Edgar Filing: TARGET CORP

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended October 30, 2010

Commission File Number 1-6049

TARGET CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota		41-0215170
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1000 Nicollet Mall, Minneapolis, Minnesota		55403
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 612/304-6073

Former name, former address and former fiscal year, if changed since last report: N/A

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller Reporting company o

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

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 $.0833, outstanding at December 1, 2010 were 708,081,740.

TARGET CORPORATION

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Operations	1
	Consolidated Statements of Financial Position	2
	Consolidated Statements of Cash Flows	3
	Consolidated Statements of Shareholders’ Investment	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Reserved	24
Item 5.	Other Information	24
Item 6.	Exhibits	24


Signature		26
Exhibit Index		27

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations

	Three Months Ended					Nine Months Ended
	October 30,			October 31,		October 30,			October 31,
(millions, except per share data) (unaudited)	2010			2009		2010			2009
Sales	$	15,226		$	14,789	$	45,509		$	43,717
Credit card revenues	379			487		1,220			1,459
Total revenues	15,605			15,276		46,729			45,176
Cost of sales	10,562			10,229		31,267			30,080
Selling, general and administrative expenses	3,345			3,255		9,749			9,405
Credit card expenses	198			381		693			1,153
Depreciation and amortization	533			537		1,545			1,487
Earnings before interest expense and income taxes	967			874		3,475			3,051
Net interest expense
Nonrecourse debt collateralized by credit card receivables	20			23		64			74
Other interest expense	175			168		505			517
Interest income	(1		)	—		(2		)	(3		)
Net interest expense	194			191		567			588
Earnings before income taxes	773			683		2,908			2,463
Provision for income taxes	238			247		1,023			911
Net earnings	$	535		$	436	$	1,885		$	1,552
Basic earnings per share	$	0.75		$	0.58	$	2.59		$	2.06
Diluted earnings per share	$	0.74		$	0.58	$	2.57		$	2.06
Weighted average common shares outstanding
Basic	715.4			751.8		728.8			752.0
Diluted	721.0			755.7		734.4			754.3

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Financial Position

	October 30,		January 30,		October 31,
(millions)	2010		2010		2009
Assets	(unaudited)				(unaudited)
Cash and cash equivalents, including marketable securities of $349, $1,617 and $273	$	936	$	2,200	$	864
Credit card receivables, net of allowance of $775, $1,016 and $1,025	5,955		6,966		7,023
Inventory	9,550		7,179		9,382
Other current assets	1,905		2,079		2,314
Total current assets	18,346		18,424		19,583
Property and equipment
Land	5,891		5,793		5,754
Buildings and improvements	23,101		22,152		22,250
Fixtures and equipment	4,908		4,743		4,732
Computer hardware and software	2,461		2,575		2,599
Construction-in-progress	448		502		291
Accumulated depreciation	(11,219)		(10,485)		(10,035)
Property and equipment, net	25,590		25,280		25,591
Other noncurrent assets	1,013		829		805
Total assets	$	44,949	$	44,533	$	45,979
Liabilities and shareholders’ investment
Accounts payable	$	7,761	$	6,511	$	7,641
Accrued and other current liabilities	3,179		3,120		3,117
Unsecured debt and other borrowings	814		796		577
Nonrecourse debt collateralized by credit card receivables	36		900		1,063
Total current liabilities	11,790		11,327		12,398
Unsecured debt and other borrowings	11,737		10,643		11,432
Nonrecourse debt collateralized by credit card receivables	3,943		4,475		4,463
Deferred income taxes	814		835		804
Other noncurrent liabilities	1,786		1,906		1,911
Total noncurrent liabilities	18,280		17,859		18,610
Shareholders’ investment
Common stock	59		62		63
Additional paid-in capital	3,128		2,919		2,866
Retained earnings	12,254		12,947		12,559
Accumulated other comprehensive loss	(562)		(581)		(517)
Total shareholders’ investment	14,879		15,347		14,971
Total liabilities and shareholders’ investment	$	44,949	$	44,533	$	45,979
Common shares outstanding	707.9		744.6		752.2

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

	Nine Months Ended
	October 30,			October 31,
(millions) (unaudited)	2010			2009
Operating activities
Net earnings	$	1,885		$	1,552
Reconciliation to cash flow
Depreciation and amortization	1,545			1,487
Share-based compensation expense	77			72
Deferred income taxes	249			451
Bad debt expense	445			900
Loss/impairment of property and equipment, net	12			85
Other non-cash items affecting earnings	128			44
Changes in operating accounts providing / (requiring) cash
Accounts receivable originated at Target	241			190
Inventory	(2,371		)	(2,677		)
Other current assets	(187		)	(251		)
Other noncurrent assets	(118		)	27
Accounts payable	1,250			1,303
Accrued and other current liabilities	(141		)	(148		)
Other noncurrent liabilities	(163		)	(8		)
Cash flow provided by operations	2,852			3,027
Investing activities
Expenditures for property and equipment	(1,607		)	(1,440		)
Proceeds from disposal of property and equipment	36			25
Change in accounts receivable originated at third parties	325			(29		)
Other investments	(70		)	10
Cash flow required for investing activities	(1,316		)	(1,434		)
Financing activities
Additions to long-term debt	997			—
Reductions of long-term debt	(1,450		)	(1,255		)
Dividends paid	(432		)	(369		)
Repurchase of stock	(2,055		)	—
Stock option exercises and related tax benefit	133			31
Other	7			—
Cash flow required for financing activities	(2,800		)	(1,593		)
Net (decrease)/increase in cash and cash equivalents	(1,264		)	—
Cash and cash equivalents at beginning of period	2,200			864
Cash and cash equivalents at end of period	$	936		$	864

See accompanying Notes to Consolidated Financial Statements.

