fashion, price, advertising, depth of selection
and credit availability.
Intellectual Property
Our brand image is a critical element of our business strategy. Our principal trademarks, including Target,
SuperTarget and our ‘‘Bullseye Design,’’ have been registered with the U.S. Patent and Trademark Office.
Geographic Information
Substantially all of our revenues are generated in, and long-lived assets are located in, the United States.
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Available Information
Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are
available free of charge at www.Target.com (click on ‘‘Investors’’ and ‘‘SEC Filings’’) as soon as reasonably
practicable after we file such material with, or furnish it to, the Securities and Exchange Commission (SEC).
Our Corporate Governance Guidelines, Business Conduct Guide, Corporate Responsibility Report and the
position descriptions for our Board of Directors and Board committees are also available free of charge in print
upon request or at www.Target.com (click on ‘‘Investors’’ and ‘‘Corporate Governance’’).
Item 1A. Risk Factors
A description of risk factors and cautionary statements relating to forward-looking information is included
in Exhibit (99)A to this Form 10-K, which is incorporated herein by reference.
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 2. Properties
The following table lists our retail stores as of February 2, 2008:
Retail Sq. Ft. Retail Sq. Ft.
State Number of Stores (in thousands) State Number of Stores (in thousands)
Alabama 18 2,554 Montana 7 780
Alaska — — Nebraska 14 1,934
Arizona 45 5,800 Nevada 15 1,863
Arkansas 6 745 New Hampshire 8 1,023
California 225 28,836 New Jersey 38 4,925
Colorado 38 5,615 New Mexico 9 1,024
Connecticut 16 2,093 New York 58 7,718
Delaware 2 268 North Carolina 45 5,852
Florida 115 15,701 North Dakota 4 554
Georgia 51 6,845 Ohio 63 7,798
Hawaii — — Oklahoma 10 1,455
Idaho 6 664 Oregon 18 2,166
Illinois 82 11,035 Pennsylvania 47 6,039
Indiana 32 4,207 Rhode Island 3 378
Iowa 21 2,855 South Carolina 18 2,224
Kansas 18 2,450 South Dakota 4 417
Kentucky 12 1,383 Tennessee 28 3,464
Louisiana 13 1,853 Texas 136 18,580
Maine 4 503 Utah 11 1,679
Maryland 32 4,082 Vermont — —
Massachusetts 30 3,803 Virginia 49 6,425
Michigan 57 6,690 Washington 34 3,968
Minnesota 71 10,032 West Virginia 5 626
Mississippi 4 489 Wisconsin 34 4,042
Missouri 33 4,321 Wyoming 2 187
Total 1,591 207,945
6
The following table summarizes the number of owned or leased stores and distribution centers at
February 2, 2008:
Distribution
Stores Centers
Owned 1,352 26
Leased 73 5
Combined (a) 166 1
Total 1,591 32 (b)
(a) Properties within the ‘‘combined’’ category are primarily owned buildings on leased land.
(b) The 32 distribution centers have a total of 45,069 thousand square feet.
We own our corporate headquarters buildings located in Minneapolis, Minnesota, and we lease and own
additional office space in the United States. Our international sourcing operations have 34 office locations in
24 countries, all of which are leased. We also lease office space in Bangalore, India, where we operate various
support functions. Our properties are in good condition, well maintained and suitable to carry on our
business.
For additional information on our properties see also (1) Capital Expenditures section in Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations and (2) Note 12 and
Note 21 of the Notes to Consolidated Financial Statements in Item 8, Financial Statements and
Supplementary Data.
Item 3. Legal Proceedings
SEC Rule S-K Item 103 requires that companies disclose environmental legal proceedings involving a
governmental authority when such proceedings involve potential monetary sanctions of $100,000 or more.
We are a party to an administrative action by governmental authorities involving environmental matters that
may involve potential monetary sanctions in excess of $100,000. The allegation made by the California
Environmental Protection Agency Air Resources Board (CARB) involves a non-food product (windshield wiper
fluid) we formerly sold that allegedly contained levels of a volatile organic compound in excess of permissible
levels. The allegation was made in March 2006 and we expect the sanctions for this matter will not exceed
$200,000. In addition, we are one of many defendants in a lawsuit filed on February 13, 2008, by the state of
California involving environmental matters that may involve potential monetary sanctions in excess of
$100,000. The allegation, initially made by CARB in April 2006, involves a non-food product (hairspray) sold
that contained levels of a volatile organic compound in excess of permissible levels. We anticipate that the
settlement, to be fully indemnified by the vendor, is likely to exceed $100,000. For a description of other legal
proceedings see Note 17.
The American Jobs Creation Act of 2004 requires SEC registrants to disclose if they have been required
to pay certain penalties for failing to disclose to the Internal Revenue Service their participation in listed
transactions. We have not been required to pay any of the penalties set forth in Section 6707A(e)(2) of the
Internal Revenue Code.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
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Item 4A. Executive Officers
The executive officers of Target as of March 11, 2008 and their positions and ages are as follows:
Name Title Age
Timothy R. Baer Executive Vice President, General Counsel and Corporate Secretary 47
Michael R. Francis Executive Vice President, Marketing 45
John D. Griffith Executive Vice President, Property Development 46
Jodeen A. Kozlak Executive Vice President, Human Resources 44
Troy H. Risch Executive Vice President, Stores 40
Janet M. Schalk Executive Vice President and Chief Information Officer 49
Douglas A. Scovanner Executive Vice President and Chief Financial Officer 52
Terrence J. Scully President, Target Financial Services 55
Gregg W. Steinhafel President and Director 53
Robert J. Ulrich Chairman of the Board, Chief Executive Officer, Chairman of the Executive
Committee and Director 64
Effective May 1, 2008, Robert Ulrich will retire as Chief Executive Officer (CEO). Gregg Steinhafel was
named by the Board of Directors to succeed Mr. Ulrich as CEO. Mr. Ulrich will remain as Chairman of the Board
through the end of fiscal 2008.
Each officer is elected by and serves at the pleasure of the Board of Directors. There is neither a family
relationship between any of the officers named and any other executive officer or member of the Board of
Directors, nor is there any arrangement or understanding pursuant to which any person was selected as an
officer. The period of service of each officer in the positions listed and other business experience for the past
five years is listed below.
Timothy R. Baer Executive Vice President, General Counsel and Corporate Secretary since
March 2007. Senior Vice President, General Counsel and Corporate Secretary
from June 2004 to March 2007. Senior Vice President from April 2004 to
May 2004. Vice President from February 2002 to March 2004.
Michael R. Francis Executive Vice President, Marketing since February 2003.
John D. Griffith Executive Vice President, Property Development since February 2005. Senior
Vice President, Property Development from February 2000 to January 2005.
Jodeen A. Kozlak Executive Vice President, Human Resources since March 2007. Senior Vice
President, Human Resources from February 2006 to March 2007. Vice President,
Human Resources and Employee Relations General Counsel from
November 2005 to February 2006. From June 2001 to November 2005 Ms. Kozlak
held several positions in Employee Relations at Target.
Troy H. Risch Executive Vice President, Stores since September 2006. Group Vice President
from September 2005 to September 2006. Group Director from February 2002 to
September 2005.
Janet M. Schalk Executive Vice President and Chief Information Officer since March 2007. Senior
Vice President and Chief Information Officer from September 2005 to March 2007.
Vice President, Application Development from November 2004 to
September 2005. Director, Target Technology Services from July 1997 to
November 2004.
Douglas A. Scovanner Executive Vice President and Chief Financial Officer since February 2000.
Terrence J. Scully President, Target Financial Services since March 2003.
Gregg W. Steinhafel Director since January 2007. President since August 1999.
Robert J. Ulrich Chairman of the Board, Chief Executive Officer, Chairman of the Executive
Committee and Director of Target since 1994.
8
PART I I
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Our common stock is listed on the New York Stock Exchange under the symbol ‘‘TGT.’’ We are authorized
to issue up to 6,000,000,000 shares of common stock, par value $.0833, and up to 5,000,000 shares of
preferred stock, par value $.01. At March 11, 2008, there were 18,128 shareholders of record. Dividends
declared per share and the high and low closing common stock price for each fiscal quarter during 2007 and
2006 are disclosed in Note 28.
The following table presents information with respect to purchases of Target common stock made during
the three months ended February 2, 2008, by Target or any ‘‘affiliated purchaser’’ of Target, as defined in
Rule 10b-18(a)(3) under the Exchange Act.
Approximate
Total Number of Dollar Value of
Shares Purchased Shares that May
Total Number Average as Part of Yet Be Purchased
of Shares Price Paid Publicly Announced Under the
Period Purchased per Share Program Program
November 4, 2007 through
December 1, 2007 15,930,679 $56.78 15,930,679 $ 9,095,504,320
December 2, 2007 through January 5,
2008 2,193,723 57.63 18,124,402 8,969,071,915
January 6, 2008 through February 2,
2008 8,327,032 49.76 26,451,434 8,554,709,076
Total 26,451,434 $54.64 26,451,434 $8,554,709,076
In November 2007, our Board of Directors authorized the repurchase of $10 billion of our common stock. We intend to complete this share
repurchase program within approximately three years through open market transactions and other means. Under the right combination of
business results, liquidity and share price, we would expect to complete half, or more, of this program by the end of 2008. Since the
inception of this share repurchase program, we have repurchased a total of 26.5 million shares of our common stock for a total cash
investment of $1,445 million ($54.64 per share). All shares repurchased during the quarter were under the November 2007 authorization.
The table above excludes shares of common stock reacquired from team members who tendered owned shares to satisfy the exercise
price on stock option exercises or tax withholding on equity awards as part of our long-term incentive plans. In the fourth quarter of 2007, no
shares were acquired pursuant to our long-term incentive plans.
The table above includes shares reacquired upon settlement of prepaid forward contracts. In the fourth quarter of 2007, 0.8 million shares
were reacquired through these contracts. The details of our long positions in prepaid forward contracts are provided in Note 26.
The table above excludes the $331 million of net premiums paid on the purchase and sale of call options on our common stock in the fourth
quarter of 2007. Refer to Note 24 for further details of these contracts.
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Comparison of Cumulative Five Year Total Return
2003 2004 2005 2006 2007 2008
D
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(
$
)
Peer Group
S&P 500 Index
Target
50
100
150
250
200
Fiscal Years Ended
February 1, January 31, January 29, January 28, February 3, February 2,
2003 2004 2005 2006 2007 2008
Target $100.00 $135.54 $182.47 $198.11 $226.33 $210.03
S&P 500 Index 100.00 134.57 142.95 157.79 181.97 178.69
Peer Group 100.00 130.86 142.71 147.71 166.79 153.65
The graph above compares the cumulative total shareholder return on our common stock for the last five
fiscal years with the cumulative total return on the S&P 500 Index and a peer group consisting of the
companies comprising the S&P 500 Retailing Index and the S&P 500 Food and Staples Retailing Index (Peer
Group) over the same period. The Peer Group index consists of 40 general merchandise, food and drug
retailers and is weighted by the market capitalization of each component company. The graph assumes the
investment of $100 in Target common stock, the S&P 500 Index and the Peer Group on February 1, 2003 and
reinvestment of all dividends.
Item 6. Selected Financial Data
2007 2006(a) 2005 2004 2003 2002
Financial Results: (millions)
Total revenues $63,367 $59,490 $52,620 $46,839 $42,025 $37,410
Earnings from continuing operations $ 2,849 $ 2,787 $ 2,408 $ 1,885 $ 1,619 $ 1,376
Net Earnings $ 2,849 $ 2,787 $ 2,408 $ 3,198 $ 1,809 $ 1,623
Per Share:
Basic earnings per share $ 3.37 $ 3.23 $ 2.73 $ 2.09 $ 1.78 $ 1.52
Diluted earnings per share $ 3.33 $ 3.21 $ 2.71 $ 2.07 $ 1.76 $ 1.51
Cash dividends declared $ .54 $ .46 $ .38 $ .31 $ .27 $ .24
Financial Position: (millions)
Total assets $44,560 $37,349 $34,995 $32,293 $27,390 $24,506
Long-term debt, including current portion $16,590 $10,037 $ 9,872 $ 9,538 $11,018 $11,090
(a) Consisted of 53 weeks.
10
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Executive Summary
Fiscal 2007, a 52 week period, was a year of slower sales and earnings growth for Target than in our
recent past. Net earnings increased 2.2 percent to $2,849 million, and on this same basis, diluted earnings per
share rose 3.9 percent to $3.33. Sales increased 6.2 percent, including comparable-store sales (as defined
below) growth of 3.0 percent. The shorter fiscal year in 2007 adversely impacted sales growth by
1.9 percentage points but had no impact on comparable-store sales growth. The combination of retail and
credit card operations produced earnings before interest expense and income taxes of $5,272 million, an
increase of 4.0 percent from 2006.
Net cash provided by operating activities was $4,125 million for 2007. During 2007 we repurchased
46.2 million shares of our common stock for a total investment of $2,642 million. Additionally, we paid
dividends of $442 million and invested $331 million in call options on our own common stock. We also opened
118 new stores in 2007, or 103 stores net of 14 relocations and one closing.
Management’s Discussion and Analysis is based on our Consolidated Financial Statements in Item 8,
Financial Statements and Supplementary Data.
Analysis of Results of Operations
Revenues and Comparable-Store Sales
Sales include merchandise sales, net of expected returns, from our stores and our online business, as
well as gift card breakage. Refer to Note 2 for a definition of gift card breakage. Total revenues include sales
and credit card revenues. Total revenues do not include sales tax as we consider ourselves a pass-through
conduit for collecting and remitting sales taxes. Comparable-store sales are sales from our online business
and sales from general merchandise and SuperTarget stores open longer than one year, including:
• sales from stores that have been remodeled or expanded while remaining open
• sales from stores that have been relocated to new buildings of the same format within the same trade
area, in which the new store opens at about the same time as the old store closes
Comparable-store sales do not include:
• sales from general merchandise stores that have been converted, or relocated within the same trade
area, to a SuperTarget store format
• sales from stores that were intentionally closed to be remodeled, expanded or reconstructed
Comparable-store sales increases or decreases are calculated by comparing sales in current year periods
with comparable prior fiscal-year periods of equivalent length. The method of calculating comparable-store
sales varies across the retail industry.
Revenue Growth 2007 2006 2005
Comparable-store sales 3.0% 4.8% 5.6%
Sales(a) 6.2% 12.9% 12.2%
Credit card revenues(a) 17.6% 19.5% 16.5%
Total revenues(a) 6.5% 13.1% 12.3%
(a) 2006 consisted of 53 weeks.
In 2007, a 52-week year following a 53-week year, total revenues were $63,367 million compared with
$59,490 in 2006, an increase of 6.5 percent. Total revenue growth was attributable to the opening of new
stores, a comparable-store sales increase of 3.0 percent and a 17.6 percent increase in credit card revenues.
These factors were partially offset by the impact of an extra week in 2006.
Comparable-store sales growth in 2007 was primarily attributable to growth in average transaction
amount. Comparable-store sales growth in 2006 was attributable to growth in average transaction amount
and the number of transactions in comparable stores. In each of the past several years, our comparable-store
sales growth has experienced a modest negative impact due to the transfer of sales to new stores. In 2007,
there was a deflationary impact of approximately 2 percent on sales growth compared with a deflationary
impact of 1 percent in 2006. In 2008, we expect sales growth to increase in the 8 to 9 percent range, reflecting
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the continued contribution from new stores and an expected comparable store sales increase in the range of 2
to 3 percent. We do not expect inflation/deflation to have a significant effect on sales growth in 2008.
Beginning in 2007, we changed our definition of comparable-store sales to include sales from our online
business because we believe this combined measure represents a more useful disclosure in light of our fully
integrated, multi-channel approach to our business.
Gross Margin Rate
Gross margin rate represents gross margin (sales less cost of sales) as a percentage of sales. See Note 3
for a description of expenses included in cost of sales.
In 2007, our consolidated gross margin rate was 31.8 percent compared with 31.9 percent in 2006. Within
our gross margin rate for the year, we experienced a deterioration in markup due to sales mix. Markup is the
difference between an item’s cost and its retail price (expressed as a percentage of its retail price). Factors that
affect markup include vendor offerings and negotiations, vendor income, sourcing strategies, market forces
like the cost of raw materials and freight, and competitive influences. Markdowns are the reduction in the
original or previous price of retail merchandise. Factors that affect markdowns include inventory management
and competitive influences. The definition and method of calculating markup, markdowns and gross margin
varies across the retail industry.
In 2006, our consolidated gross margin rate was 31.9 percent compared with 31.9 percent in 2005. Within
our gross margin rate for 2006, we experienced an increase in markup, which was offset by an increase in
markdowns.
In 2008 we expect our gross margin rate to decrease modestly from 2007.
Selling, General and Administrative Expense Rate
Our selling, general and administrative (SG&A) expense rate represents SG&A expenses as a percentage
of sales. See Note 3 for a description of expenses included in SG&A expenses. SG&A expenses exclude
depreciation and amortization, as well as expenses associated with our credit card operations, which are
reflected separately in our Consolidated Statements of Operations.
In 2007 our SG&A expense rate was 22.3 percent compared with 22.2 percent in 2006. Within SG&A
expenses in 2007 there were no expense categories that experienced a significant fluctuation in expenses as a
percentage of sales, when compared with 2006.
