Target 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 Target annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 88

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88

Table of contents

  • Page 1

  • Page 2
    ... '05 '06 '07 '08 '09 Diluted EPS 2009 Growth %: 15.2% Five-year CAGR: 9.8% 2009 Sales ($63.4 Billion) 23% 22% 20% Household Essentials Hardlines Apparel & Accessories 19% 16% Home Furnishings & Décor Food & Pet Supplies Retail sales, does not include credit card revenues. $2.71 $2.86 $3.30

  • Page 3
    ... the place to work, the place to invest, and the place to experience what's new and remarkable. Fresh ideas come to life in everything we do. From our clean stores to our market-fresh produce. We're continuing to bring outstanding quality and great design together at an incredible price. With speed...

  • Page 4
    ...behavior in 2009 in light of overwhelming uncertainty, Target remained focused on initiatives to deliver a superior guest experience, drive growth, enhance gross margin and profitability, improve expense management and invest capital productively. For example: • We added our PFresh design to more...

  • Page 5
    ...that Target is stronger and better positioned to deliver profitable market share growth in 2010 and generate substantial value for our shareholders well into the future. We support the communities in which we do business by donating 5% of our income toward education, the arts, social services and...

  • Page 6
    ... in operating outside the contiguous states and capture profitable market share growth. By partnering with talented and innovative designers, Target continues to delight guests and create excitement with affordable and differentiated merchandise assortments. Our limited-time-only collection...

  • Page 7
    ... our guests expect from Target. Our popular MOBILE Web site and iPhone applications serve as in-store assistants by making shopping more convenient. Guests can now access TargetLists and registries, view the Weekly Ad, and determine a product's availability and aisle location from their phone while...

  • Page 8
    ... and frozen foods. We use targeted marketing strategies like direct mail, newspaper ads and billboards to drive guest traffic to stores with this expanded food offering, and our open market layout and colorful overhead signs increase awareness in stores. In 2009, we introduced our PFresh design and...

  • Page 9
    We continuously modify the layout of our stores to offer an engaging, EASY-TO-SHOP ENVIRONMENT. Recent enhancements in Beauty, Jewelry, Shoes, Home and Electronics create a more convenient and inviting Target shopping experience for our guests and generate incremental traffic and sales. 7

  • Page 10
    ... give our guests confidence in our pricing every day. At the same time, our bold, fresh, uniquely Target messaging in our broadcast ads, Weekly Ad, in-store signs and direct marketing is making sure that our guests understand the outstanding value we offer. Highly recognized NATIONAL BRANDS such as...

  • Page 11
    .... Our affordable and exclusive limited-time-only collections -whether it's apparel by Tracy Feith, space-saving home décor by Dror Benshetrit or handbags by Carlos Falchi -drive purchase urgency with guests who appreciate great design at a great price. Target is our guests' SEASONAL DESTINATION for...

  • Page 12
    ...the world and provides them with a clear direction on how we approach our business. "Fast, Fun and Friendly" is how we approach our work and business, ensuring our guests and team members have an energizing experience every day. We know that diverse points of view and new ideas drive performance and...

  • Page 13
    ... for guests and team members who count on Target to help them find a better, simpler way to meet their health and wellness needs. For our guests, we offer wellness solutions throughout our stores with assortments like C9 by Champion activewear, fitness items in sporting goods, and organic and better...

  • Page 14
    ... organizations like the American Red Cross by providing funding, resources such as relief kits, and expertise to help prepare for and respond to disasters. In the civic arena, we engage in legislative activities that add value to our business, team and communities. For example, we work to develop...

  • Page 15
    ... for volunteerism. Since the program's inception in 2008, through volunteer efforts and funding, we have enhanced more than 2,000 school libraries across the country. Target is committed to providing SAFE AND SECURE shopping and working environments for our guests and team members. We take a multi...

  • Page 16
    ... rewards Increasing guest loyalty is more important than ever, and our financial products and services play a key role in strengthening guest relationships. As the wants and needs of our guests evolve, we remain relevant with continuous innovation that drives profitability and advances our brand. We...