Consolidated Statements of Shareholders’ Investment

											Accumulated Other Comprehensive Income/(Loss)
(millions, except footnotes)	Common Stock Shares		Stock Par Value			Additional Paid-in Capital		Retained Earnings			Pension and Other Benefit Liability Adjustments			Derivative Instruments, Foreign Currency and Other			Total
January 31, 2009	752.7		$	63		$	2,762	$	11,443		$	(510	)	$	(46	)	$	13,712
Net earnings	—		—			—		2,488			—			—			2,488
Other comprehensive income
Pension and other benefit liability adjustments, net of taxes of $17	—		—			—		—			(27		)	—			(27		)
Net change on cash flow hedges, net of taxes of $2	—		—			—		—			—			4			4
Currency translation adjustment, net of taxes of $0	—		—			—		—			—			(2		)	(2		)
Total comprehensive income																	2,463
Dividends declared	—		—			—		(503		)	—			—			(503		)
Repurchase of stock	(9.9	)	(1		)	—		(481		)	—			—			(482		)
Stock options and awards	1.8		—			157		—			—			—			157
January 30, 2010	744.6		$	62		$	2,919	$	12,947		$	(537	)	$	(44	)	$	15,347
(unaudited)
Net earnings	—		—			—		1,885			—			—			1,885
Other comprehensive income
Pension and other benefit liability adjustments, net of taxes of $11	—		—			—		—			16			—			16
Net change on cash flow hedges, net of taxes of $2	—		—			—		—			—			2			2
Currency translation adjustment, net of taxes of $0	—		—			—		—			—			1			1
Total comprehensive income																	1,904
Dividends declared	—		—			—		(483		)	—			—			(483		)
Repurchase of stock	(40.2	)	(3		)	—		(2,095		)	—			—			(2,098		)
Stock options and awards	3.5		—			209		—			—			—			209
October 30, 2010	707.9		$	59		$	3,128	$	12,254		$	(521	)	$	(41	)	$	14,879

Dividends declared per share were $0.25 and $0.17 for the three months ended October 30, 2010, and October 31, 2009, respectively, and $0.67 and $0.50 for the nine months ended October 30, 2010 and October 31, 2009, respectively. For the fiscal year ended January 30, 2010, dividends declared per share were $0.67.

See accompanying Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

1. Accounting Policies

The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statement disclosures contained in the 2009 Form 10-K for Target Corporation (Target or the Corporation). The same accounting policies are followed in preparing quarterly financial data as are followed in preparing annual data. See Note 1 in our Form 10-K for the fiscal year ended January 30, 2010, for those policies. In the opinion of management, all adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature.

Due to the seasonal nature of our business, quarterly revenues, expenses, earnings and cash flows are not necessarily indicative of the results that may be expected for the full year.

2. Earnings Per Share

Basic earnings per share (EPS) is net earnings divided by the weighted average number of common shares outstanding during the period. Diluted EPS includes the incremental shares assumed to be issued upon the exercise of stock options and under performance share and restricted stock unit arrangements.

Earnings Per Share	Basic EPS											Diluted EPS
	Three Months Ended						Nine Months Ended					Three Months Ended					Nine Months Ended
	Oct. 30		,	Oct. 31		,	Oct. 30		,	Oct. 31,		Oct. 30		,	Oct. 31,		Oct. 30		,	Oct. 31		,
(millions, except per share data)	2010			2009			2010			2009		2010			2009		2010			2009
Net earnings	$	535		$	436		$	1,885		$	1,552	$	535		$	436	$	1,885		$	1,552
Basic weighted average common shares outstanding	715.4			751.8			728.8			752.0		715.4			751.8		728.8			752.0
Incremental stock options, performance share units and restricted stock units	—			—			—			—		5.6			3.9		5.6			2.3
Weighted average common shares outstanding	715.4			751.8			728.8			752.0		721.0			755.7		734.4			754.3
Earnings per share	$	0.75		$	0.58		$	2.59		$	2.06	$	0.74		$	0.58	$	2.57		$	2.06

For the October 30, 2010 and October 31, 2009 computations, 10.7 million and 16.3 million stock options, respectively, were excluded from the calculation of weighted average shares for diluted EPS because their effects were antidilutive.

3. Fair Value Measurements

Fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

The following table presents financial assets and liabilities measured at fair value on a recurring basis:

Fair Value Measurements —
Recurring Basis	Fair Value at						Fair Value at						Fair Value at
	October 30, 2010						January 30, 2010						October 31, 2009
(millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents
Marketable securities	$	349	$	—	$	—	$	1,617	$	—	$	—	$	273	$	—	$	—
Other current assets
Prepaid forward contracts	62		—		—		79		—		—		54		—		—
Other noncurrent assets
Interest rate swaps(a)	—		172		—		—		131		—		—		134		—
Company-owned life insurance investments(b)	—		337		—		—		305		—		—		292		—
Total	$	411	$	509	$	—	$	1,696	$	436	$	—	$	327	$	426	$	—
Liabilities
Other noncurrent liabilities
Interest rate swaps(a)	$	—	$	80	$	—	$	—	$	23	$	—	$	—	$	21	$	—
Total	$	—	$	80	$	—	$	—	$	23	$	—	$	—	$	21	$	—

(a) There were no interest rate swaps designated as accounting hedges at October 30, 2010, January 30, 2010 or October 31, 2009.

