Target 2013 Annual Report Download - page 13

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Our failure to comply with federal, state, local and international laws, or changes in these laws could increase
our costs, reduce our margins and lower our sales.
Our business is subject to a wide array of laws and regulations in the United States, Canada and other countries in
which we operate. Significant workforce-related legislative changes could increase our expenses and adversely affect
our operations. Examples of possible workforce-related legislative changes include changes to an employer's obligation
to recognize collective bargaining units, the process by which collective bargaining agreements are negotiated or
imposed, minimum wage requirements, and health care mandates. In addition, changes in the regulatory environment
affecting Medicare reimbursements, privacy and information security, product safety, supply chain transparency, or
environmental protection, among others, could cause our expenses to increase without an ability to pass through any
increased expenses through higher prices. For example, we are currently facing government inquiries related to the
Data Breach that may result in the imposition of fines or other penalties. In addition, any legislative or regulatory
changes adopted in reaction to the recent retail-industry data breaches could increase or accelerate our compliance
costs. Also, our pharmacy and clinic operations are governed by various regulations, and a significant change in, or
our noncompliance with, these regulations could have a material adverse effect on our compliance costs and results
of operations. In addition, if we fail to comply with other applicable laws and regulations, including wage and hour
laws, the Foreign Corrupt Practices Act and local anti-bribery laws, we could be subject to legal risk, including
government enforcement action and class action civil litigation, which could adversely affect our results of operations
by increasing our costs, reducing our margins and lowering our sales.
Weather conditions where our stores are located may impact consumer shopping patterns, which alone or
together with natural disasters, particularly in areas where our sales are concentrated, could adversely affect
our results of operations.
Uncharacteristic or significant weather conditions can affect consumer shopping patterns, particularly in apparel and
seasonal items, which could lead to lost sales or greater than expected markdowns and adversely affect our short-
term results of operations. In addition, our three largest states by total sales are California, Texas and Florida, areas
where natural disasters are more prevalent. Natural disasters in those states or in other areas where our sales are
concentrated could result in significant physical damage to or closure of one or more of our stores or distribution
centers, and cause delays in the distribution of merchandise from our vendors to our distribution centers and stores,
which could adversely affect our results of operations by increasing our costs and lowering our sales.
Changes in our effective income tax rate could adversely affect our net income.
A number of factors influence our effective income tax rate, including changes in tax law, tax treaties, interpretation of
existing laws, and our ability to sustain our reporting positions on examination. Changes in any of those factors could
change our effective tax rate, which could adversely affect our net income. In addition, our operations outside of the
United States may cause greater volatility in our effective tax rate.
If we are unable to access the capital markets or obtain bank credit, our financial position, liquidity and results
of operations could suffer.
We are dependent on a stable, liquid and well-functioning financial system to fund our operations and capital
investments. In particular, we have historically relied on the public debt markets to fund portions of our capital
investments and the commercial paper market and bank credit facilities to fund seasonal needs for working capital.
Our continued access to these markets depends on multiple factors including the condition of debt capital markets,
our operating performance and maintaining strong debt ratings. If rating agencies lower our credit ratings, it could
adversely impact our ability to access the debt markets, our cost of funds and other terms for new debt issuances.
Each of the credit rating agencies reviews its rating periodically, and there is no guarantee our current credit rating will
remain the same. In addition, we use a variety of derivative products to manage our exposure to market risk, principally
interest rate and equity price fluctuations. Disruptions or turmoil in the financial markets could reduce our ability to
meet our capital requirements or fund our working capital needs, and lead to losses on derivative positions resulting
from counterparty failures, which could adversely affect our financial position and results of operations.
A significant disruption in our computer systems and our inability to adequately maintain and update those
systems could adversely affect our operations and our ability to maintain guest confidence.
We rely extensively on our computer systems to manage inventory, process guest transactions, manage guest data,
communicate with our vendors and other third parties, service REDcard accounts and summarize and analyze results,
and on continued and unimpeded access to the internet to use our computer systems. Our systems are subject to