  • Page 17
    2009 sales per capita Year-end Store Count and Square Footage by State SALES PER CAPITA GROUP NO. OF STORES RETAIL SQ. FT. (THOUSANDS) SALES PER CAPITA GROUP NO. OF STORES RETAIL SQ. FT. (THOUSANDS) SALES PER CAPITA GROUP NO. OF STORES RETAIL SQ. FT. (THOUSANDS) Over $300 Colorado Minnesota ...

  • Page 18
    ... shares outstanding (in millions) Cash flow provided by operations (in millions) Revenues per square foot (g)(h) Retail square feet (in thousands) Square footage growth Total number of stores General merchandise SuperTarget Total number of distribution centers (a) (b) (c) (d) Consisted of 53 weeks...

  • Page 19
    ... Corporate Governance Guidelines, Corporate Responsibility Report and Board of Director Committee Position Descriptions, are also available on the internet at Target.com/investors. TRUSTEE, EMPLOYEE SAVINGS 401(K) AND PENSION PLANS State Street Bank and Trust Company STOCK EXCHANGE LISTINGS Trading...

  • Page 20
    ... 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 1, 2009 was $32,739,208,053, based on the closing price of $43.62 per share of Common Stock as reported on the New York Stock Exchange...

  • Page 21
    (This page has been left blank intentionally.)

  • Page 22
    ... and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services Exhibits and Financial Statement Schedules...

  • Page 23
    ... and our disciplined approach to managing our current business and investing in future growth. As a component of the Retail Segment, our online business strategy is designed to enable guests to purchase products seamlessly either online or by locating them in one of our stores with the aid of online...

  • Page 24
    ...team member assistance programs, life insurance and merchandise discounts. 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...

  • Page 25
    ...drive sales and deepen guest relationships at Target. Our financial products compete with those of other issuers for market share of sales volume. Our ability to differentiate the value of our financial products primarily through our rewards programs, terms, credit line management, and guest service...

  • Page 26
    ... wage rates, health care and other benefit costs and changing demographics. If we are unable to attract and retain adequate numbers of qualified team members, our operations, guest service levels and support functions could suffer. Those factors, together with increasing wage and benefit costs...

  • Page 27
    ...out-of-stocks that could lead to lost sales. In addition, a large portion of our merchandise is sourced, directly or indirectly, from outside the United States, with China as our single largest source. Political or financial instability, trade restrictions, increased tariffs, currency exchange rates...

  • Page 28
    ...financial system to fund our operations and growth plans. In particular, we have historically relied on the public debt markets to raise capital for new store development and other capital expenditures, the commercial paper market and bank credit facilities to fund seasonal needs for working capital...

  • Page 29
    ...(b) The 38 distribution centers have a total of 48,588 thousand square feet. 1,492 81 167 1,740 29 8 1 38 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 27...

  • Page 30
    ... of the Internal Revenue Code. For a description of other legal proceedings, see Note 18 of the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data. PA R T I Item 4. Reserved Item 4A. Executive Officers The executive officers of Target as of...

  • Page 31
    service period 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 ...

  • Page 32
    ... 8, Financial Statements and Supplementary Data. In November 2007, our Board of Directors authorized the repurchase of $10 billion of our common stock. In November 2008 we announced a temporary suspension of our open-market share repurchase program. In January 2010, we resumed open-market purchases...

  • Page 33
    ...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 January 29, 2005 and reinvestment of all dividends. Item 6. Selected Financial Data As of or for the Year Ended 2008 2007 2006...

  • Page 34
    ...Retail Segment rate analysis metrics are computed by dividing the applicable amount by sales. 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 of the Notes to Consolidated Financial Statements for...

  • Page 35
    ... 2008 (2.9)% (3.1)% 0.2% (2.1)% 2.3% 2007 3.0% 0.3% 2.6% 1.1% 1.5% The comparable-store sales increases or decreases above are calculated by comparing sales in fiscal year periods with comparable prior fiscal year periods of equivalent length. In fiscal 2009, the change in comparable-store sales...