(b) Company-owned life insurance investments consist of equity index funds and fixed income assets. Amounts are presented net of loans of $242 million at October 30, 2010, $244 million at January 30, 2010, and $240 million at October 31, 2009 that are secured by some of these policies.

Position		Valuation Technique
Marketable securities		Initially valued at transaction price. Carrying value of cash equivalents (including money market funds) approximates fair value because maturities are less than three months.
Prepaid forward contracts		Initially valued at transaction price. Subsequently valued by reference to the market price of Target common stock.
Interest rate swaps		Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g., interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made on each swap using observable market credit spreads.
Company-owned life insurance investments		Includes investments in separate accounts that are valued based on market rates credited by the insurer.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). The fair value measurements related to long-lived assets held for sale and held and used in the following table were determined using available market prices at the measurement date based on recent investments or pending transactions of similar assets, third-party independent appraisals, valuation multiples or public comparables, less cost to sell where appropriate. We classify these measurements as Level 2.

Fair Value Measurements — Nonrecurring Basis

	Other current assets						Property and equipment
	Long-lived assets held for sale						Long-lived assets held and used(a)
(millions)	Three Months Ended			Nine Months Ended			Three Months Ended			Nine Months Ended
Measured as of Oct. 30, 2010:
Carrying amount	$	—		$	2		$	25		$	73
Fair value measurement	—			2			23			63
Gain/(loss)	—			—			(2		)	(10		)
Measured as of Oct. 31, 2009:
Carrying amount	34			61			29			83
Fair value measurement	31			49			22			55
Gain/(loss)	(3		)	(12		)	(7		)	(28		)

(a) Primarily relates to real estate and buildings intended for sale in the future but not currently meeting the held for sale criteria.

The following table presents the carrying amounts and estimated fair values of financial instruments not measured at fair value 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 measured using a discounted cash flow analysis based on our current market interest rates for similar types of financial instruments.

Financial Instruments Not Measured at Fair Value	October 30, 2010				October 31, 2009
	Carrying		Fair		Carrying		Fair
(millions)	Amount		Value		Amount		Value
Financial assets
Other current assets
Marketable securities(a)	$	73	$	73	$	55	$	55
Other noncurrent assets
Marketable securities(a)	—		—		4		4
Total	$	73	$	73	$	59	$	59
Financial liabilities
Total debt(b)	$	16,037	$	17,880	$	17,149	$	18,441
Total	$	16,037	$	17,880	$	17,149	$	18,441

(a) Amounts include held-to-maturity government and money market investments that are held to satisfy the regulatory requirements of Target Bank and Target National Bank.

(b) Represents the sum of nonrecourse debt collateralized by credit card receivables and unsecured debt and other borrowings excluding unamortized swap valuation adjustments and capital lease obligations.

The carrying amounts of credit card receivables, net of allowance, accounts payable, and certain accrued and other current liabilities approximate fair value at October 30, 2010.

4. Credit Card Receivables

Credit card receivables are recorded net of an allowance for doubtful accounts. The allowance, recognized in an amount equal to the anticipated future write-offs of existing receivables, was $775 million at October 30, 2010, $1,016 million at January 30, 2010 and $1,025 million at October 31, 2009. This allowance includes provisions for uncollectible finance charges and other credit-related fees. We estimate future write-offs based on historical experience of delinquencies, risk scores, aging trends, and industry risk trends. Substantially all accounts continue to accrue finance charges until they are written off. Total receivables past due ninety days or more and still accruing finance charges were $234 million at October 30, 2010, $371 million at January 30, 2010 and $370 million at October 31, 2009. Accounts are written off when they become 180 days past due.

Under certain circumstances, we offer cardholder payment plans that modify finance charges and minimum payments, which meet the accounting definition of a troubled debt restructuring (TDRs). These concessions are made on an individual cardholder basis for economic or legal reasons specific to each individual cardholder’s circumstances. As a percentage of period-end gross receivables, receivables classified as TDRs were 6.3 percent at October 30, 2010, 6.7 percent at January 30, 2010, and 6.7 percent at October 31, 2009. Receivables classified as TDRs are treated consistently with other aged receivables in determining our allowance for doubtful accounts.

As a method of providing funding for our credit card receivables, we sell on an ongoing basis all of our consumer credit card receivables to Target Receivables Corporation (TRC), a wholly owned, bankruptcy remote subsidiary. TRC then transfers the receivables to the Target Credit Card Master Trust (the Trust), which from time to time will sell debt securities to third parties either directly or through a related trust. These debt securities represent undivided interests in the Trust assets. TRC uses the proceeds from the sale of debt securities and its share of collections on the receivables to pay the purchase price of the receivables to the Corporation.

We consolidate the receivables within the Trust and any debt securities issued by the Trust, or a related trust, in our Consolidated Statements of Financial Position. The receivables transferred to the Trust are not available to general creditors of the Corporation. The payments to the holders of the debt securities issued by the Trust or the related trust are made solely from the assets transferred to the Trust or the related trust and are nonrecourse to the general assets of the Corporation. Upon termination of the securitization program and repayment of all debt securities, any remaining assets could be distributed to the Corporation in a liquidation of TRC.