In 2006, our SG&A expense rate was 22.2 percent compared with 21.8 percent in 2005. This increase was
primarily due to higher store payroll costs, the year-over-year impact of reduced transition services income
related to our 2004 divestiture of Mervyn’s and the $27 million Visa/MasterCard settlement that reduced SG&A
expense in 2005.
In 2008, we expect our SG&A expense rate to be approximately equal to our 2007 rate.
Credit Card Contribution
We offer credit to qualified guests through our REDcard products, the Target Visa and the Target Card.
Our credit card program strategically supports our core retail operations and remains an important contributor
to our overall profitability. Our credit card revenues are comprised of finance charges, late fees and other
revenues. In addition, we receive fees from merchants who accept the Target Visa credit card. Effective
February 2007, we redefined Credit Card Contribution to Earnings Before Taxes (EBT) to exclude intra-
company merchant fees and include the effect of new account and loyalty rewards discounts as expenses of
our credit card programs. We have reclassified prior period amounts to conform to the current year disclosure.
These changes were made to better facilitate comparison of our credit card results to the performance of other
bank card portfolios and to better facilitate comparison of our core retail operations to other retailers who have
sold their credit card portfolios to third parties. These reclassifications had no effect on our Consolidated
Statements of Operations. In 2007, our net credit card revenues increased primarily due to an 18.1 percent
increase in average receivables, combined with a moderate increase in the yield on those receivables. Late
fees and other revenue of $422 million benefited from a change in terms for the Target Card portfolio.
Our credit card operations are allocated a portion of consolidated interest expense based on estimated
funding costs for average net accounts receivable and other financial services assets. Our allocation
methodology assumes that 90 percent of the sum of average net receivables and other financial services
assets are debt-financed with a mix of fixed rate and variable rate debt in proportion to the mix of fixed and
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variable rate financial services assets. The majority of our credit card portfolio earns interest at variable rates;
thus, the majority of the interest allocation to the credit card business is at rates that are determined based
upon our approximate variable rate cost of borrowed funds.
Credit card expenses include a bad debt provision, as well as operations and marketing expenses
supporting our credit card portfolio. In 2007 versus 2006, our bad debt provision increased relative to our
average receivables balance due to higher net write-offs experienced during the year as write-offs returned to
a more normalized level.
In 2006 versus 2005, our bad debt provision decreased relative to our average receivables balance due to
the favorable write-off experience and continued strength of the overall credit quality of the portfolio. Our 2006
year-end reserve balance as a percentage of average receivables increased as we reserved for the expected
increase in future write-offs. Our delinquency rates increased in the last quarter of 2006 as compared with
2005 as we cycled the effects of the October 2005 federal bankruptcy legislation and experienced the effects
of the mandated increases in minimum payments for certain guests. Operations and marketing expenses
increased primarily due to the growth of the Target Visa portfolio.
In 2007, our credit card operations’ contribution to earnings before income taxes (EBT) was $600 million,
a 20.8 percent increase from 2006. The favorability in credit card contribution was attributable to strong
growth in both net interest income and non-interest income partially offset by an increase in bad debt
expense.
In 2006, our credit card operations’ contribution to earnings before income taxes (EBT) was $497 million,
a 83.5 percent increase from 2005. The favorability in credit card contribution was attributable to strong
growth in net interest income and the year-over-year reduction in bad debt expense.
Our receivables balance grew at a very strong pace in the second half of 2007, and while we expect that
this sequential growth is behind us, we will continue to enjoy the benefit of this growth on a year-over-year
basis in the first half of 2008. Our EBT yields will likely remain at industry-leading levels, although not likely fully
achieving the record levels set in 2007, especially in the first half of the year. We expect 60+ day delinquency
rates to remain stable throughout 2008 at recent levels, in the range of 4 percent, and our annualized net
write-offs as a percentage of average receivables, as we report them quarterly, are not likely to rise much
above 7 percent.
Credit Card Contribution to EBT
(millions) 2007 2006 2005
Revenues
Finance charges $1,308 $1,117 $ 915
Interest expense (330) (286) (193)
Net interest income 978 831 722
Late fees and other revenues 422 356 310
Third-party merchant fees 166 139 124
New account and loyalty rewards discounts (a) (113) (107) (96)
Non-interest income 475 388 338
Net credit card revenues 1,453 1,219 1,060
Expenses
Bad debt provision 481 380 466
Operations and marketing 356 327 310
Allocated depreciation charge (b) 16 15 13
Total expenses 853 722 789
Credit card contribution to EBT $ 600 $ 497 $ 271
As a percentage of average receivables 8.3% 7.9% 4.9%
Net interest margin (c) 13.4% 13.2% 13.0%
(a) Primarily consists of new account and loyalty rewards program discounts on our REDcard products, which are included as
reductions of sales in our Consolidated Statements of Operations.
(b) Included in depreciation and amortization in our Consolidated Statements of Operations.
(c) Net interest income divided by average accounts receivable.
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Receivables
(millions) 2007 2006 2005
Year-end receivables $8,624 $6,711 $6,117
Average receivables $7,275 $6,161 $5,544
Accounts with three or more payments (60+ days) past due as a
percentage of year-end receivables 4.0% 3.5% 2.8%
Accounts with four or more payments (90+ days) past due as a percentage
of year-end receivables 2.7% 2.4% 1.9%
Allowance for Doubtful Accounts
(millions) 2007 2006 2005
Allowance at beginning of year $ 517 $ 451 $ 387
Bad debt provision 481 380 466
Net write-offs (428) (314) (402)
Allowance at end of year $ 570 $ 517 $ 451
As a percentage of year-end receivables 6.6% 7.7% 7.4%
Net write-offs as a percentage of average receivables 5.9% 5.1% 7.2%
We offer new account discounts and rewards programs on our REDcard products. These discounts and
rewards are redeemable only on purchases made at Target. The discounts associated with our REDcard
products are included as reductions in sales in our Consolidated Statements of Operations and were
$108 million, $104 million and $97 million in 2007, 2006 and 2005, respectively.
Depreciation and Amortization
In 2007, depreciation and amortization expense totaled $1,659 million, an increase of 10.9 percent. The
increase was due to increased capital expenditures, specifically related to investments in new stores. In 2006,
depreciation and amortization expense increased 6.1 percent, to $1,496 million. During 2006, we adjusted the
period over which we amortize leasehold acquisition costs to match the expected terms for individual leases,
resulting in a cumulative benefit to depreciation and amortization expense of approximately $28 million. We
expect 2008 depreciation and amortization expense to be approximately $1.9 billion.
Net Interest Expense
In 2007, net interest expense was $647 million compared with $572 million in 2006, an increase of
13.2 percent. This increase related to higher average debt balances, including the debt to fund growth in
accounts receivable, partially offset by the benefit of one less week. The average portfolio interest rate was
6.1 percent in 2007 and 6.2 percent in 2006.
In 2006, net interest expense was $572 million compared with $463 million in 2005, an increase of
23.4 percent. This increase related primarily to growth in the cost of funding our credit card operations and
was also unfavorably impacted by the 53
rd
week in 2006. The average portfolio interest rate was 6.2 percent in
2006 and 5.9 percent in 2005.
Our 2008 net interest expense is expected to increase due to significantly higher average net debt
balances.
Provision for Income Taxes
Our effective income tax rate was 38.4 percent in 2007, 38.0 percent in 2006 and 37.6 percent in 2005.
The increase in 2007 was primarily due to the less favorable impact that capital market returns had on certain
book to tax differences during 2007, compared to the more favorable returns in 2006. Our lower 2005 effective
rate was due to the favorable resolution of various tax matters in 2005. We do not expect our 2008 effective
income tax rate to change significantly from 2007.
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Analysis of Financial Condition
Liquidity and Capital Resources
Our financial condition remains strong. In assessing our financial condition, we consider factors such as
cash flows provided by operations, capital expenditures and debt service obligations. Cash flow provided by
operations was $4,125 million in 2007 compared with $4,862 million in 2006, primarily due to significantly
greater growth in Target Visa accounts receivable and an investment in inventory growth, net of accounts
payable.
We continue to fund our growth and execute our share repurchase program through a combination of
internally generated funds and debt financing.
Our year-end gross receivables were $8,624 million compared with $6,711 million in 2006, an increase of
28.5 percent. This growth was driven by many factors, including a product change from proprietary Target
Cards to higher-limit Target Visa cards for a group of higher credit-quality Target Card Guests and the impact
of an industry-wide decline in payment rates. Average receivables in 2007 increased 18.1 percent. Given the
significant rate of growth of receivables in 2007, we expect that our average receivables balance during the
first half of 2008 will be significantly greater than that in 2007. Additionally, absent product changes for
additional Target Card holders in 2008, we expect that our year end 2008 receivable balance will rise only
modestly.
Year-end inventory levels increased $525 million, or 8.4 percent, reflecting the natural increase required to
support additional square footage and comparable-store sales growth. This growth was partially funded by an
increase in accounts payable over the same period.
During 2007, we repurchased 46.2 million shares of our common stock for a total cash investment of
$2,642 million ($57.24 per share). Of these repurchases, 26.5 million shares of our common stock for a total
cash investment of $1,445 million ($54.64 per share) were made under a $10 billion share repurchase plan
authorized by our Board of Directors in November 2007. We intend to complete this new share repurchase
program within approximately three years through open market transactions and other means. Under the right
combination of business results, liquidity and share price, we would expect to complete half, or more, of this
new program by the end of 2008. The remaining shares repurchased in 2007 were under the prior program.
Under the prior program that was originally approved in June 2004 and amended in November 2005 and
June 2007, we repurchased a total of 90.7 million shares of our common stock for a total investment of
$4,646 million ($51.20 per share) from June 2004 through November 2007. Additionally, in the fourth quarter
of 2007, we purchased and sold a series of call options at a net cost of $331 million on 30 million shares of our
common stock. The options expire in the first and second quarters of 2008. Refer to Note 24 for further details
of these instruments.
In 2006 we repurchased 19.5 million shares for a total investment of $977 million ($50.16 per share).
During 2007 and 2006 some of the shares repurchased were delivered upon the settlement of prepaid
forward contracts. The details of prepaid forward contract settlements and our long positions in prepaid
forward contracts have been provided in Note 24 and Note 26.
In 2007 we declared dividends of $.54 per share totaling $454 million, an increase of 14.6 percent over
2006. In 2006 we declared dividends of $.46 per share totaling $396 million, an increase of 18.6 percent over
2005. We have paid dividends every quarter since our first dividend was declared following our 1967 initial
public offering, and it is our intent to continue to do so in the future.
We believe that cash flows from operations, together with current levels of cash and cash equivalents,
proceeds from borrowings and/or the potential sale of some or all of our receivables, will be sufficient in 2008
to fund planned capital expenditures, dividends, share repurchases, growth in receivables, maturities of
long-term debt, seasonal inventory buildup and other cash requirements.
Our financing strategy is to ensure liquidity and access to capital markets, to manage our net exposure to
floating interest rate volatility and to maintain a balanced spectrum of debt maturities. Within these
parameters, we seek to minimize our cost of borrowing.
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Maintaining strong investment-grade debt ratings is a key part of our strategy. Our debt ratings as of
February 2, 2008 were as follows:
Standard and Debt Ratings
Moody’s Poor’s Fitch
Long-term debt A2 A+ A
Commercial paper P-1 A-1 F1
Securitized receivables Aaa AAA n/a
As described in Note 18, during 2007 we issued $6,750 million of long-term debt, and we issued
$1,900 million of Variable Funding Certificates backed by credit card receivables through the Target Credit
Card Master Trust. As of February 2, 2008, $1,500 million of the Variable Funding Certificates were
outstanding. Further liquidity is provided by a committed $2 billion unsecured revolving credit facility obtained
through a group of banks in April 2007, which will expire in April 2012. No balances were outstanding at any
time during 2007 or 2006 under this or previously existing revolving credit facilities. Most of our long-term debt
obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our
credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these
covenants. At February 2, 2008, no notes or debentures contained provisions requiring acceleration of
payment upon a debt rating downgrade, except that certain outstanding notes allow the note holders to put
the notes to us if within a matter of months of each other we experience both (a) a change in control and
(b) our long-term debt ratings are either reduced and the resulting rating is non-investment grade, or our long-
term debt ratings are placed on watch for possible reduction and those ratings are subsequently reduced and
the resulting rating is non-investment grade.
Our interest coverage ratio represents the ratio of pre-tax earnings before fixed charges (interest expense
and the interest portion of rent expense) to fixed charges. Our interest coverage ratio calculated as prescribed
by Securities and Exchange Commission (SEC) rules was 6.4x, 7.1x, and 7.2x in 2007, 2006 and 2005,
respectively.
Capital Expenditures
Capital expenditures were $4,369 million in 2007 compared with $3,928 million in 2006 and $3,388 million
in 2005. This increase was primarily attributable to continued new store expansion. Approximately
$1,404 million of 2007 capital expenditures is related to stores that will open in 2008 and later years. Net
property and equipment increased $2,664 million in 2007 following an increase of $2,393 million in 2006.
Percentage of Capital Expenditures
Capital Expenditures
2007 2006 2005
New stores 71% 61% 60%
Remodels and expansions 7 12 12
Information technology, distribution and other 22 27 28
Total 100% 100% 100%
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In 2008, we expect to invest $4.5 billion to $4.7 billion in capital expenditures, including investments in
approximately 116 new stores, adding about 95 new locations, net of relocations and closings, and two
distribution centers that will open in 2008.
February 2, February 3, Number of Stores
2008 Opened Closed (a) 2007
Target general merchandise stores 1,381 85 15 1,311
SuperTarget stores 210 33 — 177
Total 1,591 118 15 1,488
Retail Square Feet (b)
(thousands)
Target general merchandise stores 170,858 11,621 1,569 160,806
SuperTarget stores 37,087 5,829 — 31,258
Total 207,945 17,450 1,569 192,064
(a) Includes 14 store relocations in the same trade area and 1 store closed without replacement.
(b) Reflects total square feet, less office, distribution center and vacant space.
Commitments and Contingencies
At February 2, 2008, our contractual obligations were as follows:
Contractual Obligations
Payments Due by Period
Less than 1-3 3-5 After 5
(millions) Total 1 Year Years Years Years
Long-term debt (a) $ 16,726 $ 1,951 $ 3,487 $ 2,358 $ 8,930
Interest payments – long-term
debt (b) 12,314 922 1,619 1,299 8,474
Capital lease obligations 232 12 32 33 155
Operating leases (c) 3,694 239 360 252 2,843
Deferred compensation 662 176 148 125 213
Real estate obligations 1,078 856 220 2 —
Purchase obligations 663 351 303 9 —
Contractual cash obligations $ 35,369 $ 4,507 $ 6,169 $ 4,078 $ 20,615
(a) Required principal payments only. Excludes Statement of Financial Accounting Standards No. 133, ‘‘Accounting for Derivative
Instruments and Hedging Activities,’’ fair market value adjustments recorded in long-term debt. Includes $500 million of short-term
borrowings that are due in the first quarter of 2008.
(b) Includes payments on $2,400 million of floating rate debt secured by credit card receivables, $500 million of which matures in 2008,
$900 million of which matures in 2010, and $1,000 million of which matures in 12 monthly installments beginning in May 2012. These
payments are calculated assuming rates of approximately 3.3 percent, based on presumed LIBOR of 3.15 percent plus a spread, for
each year outstanding. Excludes payments received or made related to interest rate swaps. The fair value of outstanding interest rate
swaps has been provided in Note 20.
(c) Total contractual lease payments include $1,721 million of lease payments related to options to extend the lease term that are
reasonably assured of being exercised and also includes $98 million of legally binding minimum lease payments for stores opening
in 2008 or later. Refer to Note 21 for a further description of leases.
Note: Tax contingencies of $571 million, including interest and penalties, are not included in the table above because we are not
able to make reasonably reliable estimates of the period of cash settlement.
Real estate obligations include commitments for the purchase, construction or remodeling of real estate
and facilities. Purchase obligations include all legally binding contracts such as firm minimum commitments
for inventory purchases, merchandise royalties, purchases of equipment, marketing-related contracts,
software acquisition/license commitments and service contracts.
We issue inventory purchase orders in the normal course of business, which represent authorizations to
purchase that are cancelable by their terms. We do not consider purchase orders to be firm inventory
commitments; therefore, they are excluded from the table above. We also issue trade letters of credit in the
ordinary course of business, which are excluded from this table as these obligations are conditional on the
purchase order not being cancelled. If we choose to cancel a purchase order, we may be obligated to
reimburse the vendor for unrecoverable outlays incurred prior to cancellation.
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We have not included obligations under our pension and postretirement health care benefit plans in the
contractual obligations table above. Our historical practice regarding these plans has been to contribute
amounts necessary to satisfy minimum pension funding requirements plus periodic discretionary amounts
determined to be appropriate. Further information on these plans, including our expected contributions for
2008, is included in Note 27.
We have not provided any material financial guarantees as of February 2, 2008. We have not created and
are not party to any off-balance sheet entities for the purpose of raising capital, incurring debt or operating our
business. We do not have any arrangements or relationships with entities that are not consolidated into the
financial statements that are reasonably likely to materially affect our liquidity or the availability of capital
resources.
Critical Accounting Estimates
Our analysis of operations and financial condition is based on our consolidated financial statements,
prepared in accordance with U.S. generally accepted accounting principles (GAAP). Preparation of these
consolidated financial statements requires us to make estimates and assumptions affecting the reported
amounts of assets and liabilities at the date of the financial statements, reported amounts of revenues and
expenses during the reporting period and related disclosures of contingent assets and liabilities. In the Notes
to Consolidated Financial Statements, we describe the significant accounting policies used in preparing the
consolidated financial statements. Our estimates are evaluated on an ongoing basis and are drawn from
historical experience and other assumptions that we believe to be reasonable under the circumstances.
