2013 Annual Report - Target Corporate

2013 Annual Report

Welcome to our 2013 Annual Report. To explore the key stories of the past year and find out more about what's in store for the year ahead, please visit our online Annual Report at annualreport.

Financial Highlights (Note: 2012 was a 53-week year.)

Total Revenues

IN MILLIONS

EBIT (Earnings before interest expense and income taxes) IN MILLIONS

Net Earnings

IN MILLIONS

Diluted EPS

$65,357 $67,390 $69,865

$73,301 $72,596 $4,673 $5,252

$5,322 $5,371 $4,229 $2,488 $2,920 $2,929 $2,999 $1,971 $3.30 $4.00 $4.28

$4.52 $3.07

'09 '10 '11 '12 '13

2013 Change: ?1.0% Five-year CAGR: 2.3%

'09 '10 '11 '12 '13

2013 Change: ?21.3% Five-year CAGR: ?0.8%

'09 '10 '11 '12 '13

2013 Change: ?34.3% Five-year CAGR: ?2.3%

'09 '10 '11 '12 '13

2013 Change: ?32.1% Five-year CAGR: 1.4%

Total U.S. Segment Sales: $71.3 Billion

25%

21%

Household Essentials

Food & Pet Supplies

19%

Apparel & Accessories

18%

17%

Hardlines

Home Furnishings & D?cor

Target 2013 Annual Report

To our shareholders

Amid massive transformation in the retail industry and challenges to our business, 2013 was a year that tested the strength of our brand and the resilience of our team. And, while we fell short of our performance expectations, we made meaningful investments and progress in key strategies that position Target to deliver sustained growth and shareholder return well into the future.

A top priority in the past year was our continued journey to becoming a truly omnichannel retailer. We intensified our focus on providing a guest experience that seamlessly integrates physical and digital shopping, while offering outstanding convenience and a compelling assortment of distinctive style and exceptional value. Enhancements to Target's mobile app; the launch of Cartwheel, our social savings program; strategic acquisitions that expanded our online assortment; and the rollout of pick-up-in-store capabilities ensure that our guests can shop whenever and however they want. And, the increased development of our technology and evolution within our supply chain further support our omnichannel transformation.

In addition, 2013 marked the largest single year of store growth in Target's history. On top of 19 new stores in the U.S., we opened 124 stores and three distribution centers in Canada. We are proud of our team's incredible dedication and commitment to achieving this unprecedented international expansion, but we are disappointed in our financial performance during our first year in Canada, which resulted in much higher-than-expected earnings dilution. We believe the operational changes we have made will deliver stronger performance in 2014, and we remain confident that our Canadian segment will prove to be an excellent investment over time.

Finally, last year we also sold our entire consumer credit card portfolio to TD Bank Group. We're very pleased to have reached the right agreement with the right strategic partner in a transaction that removes these more volatile assets from our balance sheet and allows us to continue offering valuable debit and credit payment options and rewards to our guests.

While we achieved these and other important milestones in the face of economic and competitive challenges throughout the year, we did not deliver our planned sales and earnings, and our shortfall was further exacerbated by the impact of the criminal attack on our systems just before the holiday season. We know our guests were deeply affected by this breach and we are sorry for the anguish and inconvenience it has caused. We are

committed to learning from this incident and dedicating time and resources to make Target, and our industry, more secure for consumers in the future.

The events of 2013 have further sharpened our resolve to be an even stronger competitor in the marketplace -- to uphold our "Expect More. Pay Less." brand promise by bringing inspiration, tremendous value and incomparable shopping ease to our guests. We believe this commitment, combined with our team's passion, our strong capital position and our disciplined expense management will keep us on pace to achieve our long-term financial goals and reward our shareholders for many years to come.

Gregg Steinhafel Chairman, President and CEO Target

Board of Directors Changes In June 2013, Mary Dillon resigned from our board of directors after six years of service to assume her new position as CEO of Ulta Salon, Cosmetics & Fragrance, Inc. In July, we welcomed Kenneth Salazar, former U.S. Secretary of the Interior and U.S. Senator from Colorado, to our board of directors. And in March of this year, Sol Trujillo, former CEO of Telstra Corporation Limited, retired from our board of directors after 20 years of service. We thank Mary and Sol for their many contributions to Target.

Target 2013 Annual Report

Financial Summary

2013

2012 (a)

2011

2010

2009

2008

FINANCIAL RESULTS: (in millions) Sales Credit card revenues Total revenues Cost of sales Selling, general and administrative expenses (b) Credit card expenses Depreciation and amortization Gain on receivables transaction Earnings before interest expense and income taxes (c) Net interest expense Earnings before income taxes Provision for income taxes Net earnings

$ 72,596 ?

