Target 2006 Annual Report Download - page 23

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Thomas O’Brien, Waverly, and Woolrich. We also generate revenue from in-store amenities such as Food
Avenueᓼ, Target ClinicSM, Target PharmacySM, and Target PhotoSM, and from leased or licensed departments
such as Optical, Pizza Hut, Portrait Studio and Starbucks.
For 2006 and 2005, percentage of sales by product category were as follows:
Percentage of Sales
Category 2006 2005
Consumables and commodities 32% 30%
Electronics, entertainment, sporting goods and toys 23 23
Apparel and accessories 22 22
Home furnishings and d´
ecor 19 20
Other 45
Total 100% 100%
Distribution
The vast majority of our merchandise is distributed through a network of 25 regional distribution
centers and four import warehouses. 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 either distributed through our own distribution network, through third parties, or shipped
directly from vendors.
Employees
At February 3, 2007, we employed approximately 352,000 full-time, part-time and seasonal
employees, referred to as ‘‘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 each year. The increase in
working capital during this time is typically financed with cash flow from operations and short-term
borrowings. See further description 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. We believe that we have a competitive advantage with regard to these factors.
Additionally, we are a leader in supporting the communities where we do business.
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.
5
PART I