Actual results could differ under different assumptions or conditions. Our senior management has discussed
the development and selection of our critical accounting estimates with the Audit Committee of our Board of
Directors. The following items in our consolidated financial statements require significant estimation or
judgment:
Inventory and cost of sales We use the retail inventory method to account for substantially all of our
inventory and the related cost of sales. Under this method, inventory is stated at cost using the last-in, first-out
(LIFO) method as determined by applying a cost-to-retail ratio to each merchandise grouping’s ending retail
value. Cost includes the purchase price as adjusted for vendor income. Since inventory value is adjusted
regularly to reflect market conditions, our inventory methodology reflects the lower of cost or market. We
reduce inventory for estimated losses related to shrink and markdowns. Our shrink estimate is based on
historical losses verified by ongoing physical inventory counts. Historically our actual physical inventory count
results have shown our estimates to be reliable. Markdowns designated for clearance activity are recorded
when the salability of the merchandise has diminished. Inventory is at risk of obsolescence if economic
conditions change. Examples of relevant economic conditions include shifting consumer demand, changing
consumer credit markets or increasing competition. We believe these risks are largely mitigated because
substantially all of our inventory turns in less than six months. Inventory is further described in Note 10.
Vendor income receivable Cost of sales and SG&A expenses are partially offset by various forms of
consideration received from our vendors. This ‘‘vendor income’’ is earned for a variety of vendor-sponsored
programs, such as volume rebates, markdown allowances, promotions and advertising, as well as for our
compliance programs. We establish a receivable for the vendor income that is earned but not yet received.
Based on provisions of the agreements in place, this receivable is computed by estimating when we have
completed our performance and the amount earned. We perform detailed analyses to determine the
appropriate level of the receivable in aggregate. The majority of all year-end receivables associated with these
activities are collected within the following fiscal quarter. Vendor income is described further in Note 4.
Allowance for doubtful accounts When receivables are recorded, we recognize an allowance for doubtful
accounts in an amount equal to anticipated future write-offs. This allowance includes provisions for
uncollectible finance charges and other credit fees. We estimate future write-offs based on delinquencies, risk
scores, aging trends, industry risk trends and our historical experience. Substantially all accounts continue to
accrue finance charges until they are written off. Accounts are automatically written off when they become
180 days past due. Management believes the allowance for doubtful accounts is adequate to cover
anticipated losses in our credit card accounts receivable under current conditions; however, significant
deterioration in any of the factors mentioned above or in general economic conditions could materially
change these expectations. Historically, our allowance for doubtful accounts has been sufficient to cover
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actual credit losses, and we believe that the allowance recorded at February 2, 2008 is also sufficient to cover
anticipated losses. Accounts receivable is described in Note 9.
Analysis of long-lived and intangible assets for impairment We review assets at the lowest level for which
there are identifiable cash flows, usually at the store level. The carrying amount of assets is compared with the
expected undiscounted future cash flows to be generated by those assets over their estimated remaining
economic lives. If the undiscounted cash flows are less than the carrying amount of the asset, the asset is
written down to fair value. Impairment testing of intangibles requires a comparison between the carrying value
and the fair value. Discounted cash flow models are used in determining fair value for the purposes of the
required annual impairment analysis. No material impairments were recorded in 2007, 2006 or 2005 as a
result of the tests performed.
Insurance/self-insurance We retain a substantial portion of the risk related to certain general liability,
workers’ compensation, property loss and team member medical and dental claims. Liabilities associated
with these losses include estimates of both claims filed and losses incurred but not yet reported. We estimate
our ultimate cost based on an analysis of historical data and actuarial estimates. General liability and workers’
compensation liabilities are recorded at our estimate of their net present value; other liabilities are not
discounted. We believe that the amounts accrued are adequate, although actual losses may differ from the
amounts provided. We maintain stop-loss coverage to limit the exposure related to certain risks. Refer to
Item 7A for further disclosure of the market risks associated with our insurance policies.
Income taxes We pay income taxes based on the tax statutes, regulations and case law of the various
jurisdictions in which we operate. Significant judgment is required in determining income tax provisions and in
evaluating the ultimate resolution of tax matters in dispute with tax authorities. Historically, our assessments of
the ultimate resolution of tax issues have been materially accurate. The current open tax issues are not
dissimilar in size or substance from historical items. We believe the resolution of these matters will not have a
material impact on our consolidated financial statements. Income taxes are described further in Note 22.
Pension and postretirement health care accounting We fund and maintain a qualified defined benefit
pension plan. We also maintain several smaller nonqualified plans and a postretirement health care plan for
certain current and retired team members. The costs for these plans are determined based on actuarial
calculations using the assumptions described in the following paragraphs.
Our expected long-term rate of return on plan assets is determined by the composition of our asset
portfolio, our historical long-term investment performance and current market conditions.
The discount rate used to determine benefit obligations is adjusted annually based on the interest rate for
long-term high-quality corporate bonds as of the measurement date using yields for maturities that are in line
with the duration of our pension liabilities. Historically, this same discount rate has also been used to
determine pension and postretirement health care expense for the following plan year. Effective February 4,
2007, we adopted the measurement date provisions of SFAS No. 158, ‘‘Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R)’’ (SFAS 158), as discussed below in the 2007 Adoptions section. The discount rates used to determine
benefit obligations and benefits expense are included in Note 27. The amount of benefits expense recorded
during the year is partially dependent upon the discount rates used, and a 0.1 percent increase to the
weighted average discount rate used to determine pension and postretirement health care expenses would
decrease annual expense by approximately $1 million.
Based on our experience, we use a graduated compensation growth schedule that assumes higher
compensation growth for younger, shorter-service pension-eligible team members than it does for older,
longer-service pension-eligible team members. In 2007, we increased the assumed rate of compensation
increase by 0.25 percentage points for the purpose of calculating the February 2, 2008 benefit obligation,
which increased the net periodic benefit cost for 2007 by approximately $2 million.
Pension and postretirement health care benefits are further described in Note 27.
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New Accounting Pronouncements
2007 Adoptions
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 158. SFAS 158
requires sponsors of defined benefit pension and other postretirement benefit plans (collectively
postretirement benefit plans) to recognize the funded status of their postretirement benefit plans in the
statement of financial position, measure the fair value of plan assets and benefit obligations as of the date of
the fiscal year-end statement of financial position and provide additional disclosures. We adopted the
recognition and disclosure provisions of SFAS 158 during 2006. We adopted the SFAS 158 measurement date
provision at the beginning of the first quarter of 2007, and the details of our adoption of this provision are
described in Note 27.
In July 2006, the FASB issued FASB Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes –
an interpretation of FASB Statement No. 109’’ (FIN 48). FIN 48 prescribes the financial statement recognition
and measurement criteria for tax positions taken in a tax return, clarifies when tax benefits should be recorded
and how they should be classified in financial statements and requires certain disclosures of uncertain tax
matters. We adopted the provisions of FIN 48 at the beginning of the first quarter of 2007, and the details of our
adoption of FIN 48 are described in Note 22.
At the beginning of the first quarter of 2007, we adopted the FASB’s Emerging Issues Task Force Issue
No. 06-5, ‘‘Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in
Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance’’ and recorded
a $4 million increase to other noncurrent assets, with a corresponding increase to retained earnings of
$4 million.
2008 and Future Adoptions
In September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value Measurement’’ (SFAS 157). SFAS 157
defines fair value, provides guidance for measuring fair value in U.S. generally accepted accounting principles
and expands disclosures about fair value measurements. SFAS 157 will be effective at the beginning of fiscal
2008 for financial assets and liabilities and at the beginning of fiscal 2009 for nonfinancial assets and liabilities.
The adoption of this statement will not have a material impact on our consolidated net earnings, cash flows or
financial position.
In February 2007, the FASB issued SFAS No. 159, ‘‘The Fair Value Option for Financial Assets and
Financial Liabilities’’ (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments
and certain other items at fair value. SFAS 159 will be effective at the beginning of fiscal 2008. The adoption of
this statement will not have a material impact on our consolidated net earnings, cash flows or financial
position.
In December 2007, the FASB issued SFAS No. 141(R), ‘‘Business Combinations’’ (SFAS 141(R)), which
changes the accounting for business combinations and their effects on the financial statements. SFAS 141(R)
will be effective at the beginning of fiscal 2009. The adoption of this statement is not expected to have a
material impact on our consolidated net earnings, cash flows or financial position.
In December 2007, the FASB issued SFAS No. 160, ‘‘Accounting and Reporting of Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51’’ (SFAS 160). SFAS 160
requires entities to report non-controlling interests in subsidiaries as equity in their consolidated financial
statements. SFAS 160 will be effective at the beginning of fiscal 2009. The adoption of this statement is not
expected to have a material impact on our consolidated net earnings, cash flows or financial position.
Forward-Looking Statements
This report, including the preceding Management’s Discussion and Analysis, contains forward-looking
statements regarding our performance, financial position, liquidity and adequacy of capital resources.
Forward-looking statements are typically accompanied by the words ‘‘expect,’’ ‘‘may,’’ ‘‘could,’’ ‘‘believe,’’
‘‘would,’’ ‘‘might,’’ ‘‘anticipates,’’ or words of similar import. The forward-looking statements in this report
include the anticipated impact of new and proposed accounting pronouncements, the expected outcome of
pending and threatened litigation, our expectations with respect to our share repurchase program and our
outlook in fiscal 2008. Forward-looking statements are based on our current assumptions and expectations
and are subject to certain risks and uncertainties that could cause actual results to differ materially from those
20
projected. We caution that the forward-looking statements are qualified by the risks and challenges posed by
increased competition (including the effects of competitor liquidation activities), shifting consumer demand,
changing consumer credit markets, changing wages, health care and other benefit costs, shifting capital
markets and general economic conditions, hiring and retaining effective team members, sourcing
merchandise from domestic and international vendors, investing in new business strategies, changes in the
political or regulatory environment, the outbreak of war or pandemics and other significant national and
international events, and other risks and uncertainties. As a result, although we believe there is a reasonable
basis for the forward-looking statements, you should not place undue reliance on those statements. You are
encouraged to review Exhibit (99)A to this Form 10-K, which contains additional important factors that may
cause actual results to differ materially from those predicted in the forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk results primarily from interest rate changes on our debt obligations and on
our credit card receivables, the majority of which are assessed finance charges at a prime-based floating rate.
To manage our net interest margin, we generally maintain levels of floating-rate debt to generate similar
changes in net interest expense as finance charge revenues fluctuate. Our degree of floating asset and liability
matching may vary over time and vary in different interest rate environments. At February 2, 2008, our level of
floating-rate credit card assets exceeded our level of net floating-rate debt obligations by approximately
$1.4 billion. As a result, based on our balance sheet position at February 2, 2008, the annualized effect of a
one percentage point decrease in floating interest rates on our interest rate swap agreements and other
floating rate debt obligations, net of our floating rate credit card assets and marketable securities, would be to
decrease earnings before income taxes by approximately $14 million. See further description in Note 20 and
Note 29.
We record our general liability and workers’ compensation liabilities at net present value; therefore, these
liabilities fluctuate with changes in interest rates. Periodically and in certain interest rate environments, we
economically hedge a portion of our exposure to these interest rate changes by entering into interest rate
forward contracts that partially mitigate the effects of interest rate changes. Based on our balance sheet
position at February 2, 2008, the annualized effect of a one percentage point decrease in interest rates would
be to decrease earnings before income taxes by approximately $16 million.
In addition, we are exposed to fluctuations of market returns on our qualified defined benefit pension and
nonqualified defined contribution plans. The annualized effect of a one percentage point decrease in the
return on pension plan assets would decrease plan assets by $22 million at February 2, 2008. The resulting
impact on net pension expense would be calculated consistent with the provisions of SFAS No. 87,
‘‘Employers’ Accounting for Pensions.’’ The value of our pension liabilities is inversely related to changes in
interest rates. To protect against declines in interest rates we hold high-quality, long-duration bonds and
interest rate swaps in our pension plan trust. At year end, we had hedged approximately 50 percent of the
interest rate exposure of our funded status. See further description in Note 27.
As more fully described in Note 13 and Note 26, we are exposed to market returns on accumulated team
member balances in our nonqualified, unfunded deferred compensation plans. We control our risk of offering
the nonqualified plans by making investments in life insurance contracts and prepaid forward contracts on our
own common stock that offset a substantial portion of our economic exposure to the returns on these plans.
The annualized effect of a one percentage point change in market returns on our nonqualified defined
contribution plans (inclusive of the effect of the investment vehicles used to manage our economic exposure)
would not be significant.
We do not have significant direct exposure to foreign currency rates as all of our stores are located in the
United States, and the vast majority of imported merchandise is purchased in U.S. dollars.
Overall, there have been no material changes in our primary risk exposures or management of market
risks since the prior year.
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1APR200416063806
Item 8. Financial Statements and Supplementary Data
Report of Management on the Consolidated Financial Statements
Management is responsible for the consistency, integrity and presentation of the information in the Annual Report.
The consolidated financial statements and other information presented in this Annual Report have been prepared in
accordance with accounting principles generally accepted in the United States and include necessary judgments and
estimates by management.
To fulfill our responsibility, we maintain comprehensive systems of internal control designed to provide reasonable
assurance that assets are safeguarded and transactions are executed in accordance with established procedures. The
concept of reasonable assurance is based upon recognition that the cost of the controls should not exceed the benefit
derived. We believe our systems of internal control provide this reasonable assurance.
The Board of Directors exercised its oversight role with respect to the Corporation’s systems of internal control
primarily through its Audit Committee, which is comprised of four independent directors. The Committee oversees the
Corporation’s systems of internal control, accounting practices, financial reporting and audits to assess whether their
quality, integrity and objectivity are sufficient to protect shareholders’ investments.
In addition, our consolidated financial statements have been audited by Ernst & Young LLP, independent registered
public accounting firm, whose report also appears on this page.
Robert J. Ulrich Douglas A. Scovanner
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
March 11, 2008
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
The Board of Directors and Shareholders
Target Corporation
We have audited the accompanying consolidated statements of financial position of Target Corporation and
subsidiaries (the Corporation) as of February 2, 2008 and February 3, 2007, and the related consolidated statements of
operations, cash flows, and shareholders’ investment for each of the three years in the period ended February 2, 2008. Our
audits also included the financial statement schedule listed in Item 15(a). These financial statements and schedule are the
responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements
and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Target Corporation and subsidiaries at February 2, 2008 and February 3, 2007, and the consolidated
results of their operations and their cash flows for each of the three years in the period ended February 2, 2008, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 27, Pension and Postretirement Health Care Benefits, to the consolidated financial statements,
effective February 3, 2007, the Corporation adopted the recognition and disclosure provisions of Statement of Financial
Accounting Standards 158, ‘‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106, and 132(R).’’ Also, effective February 4, 2007, the Corporation adopted
the measurement provision of SFAS 158, ‘‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).’’ In addition, as discussed in Note 22, Income
Taxes, effective February 4, 2007, the Corporation adopted the provisions of FASB Interpretation No. 48, ‘‘Accounting for
Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109’’.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Corporation’s internal control over financial reporting as of February 2, 2008, based on criteria established in
Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 11, 2008, expressed an unqualified opinion thereon.
Minneapolis, Minnesota
March 11, 2008
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1APR200416064753
1APR200416063806
Report of Management on Internal Control
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we assessed the effectiveness of our internal control over
financial reporting as of February 2, 2008, based on the framework in Internal Control—Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we conclude that the
Corporation’s internal control over financial reporting is effective based on those criteria.
Our internal control over financial reporting as of February 2, 2008, has been audited by Ernst & Young LLP, the
independent registered accounting firm who has also audited our consolidated financial statements, as stated in their
report which appears on this page.
Robert J. Ulrich Douglas A. Scovanner
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
March 11, 2008
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
The Board of Directors and Shareholders
Target Corporation
We have audited Target Corporation and subsidiaries’ (the Corporation) internal control over financial reporting as of
February 2, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Corporation’s management is responsible
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company, (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company, and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as
of February 2, 2008, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated statements of financial position of Target Corporation and subsidiaries as of February 2, 2008
and February 3, 2007, and the related consolidated statements of operations, cash flows and shareholders’ investment for
each of the three years in the period ended February 2, 2008, and our report dated March 11, 2008, expressed an
unqualified opinion thereon.
Minneapolis, Minnesota
March 11, 2008
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Consolidated Statements of Operations
(millions, except per share data) 2007 2006 2005
Sales $61,471 $57,878 $51,271
Credit card revenues 1,896 1,612 1,349
Total revenues 63,367 59,490 52,620
Cost of sales 41,895 39,399 34,927
Selling, general and administrative expenses 13,704 12,819 11,185
Credit card expenses 837 707 776
Depreciation and amortization 1,659 1,496 1,409
Earnings before interest expense and income taxes 5,272 5,069 4,323
Net interest expense 647 572 463
Earnings before income taxes 4,625 4,497 3,860
Provision for income taxes 1,776 1,710 1,452
Net earnings $ 2,849 $ 2,787 $ 2,408
Basic earnings per share $ 3.37 $ 3.23 $ 2.73
Diluted earnings per share $ 3.33 $ 3.21 $ 2.71
Weighted average common shares outstanding
Basic 845.4 861.9 882.0
Diluted 850.8 868.6 889.2
See accompanying Notes to Consolidated Financial Statements.