In the second quarter of 2008, we sold an interest in our credit card receivables to a JPMorgan Chase affiliate (JPMC). The interest sold represented 47 percent of the receivables portfolio at the time of the transaction. This transaction was accounted for as a secured borrowing, and accordingly, the credit card receivables within the Trust and the note payable issued are reflected in our Consolidated Statements of Financial Position. Notwithstanding this accounting treatment, the accounts receivable assets that collateralize the note payable supply the cash flow to pay principal and interest to the note holder; the receivables are not available to general creditors of the Corporation; and the payments to JPMC are made solely from the Trust and are nonrecourse to the general assets of the Corporation. Interest and principal payments due on the note are satisfied provided the cash flows from the Trust assets are sufficient. If the cash flows are less than the periodic interest, the available amount, if any, is paid with respect to interest. Interest shortfalls will be paid to the extent subsequent cash flows from the assets in the Trust are sufficient. Future principal payments will be made from JPMC’s prorata share of cash flows from the Trust assets.

In the event of a decrease in the receivables principal amount such that JPMC’s interest in the entire portfolio would exceed 47 percent for three consecutive months, TRC (using the cash flows from the assets in the Trust) would be required to pay JPMC a pro rata amount of principal collections such that the portion owned by JPMC would not exceed 47 percent, unless JPMC provides a waiver. Conversely, at the option of the Corporation, JPMC may be required to fund an increase in the portfolio to maintain their 47 percent interest up to a maximum JPMC principal balance of $4.2 billion. Due to the continuing declines in gross credit card receivables, TRC repaid JPMC $110 million and $530 million for the three and nine months ended October 30, 2010, respectively, under the terms of this agreement. No payments were made during the nine months ended October 31, 2009. On November 26, 2010, TRC repaid an additional $36 million to JPMC.

If a three-month average of monthly finance charge excess (JPMC’s prorata share of finance charge collections less write-offs and specified expenses) is less than 2 percent of the outstanding principal balance of JPMC’s interest, the Corporation must implement mutually agreed-upon underwriting strategies. If the three-month average finance charge excess falls below 1 percent of the outstanding principal balance of JPMC’s interest, JPMC may compel the Corporation to implement underwriting and collections activities, provided those activities are compatible with the Corporation’s systems, as well as consistent with similar credit card receivable portfolios managed by JPMC. If the Corporation fails to implement the activities, JPMC has the right to cause the accelerated repayment of the note payable issued in the transaction. As noted in the preceding paragraph, payments would be made solely from the Trust assets.

5. Contingencies

We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of the currently identified claims or litigation matters will materially affect our results of operations, cash flows or financial condition.

6. Notes Payable and Long-Term Debt

We obtain short-term financing from time to time under our commercial paper program, a form of notes payable. There were no amounts outstanding under our commercial paper program at October 30, 2010, January 30, 2010, or October 31, 2009. There were no amounts outstanding under our commercial paper program at any time during the three and nine months ended October 30, 2010. During the three and nine months ended October 31, 2009 the maximum amount outstanding was $112 million and the average amount outstanding was $4 million and $1 million, respectively.

In July 2010, we issued $1 billion of long-term debt at 3.875% that matures in July 2020. Proceeds from this issuance were used for general corporate purposes.

In April 2010, TRC repurchased and retired the entire $900 million series of nonrecourse debt collateralized by credit card receivables, at par, that otherwise would have matured in October 2010. No gain or loss was recorded other than insignificant expenses associated with retiring this debt.

In addition, TRC has made payments to JPMC to reduce its interest in our credit card receivables as described in Note 4, Credit Card Receivables.

7. Derivative Financial Instruments

Derivative financial instruments are reported at fair value on the Consolidated Statements of Financial Position. Historically our derivative instruments have primarily consisted of interest rate swaps. We use these derivatives to mitigate our interest rate risk. We have counterparty credit risk resulting from our derivative instruments. This risk lies primarily with two global financial institutions. We monitor this concentration of counterparty credit risk on an ongoing basis.

During 2008, we terminated or de-designated certain interest rate swaps that were accounted for as hedges. Total net gains amortized into net interest expense for terminated or de-designated swaps were $11 million and $13 million during the three months ended October 30, 2010 and October 31, 2009, respectively. Total net gains amortized into net interest expense for terminated and de-designated swaps were $34 million and $46 million during the nine months ended October 30, 2010 and October 31, 2009, respectively. The amount remaining on unamortized hedged debt valuation gains from terminated or de-designated interest rate swaps that will be amortized into earnings over the remaining lives of the underlying debt totaled $164 million, $197 million and $216 million, at October 30, 2010, January 30, 2010 and October 31, 2009, respectively.

Periodic payments, valuation adjustments and amortization of gains or losses related to derivative contracts are summarized below:

Derivative Contracts — Effect on Results of Operations		Three Months Ended				Nine Months Ended
	Classification of	Oct. 30,		Oct. 31,		Oct. 30,		Oct. 31,
(millions)	Income/(Expense)	2010		2009		2010		2009
Interest Rate Swaps	Other interest expense	$	12	$	17	$	40	$	48

At October 30, 2010, there were no derivative instruments designated as accounting hedges.

See Note 3, Fair Value Measurements, for a description of the fair value measurement of derivative contracts and their classification on the Consolidated Statements of Financial Position.

8. Income Taxes

We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years before 2009 and, with few exceptions, are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before 2003.

We accrue for the effects of uncertain tax positions and the related potential penalties and interest.