72,596 51,160 15,375

? 2,223

(391 ) 4,229 1,126 3,103 1,132 $ 1,971

$ 71,960 1,341

73,301 50,568 14,914

467 2,142

(161) 5,371

762 4,609 1,610 $ 2,999

$ 68,466 1,399

69,865 47,860 14,106

446 2,131

? 5,322

866 4,456 1,527 $ 2,929

$ 65,786 1,604

67,390 45,725 13,469

860 2,084

? 5,252

757 4,495 1,575 $ 2,920

$ 63,435 1,922

65,357 44,062 13,078

1,521 2,023

? 4,673

801 3,872 1,384 $ 2,488

$ 62,884 2,064

64,948 44,157 12,954

1,609 1,826

? 4,402

866 3,536 1,322 $ 2,214

PER SHARE: Basic earnings per share Diluted earnings per share Cash dividends declared

$ 3.10 $ 3.07 $ 1.65

$ 4.57 $ 4.52 $ 1.38

$ 4.31 $ 4.28 $ 1.15

$ 4.03 $ 4.00 $ 0.92

$ 3.31 $ 3.30 $ 0.67

$ 2.87 $ 2.86 $ 0.62

FINANCIAL POSITION: (in millions) Total assets Capital expenditures Long-term debt, including current portion Net debt (d) Shareholders' investment

$ 44,553 $ 3,453 $ 13,782 $ 13,779 $ 16,231

$ 48,163 $ 3,277 $ 17,648 $ 17,518 $ 16,558

$ 46,630 $ 4,368 $ 17,483 $ 17,289 $ 15,821

$ 43,705 $ 2,129 $ 15,726 $ 14,597 $ 15,487

$ 44,533 $ 1,729 $ 16,814 $ 15,288 $ 15,347

$ 44,106 $ 3,547 $ 18,752 $ 18,562 $ 13,712

U.S. SEGMENT FINANCIAL RATIOS: Comparable sales growth (e) Gross margin (% of sales) SG&A (% of sales) (f) EBIT margin (% of sales) (f)

(0.4%) 29.8% 20.0%

7.0%

2.7% 29.7% 19.1%

7.8%

3.0% 30.1% 19.1%

8.0%

2.1% 30.5% 19.3%

8.0%

(2.5%) 30.5% 20.0%

7.4%

(2.9%) 29.8% 19.9%

7.0%

OTHER: Common shares outstanding (in millions) Cash flow provided by operations (in millions) Revenue per square foot (g) Retail square feet (in thousands) Square footage growth Total number of stores

General merchandise Expanded food assortment SuperTarget CityTarget Canada Total number of distribution centers

632.9

$ 6,520

$

298

254,243

6.9%

1,917

289

1,245

251

8

124

40

645.3

$ 5,325

$

299

237,847

0.9%

1,778

391

1,131

251

5

?

40

669.3

$ 5,434

$

294

235,721

0.9%

1,763

637

875

251

?

?

37

704.0

$ 5,271

$

290

233,618

0.7%

1,750

1,037

462

251

?

?

37

744.6

$ 5,881

$

287

231,952

4.2%

1,740

1,381

108

251

?

?

37

752.7

$ 4,430

$

301

222,588

7.0%

1,682

1,441

2

239

?

?

34

(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 short-term investments of $3 million, $130 million, $194 million, $1,129 million, $1,526 million and $190 million, respectively.

Management believes this measure is an indicator of our level of financial leverage because short-term investments are available to pay debt maturity obligations. (e) See definition of comparable sales in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. (f) Prior period segment results have been revised to reflect the combination of our historical U.S. Retail Segment and U.S. Credit Card Segment into one U.S. Segment. (g) Represents U.S. revenue per square foot which is calculated using rolling 13 month average square feet and a rolling four quarters of average revenue. In 2012, revenue per square foot was calculated

excluding the 53rd week in order to provide a more useful comparison to other years. Using total reported revenues for 2012 (including the 53rd week) resulted in revenue per square foot of $304.

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 1, 2014

OR

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 (State or other jurisdiction of incorporation or organization)

1000 Nicollet Mall, Minneapolis, Minnesota (Address of principal executive offices)

41-0215170 (I.R.S. Employer Identification No.)

55403 (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 Common Stock, par value $0.0833 per share

Name of Each Exchange on Which Registered 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

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 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

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (?232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes No

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

Non-accelerated filer (Do not check if a smaller reporting company)

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

Aggregate market value of the voting stock held by non-affiliates of the registrant on August 3, 2013 was $45,036,171,526, based on the closing price of $71.50 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 $0.0833, outstanding at March 10, 2014 were 633,174,692.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of Target's Proxy Statement to be filed on or about April 28, 2014 are incorporated into Part III.

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