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Consolidated Statements of Financial Position
February 2, February 3,
(millions, except footnotes) 2008 2007
Assets
Cash and cash equivalents $ 2,450 $ 813
Accounts receivable, net 8,054 6,194
Inventory 6,780 6,254
Other current assets 1,622 1,445
Total current assets 18,906 14,706
Property and equipment
Land 5,522 4,934
Buildings and improvements 18,329 16,110
Fixtures and equipment 3,858 3,553
Computer hardware and software 2,421 2,188
Construction-in-progress 1,852 1,596
Accumulated depreciation (7,887) (6,950)
Property and equipment, net 24,095 21,431
Other noncurrent assets 1,559 1,212
Total assets $44,560 $37,349
Liabilities and shareholders’ investment
Accounts payable $ 6,721 $ 6,575
Accrued and other current liabilities 3,097 3,180
Current portion of long-term debt and notes payable 1,964 1,362
Total current liabilities 11,782 11,117
Long-term debt 15,126 8,675
Deferred income taxes 470 577
Other noncurrent liabilities 1,875 1,347
Shareholders’ investment
Common stock 68 72
Additional paid-in-capital 2,656 2,387
Retained earnings 12,761 13,417
Accumulated other comprehensive loss (178) (243)
Total shareholders’ investment 15,307 15,633
Total liabilities and shareholders’ investment $44,560 $37,349
Common Stock Authorized 6,000,000,000 shares, $.0833 par value; 818,737,715 shares issued and outstanding at February 2, 2008;
859,771,157 shares issued and outstanding at February 3, 2007
Preferred Stock Authorized 5,000,000 shares, $.01 par value; no shares were issued or outstanding at February 2, 2008 or February 3,
2007
See accompanying Notes to Consolidated Financial Statements.
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Consolidated Statements of Cash Flows
(millions) 2007 2006 2005
Operating activities
Net earnings $ 2,849 $ 2,787 $ 2,408
Reconciliation to cash flow
Depreciation and amortization 1,659 1,496 1,409
Share-based compensation expense 73 99 93
Deferred income taxes (70) (201) (122)
Bad debt provision 481 380 466
Loss on disposal of property and equipment, net 28 53 70
Other non-cash items affecting earnings 52 (35) (50)
Changes in operating accounts providing / (requiring) cash:
Accounts receivable originated at Target (602) (226) (244)
Inventory (525) (431) (454)
Other current assets (139) (30) (28)
Other noncurrent assets 101 5 (24)
Accounts payable 111 435 489
Accrued and other current liabilities 62 430 421
Other noncurrent liabilities 124 100 2
Other (79) — 15
Cash flow provided by operations 4,125 4,862 4,451
Investing activities
Expenditures for property and equipment (4,369) (3,928) (3,388)
Proceeds from disposal of property and equipment 95 62 58
Change in accounts receivable originated at third parties (1,739) (683) (819)
Other investments (182) (144) —
Cash flow required for investing activities (6,195) (4,693) (4,149)
Financing activities
Additions to short-term notes payable 1,000 — —
Reductions of short-term notes payable (500) — —
Additions to long-term debt 7,617 1,256 913
Reductions of long-term debt (1,326) (1,155) (527)
Dividends paid (442) (380) (318)
Repurchase of stock (2,477) (901) (1,197)
Premiums on call options (331) — —
Stock option exercises and related tax benefit 210 181 231
Other (44) (5) (1)
Cash flow provided by / (required for) financing activities 3,707 (1,004) (899)
Net increase / (decrease) in cash and cash equivalents 1,637 (835) (597)
Cash and cash equivalents at beginning of year 813 1,648 2,245
Cash and cash equivalents at end of year $ 2,450 $ 813 $ 1,648
Amounts presented herein are on a cash basis and therefore may differ from those shown in other sections of this Annual Report.
Consistent with the provisions of Statement of Financial Accounting Standards (SFAS) No. 95, ‘‘Statement of Cash Flows,’’ cash flows
related to accounts receivable are classified as either an operating activity or an investing activity, depending on their origin.
Cash paid for income taxes was $1,734, $1,823 and $1,448 during 2007, 2006 and 2005, respectively. Cash paid for interest (net of
interest capitalized) was $633, $584 and $468 during 2007, 2006 and 2005, respectively.
See accompanying Notes to Consolidated Financial Statements.
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Consolidated Statements of Shareholders’ Investment
Accumulated Other
Comprehensive
Income/(Loss)
Pension and
Other
Common Stock Additional Benefit Derivative
Stock Par Paid-in Retained Liability Instruments
(millions, except footnotes) Shares Value Capital Earnings Adjustments and Other Total
January 29, 2005 890.6 $74 $1,810 $11,148 $ (7) $ 4 $13,029
Net earnings — — — 2,408 — — 2,408
Other comprehensive income — — — — 1 — 1
Total comprehensive income 2,409
Dividends declared — — — (334) — — (334)
Repurchase of stock (23.1) (2) — (1,209) — — (1,211)
Stock options and awards 6.6 1 311 — — — 312
January 28, 2006 874.1 73 2,121 12,013 (6) 4 14,205
Net earnings — — — 2,787 — — 2,787
Other comprehensive loss, net of
taxes of $5 — — — — (7) — (7)
Total comprehensive income 2,780
Cumulative effect of adopting
SFAS 158, net of taxes of $152 — — — — (234) — (234)
Dividends declared — — — (396) — — (396)
Repurchase of stock (19.5) (2) — (987) — — (989)
Stock options and awards 5.2 1 266 — — — 267
February 3, 2007 859.8 72 2,387 13,417 (247) 4 15,633
Net earnings — — — 2,849 — — 2,849
Other comprehensive income
Pension and other benefit liability
adjustments, net of taxes of $38 — — — — 59 — 59
Unrealized losses on cash flow
hedges, net of taxes of $31 — — — — — (48) (48)
Total comprehensive income 2,860
Cumulative effect of adopting new
accounting pronouncements — — — (31) 54 — 23
Dividends declared — — — (454) — — (454)
Repurchase of stock (46.2) (4) — (2,689) — — (2,693)
Premiums on call options — — — (331) — — (331)
Stock options and awards 5.1 — 269 — — — 269
February 2, 2008 818.7 $68 $2,656 $12,761 $(134) $(44) $15,307
Dividends declared per share were $.54, $.46 and $.38 in 2007, 2006 and 2005, respectively.
See accompanying Notes to Consolidated Financial Statements.
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Notes to Consolidated Financial Statements
1. Summary of Accounting Policies
Organization Target Corporation (the Corporation or Target) operates large-format general merchandise and
food discount stores in the United States and a fully integrated online business, Target.com. Our credit card
operations represent an integral component of our core retail business, strengthening the bond with our
guests, driving incremental sales and contributing meaningfully to earnings. We operate as a single business
segment.
Consolidation The consolidated financial statements include the balances of the Corporation and its
subsidiaries after elimination of intercompany balances and transactions. All material subsidiaries are wholly
owned.
Use of estimates The preparation of our consolidated financial statements in conformity with U.S. Generally
Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions affecting
reported amounts in the consolidated financial statements and accompanying notes. Actual results may differ
significantly from those estimates.
Fiscal year Our fiscal year ends on the Saturday nearest January 31. Unless otherwise stated, references to
years in this report relate to fiscal years, rather than to calendar years. Fiscal year 2007 (2007) ended
February 2, 2008 and consisted of 52 weeks. Fiscal year 2006 (2006) ended February 3, 2007 and consisted of
53 weeks. Fiscal year 2005 (2005) ended January 28, 2006 and consisted of 52 weeks.
Reclassifications Certain prior year amounts have been reclassified to conform to the current year
presentation.
Share-based compensation We estimate the fair value of all share-based awards on the date of grant, which
we define as the date the award is approved by our Board of Directors or, for a limited number of awards to
team members who are not executive officers, the date the award is approved by management with
appropriate delegated authority. The majority of granted awards are nonqualified stock options that vest
annually in equal amounts over a four-year period, and all stock options have an exercise price equal to the fair
market value of our common stock on the date of grant. Generally, we recognize compensation expense for
awards on a straight-line basis over the four-year vesting period. In certain circumstances under our share-
based compensation plans, we allow for the vesting of team member awards to continue post-employment.
For such awards granted subsequent to our adoption of SFAS 123(R) and to the extent the team member
meets certain age and service requirements on the date of grant, we accelerate expense recognition such that
the value of the award is fully expensed over the team member’s minimum service period instead of over the
explicit vesting period. Awards granted prior to the adoption of SFAS 123(R) continue to be expensed over the
explicit vesting period. Additional information related to share-based awards is included in Note 25.
Derivative financial instruments Derivative financial instruments are carried at fair value on the balance
sheet. Our derivative instruments are primarily interest rate swaps that hedge the fair value of certain debt by
effectively converting interest from a fixed rate to a floating rate. These instruments qualify for hedge
accounting, and the associated assets and liabilities are recorded in the Consolidated Statements of Financial
Position. The changes in market value of an interest rate swap, as well as the offsetting change in market value
of the hedged debt, are recognized within earnings in the current period. Ineffectiveness would result when
changes in the market value of the hedged debt are not completely offset by changes in the market value of
the interest rate swap. There was no ineffectiveness recognized in 2007, 2006 or 2005 related to these
instruments. Further information related to interest rate swaps is included in Note 20 and Note 29.
From time to time, we enter into other interest rate derivative financial instruments, including interest rate
locks and interest rate forward contracts. Interest rate locks are used periodically as hedges of the interest rate
risk associated with the anticipated issuance of fixed-rate debt and are typically designated as hedges of
forecasted transactions. Interest rate forward contracts are used to offset a portion of our exposure to our
workers’ compensation and general liability obligations, which are recorded on a discounted basis, and these
instruments are not designated as accounting hedges.
28
Nearly all of our inventory purchases are in U.S. dollars; therefore, we have immaterial foreign currency
hedging activities.
Additionally, we have investments in prepaid forward contracts in our common stock as described in
Note 26. During 2007, we purchased and sold call options on 30 million shares of our common stock as
described in Note 24.
2. Revenues
Our retail stores generally record revenue at the point of sale. Sales from our online business include
shipping revenue and are recorded upon delivery to the guest. Total revenues do not include sales tax as we
consider ourselves a pass through conduit for collecting and remitting sales taxes. Generally, guests may
return merchandise within 90 days of purchase. Revenues are recognized net of expected returns, which we
estimate using historical return patterns. Commissions earned on sales generated by leased departments are
included within sales and were $16 million in 2007, $15 million in 2006 and $14 million in 2005.
Revenue from gift card sales is recognized upon redemption of the gift card. Our gift cards do not have
expiration dates. Based on historical redemption rates, a small and relatively stable percentage of gift cards
will never be redeemed, referred to as ‘‘breakage.’’ Estimated breakage revenue is recognized over a period
of time in proportion to actual gift card redemptions and was immaterial in 2007, 2006 and 2005.
Credit card revenues are recognized according to the contractual provisions of each applicable credit
card agreement. When accounts are written off, uncollected finance charges and late fees are recorded as a
reduction of credit card revenues. Target retail store sales charged to our credit cards totaled $4,105 million,
$3,961 million and $3,655 million in 2007, 2006 and 2005, respectively. We offer new account discounts and
rewards programs on our REDcard products, the Target Visa, Target Card and Target Check Card. These
discounts are redeemable only on purchases made at Target. The discounts associated with our REDcard
products are included as reductions in sales in our Consolidated Statements of Operations and were
$108 million, $104 million and $97 million in 2007, 2006 and 2005, respectively.
3. Cost of Sales and Selling, General and Administrative Expenses
The following table illustrates the primary costs classified in each major expense category:
Cost of Sales Selling, General and Administrative Expenses
Total cost of products sold including Compensation and benefit costs including
• Freight expenses associated with moving • Stores
merchandise from our vendors to our • Headquarters, including buying and
distribution centers and our retail stores, and merchandising
among our distribution and retail facilities • Distribution operations
• Vendor income that is not reimbursement of Occupancy and operating costs of retail,
specific, incremental and identifiable costs distribution and headquarters facilities
Inventory shrink Advertising, offset by vendor income that is a
Markdowns reimbursement of specific, incremental and
Shipping and handling expenses identifiable costs
Terms cash discount Pre-opening costs of stores and other facilities
Other administrative costs
The classification of these expenses varies across the retail industry.
Compensation, benefits and other expenses for buying, merchandising and distribution operations
classified in selling, general and administrative expenses were approximately $1,321 million, $1,274 million
and $1,133 million for 2007, 2006 and 2005, respectively.
4. Consideration Received from Vendors
We receive consideration for a variety of vendor-sponsored programs, such as volume rebates,
markdown allowances, promotions and advertising and for our compliance programs, referred to as ‘‘vendor
income.’’ Vendor income reduces either our inventory costs or selling, general and administrative expenses
based on the provisions of the arrangement. Promotional and advertising allowances are intended to offset
our costs of promoting and selling merchandise in our stores. Under our compliance programs, vendors are
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charged for merchandise shipments that do not meet our requirements (‘‘violations’’), such as late or
incomplete shipments. These allowances are recorded when violations occur. Substantially all consideration
received is recorded as a reduction of cost of sales.
We establish a receivable for vendor income that is earned but not yet received. Based on provisions of
the agreements in place, this receivable is computed by estimating when we have completed our
performance and the amount earned. We perform detailed analyses to determine the appropriate level of the
receivable in the aggregate. The majority of year-end receivables associated with these activities are collected
within the following fiscal quarter.
5. Advertising Costs
Advertising costs are expensed at first showing or distribution of the advertisement and were
$1,195 million, $1,170 million, and $1,028 million for 2007, 2006 and 2005, respectively. Advertising vendor
income that offset advertising expenses was approximately $123 million, $118 million, and $110 million for
2007, 2006 and 2005, respectively. Newspaper circulars and media broadcast made up the majority of our
advertising costs in all three years.
6. Earnings per Share
Basic earnings per share (EPS) is net earnings divided by the weighted average number of common
shares outstanding during the period. Diluted EPS includes the incremental shares assumed to be issued
upon the exercise of stock options and the incremental shares assumed to be issued under performance
share and restricted stock unit arrangements.
Earnings per Share
Basic EPS Diluted EPS
(millions, except per share data) 2007 2006 2005 2007 2006 2005
Net earnings $2,849 $2,787 $2,408 $2,849 $2,787 $2,408
Adjustment for prepaid forward contracts — — — (11) — —
Net earnings for EPS calculation $2,849 $2,787 $2,408 $2,838 $2,787 $2,408
Basic weighted average common shares
outstanding 845.4 861.9 882.0 845.4 861.9 882.0
Incremental stock options, performance
share units and restricted stock units — — — 6.0 6.7 7.2
Adjustment for prepaid forward contracts — — — (0.6) — —
Weighted average common shares
outstanding 845.4 861.9 882.0 850.8 868.6 889.2
Earnings per share $ 3.37 $ 3.23 $ 2.73 $ 3.33 $ 3.21 $ 2.71
For the 2007, 2006 and 2005 EPS computations, 6.3 million, 1.8 million and 4.4 million stock options,
respectively, were excluded from the calculation of weighted average shares for diluted EPS because their
effects were antidilutive. Refer to Note 26 for a description of the prepaid forward contracts referred to in the
table above.
7. Other Comprehensive Income/(Loss)
Other comprehensive income/(loss) includes revenues, expenses, gains and losses that are excluded
from net earnings under GAAP and are recorded directly to shareholders’ investment. In 2007, 2006 and 2005,
other comprehensive income/(loss) included gains and losses on certain hedge transactions, the change in
our minimum pension liability (prior to the adoption of SFAS 158), and amortization of pension and
post-retirement plan amounts, net of related taxes. Significant items affecting other comprehensive income/
(loss) are shown in the Consolidated Statements of Shareholders’ Investment.
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8. Cash Equivalents
Cash equivalents include highly liquid investments with an original maturity of three months or less from
the time of purchase. We carry these investments at cost, which approximates market value. These
investments were $1,851 million and $281 million at February 2, 2008 and February 3, 2007, respectively. Also
included in cash equivalents are proceeds due from credit and debit card transactions with settlement terms
of less than five days. Credit and debit card receivables included within cash equivalents were $367 million
and $355 million at February 2, 2008 and February 3, 2007, respectively.
9. Accounts Receivable
Accounts receivable are recorded net of an allowance for expected losses. The allowance, recognized in
an amount equal to the anticipated future write-offs, was $570 million at February 2, 2008 and $517 million at
February 3, 2007. We estimate future write-offs based on delinquencies, risk scores, aging trends, industry
risk trends and our historical experience. Substantially all accounts continue to accrue finance charges until
they are written off. Total accounts receivable past due ninety days or more and still accruing finance charges
were $235 million at February 2, 2008 and $160 million at February 3, 2007. Accounts are written off when they
become 180 days past due.
As a method of providing funding for our accounts receivable, we sell on an ongoing basis all of our
consumer credit card receivables to Target Receivables Corporation (TRC), a wholly owned, bankruptcy-
remote subsidiary. TRC then transfers the receivables to the Target Credit Card Master Trust (the Trust), which
from time to time will sell debt securities to third parties either directly or through a related trust. These debt
securities represent undivided interests in the Trust assets. TRC uses the proceeds from the sale of debt
securities and its share of collections on the receivables to pay the purchase price of the receivables to Target.