During the first quarter of 2010, we filed a tax accounting method change that resolved the uncertainty surrounding the timing of deductions for one of our tax positions, resulting in a $130 million decrease to our unrecognized tax benefit liability. Because this matter solely related to the timing of the deduction, this change had virtually no effect on net tax expense in the first quarter of 2010.

During the third quarter of 2010, we recorded a reduction to income tax expense of $45 million due to the favorable resolution of various state income tax matters. As of October 30, 2010, our unrecognized tax benefit liability was $337 million.

9. Share Repurchase

Since the inception of our share repurchase program, which began in the fourth quarter of 2007, we have repurchased 143.8 million shares of our common stock, for a total cash investment of $7,413 million (average price per share of $51.55).

During the three months ended October 30, 2010, we repurchased 15.2 million shares of our common stock, including 0.5 million shares through settlement of prepaid forward contracts, for a total cash investment of $793 million (average price per share of $52.29), of which $9 million was paid in prior periods. The prepaid forward contracts settled during the three months ended October 30, 2010 had a total cash investment of $24 million and an aggregate market value of $26 million at their respective settlement dates.

During the nine months ended October 30, 2010, we repurchased 40.2 million shares of our common stock, including 0.8 million shares through settlement of prepaid forward contracts, for a total cash investment of $2,093 million (average price per share of $52.04), of which $24 million was paid in prior periods. The prepaid forward contracts settled during the nine months ended October 30, 2010 had a total cash investment of $39 million and an aggregate market value of $42 million at their respective settlement dates.

During the three months ended October 31, 2009, we repurchased 0.3 million shares of our common stock, for a total cash investment of $14 million (average price per share of $43.80), of which $9 million was paid in prior periods. All shares reacquired during the three months ended October 31, 2009 were delivered upon settlement of prepaid forward contracts. The prepaid forward contracts settled during the three months ended October 31, 2009 had a total cash investment of $14 million and an aggregate market value of $15 million at their respective settlement dates.

During the nine months ended October 31, 2009, we repurchased 1.5 million shares of our common stock, for a total cash investment of $56 million (average price per share of $36.57), of which $42 million was paid in prior periods. All shares reacquired during the nine months ended October 31, 2009 were delivered upon settlement of prepaid forward contracts. The prepaid forward contracts settled during the nine months ended October 31, 2009 had a total cash investment of $56 million and an aggregate market value of $60 million at their respective settlement dates.

See Note 10, Pension, Postretirement Health Care and Other Benefits, for further details of our prepaid forward contracts.

10. Pension, Postretirement Health Care and Other Benefits

We have qualified defined benefit pension plans covering team members who meet age and service requirements, including in certain circumstances, date of hire. We also have unfunded, nonqualified pension plans for team members with qualified plan compensation restrictions. Eligibility for, and the level of, these benefits varies depending on team members’ date of hire, length of service and/or team member compensation. Upon early retirement and prior to Medicare eligibility, 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 new participants, with limited exceptions.

The following table provides a summary of the amounts recognized in our Consolidated Statements of Financial Position for our postretirement benefit plans:

Net Pension Expense and	Pension Benefits												Postretirement Health Care Benefits
Postretirement Healthcare	Three Months Ended						Nine Months Ended						Three Months Ended					Nine Months Ended
Expense	Oct. 30,			Oct. 31,			Oct. 30,			Oct. 31,			Oct. 30,			Oct. 31,		Oct. 30,			Oct. 31,
(millions)	2010			2009			2010			2009			2010			2009		2010			2009
Service cost	$	29		$	25		$	87		$	75		$	2		$	2	$	7		$	5
Interest cost	32			32			96			94			1			2		3			6
Expected return on assets	(48		)	(44		)	(144		)	(132		)	—			—		—			—
Recognized losses	11			6			33			18			1			—		3			—
Recognized prior service cost	—			(1		)	(1		)	(3		)	(2		)	—		(7		)	—
Total	$	24		$	18		$	71		$	52		$	2		$	4	$	6		$	11

We will likely make contributions in the range of $100 million to $300 million to our qualified defined benefit pension plan during the fourth quarter of 2010, depending on a variety of factors, including the calculation of the pension liability based on prevailing interest rates at the end of the fiscal year.

We also maintain a nonqualified, unfunded deferred compensation plan for approximately 3,500 current and retired team members whose participation in our 401(k) plan is limited by statute or regulation. These team members choose from a menu of crediting rate alternatives that are the same as the investment choices in our 401(k) plan, including Target common stock. We credit an additional two percent per year to the accounts of all active participants, excluding executive officer participants, in part to recognize the risks inherent to their participation in a plan of this nature. We also maintain a nonqualified, unfunded deferred compensation plan that was frozen during 1996, covering substantially fewer than 100 participants, most of whom are retired. In this plan, deferred compensation earns returns tied to market levels of interest rates plus an additional 6 percent return, with a minimum of 12 percent and a maximum of 20 percent, as determined by the plan’s terms.

We control some of our risk of offering the nonqualified plans by investing in vehicles that offset a substantial portion of our economic exposure to the returns of the plans. These investment vehicles include company-owned life insurance on approximately 4,000 highly compensated current and former team members who have given their consent to be insured and prepaid forward contracts in our own common stock. All of these investments are general corporate assets and are marked-to-market with the related gains and losses recognized in the Consolidated Statements of Operations in the period they occur.

