Target Corporation Second Quarter Earnings Per Share $0.80

Target Corporation (NYSE:TGT) today reported net earnings for the second quarter ended August 4, 2007 of $686 million, or 80 cents per share, compared with $609 million, or 70 cents per share in the second quarter ended July 29, 2006, representing a 14.0 percent increase in earnings per share. All earnings per share figures refer to diluted earnings per share. "We are pleased with our second quarter and year-to-date results,” said Bob Ulrich, chairman and chief executive officer of Target Corporation. "We continue to believe Target will deliver strong sales and profit performance in 2007 and generate another year of profitable market share growth. We also continue to believe that $3.60 remains within the range of likely outcomes for our full-year 2007 earnings per share.” Total revenues in the second quarter increased 9.5 percent to $14.620 billion from $13.347 billion in 2006, reflecting a 4.9 percent increase in comparable-store sales combined with the contribution from new store expansion and from our credit card operations. (Total revenues include retail sales and net credit card revenues. Comparable-store sales are sales from stores open longer than one year.) Earnings before interest and income taxes (EBIT) in the second quarter of 2007 increased 11.8 percent to $1.267 billion, compared with $1.134 billion in the second quarter a year ago. Key contributors to this EBIT growth included gross margin rate improvement offset by unfavorable expense rate performance, combined with strong profit growth in our credit card operations. (Gross margin rate represents sales less cost of sales expressed as a percentage of sales. Expense rate represents selling, general and administrative expenses expressed as a percentage of sales.) Net interest expense for the quarter increased $14 million compared with second quarter 2006 primarily due to higher average debt balances, including the debt to fund the growth in our accounts receivable. The contribution from the company’s credit card operations to second quarter earnings before taxes (EBT), net of the allocated interest expense, was $163 million, an increase of $41 million, or 34.0 percent, from the same period in 2006. This favorability is attributable to growth in net interest income as well as other finance charges. Other Factors The company’s effective income tax rate for the second quarter was 38.4 percent in 2007 compared with 38.8 percent in 2006. For the full year, the effective income tax rate is still expected to increase modestly from last year’s 38.0 percent rate. Under a share repurchase program that began in 2004 and was increased by the Board to an $8 billion authorization in June 2007, the company repurchased $476 million of its common stock during the second quarter of 2007, acquiring 7.5 million shares at an average price of $63.23 per share. During the first half of 2007, the company repurchased $1,025 million of its common stock, acquiring 16.7 million shares at an average price of $61.34 per share. Program-to-date, the company has acquired 87.8 million shares of its common stock at an average price per share of $50.99, reflecting a total investment of approximately $4.5 billion. The company expects to continue to execute this program primarily in open market transactions, subject to market conditions, and expects to complete the total program by year-end 2010, or sooner. Miscellaneous Target Corporation will webcast its second quarter earnings conference call at 9:30am CDT today. Investors and the media are invited to listen to the call through the company’s website at www.target.com/investors (click on "webcasts”). A telephone replay of the call will be available beginning at approximately 11:30am CDT today through the end of business on August 23, 2007. The replay number is (800) 642-1687 (passcode: 7389853). Forward-looking statements in this release, which include our outlook for full year tax rate, full year EPS and the timing to complete our share repurchase program, should be read in conjunction with the cautionary statements in Exhibit (99)A to the company’s 2006 Form 10-K. Target