The accounting guidance for such transactions, SFAS No. 140, ‘‘Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (a replacement of SFAS No. 125),’’ requires the inclusion
of the receivables within the Trust and any debt securities issued by the Trust, or a related trust, in our
Consolidated Statements of Financial Position. Notwithstanding this accounting treatment, the receivables
transferred to the Trust are not available to general creditors of Target. Upon termination of the securitization
program and repayment of all debt securities issued from time to time by the Trust, or a related trust, any
remaining assets could be distributed to Target in a liquidation of TRC.
10. Inventory
Substantially all of our inventory and the related cost of sales are accounted for under the retail inventory
accounting method (RIM) using the last-in, first-out (LIFO) method. Inventory is stated at the lower of LIFO cost
or market. Cost includes purchase price as adjusted for vendor income. Inventory is also reduced for
estimated losses related to shrink and markdowns. The LIFO provision is calculated based on inventory
levels, markup rates and internally measured retail price indices. At February 2, 2008 and February 3, 2007,
our inventories valued at LIFO approximate those inventories as if they were valued at FIFO.
Under RIM, the valuation of inventory at cost and the resulting gross margins are calculated by applying a
cost-to-retail ratio to the retail value inventory. RIM is an averaging method that has been widely used in the
retail industry due to its practicality. The use of RIM will result in inventory being valued at the lower of cost or
market since permanent markdowns are currently taken as a reduction of the retail value of inventory.
We routinely enter into arrangements with certain vendors whereby we do not purchase or pay for
merchandise until the merchandise is ultimately sold to a guest. Revenues under this program are included in
sales in the Consolidated Statements of Operations, but the merchandise received under the program is not
included in inventory in our Consolidated Statements of Financial Position because of the virtually
simultaneous timing of our purchase and sale of this inventory. Sales made under these arrangements totaled
$1,390 million, $1,178 million and $872 million for 2007, 2006 and 2005, respectively.
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11. Other Current Assets
Other Current Assets February 2, February 3,
(millions) 2008 2007
Deferred taxes $ 556 $ 427
Vendor income receivable 244 285
Other receivables (a) 353 278
Other 469 455
Total $1,622 $1,445
(a) Other receivables relate primarily to pharmacy receivables and merchandise sourcing services provided to third parties.
12. Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed
using the straight-line method over estimated useful lives or lease term if shorter. We amortize leasehold
improvements purchased after the beginning of the initial lease term over the shorter of the assets’ useful lives
or a term that includes the original lease term plus any renewals that are reasonably assured at the date the
leasehold improvements are acquired. Depreciation expense for 2007, 2006 and 2005 was $1,644 million,
$1,509 million and $1,384 million, respectively. For income tax purposes, accelerated depreciation methods
are generally used. Repair and maintenance costs are expensed as incurred and were $592 million,
$532 million and $474 million in 2007, 2006 and 2005, respectively. Pre-opening costs of stores and other
facilities, including supplies, payroll and other start-up costs for store and other facility openings, are
expensed as incurred.
Estimated useful lives by major asset category are as follows:
Asset Life (in years)
Buildings and improvements 8-39
Fixtures and equipment 3-15
Computer hardware and software 4
Long-lived assets are reviewed for impairment annually and also when events or changes in
circumstances indicate that the asset’s carrying value may not be recoverable. No material impairments were
recorded in 2007, 2006 or 2005 as a result of the tests performed.
13. Other Noncurrent Assets
Other Noncurrent Assets February 2, February 3,
(millions) 2008 2007
Cash value of life insurance (a) $ 578 $ 559
Prepaid pension expense 394 325
Interest rate swaps (b) 215 23
Goodwill and intangible assets 208 212
Other 164 93
Total $1,559 $1,212
(a) Company-owned life insurance policies on approximately 4,000 team members who are designated highly-compensated under the
Internal Revenue Code and have given their consent to be insured.
(b) See Notes 20 and 29 for additional information relating to our interest rate swaps.
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14. Goodwill and Intangible Assets
Goodwill and intangible assets are recorded within other noncurrent assets at cost less accumulated
amortization. Goodwill totaled $60 million at February 2, 2008 and February 3, 2007. Goodwill is not
amortized; instead, it is subject to an annual impairment test. Discounted cash flow models are used in
determining fair value for the purposes of the required annual impairment analysis. No material impairments
were recorded in 2007, 2006 or 2005 as a result of the tests performed. Intangible assets by major classes
were as follows:
Leasehold
Intangible Assets
Acquisition Costs Other (a) Total
Feb. 2, Feb. 3, Feb. 2, Feb. 3, Feb. 2, Feb. 3,
(millions) 2008 2007 2008 2007 2008 2007
Gross asset $181 $187 $111 $ 173 $ 292 $ 360
Accumulated amortization (52) (47) (92) (161) (144) (208)
Net intangible assets $129 $140 $ 19 $ 12 $ 148 $ 152
(a) Other intangible assets relate primarily to acquired trade names and customer lists.
Amortization is computed on intangible assets with definite useful lives using the straight-line method
over estimated useful lives that range from three to 39 years. During 2006, we adjusted the period over which
we amortize leasehold acquisition costs to match the expected terms for individual leases resulting in a
cumulative benefit to amortization expense of approximately $28 million. Amortization expense for 2007, 2006
and 2005 was $15 million, $(13) million and $25 million, respectively. The estimated aggregate amortization
expense of our definite-lived intangible assets for each of the five succeeding fiscal years is as follows:
Amortization Expense
(millions) 2008 2009 2010 2011 2012
Amortization expense $17 $14 $10 $8 $8
15. Accounts Payable
We reclassify book overdrafts to accounts payable at period end. At February 2, 2008 and February 3,
2007, $588 million and $652 million of such overdrafts, respectively, were reclassified to accounts payable.
16. Accrued and Other Current Liabilities
Accrued and Other Current Liabilities February 2, February 3,
(millions) 2008 2007
Wages and benefits $ 727 $ 674
Taxes payable (a) 400 450
Gift card liability (b) 372 338
Construction in process accrual 228 191
Deferred compensation 176 46
Workers’ compensation and general liability 164 154
Interest payable 153 122
Straight-line rent accrual 152 135
Dividends payable 115 103
Income taxes payable 111 422
Other 499 545
Total $3,097 $3,180
(a) Taxes payable consist of real estate, team member withholdings and sales tax liabilities.
(b) Gift card liability represents the amount of gift cards that have been issued but have not been redeemed, net of estimated breakage.
17. Commitments and Contingencies
At February 2, 2008, our obligations included notes and debentures of $16,726 million (further described
in Note 18), excluding swap fair market value adjustments. At February 2, 2008, capital lease obligations were
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$232 million and total future minimum payments of operating leases were $3,694 million. The amount of future
contractual lease payments includes certain options for lease term extension that are reasonably assured of
being exercised in the amount of $1,721 million and $98 million of legally binding minimum lease payments for
stores that will open in 2008 or later (see additional detail in Note 21). Deferred compensation obligations were
$662 million at February 2, 2008. In addition, real estate obligations, including commitments for the purchase,
construction or remodeling of real estate and facilities, were approximately $1,078 million at February 2, 2008.
Purchase obligations, which include all legally binding contracts such as firm commitments for inventory
purchases, merchandise royalties, purchases of equipment, marketing-related contracts, software
acquisition/license commitments and service contracts, were approximately $663 million at February 2, 2008.
We issue inventory purchase orders, which represent authorizations to purchase that are cancelable by their
terms. We do not consider purchase orders to be firm inventory commitments. We also issue trade letters of
credit in the ordinary course of business, which are not firm commitments as they are conditional on the
purchase order not being cancelled. If we choose to cancel a purchase order, we may be obligated to
reimburse the vendor for unrecoverable outlays incurred prior to cancellation under certain circumstances.
Trade letters of credit totaled $1,861 million at February 2, 2008, a portion of which is in accounts payable.
Standby letters of credit, relating primarily to retained risk on our insurance claims, totaled $69 million at
February 2, 2008.
We are exposed to claims and litigation arising in the ordinary course of business and use various
methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and
other constituents. We believe the recorded reserves in our consolidated financial statements are adequate in
light of the probable and estimable liabilities. We do not believe that any of the currently identified claims or
litigation matters will have a material adverse impact on our results of operations, cash flows or financial
condition.
18. Notes Payable and Long-Term Debt
We obtain short-term financing throughout the year under our commercial paper program, a form of
notes payable. Information on this program is as follows:
Commercial Paper
(dollars in millions) 2007 2006
Maximum amount outstanding during the year $1,589 $957
Average amount outstanding during the year $ 404 $273
Amount outstanding at year-end $ — $ —
Weighted average interest rate 5.2% 5.3%
In April 2007, we entered into a five-year $2 billion unsecured revolving credit facility with a group of
banks. The new facility replaced our existing credit agreement and will expire in 2012. No balances were
outstanding at any time during 2007 or 2006 under this or previously existing revolving credit facilities.
We issued various long-term, unsecured debt instruments during 2007 and 2006. Information on these
transactions is as follows:
Issuance of Long-Term Unsecured Debt
(dollars in millions) Amount
2006
5.875% notes due July 2016 $ 750
2007
5.375% notes due May 2017 $1,000
LIBOR plus .125% floating rates notes due August 2009 500
6.5% notes due October 2037 1,250
5.125% notes due January 2013 500
6.0% notes due January 2018 1,250
7.0% notes due January 2038 2,250
Total for 2007 $6,750
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In September 2006, through TRC, we issued $500 million of Variable Funding Certificates (Certificates)
backed by credit card receivables through the Target Credit Card Master Trust. At February 3, 2007, the
outstanding amount of the Certificates was $100 million, and including the Certificates, the total amount of
debt backed by credit card receivables held in the Target Credit Card Master Trust or related trusts was
$1,750 million.
In April 2007, TRC amended its Certificates, and we borrowed an additional $900 million through our
Certificates. In August 2007, through TRC, we borrowed an additional $1 billion through our Certificates,
$500 million of which was repaid before the end of 2007. At February 2, 2008, the outstanding amount of the
Certificates was $1,500 million. During 2007, we repaid $750 million of long-term debt that was backed by
credit card receivables held in the Target Credit Card Master Trust. At February 2, 2008, the total amount of
debt backed by credit card receivables held in the Target Credit Card Master Trust or related trusts, including
the Certificates, was $2,400 million.
Refer to Note 9 for further description of our accounts receivable financing program. Other than debt
backed by our credit card receivables and other immaterial borrowings, all of our outstanding borrowings are
senior, unsecured obligations.
The carrying value and maturities of our debt portfolio, including swap valuation adjustments for our fair
value hedges, was as follows:
Debt Maturities
February 2, 2008 February 3, 2007
(dollars in millions) Rate (a) Balance Rate (a) Balance
Due fiscal 2007-2011 4.9% $ 5,614 6.2% $ 5,931
Due fiscal 2012-2016 4.9 3,893 5.4 2,302
Due fiscal 2017-2021 5.4 2,661 6.8 362
Due fiscal 2022-2026 8.7 64 8.7 64
Due fiscal 2027-2031 6.8 680 6.8 680
Due fiscal 2032-2037 6.8 4,051 6.3 551
Total notes and debentures (b) 5.5 16,963 6.1 9,890
Capital lease obligations 127 147
Less: amounts due within one year (1,964) (1,362)
Long-term debt $15,126 $ 8,675
(a) Reflects the weighted average stated interest rate as of year-end, including the impact of interest rate swaps.
(b) The estimated fair value of total notes and debentures, excluding swap valuation adjustments, using a discounted cash flow analysis
based on our incremental interest rates for similar types of financial instruments, was $17,117 million at February 2, 2008 and
$10,058 million at February 3, 2007. See Note 20 for the estimated fair value of our interest rate swaps.
Required principal payments on notes and debentures over the next five years, excluding capital lease
obligations and fair market value adjustments recorded in long-term debt, are as follows:
Required Principal Payments
(millions) 2008 2009 2010 2011 2012
Required principal payments $1,951 $1,251 $2,236 $107 $2,251
Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a
secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to
remain, in compliance with these covenants.
19. Net Interest Expense
Net Interest Expense
(millions) 2007 2006 2005
Interest expense on debt $736 $635 $524
Interest expense on capital leases 11 11 8
Capitalized interest (78) (49) (42)
Interest income (22) (25) (27)
Net interest expense $647 $572 $463
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20. Derivative Financial Instruments
At February 2, 2008 and February 3, 2007, interest rate swaps were outstanding in notional amounts
totaling $4,575 million and $3,725 million, respectively. The increase in swap exposure was executed to
manage our mix of fixed-rate debt and floating-rate debt.
In 2007, 2006 and 2005, the total net gains amortized into net interest expense for terminated swaps were
$6 million, $9 million, and $8 million, respectively.
Interest Rate
Swaps
Notional Amount Outstanding at
Pay Floating Rate at (a)
(dollars in millions)
Maturity (b) Feb. 2, 2008 Feb. 3, 2007 Receive Fixed Feb. 2, 2008 Feb. 3, 2007
March 2008 $ 250 $ 250 3.9% 3.3% 5.3%
March 2008 250 250 3.8 3.3 5.3
October 2008 500 500 4.4 3.0 5.4
October 2008 250 250 3.8 3.3 5.3
November 2008 200 200 3.9 3.3 5.3
June 2009 400 400 4.4 2.5 5.3
June 2009 350 350 4.2 4.2 5.3
August 2010 325 325 4.8 4.2 5.3
August 2010 225 225 4.5 4.2 5.3
January 2011 225 225 5.5 4.2 5.3
March 2012 250 — 5.6 3.3 —
July 2016 500 500 5.7 4.2 5.3
July 2016 250 250 5.7 4.2 5.3
May 2017 400 — 5.2 3.3 —
May 2017 200 — 5.2 3.3 —
$4,575 $3,725
(a) Reflects the year-end floating interest rate.
(b) The weighted average life of the interest rate swaps was approximately 3.6 years at February 2, 2008.
The market value of outstanding interest rate swaps and net unamortized gains/(losses) from terminated
interest rate swaps was $237 million and $(7) million at February 2, 2008 and February 3, 2007, respectively.
No ineffectiveness was recognized related to these instruments in 2007, 2006 or 2005. See Note 29 for
additional information relating to our interest rate swaps.
We also enter into interest rate forward contracts to offset a portion of the interest rate exposure on our
discounted workers’ compensation and general liability obligations. These instruments are not designated as
hedges for accounting purposes, thus they are marked-to-market through earnings each period. The gain/
(loss) recognized on these instruments in 2007 and 2006 was $18 million and $0 million, respectively. There
were no such instruments outstanding in 2005. See Note 16 and Note 23 for details of our workers’
compensation and general liability accruals.
During 2007, we entered into a series of interest rate lock agreements that effectively fixed the interest
payments on our anticipated issuance of debt that would be affected by interest-rate fluctuations on the US
Treasury benchmark between the effective date of the interest rate locks and the date of the issuance of the
debt. Upon our issuance of fixed-rate debt in January 2008, these agreements were terminated resulting in a
payment of $79 million to the counterparty due to a decline in US Treasury rates prior to issuance. This
payment is classified within other operating cash flows on the Consolidated Statements of Cash Flows. The
loss of $48 million, net of taxes of $31 million, has been recorded in accumulated other comprehensive loss
and is being recognized as an adjustment to interest expense over the same period in which the related
interest costs on the debt are recognized in earnings. During 2007 the amount reclassified into earnings was
not material. We estimate that $3 million ($5 million pre tax) of losses related to these rate locks in
accumulated other comprehensive income will be reclassified to earnings in 2008.
During the fourth quarter of 2007, we purchased and sold call options on our common stock. Refer to
Note 24 for additional details of these instruments.
21. Leases
We lease certain retail locations, warehouses, distribution centers, office space, equipment and land.
Assets held under capital lease are included in property and equipment. Operating lease rentals are expensed
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on a straight-line basis over the life of the lease. At the inception of a lease, we determine the lease term by
assuming the exercise of those renewal options that are reasonably assured because of the significant
economic penalty that exists for not exercising those options. The exercise of lease renewal options is at our
sole discretion. The expected lease term is used to determine whether a lease is capital or operating and is
used to calculate straight-line rent expense. Additionally, the depreciable life of buildings and leasehold
improvements is limited by the expected lease term.
Rent expense on buildings, which is included in selling, general and administrative expenses, includes
rental payments based on a percentage of retail sales over contractual levels for certain stores. Total rent
expense was $165 million in 2007, $158 million in 2006 and $154 million in 2005, including percentage rent
expense of $5 million in 2007, 2006 and 2005. Certain leases require us to pay real estate taxes, insurance,
maintenance and other operating expenses associated with the leased premises. These expenses are
classified in selling, general and administrative expenses consistent with similar costs for owned locations.
Most long-term leases include one or more options to renew, with renewal terms that can extend the lease
term from one to more than fifty years. Certain leases also include options to purchase the leased property.
Future minimum lease payments required under noncancelable lease agreements existing at February 2,
2008 were as follows:
Future Minimum Lease Payments
(millions) Operating Leases Capital Leases
2008 $ 239 $ 12
2009 187 16
2010 173 16
2011 129 16
2012 123 17
After 2012 2,843 155
Total future minimum lease payments $3,694 (a) 232
Less: Interest (b) (105)
Present value of future minimum capital lease payments $ 127 (c)
(a) Total contractual lease payments include $1,721 million related to options to extend lease terms that are reasonably assured of being
exercised and also includes $98 million of legally binding minimum lease payments for stores that will open in 2008 or later.