  • Page 36
    ... 2008 was due to increased capital expenditures, specifically related to investments in new stores. Store Data Number of Stores January 31, 2009 Opened Closed (a) January 30, 2010 Retail Square Feet (b) (thousands) January 31, 2009 Opened Closed (a) January 30, 2010 Target general merchandise stores...

  • Page 37
    ... fees Total revenues Bad debt expense Operations and marketing expenses (a) Depreciation and amortization Total expenses EBIT Interest expense on nonrecourse debt collateralized by credit card receivables Segment profit Average receivables funded by Target (b) Segment pretax ROIC (c) 2009 2008 2007...

  • Page 38
    ... payments (60+ days) past due as a percentage of period-end credit card receivables Accounts with four or more payments (90+ days) past due as a percentage of period-end gross credit card receivables Credit card penetration (a) Fiscal Year Percent Change 2009 2008 2007 2009/2008 2008/2007 $ 9,094...

  • Page 39
    ...internally generated funds. In addition we accelerated the payoff of a $550 million 2010 debt maturity, restarted our share repurchase program earlier than expected and experienced a $1.3 billion increase in marketable securities at January 30, 2010. Our 2009 period-end gross credit card receivables...

  • Page 40
    ...paper issued. In 2009 we funded our working capital needs through internally generated funds. Additionally and as described in Note 10 of the Notes to Consolidated Financial Statements, during 2008 we sold to JPMC an interest in our credit card receivables for approximately $3.8 billion. We received...

  • Page 41
    ... binding minimum lease payments for stores opening in 2010 or later for capital and operating leases, respectively. Capital lease obligations include interest. Refer to Note 21 of the Notes to Consolidated Financial Statements for a further description of leases. (d) Estimated tax contingencies of...

  • Page 42
    ... 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...

  • Page 43
    ...to Consolidated Financial Statements. 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...

  • Page 44
    ... Segment, our outlook for year-end gross credit card receivables, portfolio size, future write-offs of current receivables, profit, ROIC, and the allowance for doubtful accounts; on a consolidated basis, the expected effective income tax rate, the continued execution of our share repurchase program...

  • Page 45
    ... 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...

  • Page 46
    ... statements of financial position of Target Corporation and subsidiaries (the Corporation) as of January 30, 2010 and January 31, 2009, and the related consolidated statements of operations, cash flows, and shareholders' investment for each of the three years in the period ended January 30, 2010...

  • Page 47
    ... of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of Target Corporation and subsidiaries as of January 30, 2010 and January 31, 2009, and the related consolidated statements of operations, cash flows and shareholders' investment for...

  • Page 48
    Consolidated Statements of Operations (millions, except per share data) Sales Credit card revenues Total revenues Cost of sales Selling, general and administrative expenses Credit card expenses Depreciation and amortization Earnings before interest expense and income taxes Net interest expense ...

  • Page 49
    ... and outstanding at January 30, 2010; 752,712,464 shares issued and outstanding at January 31, 2009. Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding at January 30, 2010 or January 31, 2009. See accompanying Notes to Consolidated Financial Statements...

  • Page 50
    ...Repurchase of stock Premiums on call options Stock option exercises and related tax benefit Other Cash flow provided by / (required for) financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year...

  • Page 51
    ...net of taxes of $31 Total comprehensive income Cumulative effect of adopting new accounting pronouncements Dividends declared Repurchase of stock Premiums on call options Stock options and awards February 2, 2008 Net earnings Other comprehensive income Pension and other benefit liability adjustments...

  • Page 52
    ... current year presentation. Accounting policies applicable to the items discussed in the Notes to the Consolidated Financial Statement are described in the respective notes. 2. Revenues Our retail stores generally record revenue at the point of sale. Sales from our online business include shipping...

  • Page 53
    ... associated with sales to our guests Terms cash discount Distribution center costs, including compensation and benefits costs Compensation and benefit costs including • Stores • Headquarters Occupancy and operating costs of retail and headquarters facilities Advertising, offset by vendor income...