The total change in fair value for contracts indexed to our own common stock recorded in earnings was a pretax gain of $1 million and $6 million for the three months ended October 30, 2010 and October 31, 2009, respectively, and a pretax gain of $1 million and $31 million for the nine months ended October 30, 2010 and October 31, 2009, respectively. For the nine months ended October 30, 2010, we invested approximately $26 million in prepaid forward contracts in our own common stock. For the nine months ended October 31, 2009, we invested approximately $14 million in such investment instruments, and these investments are included in the Consolidated Statements of Cash Flows within other investing activities. Adjusting our position in these investment vehicles may involve repurchasing shares of Target common stock when settling the forward contracts. For the three and nine months ended October 30, 2010, these repurchases totaled 0.5 million and 0.8 million shares, respectively, and for the three and nine months ended October 31, 2009, these repurchases totaled 0.3 million and 1.5 million shares, respectively, and are included in the total share repurchases described in Note 9, Share Repurchase.

At October 30, 2010, January 30, 2010 and October 31, 2009, our outstanding interest in contracts indexed to our common stock was as follows:

Prepaid Forward Contracts on Target Common Stock		Contractual
(millions, except per share data)	Number of Shares	Price Paid per Share		Fair Value		Total Cash Investment
October 31, 2009	1.1	$	41.11	$	54	$	46
January 30, 2010	1.5	42.77		79		66
October 30, 2010	1.2	43.87		62		53

11. Segment Reporting

Our measure of profit for each segment is a measure that management considers analytically useful in measuring the return we are achieving on our investment.

Business Segment Results	Three Months Ended October 30, 2010						Three Months Ended October 31, 2009
			Credit						Credit
(millions)	Retail		Card		Total		Retail		Card		Total
Sales/Credit card revenues	$	15,226	$	379	$	15,605	$	14,789	$	487	$	15,276
Cost of sales	10,562		—		10,562		10,229		—		10,229
Bad debt expense(a)	—		110		110		—		301		301
Selling, general and administrative/ Operations and marketing expenses(a), (b)	3,319		114		3,433		3,236		99		3,335
Depreciation and amortization	529		5		533		533		4		537
Earnings before interest expense and income taxes	816		150		967		791		83		874
Interest expense on nonrecourse debt collateralized by credit card receivables	—		20		20		—		23		23
Segment profit	$	816	$	130	947		$	791	$	60	851
Unallocated (income) and expenses
Other interest expense					175						168
Interest income					(1)						—
Earnings before income taxes					$	773					$	683

	Nine Months Ended October 30, 2010							Nine Months Ended October 31, 2009
			Credit							Credit
(millions)	Retail		Card		Total			Retail		Card		Total
Sales/Credit card revenues	$	45,509	$	1,220	$	46,729		$	43,717	$	1,459	$	45,176
Cost of sales	31,267		—		31,267			30,080		—		30,080
Bad debt expense(a)	—		445		445			—		900		900
Selling, general and administrative/ Operations and marketing expenses(a), (b)	9,689		307		9,997			9,345		312		9,658
Depreciation and amortization	1,532		14		1,545			1,476		11		1,487
Earnings before interest expense and income taxes	3,021		454		3,475			2,816		236		3,051
Interest expense on nonrecourse debt collateralized by credit card receivables	—		64		64			—		74		74
Segment profit	$	3,021	$	390	3,411			$	2,816	$	162	2,977
Unallocated (income) and expenses
Other interest expense					505							517
Interest income					(2		)					(3		)
Earnings before income taxes					$	2,908						$	2,463

(a)

The combination of bad debt expense and operations and marketing expenses within the Credit Card Segment represent credit card expenses on the Consolidated Statements of Operations.

(b)

Loyalty Program discounts are recorded as reductions to sales in our Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard rewards loyalty program, we changed the formula under which our Credit Card segment reimburses our Retail Segment to better align with the attributes of the new program. In the three months and nine months ended October 30, 2010, these reimbursed amounts were $26 million and $60 million, respectively, compared with $19 million and $59 million in the corresponding periods in 2009. In all periods these amounts were recorded as reductions to SG&A expenses within the Retail Segment and increases to operations and marketing expenses within the Credit Card Segment.

Note: The sum of the segment amounts may not equal the total amounts due to rounding.

Total Assets by Segment	October 30, 2010						January 30, 2010					October 31, 2009
			Credit						Credit					Credit
(millions)	Retail		Card		Total		Retail		Card		Total	Retail		Card		Total
Total assets	$	38,617	$	6,332	$	44,949	$	37,200	$	7,333	$44,533	$	38,519	$	7,460	$	45,979

Substantially all of our revenues are generated in, and long-lived assets are located in, the United States.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Our financial results for the third quarter of 2010 in our Retail Segment reflect increased sales of 3.0 percent over the same period last year due to a 1.6 percent comparable-store increase combined with the contribution from new stores. Our Retail Segment EBITDA and EBIT margin rates remained essentially unchanged in the third quarter of 2010 compared with the prior year. In the Credit Card Segment, we achieved a significant increase in segment profit primarily due to declining bad debt expense driven by improved trends in key measures of risk.

Cash flow provided by operations was $2,852 million and $3,027 million for the nine months ended October 30, 2010 and October 31, 2009, respectively. We opened 13 new stores and 75 new stores in the first three quarters of 2010 and 2009, respectively. During the first three quarters of 2010, we remodeled 341 stores under our current store remodel program, significantly more than the 62 stores we remodeled in the comparable prior year period.