(b) Calculated using the interest rate at inception for each lease.
(c) Includes the current portion of $4 million.
22. Income Taxes
We account for income taxes under the asset and liability method. We have recognized deferred tax
assets and liabilities for the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted income tax rates in effect for the year the temporary
differences are expected to be recovered or settled. Tax rate changes affecting deferred tax assets and
liabilities are recognized in income at the enactment date. We have not recorded deferred taxes when
earnings from foreign operations are considered to be indefinitely invested outside the U. S. Such amounts
are not significant. In the Consolidated Statements of Financial Position, the current deferred tax asset
balance is the net of all current deferred tax assets and current deferred tax liabilities. The noncurrent deferred
tax liability is the net of all noncurrent deferred tax assets and noncurrent deferred tax liabilities.
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Reconciliation of tax rates is as follows:
Tax Rate Reconciliation 2007 2006 2005
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 4.0 4.0 3.3
Other (0.6) (1.0) (0.7)
Effective tax rate 38.4% 38.0% 37.6%
The components of the provision for income taxes were as follows:
Provision for Income Taxes: Expense (Benefit)
(millions) 2007 2006 2005
Current
Federal $1,568 $1,627 $1,361
State/other 278 284 213
1,846 1,911 1,574
Deferred
Federal (67) (174) (110)
State/other (3) (27) (12)
(70) (201) (122)
Total $1,776 $1,710 $1,452
The components of the net deferred tax asset/(liability) were as follows:
Net Deferred Tax Asset/(Liability) February 2, February 3,
(millions) 2008 2007
Gross deferred tax assets
Accrued and deferred compensation $ 466 $ 466
Accruals and reserves not currently deductible 347 169
Self-insured benefits 271 238
Allowance for doubtful accounts 220 191
Other 104 62
1,408 1,126
Gross deferred tax liabilities
Property and equipment (1,069) (1,041)
Pension (131) (100)
Deferred credit card income (94) (119)
Other (28) (16)
(1,322) (1,276)
Total $ 86 $ (150)
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions.
With few exceptions, we are no longer subject to income tax examinations for years before 1998.
We adopted the provisions of FIN 48 on February 4, 2007. As a result of the adoption of FIN 48, we
recorded a $19 million decrease to retained earnings. A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
Reconciliation of Unrecognized Tax Benefits
(millions)
Balance at February 4, 2007 $379
Additions based on tax positions related to the current year 60
Additions for tax positions of prior years 26
Reductions for tax positions of prior years (8)
Settlements (15)
Balance at February 2, 2008 $442
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If the company were to prevail on all unrecognized tax benefits recorded, approximately $245 million of
the $442 million reserve would benefit the effective tax rate. In addition, the impact of penalties and interest
would also benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are
recorded within income tax expense. During the years ended February 2, 2008, February 3, 2007 and
January 28, 2006, we recognized approximately $37 million, $37 million and $32 million, respectively, in
interest and penalties. We had accrued approximately $129 million and $105 million for the payment of
interest and penalties at February 2, 2008 and February 3, 2007, respectively.
Included in the balance at February 2, 2008 are $72 million of liabilities for tax positions for which the
ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the
shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of
cash to the taxing authority to an earlier period.
It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our
unrecognized tax positions will increase or decrease during the next 12 months; however, we do not expect
the change to have a significant effect on our results of operations or our financial position.
23. Other Noncurrent Liabilities
Other Noncurrent Liabilities February 2, February 3,
(millions) 2008 2007
Income tax liability $ 571 $ —
Deferred compensation 486 645
Workers’ compensation and general liability 475 418
Other 343 284
Total $1,875 $1,347
We retain a substantial portion of the risk related to certain general liability and workers’ compensation
claims. Liabilities associated with these losses include estimates of both claims filed and losses incurred but
not yet reported. We estimate our ultimate cost based on analysis of historical data and actuarial estimates.
General liability and workers’ compensation liabilities are recorded at our estimate of their net present value.
24. Share Repurchase
In November 2007, our Board of Directors approved a new share repurchase program totaling $10 billion
that replaced a prior program. Share repurchases for the last three years, repurchased primarily through open
market transactions, were as follows:
Share Repurchases Total Number of Average Price
(millions, except per share data) Shares Purchased Paid per Share Total Investment
2005 23.1 $51.88 $1,197
2006 19.5 50.16 977
2007 – Under the prior program 19.7 60.72 1,197
2007 – Under the 2007 program 26.5 54.64 1,445
Total 88.8 $54.29 $4,816
Of the shares reacquired in 2007, a portion was delivered upon settlement of prepaid forward contracts.
The prepaid forward contracts settled in 2007 had a total cash investment of $165 million and an aggregate
market value of $215 million at their respective settlement dates. The prepaid forward contracts settled in 2006
had a total cash investment of $76 million and an aggregate market value of $88 million at their respective
settlement dates. The prepaid forward contracts settled in 2005 had a total cash investment of $65 million and
an aggregate market value of $79 million at their respective settlement dates. These contracts are among the
investment vehicles used to reduce our economic exposure related to our nonqualified deferred
compensation plans. The details of our long positions in prepaid forward contracts have been provided in
Note 26.
During the fourth quarter of 2007, we purchased and sold call options on 30 million shares of our
common stock at a net cost of $331 million, or an average of $11.04 per share. The cost of any shares
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acquired with these options will depend on the actual stock price at the exercise date. We control whether
each instrument is exercised, and if we exercise our option, both the purchased and sold call options are
exercised together and are settleable in cash or shares at our election. Each series of options has various
expiration dates within the month listed in the table below. If the market price of our common stock at the
exercise date is less than the lower strike price in the table below, the options will expire worthless. If the
market price of our common stock is between the lower and upper strike price, we have the right to purchase
shares for the amount of the lower strike price. If the market price of our common stock is greater than the
listed upper strike price, we will have the right to purchase shares for the sum of (a) the lower strike price and
(b) the market price less the upper strike price. The cost of the call options was recorded as a reduction of
equity, and subsequent market price changes will not affect earnings. The aggregate fair value of these
options at February 2, 2008 was $398 million.
Call Options Outstanding at February 2, 2008
(per share)
Number of Expiration Net Premiums Lower Upper
Series Options Month Paid (millions) Premium Strike Price Strike Price
Series I 10,000,000 April 2008 $110 $11.04 $40.32 $57.96
Series II 10,000,000 May 2008 109 10.87 39.31 56.51
Series III 10,000,000 June 2008 112 11.20 39.40 56.64
February 2, 2008 30,000,000 $331 $11.04 $39.68 $57.04
25. Share-Based Compensation
We maintain a long-term incentive plan for key team members and non-employee members of our Board
of Directors. Our long-term incentive plan allows us to grant equity-based compensation awards, including
stock options, performance share unit awards, restricted stock unit awards, or a combination of awards. A
majority of granted awards are nonqualified stock options that vest annually in equal amounts over a four-year
period and expire no later than 10 years after the grant date. Options granted to the non-employee members
of our Board of Directors become exercisable after one year and have a 10-year term. We have issued
performance share or performance share unit awards annually since January 2003. These awards represent
shares potentially issuable in the future based upon the attainment of performance criteria including
compound annual growth rates in revenue and EPS. In 2006, we issued restricted stock units with three-year
cliff vesting to our executive officers other than our chief executive officer. We also regularly issue restricted
stock and restricted stock units to our Board of Directors. The number of unissued common shares reserved
for future grants under the share-based compensation plans was 36,190,569 at February 2, 2008 and
42,974,387 at February 3, 2007.
Share-Based Compensation Awards
Stock Options
Total Outstanding Currently Exercisable
(number of options and Number Exercise Intrinsic Number Exercise Intrinsic Performance Restricted
shares in thousands) of Options Price (a) Value (b) of Options Price (a) Value (b) Share Units Stock Units
January 29, 2005 31,991 $32.59 $540 22,102 $28.79 $458 1,608 —
Granted 4,057 53.94 597 (c) —
Canceled/forfeited (691) 40.67 (252) —
Exercised/Issued (6,643) 26.58 — —
January 28, 2006 28,714 $36.82 $505 19,229 $31.64 $438 1,953 —
Granted 4,980 56.84 119 (c) 221
Canceled/forfeited (607) 48.06 (177) —
Exercised/Issued (5,177) 27.08 — —
February 3, 2007 27,910 $41.95 $558 17,659 $35.32 $470 1,895 221
Granted 5,725 49.54 650 (d) 21
Canceled/forfeited (434) 52.67 — —
Exercised/Issued (5,061) 28.00 (370) (4)
February 2, 2008 28,140 $45.84 $298 16,226 $41.07 $245 2,175 (e) 238
(a) Weighted average per share.
(b) Represents stock price appreciation subsequent to the grant date, in millions.
(c) Awards will be earned based on performance during three years ending January 31, 2009.
(d) Awards will be earned based on performance during three years ending January 30, 2010.
(e) Approximately 14 percent of these performance share units, if and when earned, will be paid in cash or deferred through a credit to
the deferred compensation accounts of the participants in an amount equal to the value of any earned performance shares.
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The Black-Scholes valuation model was used to estimate the fair value of the options at grant date based
on the assumptions noted in the following table. Volatility represents an average of market quotes for implied
volatility of 5.5-year options on Target common stock. The expected life is estimated based on an analysis of
options already exercised and any foreseeable trends or changes in behavior. The risk-free interest rate is an
interpolation of the relevant U.S. Treasury security maturities as of each applicable grant date. The
assumptions disclosed below represent a weighted average of the assumptions used for all of our stock
option grants throughout the year.
Valuation of Share-Based Compensation 2007 2006 2005
Stock option valuation assumptions:
Dividend yield 1.1% 0.8% 0.7%
Volatility 39% 23% 27%
Risk-free interest rate 3.2% 4.7% 4.4%
Expected life in years 5.5 5.5 5.5
Grant date weighted average fair value $18.08 $16.52 $16.85
Performance share units grant date weighted average fair
value $59.45 $49.98 $53.96
Restricted stock units grant date weighted average fair value $57.70 $57.60 —
Compensation expense recognized in Statements of
Operations (pretax, millions) $ 73 $ 99 $ 93
Related income tax benefit (millions) $ 28 $ 39 $ 37
Compensation realized upon option exercises (pretax,
millions) $ 187 $ 142 $ 180
Related income tax benefit (millions) $ 73 $ 56 $ 71
As of February 2, 2008, there was $141 million of total unrecognized compensation expense related to
nonvested stock options. That cost is expected to be recognized over a weighted average period of 1.5 years.
The weighted average remaining life of currently exercisable options is 5.1 years, and the weighted average
remaining life of all outstanding options is 6.8 years.
Holders of performance share units will receive shares of our common stock if we meet certain EPS and
revenue growth targets and the holders also satisfy service-based vesting requirements. Compensation
expense associated with outstanding performance share units is recorded over the life of the awards. The
amount of expense recorded each period is dependent upon our estimate of the number of shares that will
ultimately be issued and, for some awards, the current Target common stock price. Future compensation
expense for currently outstanding awards could range from a credit of $54 million for previously recognized
amounts up to a maximum of approximately $56 million of expense assuming full payout under all outstanding
awards.
Total unrecognized compensation expense related to restricted stock unit awards was $8 million as of
February 2, 2008.
26. Defined Contribution Plans
Team members who meet certain eligibility requirements can participate in a defined contribution 401(k)
plan by investing up to 80 percent of their compensation, as limited by statute or regulation. Generally, we
match 100 percent of each team member’s contribution up to 5 percent of total compensation. Our
contribution to the plan is initially invested in Target common stock. These amounts are free to be diversified
by the team member immediately.
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In addition, we maintain nonqualified, unfunded deferred compensation plans for approximately 4,500
current and retired team members whose participation in our 401(k) plan is limited by statute or regulation.
These team members choose from a menu of crediting rate alternatives that are the same as the investment
choices in our 401(k) plan, including Target common stock. Through the end of 2005, we credited an
additional 2 percent per year to the accounts of all active participants, in part to recognize the risks inherent to
their participation in a plan of this nature. Effective in 2006, the additional 2 percent per year was credited only
to the accounts of active participants who were not executive officers. We also maintain a nonqualified,
unfunded deferred compensation plan that was frozen during 1996, covering 15 current and 49 retired
participants. In this plan deferred compensation earns returns tied to market levels of interest rates plus an
additional 6 percent return, with a minimum of 12 percent and a maximum of 20 percent, as determined by the
plan’s terms.
The American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code, changing the
federal income tax treatment of nonqualified deferred compensation arrangements. Failure to comply with the
new requirements would result in early taxation of nonqualified deferred compensation arrangements, as well
as a 20 percent penalty tax and additional interest payable to the IRS. In response to these new requirements,
we enacted a change to our deferred compensation plans that allowed participants an election to accelerate
the distribution dates for their account balances. Participant elections resulted in payments of $74 million in
January 2008.
We control some of our risk of offering the nonqualified plans through investing in vehicles, including
prepaid forward contracts in our own common stock, that offset a substantial portion of our economic
exposure to the returns of these plans. These investment vehicles are general corporate assets and are
marked-to-market with the related gains and losses recognized in the Consolidated Statements of Operations
in the period they occur. The total change in fair value for contracts indexed to our own common stock
recorded in earnings was pre-tax income of $6 million in 2007, $37 million in 2006 and $7 million in 2005.
During 2007 and 2006, we invested approximately $164 million and $111 million, respectively, in such
investment instruments, and these investments are included in the Consolidated Statements of Cash Flows
within other investing activities. Adjusting our position in these investment vehicles may involve repurchasing
shares of Target common stock when settling the forward contracts. In 2007, 2006 and 2005, these
repurchases totaled 3.4 million, 1.6 million and 1.5 million shares, respectively, and are included in the total
share repurchases described in Note 24.
Prepaid Forward Contracts on Target Common Stock
(dollars in millions, except per share data)
Number of Shares Current Fair Value at
Contractual Contract Price
Settlement Date February 2, 2008 February 3, 2007 per Share February 2, 2008 February 3, 2007
October 2007 — 257,000 $38.95 $ — $ 16
October 2007 — 516,033 29.07 — 32
October 2007 — 228,276 43.81 — 14
October 2007 — 189,479 52.78 — 12
October 2007 — 250,000 53.41 — 15
October 2007 — 250,000 53.41 — 15
May 2008 250,000 1,025,400 48.76 14 64
July 2008 72,832 — 62.46 4 —
August 2008 57,331 — 62.25 3 —
August 2008 145,894 — 61.69 9 —
August 2008 371,262 — 61.95 21 —
October 2008 247,524 — 60.60 14 —
November 2008 288,001 — 59.03 17 —
February 2008 177,085 — 56.47 10 —
February 2008 157,960 — 50.65 9 —
January 2009 400,000 — 48.11 23 —
2,167,889 2,716,188 $124 $168
The settlement dates of these instruments are regularly renegotiated with the counterparty, so settlement
may not occur during the months listed on the table above.
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Defined Contribution Plan Expenses
(millions) 2007 2006 2005
401(k) Defined Contribution Plan
Matching contributions expense $172 $141 $118
Nonqualified Deferred Compensation Plans
Benefits expense $ 46 $ 98 $ 64
Related investment income (26) (68) (34)
Nonqualified plan net expense $ 20 $ 30 $ 30
27. Pension and Postretirement Health Care Benefits
We have qualified defined benefit pension plans covering all U.S. team members who meet age and
service requirements. We also have unfunded nonqualified pension plans for team members with qualified
plan compensation restrictions. Benefits are provided based on years of service and team member
compensation. Upon retirement, team members also become eligible for certain health care benefits if they
meet minimum age and service requirements and agree to contribute a portion of the cost.
In September 2006, the FASB issued SFAS No. 158, ‘‘Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)’’ (SFAS 158).
SFAS 158 requires plan sponsors of defined benefit pension and other postretirement benefit plans
(collectively postretirement benefit plans) to recognize the funded status of their postretirement benefit plans
in the statement of financial position, measure the fair value of plan assets and benefit obligations as of the
date of the fiscal year-end statement of financial position and provide additional disclosures.
At the beginning of fiscal 2007, we early adopted the measurement date provisions of SFAS 158. The
measurement date provisions of SFAS 158 require us to measure the fair value of plan assets and benefit
obligations as of the date of the year-end statement of financial position. Before 2007, we measured our
pension and postretirement benefit obligations at the end of October each year. As a result, we recorded a
$16 million decrease to retained earnings, a $54 million increase to accumulated other comprehensive
income, a $65 million increase to other noncurrent assets, a $3 million increase to other noncurrent liabilities
and a $24 million decrease to deferred income taxes. The adoption of the measurement date provisions of
SFAS 158 had no effect on our Consolidated Statements of Financial Position at February 4, 2007 or any prior
periods.
We adopted the recognition and disclosure provisions of SFAS 158 on February 3, 2007. The recognition
provisions of SFAS 158 required us to recognize the funded status, which is the difference between the fair
value of plan assets and the projected benefit obligations, of our postretirement benefit plans in the
February 3, 2007 Consolidated Statements of Financial Position, with a corresponding adjustment to
accumulated other comprehensive loss, net of tax. The adjustment to accumulated other comprehensive loss
at adoption represents the net unrecognized actuarial losses and unrecognized prior service costs, both of
which were previously netted against the plans’ funded status in our Consolidated Statements of Financial
Position pursuant to the provisions of SFAS No. 87, ‘‘Employers’ Accounting for Pensions’’ (SFAS 87). These
amounts will be subsequently recognized as net periodic pension expense pursuant to our historical
accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in subsequent
periods and are not recognized as net periodic pension expense in the same periods will be recognized as a
component of other comprehensive income. Those amounts will be subsequently recognized as a
component of net periodic pension expense on the same basis as the amounts recognized in accumulated
other comprehensive loss at adoption of SFAS 158. The adoption of the recognition provisions of SFAS 158
had no effect on our Consolidated Statements of Operations at February 3, 2007 or any prior periods.