  • Page 54
    ... of pension and postretirement plan amounts, net of related taxes. Significant items affecting other comprehensive income/(loss) are shown in the Consolidated Statements of Shareholders' Investment. 8. Fair Value Measurements Fair value is the price at which an asset could be exchanged in a current...

  • Page 55
    ... are secured by some of these policies of $244 million at January 30, 2010 and $197 million at January 31, 2009. Position Marketable securities Prepaid forward contracts Interest rate swaps/forward and equity swaps Company-owned life insurance investments Valuation Technique Initially valued at...

  • Page 56
    ... in the Consolidated Statements of Financial Position. The fair value of marketable securities is determined using available market prices at the reporting date. The fair value of debt is generally measured using a discounted cash flow analysis based on our current market interest rates for similar...

  • Page 57
    ... value of inventory. We routinely enter into arrangements with 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...

  • Page 58
    ... and intangible assets Interest rate swaps (b) Other Total January 30, 2010 $319 239 131 140 $829 January 31, 2009 $305 231 163 163 $862 (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...

  • Page 59
    ...at period end. Overdrafts reclassified to accounts payable were $539 million at January 30, 2010 and $606 million at January 31, 2009. 17. Accrued and Other Current Liabilities Accrued and Other Current Liabilities (millions) Wages and benefits Taxes payable (a) Gift card liability (b) Straight-line...

  • Page 60
    ...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 2009 or 2008 under this credit facility. As further explained in Note 10, we maintain an accounts receivable financing program...

  • Page 61
    ...were not completely offset by changes in the market value of the interest rate swap. For those derivatives whose terms met the conditions of the ''short-cut method'', 100 percent hedge effectiveness was assumed. There was no ineffectiveness recognized in 2009, 2008, or 2007 related to our derivative...

  • Page 62
    ... Consolidated Statements of Operations. At January 30, 2010, a characteristic summary of interest rate swaps outstanding was: Outstanding Interest Rate Swap Characteristic Summary Weighted average rate: Pay Receive Weighted average maturity Notional Pay Floating one-month LIBOR 5.0% fixed 4.4 years...

  • Page 63
    ...interest rate exposure on our discounted workers' compensation and general liability obligations. 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...

  • Page 64
    ... by lower capital market returns on investments used to economically hedge the market risk in deferred compensation plans. Gains and losses from these investments are not taxable. Provision for Income Taxes: Expense/(Benefit) (millions) Current: Federal State/other Total current Deferred: Federal...

  • Page 65
    ...any change to have a significant effect on our results of operations or our financial position. During 2009, we filed income tax returns that included tax accounting method changes allowed under applicable tax regulations. These changes resulted in a substantial increase in tax deductions related to...

  • Page 66
    ... growth rate and domestic market share change relative to a retail peer group over a three-year performance period. We regularly issue restricted stock units with three-year cliff vesting to select team members. We also regularly issue restricted stock units to our Board of Directors. The number of...

  • Page 67
    ... plans was 21,450,009 at January 30, 2010 and 25,755,800 at January 31, 2009. Share-Based Compensation Award Activity Stock Options (a) Total Outstanding Exercisable (number of options and No. of Exercise Intrinsic No. of Exercise Intrinsic Performance Restricted units in thousands) Options Price...

  • Page 68
    ... paid during 2009. The total share based liabilities paid were $15 million in 2008 and $18 million in 2007. Total unrecognized compensation expense related to restricted stock unit awards was $16 million as of January 30, 2010. 26. Defined Contribution Plans Team members who meet certain eligibility...

  • Page 69
    ... and/or 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. Effective January 1, 2009, our qualified defined benefit pension plan was closed to...

  • Page 70
    ...for the years ended January 30, 2010 and January 31, 2009, related to our pension and postretirement health care plans: Change in Accumulated Other Comprehensive Income Pension Benefits (millions) February 2, 2008 Net actuarial loss Amortization of net actuarial Amortization of prior service January...