Analysis of Results of Operations

Retail Segment

Retail Segment Results	Three Months Ended						Nine Months Ended
	October 30,		October 31,		Percent		October 30,		October 31,		Percent
(millions)	2010		2009		Change		2010		2009		Change
Sales	$	15,226	$	14,789	3.0	%	$	45,509	$	43,717	4.1	%
Cost of sales	10,562		10,229		3.3		31,267		30,080		3.9
Gross margin	4,664		4,560		2.3		14,242		13,637		4.4
SG&A expenses(a)	3,319		3,236		2.6		9,689		9,345		3.7
EBITDA	1,345		1,324		1.6		4,553		4,292		6.1
Depreciation and amortization	529		533		(0.8	)	1,532		1,476		3.8
EBIT	$	816	$	791	3.2	%	$	3,021	$	2,816	7.3	%

EBITDA is earnings before interest expense, income taxes, depreciation and amortization.

EBIT is earnings before interest expense and income taxes.

(a) Loyalty Program discounts are recorded as reductions to sales in our Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard rewards loyalty program, we changed the formula under which our Credit Card segment reimburses our Retail Segment to better align with the attributes of the new program. In the three months and nine months ended October 30, 2010, these reimbursed amounts were $26 million and $60 million, respectively, compared with $19 million and $59 million in the corresponding periods in 2009. In all periods these amounts were recorded as reductions to SG&A expenses within the Retail Segment and increases to operations and marketing expenses within the Credit Card Segment.

Retail Segment Rate Analysis	Three Months Ended		Nine Months Ended
	October 30,	October 31,	October 30,	October 31,
	2010	2009	2010	2009
Gross margin rate	30.6%	30.8%	31.3%	31.2%
SG&A expense rate	21.8%	21.9%	21.3%	21.4%
EBITDA margin rate	8.8%	9.0%	10.0%	9.8%
Depreciation and amortization expense rate	3.5%	3.6%	3.4%	3.4%
EBIT margin rate	5.4%	5.3%	6.6%	6.4%

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. Comparable-store sales is a measure that indicates the performance of our existing stores by measuring the growth in sales for such stores for a period over the comparable, prior-year period of equivalent length. The method of calculating comparable-store sales varies across the retail industry. As a result, our comparable-store sales calculation is not necessarily comparable to similarly titled measures reported by other companies.

Comparable-store sales are sales from our online business and sales from general merchandise and SuperTarget stores open longer than one year, including:

· sales from stores that have been remodeled or expanded while remaining open (including our current store remodel program)

· sales from stores that have been relocated to new buildings of the same format within the same trade area, in which the new store opens at about the same time as the old store closes

Comparable-store sales do not include:

· sales from general merchandise stores that have been converted, or relocated within the same trade area, to a SuperTarget store format

· sales from stores that were intentionally closed to be remodeled, expanded or reconstructed

Comparable-Store Sales	Three Months Ended		Nine Months Ended
	October 30,	October 31,	October 30,	October 31,
	2010	2009	2010	2009
Comparable-store sales	1.6 %	(1.6)%	2.0 %	(3.9)%
Components of changes in comparable-store sales:
Number of transactions	2.1 %	0.6 %	2.3 %	(1.1)%
Average transaction amount	(0.5)%	(2.2)%	(0.2)%	(2.8)%
Units per transaction	3.0 %	(1.6)%	2.1 %	(2.4)%
Selling price per unit	(3.3)%	(0.6)%	(2.2)%	(0.4)%

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.

The collective interaction of a broad array of macroeconomic, competitive and consumer behavioral factors, as well as sales mix, and transfer of sales to new stores makes further analysis of sales metrics infeasible.

Beginning April 2010, all new qualified credit card applicants receive the Target Card, and we no longer issue the Target Visa to credit card applicants. Existing Target Visa cardholders are not affected. Beginning October 2010, guests receive a 5 percent discount on virtually all purchases at check-out every day when they use a REDcard at any Target store or on Target.com. Target’s REDcards include the Target Credit Card, Target Visa Credit Card and Target Debit Card. This new REDcard rewards program replaced the existing rewards program in which account holders received an initial 10 percent-off coupon for opening the account and earned points toward a 10 percent-off coupon on subsequent purchases. These changes are intended to simplify the program and to generate profitable incremental retail sales.

We monitor the percentage of store sales that are paid for using REDcards (REDcard Penetration), because our internal analysis has indicated that a meaningful portion of the incremental purchases on our REDcards are also incremental sales for Target, with the remainder of the incremental purchases on the REDcards representing a shift in tender type.

REDcard Penetration Analysis	Three Months Ended				Nine Months Ended
	October 30,		October 31,		October 30,		October 31,
	2010		2009		2010		2009

Target Credit Penetration	4.9	%	5.1	%	4.7	%	5.2	%
Target Debit Penetration	0.6	%	0.4	%	0.5	%	0.4	%
Total Store REDcard Penetration	5.5	%	5.5	%	5.2	%	5.6	%

Gross Margin Rate

Gross margin rate represents gross margin (sales less cost of sales) as a percentage of sales. See Note 3 in our Form 10-K for the fiscal year ended January 30, 2010 for a description of costs included in cost of sales. Markup is the difference between an item’s cost and its retail price (expressed as a percentage of its retail price). Factors that affect markup include vendor offerings and negotiations, vendor income, sourcing strategies, market forces like raw material and freight costs, and competitive influences. Markdowns are the reduction in the original or previous price of retail merchandise. Factors that affect markdowns include inventory management, competitive influences and economic conditions.