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Pension Benefits Change in Projected
Postretirement
Benefit Obligation
Qualified Plans Nonqualified Plans Health Care Benefits
(millions) 2007 2006 2007 2006 2007 2006
Benefit obligation at beginning of
measurement period (a) $1,764 $1,626 $36 $33 $115 $105
Effect of SFAS 158 adoption 8 — 1 — 2 —
Service cost 96 82 1 1 4 3
Interest cost 103 91 2 2 7 6
Actuarial (gain)/loss (80) 32 (4) 5 (10) 13
Participant contributions 1 — — — 7 9
Benefits paid (81) (76) (3) (5) (17) (21)
Plan amendments — 9 — — — —
Benefit obligation at end of
measurement period $1,811 $1,764 $33 $36 $108 $115
Pension Benefits Change in Plan Assets
Postretirement
Qualified Plans Nonqualified Plans Health Care Benefits
(millions) 2007 2006 2007 2006 2007 2006
Fair value of plan assets at
beginning of measurement
period $2,075 $1,845 $ — $ — $ — $ —
Effect of SFAS 158 adoption 75 — — — — —
Actual return on plan assets 119 303 — — — —
Employer contribution 3 3 3 5 10 12
Participant contributions 1 — — — 7 9
Benefits paid (81) (76) (3) (5) (17) (21)
Fair value of plan assets at end of
measurement period 2,192 2,075 — — — —
Funded status $ 381 $ 311 $(33) $(36) $(108) $(115)
(a) Beginning in 2007, the measurement date is the last day of the fiscal year. In 2006, the measurement date was October 31.
Amounts recognized in the balance sheet consist of the following amounts:
Nonqualified Plans
Recognition of Funded/(Underfunded) Status
(including postretirement
Qualified Plans health care benefits)
(millions) 2007 2006 2007 2006
Other noncurrent assets $394 $325 $ — $ —
Accrued and other current liabilities — — (12) (16)
Other noncurrent liabilities (13) (14) (129) (135)
Net amounts recognized $381 $311 $(141) $(151)
No plan assets are expected to be returned to us during 2008.
The following table summarizes the amounts recorded in accumulated other comprehensive income,
which have not yet been recognized as a component of net periodic benefit expense:
Amounts in Accumulated Other Comprehensive Income
Postretirement
Pension Plans Health Care Plans
(millions) 2007 2006 2007 2006
Net actuarial loss $227 $405 $ 9 $20
Prior service credits (15) (20) — —
Amounts in accumulated other comprehensive income $212 $385 $ 9 $20
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The following table summarizes the changes in accumulated other comprehensive income for the year
ended February 2, 2008, related to our pension and postretirement plans:
Reconciliation of Accumulated
Postretirement
Other Comprehensive Income
Pension Benefits Health Care Benefits
(millions) Pre-tax Net of tax Pre-tax Net of tax
Accumulated other comprehensive income at beginning of
2007 $385 $234 $ 21 $13
Effect of SFAS 158 adoption (88) (53) (1) (1)
Net actuarial gain (51) (31) (10) (6)
Amortization of net actuarial losses (38) (23) (1) (1)
Amortization of prior service costs and transition 4 2 — —
End of 2007 $212 $129 $ 9 $ 5
The following table summarizes the amounts in accumulated other comprehensive income expected to
be amortized and recognized as a component of net periodic benefit cost in 2008:
Amounts in Accumulated Other Comprehensive Income
(millions) Pre-tax Net of tax
Net actuarial loss $16 $10
Prior service credits (4) (2)
Total amortization expense $12 $ 8
Net Pension and Postretirement
Pension Benefits Postretirement Health Care Benefits
Health Care Benefits Expense
(millions) 2007 2006 2005 2007 2006 2005
Service cost benefits earned
during the period $ 97 $ 83 $ 67 $ 4 $ 3 $ 2
Interest cost on projected benefit
obligation 105 93 87 7 6 6
Expected return on assets (152) (141) (137) — — —
Recognized losses 38 47 43 1 1 1
Recognized prior service cost (4) (5) (5) — — —
Total $ 84 $ 77 $ 55 $12 $10 $ 9
The amortization of prior service cost is determined using the straight-line method over the average
remaining service period of team members expected to receive benefits under the plan.
Other information related to defined benefit pension plans is as follows:
Defined Benefit Pension Plan Information
(millions) 2007 2006
Accumulated benefit obligation (ABO) for all plans (a) $1,687 $1,674
Projected benefit obligation for pension plans with an ABO in excess of plan
assets (b) $ 48 $ 51
Total ABO for pension plans with an ABO in excess of plan assets $ 39 $ 44
Fair value of plan assets for pension plans with an ABO in excess of plan assets $ 2 $ 2
(a) The present value of benefits earned to date assuming no future salary growth.
(b) The present value of benefits earned to date by plan participants, including the effect of assumed future salary increases.
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Assumptions
Weighted average assumptions used to determine benefit obligations as of the measurement date were
as follows:
Postretirement
Weighted Average Assumptions
Health Care Benefits Pension Benefits
2007 2006 2007 2006
Discount rate 6.45% 5.80% 6.45% 5.80%
Average assumed rate of compensation increase 4.25% 4.00% n/a n/a
(a) Beginning in 2007, the measurement date is the last day of the fiscal year. In 2006, the measurement date was October 31.
Weighted average assumptions used to determine net periodic benefit expense for each fiscal year were
as follows:
Postretirement
Weighted Average Assumptions
Pension Benefits Health Care Benefits
2007 2006 2005 2007 2006 2005
Discount rate 5.95% 5.75% 5.75% 5.95% 5.75% 5.75%
Expected long-term rate of return
on plan assets 8.00% 8.00% 8.00% n/a n/a n/a
Average assumed rate of
compensation increase 4.25% 3.50% 2.75% n/a n/a n/a
The discount rate used to measure net periodic benefit expense each year is the rate as of the beginning
of the year (i.e., the prior measurement date). With an essentially stable asset allocation over the following
time periods, our annualized rate of return on qualified plans’ assets has averaged 13.6 percent, 8 percent and
10.2 percent for the 5-year, 10-year and 15-year periods, respectively, ending February 2, 2008.
An increase in the cost of covered health care benefits of 9 percent was assumed for 2007. In 2008, the
rate is assumed to be 8 percent for non-Medicare eligible individuals and 9 percent for Medicare eligible
individuals. Both rates will be reduced to 5 percent in 2013 and thereafter.
A one percent change in assumed health care cost trend rates would have the following effects:
(millions) 1% Increase 1% Decrease
Effect on total of service and interest cost components of net periodic
postretirement health care benefit expense $1 $(1)
Effect on the health care component of the postretirement benefit obligation $6 $(5)
Additional Information
Our pension plan weighted average asset allocations at the measurement date by asset category were as
follows:
Asset Category 2007 2006
Domestic equity securities 31% 35%
International equity securities 17 20
Debt securities 25 26
Other 27 19
Total 100% 100%
Our asset allocation strategy targets 33 percent in domestic equity securities, 19 percent in international
equity securities, 23 percent in high quality, long-duration debt securities, including interest rate swaps, and
25 percent in alternative assets. Equity securities include our common stock in amounts substantially less
than 1 percent of total plan assets as of January 31, 2008 and 2007. Other assets include private equity,
mezzanine and distressed debt, a balanced portfolio of global equities and global fixed income securities,
timber-related assets, and a 5 percent allocation to real estate. Our expected annualized long-term rate of
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return assumptions as of January 31, 2008 were 8.5 percent for domestic and international equity securities,
5.5 percent for long duration debt securities, and 9.5 percent for other assets.
Contributions
Given the qualified pension plan’s funded position, we are not required to make any contributions in
2008, although we may choose to make discretionary contributions of up to $100 million. We expect to make
contributions in the range of $5 million to $15 million to our postretirement health care benefit plan in 2008.
Estimated Future Benefit Payments
Benefit payments by the plans, which reflect expected future service as appropriate, are expected to be
paid as follows:
Estimated Future Benefit Payments Postretirement
Pension Health Care
(millions) Benefits Benefits
2008 $101 $ 9
2009 108 9
2010 113 10
2011 118 10
2012 125 11
2013-2017 737 65
28. Quarterly Results (Unaudited)
Due to the seasonal nature of our business, fourth quarter operating results typically represent a
substantially larger share of total year revenues and earnings because they include our peak sales period
from Thanksgiving through the end of December. We follow the same accounting policies for preparing
quarterly and annual financial data. The table below summarizes quarterly results for 2007 and 2006:
Quarterly Results
First Quarter Second Quarter Third Quarter Fourth Quarter Total Year
(millions, except per share data) 2007 2006 2007 2006 2007 2006 2007 2006(b) 2007 2006(b)
Total revenues $14,041 $12,863 $14,620 $13,347 $14,835 $13,570 $19,872 $19,710 $63,367 $59,490
Gross margin $ 4,437 $ 4,020 $ 4,728 $ 4,273 $ 4,571 $ 4,265 $ 5,841 $ 5,920 $19,576 $18,479
Net earnings $ 651 $ 554 $ 686 $ 609 $ 483 $ 506 $ 1,028 $ 1,119 $ 2,849 $ 2,787
Basic earnings per share (a) $ .76 $ .64 $ .81 $ .71 $ .57 $ .59 $ 1.24 $ 1.30 $ 3.37 $ 3.23
Diluted earnings per share (a) $ .75 $ .63 $ .80 $ .70 $ .56 $ .59 $ 1.23 $ 1.29 $ 3.33 $ 3.21
Dividends declared per share $ .12 $ .10 $ .14 $ .12 $ .14 $ .12 $ .14 $ .12 $ .54 $ .46
Closing common stock price
High $ 64.32 $ 55.80 $ 70.14 $ 54.71 $ 67.57 $ 59.72 $ 60.13 $ 62.35 $ 70.14 $ 62.35
Low $ 58.58 $ 50.85 $ 57.31 $ 45.53 $ 58.11 $ 45.28 $ 48.08 $ 56.03 $ 48.08 $ 45.28
(a) Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total
year amount due to the impact of changes in average quarterly shares outstanding.
(b) Fiscal year 2006 consisted of 53 weeks.
Note: Additionally, the sum of the quarterly amounts may not equal the total year amounts due to rounding.
29. Subsequent Event
Subsequent to February 2, 2008, we terminated interest rate swaps with a notional value of $3,125 million
for cash proceeds of $160 million. These interest rate swaps were designated as fair value hedges; therefore,
the valuation adjustments will be amortized to earnings over the remaining life of the related hedged debt. In
2008, we expect to amortize approximately $42 million into earnings as a reduction of interest expense related
to these agreements.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Not Applicable.
Item 9A. Controls and Procedures
As of the end of the period covered by this annual report, we conducted an evaluation, under supervision
and with the participation of management, including the chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15
and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation,
our chief executive officer and chief financial officer concluded that our disclosure controls and procedures
are effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the
Exchange Act as controls and other procedures that are designed to ensure that information required to be
disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers, or person performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during the fourth quarter of fiscal
year 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
For the Report of Management on Internal Control and the Report of Independent Registered Public
Accounting Firm on Internal Control over Financial Reporting, see Item 8, Financial Statements and
Supplementary Data.
Item 9B. Other Information
Not applicable.
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PART I I I
Certain information required by Part III is incorporated by reference from Target’s definitive Proxy
Statement to be filed on or about April 7, 2008. Except for those portions specifically incorporated in this
Form 10-K by reference to Target’s Proxy Statement, no other portions of the Proxy Statement are deemed to
be filed as part of this Form 10-K.
Item 10. Directors, Executive Officers and Corporate Governance
Election of Directors, Section 16(a) Beneficial Ownership Reporting Compliance, Additional Information –
Business Ethics and Conduct and General Information About the Board of Directors – Board Meetings and
Committees, of Target’s Proxy Statement to be filed on or about April 7, 2008, are incorporated herein by
reference. See also Item 4A, Executive Officers of Part I hereof.
Item 11. Executive Compensation
Executive and Director Compensation, of Target’s Proxy Statement to be filed on or about April 7, 2008, is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Equity Compensation Plan Information
Number of Securities Number of Securities
to be Issued Upon Weighted Average Remaining Available for
Exercise of Exercise Price of Future Issuance Under
Outstanding Options, Outstanding Equity Compensation Plans
warrants and Rights Options, Warrants as of February 2, 2008
as of February 2, and Rights as of (Excluding Securities
2008 February 2, 2008 Reflected in Column (a))
Plan Category (a) (b) (c)
Equity compensation plans
approved by security holders 30,552,976 (1) $45.84 36,190,569
Equity compensation plans not
approved by security holders — — —
Total 30,552,976 $45.84 36,190,569
(1) This amount includes 2,412,936 performance shares and RSU shares potentially issuable under our Long-Term Incentive Plan.
According to the existing plan provisions and compensation deferral elections, approximately 14 percent of these potentially
issuable performance shares, if and when earned, will be paid in cash or deferred through a credit to the deferred compensation
accounts of the participants in an amount equal to the value of any earned performance shares. The actual number of performance
shares to be issued, cash to be paid, or credits to be made to deferred compensation accounts, if any, depends on our financial
performance over a period of time. Performance shares do not have an exercise price and thus they have been excluded from the
weighted average exercise price calculation in column (b).
Beneficial Ownership of Certain Shareholders, of Target’s Proxy Statement to be filed on or about April 7,
2008, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and General Information About the Board of Directors – Director Independence, of
Target’s Proxy Statement to be filed on or about April 7, 2008, are incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Audit and Non-audit Fees, of Target’s Proxy Statement to be filed on or about April 7, 2008, is
incorporated herein by reference.
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PART I V
Item 15. Exhibits and Financial Statement Schedules
The following information required under this item is filed as part of this report:
a) Financial Statements
Consolidated Statements of Operations for the Years Ended February 2, 2008, February 3, 2007 and
January 28, 2006
Consolidated Statements of Financial Position at February 2, 2008 and February 3, 2007
Consolidated Statements of Cash Flows for the Years Ended February 2, 2008, February 3, 2007 and
January 28, 2006
Consolidated Statements of Shareholders’ Investment for the Years Ended February 2, 2008,
February 3, 2007 and January 28, 2006
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Financial Statement Schedules
For the Years Ended February 2, 2008, February 3, 2007 and January 28, 2006:
II – Valuation and Qualifying Accounts
Other schedules have not been included either because they are not applicable or because the
information is included elsewhere in this Report.
b) Exhibits
(3)A Restated Articles of Incorporation (as amended May 24, 2007) (1)
B By-Laws (as amended through November 11, 1998) (2)
(4)A Indenture, dated August 4, 2000 between Target Corporation and Bank One Trust Company, N.A.
(3)
B First Supplemental Indenture dated as of May 1, 2007 to Indenture dated as of August 4, 2000
between Target Corporation and The Bank of New York, N.A. (as successor in interest to Bank One
Trust Company N. A.) (19)
C Registrant agrees to furnish to the Commission on request copies of other instruments with respect
to long-term debt.
(10)A * Executive Short-Term Incentive Plan (4)
B Target Corporation Officer Short-Term Incentive Plan (18)
C * Amended and Restated Director Stock Option Plan of 1995 (13)
D * Supplemental Pension Plan I (5)
E * Amended and Restated Executive Long-Term Incentive Plan of 1981 (14)
F * Supplemental Pension Plan II (6)
G * Supplemental Pension Plan III (7)
H * Amended and Restated Deferred Compensation Plan Senior Management Group (20)
I * Amended and Restated Deferred Compensation Plan Directors (15)
J * Income Continuance Policy Statement (8)
K * SMG Income Continuance Policy Statement (9)
L * Amended and Restated SMG Executive Deferred Compensation Plan (21)
N * Amended and Restated Director Deferred Compensation Plan (22)
O * Executive Excess Long-Term Disability Plan (10)
P * Amended and Restated Long-Term Incentive Plan (16)
R * Director Retirement Program (11)
50
S * Deferred Compensation Trust Agreement (17)
T Five-year credit agreement dated as of April 12, 2007 among Target Corporation, Bank of America,
N.A. as Administrative Agent and the Banks listed therein (12)
(12) Statements re: Computations of Ratios
(21) List of Subsidiaries
(23) Consent of Independent Registered Public Accounting Firm
(24) Powers of Attorney
(31)A Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
(31)B Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
(32)A Certification of the Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350 Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(32)B Certification of the Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350 Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(99)A Risk Factors and Cautionary Statements Relating to Forward-Looking Information
Copies of exhibits will be furnished upon written request and payment of Registrant’s reasonable
expenses in furnishing the exhibits.
* Management contract or compensation plan or arrangement required to be filed as an exhibit to this Form 10-K.
(1) Incorporated by reference to Exhibit (3)A to Target’s Form 8-K Report filed May 25, 2007.
(2) Incorporated by reference to Exhibit (3)(ii) to Target’s Form 10-Q Report for the quarter ended October 31, 1998.
(3) Incorporated by reference to Exhibit 4.1 to Target’s Form 8-K Report filed August 10, 2000.