Corporation’s continuing operations include large, general merchandise and food discount stores, as well as an on-line business called Target.com. At quarter-end, the company operated 1,537 Target stores in 47 states. Target Corporation news releases are available at www.target.com. Consolidated Statements of Operations                               Three months ended     Six months ended   August 4,   July 29, August 4,   July 29, (millions, except per share data) (unaudited)   2007   2006   Change     2007   2006   Change Sales $ 14,167 $ 12,959 9.3 % $ 27,790 $ 25,453 9.2 % Net credit card revenues     453     388   17.0       871     757   15.0 Total revenues 14,620 13,347 9.5 28,661 26,210 9.4 Cost of sales 9,439 8,686 8.7 18,625 17,159 8.5 Selling, general and administrative expenses 3,328 2,987 11.4 6,421 5,865 9.5 Credit card expenses 182 170 7.1 351 330 6.5 Depreciation and amortization     404     370   9.0       796     704   12.9 Earnings before interest expense and income taxes 1,267 1,134 11.8 2,468 2,152 14.7 Net interest expense     154     140   9.9       290     272   6.9 Earnings before income taxes 1,113 994 12.0 2,178 1,880 15.9 Provision for income taxes     427     385   10.9       841     718   17.2 Net earnings   $ 686   $ 609   12.7 %   $ 1,337   $ 1,162   15.0 % Basic earnings per share   $ 0.81   $ 0.71   14.1 %   $ 1.57   $ 1.34   16.7 % Diluted earnings per share   $ 0.80   $ 0.70   14.0 %   $ 1.55   $ 1.33   16.7 % Weighted average common shares outstanding Basic 850.8 860.8 853.4 865.7 Diluted 857.4 867.2 860.1 872.4   Subject to reclassification Consolidated Statements of Financial Position             August 4,   July 29, (millions) (unaudited)   2007   2006 Assets Cash and cash equivalents $ 555 $ 477 Accounts receivable, net 6,397 5,540 Inventory 6,645 6,275 Other current assets     1,535       1,297   Total current assets 15,132 13,589 Property and equipment Land 5,239 4,612 Buildings and improvements 16,483 14,549 Fixtures and equipment 3,516 3,223 Computer hardware and software 2,209 2,002 Construction-in-progress 2,848 2,261 Accumulated depreciation     (7,268 )     (6,390 ) Property and equipment, net 23,027 20,257 Other non-current assets     1,307       1,577   Total assets   $ 39,466     $ 35,423     Liabilities and Shareholders' Investment Accounts payable $ 6,101 $ 5,868 Accrued and other current liabilities 2,761 2,535 Current portion of long-term debt and notes payable     2,160       1,257   Total current liabilities 11,022 9,660 Long-term debt 10,152 9,351 Deferred income taxes 408 768 Other non-current liabilities     1,930       1,271   Shareholders' investment Common stock 71 71 Additional paid-in-capital 2,610 2,217 Retained earnings 13,451 12,087 Accumulated other comprehensive loss     (178 )     (2 ) Total shareholders' investment     15,954       14,373   Total liabilities and shareholders' investment   $ 39,466     $ 35,423   Common shares outstanding     847.8       857.8     Subject to reclassification Consolidated Statements of Cash Flows                 Six months ended August 4,   July 29, (millions) (unaudited)   2007   2006 Operating Activities Net earnings $ 1,337 $ 1,162 Reconciliation of net earnings to operating cash flows Depreciation and amortization 796 704 Share-based compensation expense 42 38 Deferred income taxes (65 ) (112 ) Bad debt provision 182 181 Loss on disposal of property and equipment, net 35 47 Other non-cash items affecting earnings 61 20 Changes in operating accounts providing / (requiring) cash: Accounts receivable originated at Target (64 ) 17 Inventory (391 ) (437 ) Other current assets (125 ) 48 Other non-current assets (12 ) 5 Accounts payable (475 ) (400 ) Accrued and other current liabilities (161 ) (115 ) Other non-current liabilities 43 --   Other     --       11   Cash flow provided by operations     1,203       1,169   Investing Activities Expenditures for property and equipment (2,363 ) (1,899 ) Proceeds from disposal of property and equipment 16 15 Change in accounts receivable originated at third parties (321 ) (73 )   Other investments     (69 )     (111 ) Cash flow required for investing activities     (2,737 )     (2,068 ) Financing Activities Increase in notes payable, net 1,586 748 Additions to long-term debt 1,900 750 Reductions of long-term debt (1,253 ) (750 ) Dividends paid (205 ) (174 ) Repurchase of stock (940 ) (900 ) Stock option exercises and related tax benefit 195 58   Other     (7 )     (4 ) Cash flow provided by (required for) financing activities     1,276       (272 ) Net decrease in cash and cash equivalents (258 ) (1,171 ) Cash and cash equivalents at beginning of period     813       1,648   Cash and cash equivalents at end of period   $ 555     $ 477     Subject to reclassification Number of Stores, Retail Square Feet and Comparable-store Sales                         Number of Stores   Retail Square Feet (a) August 4,   July 29, August 4,   July 29,   (unaudited)   2007   2006   2007   2006   Change Target general merchandise stores 1,345 1,282 165,672 156,036 6.2 % SuperTarget stores   192     162     33,890     28,641     18.3 % Total   1,537     1,444     199,562     184,677     8.1 %   (a) In thousands; reflects total square feet, less office, distribution center and vacant space.                   Three months ended Six months ended August 4, July 29, August 4, July 29, (unaudited)   2007     2006     2007     2006   Comparable-store sales (b)   4.9 %   4.6 %   4.6 %   4.9 %   (b) Comparable-store sales growth is calculated by comparing sales incurrent year periods to comparable, prior year periods of equivalent length. Credit Card Contribution to Earnings Before Tax   Effective February 2007, the Company redefined Credit Card Contribution to Earnings Before Taxes (EBT). We have reclassified prior period amounts to conform to the current year disclosure. These reclassifications had no effect on our Consolidated Statements of Operations.                     Three months ended   Six months ended August 4,   July 29, August 4,   July 29, (millions) (unaudited)   2007   2006   2007   2006 Revenues Finance charges $ 305 $ 273 $ 601 $ 532 Interest expense (a)     (80 )     (68 )     (157 )     (131 ) Net interest income     225       205       444       401   Late fees and other revenues 109 80 197 160 Third-party merchant fees 39 35 73 65 New account and loyalty rewards discounts (b)     (25 )     (25 )     (49 )     (49 ) Non-interest income     123       90       221       176   Total credit card revenues     348       295       665       577   Expenses Bad debt provision 95 93 182 181 Operations and marketing 87 77 169 149 Allocated depreciation charge (c)     3       3       8       7   Total expenses     185       173       359       337   Credit card contribution to EBT   $ 163     $ 122     $ 306     $ 240   As a percentage of average receivables (annualized) 9.7 % 8.2 % 9.2 % 8.1 % Net interest margin (annualized) (d)     13.4 %     13.9 %     13.3 %     13.5 %                   Receivables (millions)                 Period-end receivables $ 6,906 $ 6,041 $ 6,906 $ 6,041 Average receivables $ 6,718 $ 5,936 $ 6,670 $ 5,945 Accounts with three or more payments (60+ days) past due as a percentage of period-end receivables   3.5 % 3.4 % Accounts with four or more payments (90+ days) past due as a percentage of period-end receivables     2.3 %     2.2 %                           Allowance for Doubtful Accounts (millions)                 Allowance at beginning of period $ 504 $ 476 $ 517 $ 451 Bad debt provision 95 93 182 181 Net write-offs     (90 )     (68 )     (190 )     (131 ) Allowance at end of period   $ 509     $ 501     $ 509     $ 501   As a percentage of period-end receivables     7.4 %     8.3 %     7.4 %     8.3 % Net write-offs as a percentage of average receivables (annualized)     5.4 %     4.6 %     5.7 %     4.4 %   (a) Represents an allocation of consolidated interest expense based on estimated funding costs for average net accounts receivable and other financial services assets and is included in net interest expense in our Consolidated Statements of Operations.     (b) 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.     (c) Included in depreciation and amortization in our Consolidated Statements of Operations.   (d) Net interest income divided by average accounts receivable.