  • Page 71
    ... years 2009, 2008, and 2007: Net Pension and Postretirement Health Care Benefits Expense (millions) Service cost benefits earned during the period Interest cost on projected benefit obligation Expected return on assets Amortization of losses Amortization of prior service cost Total Pension Benefits...

  • Page 72
    ... January 30, 2010: Health Care Cost Trend Rates - 1% Change (millions) Effect on total of service and interest cost components of net periodic postretirement health care benefit expense Effect on the health care component of the accumulated postretirement benefit obligation PA R T I I 1% Increase...

  • Page 73
    ... equity securities (a) International equity securities Debt securities Balanced funds Other (b) Total 2008 25% 13 27 5 30 100% (a) Equity securities include our common stock in amounts substantially less than 1 percent of total plan assets as of January 30, 2010 and January 31, 2009. (b) Other...

  • Page 74
    ...-strategy hedge funds Fixed income securities Private equity/real estate/ certain multi-strategy hedge funds Contributions In 2009, we made discretionary contributions of $252 million to our qualified defined benefit pension plans. We are not required to make any contributions in 2010, although...

  • Page 75
    ... 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 2009 and 2008...

  • Page 76
    ... 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...

  • Page 77
    ..., 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...

  • Page 78
    ... Registered Public Accounting Firm on Consolidated Financial Statements Financial Statement Schedules For the Years Ended January 30, 2010, January 31, 2009, and February 2, 2008: II-Valuation and Qualifying Accounts Other schedules have not been included either because they are not applicable...

  • Page 79
    ... of May 19, 2008 between Target Credit Card Owner Trust 2008-1 and Wells Fargo Bank, National Association (16) S Series 2008-1 Supplement dated as of May 19, 2008 to Amended and Restated Pooling and Servicing Agreement among Target Receivables Corporation, Target National Bank, and Wells Fargo Bank...

  • Page 80
    ...thereunto duly authorized. TARGET CORPORATION By: 1APR200416064753 Dated: March 18, 2010 Douglas A. Scovanner Executive Vice President, Chief Financial Officer and Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the...

  • Page 81
    TARGET CORPORATION Schedule II - Valuation and Qualifying Accounts Fiscal Years 2009, 2008, and 2007 (millions) Column A Column B Balance at Beginning of Period $1,010 $ 570 $ 517 Column C Additions Charged to Cost, Expenses 1,185 1,251 481 Column D Column E Balance at End of Period $1,016 $ 1,...

  • Page 82
    ... Corporation Officer Income Continuance Policy Statement (as amended and restated January 13, 2010) Executive Excess Long Term Disability Plan Director Retirement Program Target Corporation Deferred Compensation Trust Agreement (as amended and restated effective January 1, 2009) Five-Year Credit...

  • Page 83
    ... Calculation Linkbase XBRL Taxonomy Extension Definition Linkbase XBRL Taxonomy Extension Label Linkbase XBRL Taxonomy Extension Presentation Linkbase Manner of Filing Filed Electronically (32)B Filed Electronically 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE Filed Filed Filed Filed Filed...

  • Page 84
    Exhibit 12 TARGET CORPORATION Computations of Ratios of Earnings to Fixed Charges for each of the Five Years in the Period Ended January 30, 2010 Ratio of Earnings to Fixed Charges (millions) Earnings from continuing operations before income taxes Capitalized interest Adjusted earnings from ...

  • Page 85
    (This page has been left blank intentionally.)

  • Page 86
    (This page has been left blank intentionally.)

  • Page 87
    ..., Target.com Karen Gershman Senior Vice President, Marketing Corey Haaland Senior Vice President, Financial Planning, Analysis and Tax Cynthia Ho Senior Vice President, Target Sourcing Services Derek Jenkins Senior Vice President, Stores Keri Jones Senior Vice President, Merchandising, Health...

  • Page 88
    1000 Nicollet Mall Minneapolis, MN 55403 612.304.6073 Target.com