(4) Incorporated by reference to Exhibit (10)A to Target’s Form 10-K Report for the year ended February 2, 2002.
(5) Incorporated by reference to Exhibit 10(E) to Target’s Form 10-K Report for the year ended February 1, 1997, and Amendment thereto,
incorporated by reference to Exhibit (10)G to Target’s Form 10-Q Report for the quarter ended November 2, 2002.
(6) Incorporated by reference to Exhibit (10)G to Target’s Form 10-K Report for the year ended February 1, 1997, and Amendment thereto,
incorporated by reference to Exhibit (10)G to Target’s Form 10-Q Report for the quarter ended November 2, 2002.
(7) Incorporated by reference to Exhibit (10)H to Target’s Form 10-K Report for the year ended February 1, 1997, and Amendment thereto,
incorporated by reference to Exhibit (10)G to Target’s Form 10-Q Report for the quarter ended November 2, 2002.
(8) Incorporated by reference to Exhibit (10)K to Target’s Form 10-K Report for the year ended January 30, 1999.
(9) Incorporated by reference to Exhibit (10)L to Target’s Form 10-K Report for the year ended January 30, 1999.
(10) Incorporated by reference to Exhibit (10)O to Target’s Form 10-K Report for the year ended February 3, 2001.
(11) Incorporated by reference to Exhibit (10)O to Target’s Form 10-K Report for the year ended January 29, 2005.
(12) Incorporated by reference to Exhibit (10)A to Target’s Form 10-Q Report for the quarter ended May 5, 2007.
(13) Incorporated by reference to Exhibit (10)C to Target’s Form 10-K Report for the year ended February 3, 2007.
(14) Incorporated by reference to Exhibit (10)E to Target’s Form 10-K Report for the year ended February 3, 2007.
(15) Incorporated by reference to Exhibit (10)I to Target’s Form 10-K Report for the year ended February 3, 2007.
(16) Incorporated by reference to Exhibit (10)P to Target’s Form 10-K Report for the year ended February 3, 2007.
(17) Incorporated by reference to Exhibit (10)S to Target’s Form 10-K Report for the year ended February 3, 2007.
(18) Incorporated by reference to Appendix B to the Registrant’s Proxy Statement filed April 9, 2007.
(19) Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K Report filed May 1, 2007.
(20) Incorporated by reference to Exhibit (10)A to Target’s Form 10-Q Report for the quarter ended November 3, 2007.
(21) Incorporated by reference to Exhibit (10)B to Target’s Form 10-Q Report for the quarter ended November 3, 2007.
(22) Incorporated by reference to Exhibit (10)C to Target’s Form 10-Q Report for the quarter ended November 3, 2007.
51
P
A
R
T

I
V
1APR200416064753
1APR200416063806
1APR200416064753
1APR200416064753
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Target has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TARGET CORPORATION
By:
Douglas A. Scovanner
Executive Vice President, Chief Financial
Dated: March 13, 2008 Officer and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below
by the following persons on behalf of Target and in the capacities and on the dates indicated.
Robert J. Ulrich
Dated: March 13, 2008 Chairman of the Board and Chief Executive Officer
Douglas A. Scovanner
Executive Vice President, Chief Financial Officer and
Dated: March 13, 2008 Chief Accounting Officer
ROXANNE S. AUSTIN DERICA W. RICE
CALVIN DARDEN STEPHEN W. SANGER
MARY N. DILLON GREGG W. STEINHAFEL
JAMES A. JOHNSON GEORGE W. TAMKE
RICHARD M. KOVACEVICH SOLOMON D. TRUJILLO
MARY E. MINNICK ROBERT J. ULRICH Directors
ANNE M. MULCAHY
Douglas A. Scovanner, by signing his name hereto, does hereby sign this document pursuant to powers
of attorney duly executed by the Directors named, filed with the Securities and Exchange Commission on
behalf of such Directors, all in the capacities and on the date stated.
By:
Douglas A. Scovanner
Dated: March 13, 2008 Attorney-in-fact
52
TARGET CORPORATION
Schedule II—Valuation and Qualifying Accounts
Fiscal Years 2007, 2006 and 2005
(millions)
Column A Column B Column C Column D Column E
Additions
Balance at Charged to
Beginning of Cost, Expenses, Balance at End
Description Period Revenues Deductions of Period
Allowance for doubtful accounts:
2007 $517 481 (428) $570
2006 $451 380 (314) $517
2005 $387 466 (402) $451
Sales returns reserves:
2007 $ 31 1,103 (1,105) $ 29
2006 $ 11 1,123 (1,103) $ 31
2005 $ 11 968 (968) $ 11
53
Exhibit Index
Exhibit Description Manner of Filing
(3)A Restated Articles of Incorporation (as amended May 24, 2007) Incorporated by Reference
(3)B By-Laws (as amended through November 11, 1998) Incorporated by Reference
(4)A Indenture, dated August 4, 2000 between Target Corporation Incorporated by Reference
and Bank One Trust Company, N.A.
(4)B First Supplemental Indenture dated as of May 1, 2007 to Incorporated by Reference
Indenture dated as of August 4, 2000 between Target
Corporation and The Bank of New York, N.A. (as successor in
interest to Bank One Trust Company N. A.)
(10)A Executive Short-Term Incentive Plan Incorporated by Reference
(10)B Target Corporation Officer Short-Term Incentive Plan Incorporated by Reference
(10)C Amended and Restated Director Stock Option Plan of 1995 Incorporated by Reference
(10)D Supplemental Pension Plan I Incorporated by Reference
(10)E Amended and Restated Executive Long-Term Incentive Plan of Incorporated by Reference
1981
(10)F Supplemental Pension Plan II Incorporated by Reference
(10)G Supplemental Pension Plan III Incorporated by Reference
(10)H Amended and Restated Deferred Compensation Plan Senior Incorporated by Reference
Management Group
(10)I Amended and Restated Deferred Compensation Plan Directors Incorporated by Reference
(10)J Income Continuance Policy Statement Incorporated by Reference
(10)K SMG Income Continuance Policy Statement Incorporated by Reference
(10)L Amended and Restated SMG Executive Deferred Compensation Incorporated by Reference
Plan
(10)N Amended and Restated Director Deferred Compensation Plan Incorporated by Reference
(10)O Executive Excess Long-Term Disability Plan Incorporated by Reference
(10)P Amended and Restated Long-Term Incentive Plan Incorporated by Reference
(10)R Director Retirement Program Incorporated by Reference
(10)S Deferred Compensation Trust Agreement Incorporated by Reference
(10)T Five-year credit agreement dated as of June 9, 2005 among Incorporated by Reference
Target Corporation, Bank of America, N.A. as Administrative
Agent and the Banks listed therein
(12) Statements re: Computations of Ratios Filed Electronically
(21) List of Subsidiaries Filed Electronically
(23) Consent of Independent Registered Public Accounting Firm Filed Electronically
(24) Powers of Attorney Filed Electronically
(31)A Certification of the Chief Executive Officer Pursuant to Filed Electronically
Section 302 of the Sarbanes-Oxley Act of 2002
(31)B Certification of the Chief Financial Officer Pursuant to Filed Electronically
Section 302 of the Sarbanes-Oxley Act of 2002
(32)A Certification of the Chief Executive Officer Pursuant to Filed Electronically
Section 18 U.S.C. Section 1350 Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(32)B Certification of the Chief Financial Officer Pursuant to Section 18 Filed Electronically
U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
(99)A Risk Factors and Cautionary Statements Relating to Forward- Filed Electronically
Looking Information
54
Exhibit 12
TARGET CORPORATION
Computations of Ratios of Earnings to Fixed Charges for each of the
Five Years in the Period Ended February 2, 2008
Fiscal Year Ended
Ratio of Earnings to Fixed Charges
Feb. 2, Feb. 3, Jan. 28, Jan. 29, Jan. 31,
(dollars in millions) 2008 2007 2006 2005 2004
Earnings from continuing operations before
income taxes $4,625 $4,497 $3,860 $3,031 $2,603
Capitalized interest (66) (47) (42) (18) (8)
Adjusted earnings from continuing
operations before income taxes 4,559 4,450 3,818 3,013 2,595
Fixed charges:
Interest expense (a) 747 646 532 607 569
Interest portion of rental expense 94 88 84 85 68
Total fixed charges 841 734 616 692 637
Earnings from continuing operations
before income taxes and fixed charges $5,400 $5,184 $4,434 $3,705 $3,232
Ratio of earnings to fixed charges 6.42 7.06 7.21 5.35 5.07
Note: Computation is based on continuing operations.
(a) Includes interest on debt and capital leases (including capitalized interest) and amortization of debt issuance costs. Excludes interest
income and interest associated with unrecognized tax benefits, which is recorded within income tax expense.
55
SHAREHOLDER INFORMATION
Annual Meeting Transfer Agent, Registrar and Dividend
Disbursing Agent The Annual Meeting of Shareholders is scheduled for
May 22, 2008, at 11:00 a.m. (pacific daylight time) at the BNY Mellon Shareowner Services
Target store located at 350 West Lake Mead Parkway,
Henderson, Nevada, 89115-7088.
Shareholder Information Trustee, Employee Savings 401(k) and Pension
Plans Quarterly and annual shareholder information, including
the Form 10-Q and Form 10-K Annual Report, which are State Street Bank and Trust Company
filed with the Securities and Exchange Commission, is
available at no charge to shareholders. To obtain copies
of these materials, you may send an e-mail to
Stock Exchange Listings
[email protected], or write to: Senior Vice
Trading symbol: TGT
President, Communications (TPN-1146), Target
New York Stock Exchange
Corporation, 1000 Nicollet Mall, Minneapolis, Minnesota
55403. These documents as well as other information
Shareholder Assistance
about Target Corporation, including our Business
For assistance regarding individual stock records, lost Conduct Guide, Corporate Governance Profile,
certificates, name or address changes, dividend or tax Corporate Responsibility Report and Board of Director
questions, call BNY Mellon Shareowner Services at Committee Position Descriptions, are also available on
1-800-794-9871, access their website at the internet at www.Target.com/investors.
www.bnymellon.com/shareowner/isd, or write to: BNY
Mellon Shareowner Services, P.O. Box 358015,
Pittsburgh, PA 15252-8015.
Sales Information Direct Stock Purchase/Dividend Reinvestment
Plan Comments regarding our sales results are provided
periodically throughout the year on a recorded telephone BNY Mellon Shareowner Services administers a direct
message accessible by calling 612-761-6500. Our current service investment plan that allows interested investors to
sales disclosure practice includes a sales recording on purchase Target Corporation stock directly, rather than
the day of our monthly sales release. through a broker, and become a registered shareholder of
the company. The program offers many features including
dividend reinvestment. For detailed information regarding
this program, call BNY Mellon Shareowner Services toll
Officer Certifications
free at 1-800-842-7629 or write to: BNY Mellon
In accordance with the rules of the New York Stock
Shareowner Services, P.O. Box 358035, Pittsburgh, PA
Exchange (NYSE), the Chief Executive Officer of Target
15252-8035.
submitted the required annual certification to the NYSE
regarding the NYSE’s Corporate Governance listing
standards on June 19, 2007. Target’s Form 10-K for its
fiscal year ended February 2, 2008, as filed with the U.S.
Securities and Exchange Commission, includes the
certifications of Target’s Chief Executive Officer and Chief
Financial Officer required by Section 302 of the Sarbanes
Oxley Act of 2002.
Archer Farms, the Bullseye Design, Bullseye Dog, Choxie, ClearRx bottle shape, Club Wedd, Expect More. Pay Less., Fast, Fun and
Friendly, Garden Place, Go International, Long Live Happy, Market Pantry, Merona, REDcard, Room Essentials, See. Spot. Save.,
SuperTarget, Take Charge of Education, Target & Blue, Target Baby, Target Check Card, Target Credit Card, Target Home, Target House,
Target Pharmacy, Target Rewards, Target, TargetLists and Xhilaration are trademarks of Target Brands, Inc. All rights reserved.
Burt’s Bees is a registered trademark of Burt’s Bees, Inc. Converse is a registered trademark of Converse Inc. DwellStudio is a trademark
of Dwell Home Furnishings. Fieldcrest is a registered trademark of Official Pillowtex. Fortune is a registered trademark of Time, Inc.
J/A/S/O/N is a registered trademark of Jason Natural Products, Inc. Kiss My Face is a registered trademark of Kiss My Face Corporation.
MasterCard is a registered trademark of MasterCard International Incorporated. Mervyn’s is a registered trademark of Mervyn’s
Brands, Inc. Method is a registered trademark of Method Products, Inc. Pure & Natural is a registered trademark of Dial Brands, Inc.
St. Jude Children’s Research Hospital is a registered trademark of St. Jude Children’s Research Hospital, Inc. Starbucks is a registered
trademark of Starbucks U.S. Brands Corporation. Sutton & Dodge is a registered trademark of Hormel Foods, LLC. Tom’s of Maine is a
registered trademark of Tom’s of Maine, Inc. Visa is a registered trademark of Visa International Services Association.
Copyright 2008 Target.
Directors
Roxanne S. Austin
President,
Austin Investment Advisors
(1) (2) (5) (7)
Calvin Darden
Chairman,
Atlanta Beltline, Inc.
(1) (3) (4) (6) (7)
Mary N. Dillon
Executive Vice President and
Global Chief Marketing Officer,
McDonald’s Corp.
(1) (7)
James A. Johnson
Vice Chairman,
Perseus, LLC
(1) (3) (4) (7)
Richard M. Kovacevich
Chairman,
Wells Fargo & Company
(1) (2) (6) (7)
Mary E. Minnick
Partner, Lion Capital
(1) (4) (5) (7)
Anne M. Mulcahy
Chairman and
Chief Executive Officer,
Xerox Corp.
(1) (2) (5) (7)
Executive Officers
Timothy R. Baer
Executive Vice President,
Corporate Secretary and
General Counsel
Michael R. Francis
Executive Vice President,
Marketing
John D. Griffith
Executive Vice President,
Property Development
Jodeen A. Kozlak
Executive Vice President,
Human Resources
Troy H. Risch
Executive Vice President,
Stores
Janet M. Schalk
Executive Vice President,
Technology Services and
Chief Information Officer
Douglas A. Scovanner
Executive Vice President and
Chief Financial Officer
Terrence J. Scully
President,
Target Financial Services
Gregg W. Steinhafel*
President
Robert J. Ulrich*
Chairman and
Chief Executive Officer
Other Officers
Patricia Adams
Senior Vice President,
Apparel Merchandising
Lalit Ahuja
President and
Managing Director,
Target India
Stacia J. Andersen
President,
Target Sourcing Services
Carmela Batacchi
Senior Vice President,
Target Sourcing Services,
Regions II and III – Europe,
India Sub-Continent,
Latin America
Bryan Berg
Senior Vice President,
Region I – Northwest
Bob Chang
Senior Vice President,
Target Sourcing Services,
Region I – Asia
Directors & Management
Derica W. Rice
Senior Vice President and
Chief Financial Officer,
Eli Lilly & Company
(1) (7)
Stephen W. Sanger
Chairman,
General Mills, Inc.
(1) (3) (6) (7)
Gregg W. Steinhafel*
President,
Target
George W. Tamke
Partner,
Clayton, Dubilier & Rice, Inc.
(1) (2) (5) (6) (7)
Solomon D. Trujillo
Chief Executive Officer,
Telstra Corp.
(1) (3) (4) (7)
Robert J. Ulrich*
Chairman and
Chief Executive Officer,
Target
(1)
(1) Executive Committee
(2) Audit Committee
(3) Compensation Committee
(4) Corporate Responsibility
Committee
(5) Finance Committee
(6) Nominating Committee
(7) Corporate Governance Committee
Gregory J. Duppler
Senior Vice President,
Grocery Merchandising
Nathan K. Garvis
Vice President,
Government Affairs
Karen Gershman
Senior Vice President,
Marketing
Corey Haaland
Vice President and Treasurer
P. Jagannath
Senior Vice President,
Target Sourcing Services,
Target Compliance and
Production Services
Derek L. Jenkins
Senior Vice President,
Region IV – Northeast
Susan D. Kahn
Senior Vice President,
Communications
Sid Keswani
Senior Vice President,
Region III – Southeast
Richard N. Maguire
Senior Vice President,
Merchandise Planning
Annette Miller
Senior Vice President,
Target Sourcing Services
Scott Nelson
Senior Vice President,
Real Estate
Dale Nitschke
President,
Target.com
Tina M. Schiel
Senior Vice President,
Region II – Southwest
Gina Sprenger
Senior Vice President,
Home Merchandising
Mitchell L. Stover
Senior Vice President,
Distribution
Kathryn A. Tesija
Senior Vice President,
Hardlines Merchandising
Rich Varda
Senior Vice President,
Store Design
Laysha Ward
Vice President,
Community Relations
Jane P. Windmeier
Senior Vice President,
Finance
©2008 Target Stores. The Bullseye Design, Bullseye Dog and Target are trademarks
of Target Brands, Inc. All rights reserved. Printed on paper with 10% post-consumer fiber.
8
188411
* Effective May 1, 2008, Robert Ulrich will retire as Chief Executive Officer (CEO).
The Board of Directors has named Gregg Steinhafel to succeed Mr. Ulrich as CEO.
Mr. Ulrich will remain Chairman of the Board through the end of fiscal 2008.
1000 Nicollet Mall Minneapolis, MN 55403 612.304.6073 Target.com

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