For the three and nine months ended October 30, 2010, our gross margin rate was 30.6 percent and 31.3 percent respectively, compared with 30.8 percent and 31.2 percent in the same periods last year. Sales mix had little impact on gross margin rates as overall sales growth rates were similar for both lower margin rate categories and higher margin rate categories for the three and nine months ended October 30, 2010. There were no other significant variances in the drivers of gross margin rate.

Selling, General and Administrative Expense Rate

Our selling, general and administrative (SG&A) expense rate represents SG&A expenses as a percentage of sales. See Note 3 in our Form 10-K for the fiscal year ended January 30, 2010 for a description of costs included in SG&A expenses. SG&A expenses exclude depreciation and amortization, as well as expenses associated with our credit card operations, which are reflected separately in our Consolidated Statements of Operations.

For the three and nine months ended October 30, 2010, SG&A expense rates of 21.8 percent and 21.3 percent, respectively, were essentially unchanged from the 21.9 percent and 21.4 percent in the same periods last year.

Depreciation and Amortization Expense Rate

Our depreciation and amortization expense rate represents depreciation and amortization expense as a percentage of sales. For the three and nine months ended October 30, 2010, our depreciation and amortization expense rate was 3.5 percent and 3.4 percent, respectively, largely consistent with the 3.6 percent and 3.4 percent for the respective periods last year.

Store Data

During the three months ended October 30, 2010, we opened 10 new general merchandise stores (9 net of one relocation). During the three months ended October 31, 2009, we opened 25 new stores, including 20 general merchandise stores (19 net of one relocation) and 5 SuperTarget stores. During the nine months ended October 30, 2010, we opened 13 new general merchandise stores (12 net of one relocation). During the nine months ended October 31, 2009, we opened 75 new stores (61 net of relocations and closings). During the first three quarters of 2010, we remodeled 341 stores under our current store remodel program, significantly more than the 62 stores we remodeled in the comparable prior year period.

Number of Stores and Retail Square Feet	Number of Stores			Retail Square Feet(a)
	October 30,	January 30,	October 31,	October 30,	January 30,	October 31,
	2010	2010	2009	2010	2010	2009
Target general merchandise stores	1,501	1,489	1,491	189,354	187,449	187,481
SuperTarget stores	251	251	252	44,504	44,492	44,645
Total	1,752	1,740	1,743	233,858	231,941	232,126

(a) In thousands; reflects total square feet, less office, distribution center and vacant space.

Credit Card Segment

We offer credit to qualified guests through the Target Visa and the Target Card. Our credit card program supports our core retail operations and remains an important contributor to our overall profitability and engagement with our guests. Beginning April 2010, all new qualified credit card applicants receive the Target Card, and we no longer issue the Target Visa to credit card applicants. Existing Target Visa cardholders are not affected. Beginning October 2010, guests receive a 5 percent discount on virtually all purchases at check-out every day when they use a REDcard at any Target store or on Target.com. This new REDcard rewards program replaced the existing rewards program in which account holders received an initial 10 percent-off coupon for opening the account and earned points toward a 10 percent-off coupon on subsequent purchases. These changes are intended to simplify the program and to generate profitable incremental retail sales.

Credit card revenues are comprised of finance charges, late fees and other revenues, and third party merchant fees, which are the amounts received from merchants who accept the Target Visa credit card.

Credit Card Segment Results	Three Months Ended					Three Months Ended
	October 30, 2010					October 31, 2009
	Amount			Annualized		Amount			Annualized
(millions)	(in millions)			Rate(d)		(in millions)			Rate(d)
Finance charge revenue	$	315		18.4	%	$	365		17.8	%
Late fees and other revenue	38			2.2		92			4.5
Third party merchant fees	26			1.5		30			1.5
Total revenues	379			22.1		487			23.8
Bad debt expense	110			6.4		301			14.7
Operations and marketing expenses(a)	114			6.7		99			4.8
Depreciation and amortization	5			0.3		4			0.2
Total expenses	229			13.4		404			19.7
EBIT	150			8.8		83			4.1
Interest expense on nonrecourse debt collateralized by credit card Receivables	20					23
Segment profit	$	130				$	60
Average receivables funded by Target(b)	$	2,811				$	2,677
Segment pretax ROIC(c)	18.5		%			9.0		%

	Nine Months Ended					Nine Months Ended
	October 30, 2010					October 31, 2009
	Amount			Annualized		Amount			Annualized
(millions)	(in millions)			Rate(d)		(in millions)			Rate(d)
Finance charge revenue	$	989		18.4	%	$	1,097		17.4	%
Late fees and other revenue	152			2.8		270			4.3
Third party merchant fees	79			1.5		92			1.5
Total revenues	1,220			22.7		1,459			23.1
Bad debt expense	445			8.3		900			14.3
Operations and marketing expenses(a)	307			5.7		312			4.9
Depreciation and amortization	14			0.3		11			0.2
Total expenses	766			14.3		1,223			19.4
EBIT	454			8.4		236			3.7
Interest expense on nonrecourse debt collateralized by credit card receivables	64					74
Segment profit	$	390				$	162
Average receivables funded by Target(b)	$	2,705				$	2,910
Segment pretax ROIC(c)	19.2		%			7.4		%

(a)	Loyalty Program discounts are recorded as reductions to sales in our Retail Segment. Effective with the October 2010 nationwide launch of our new 5% REDcard rewards loyalty program, we changed the formula under which our Credit Card segment reimburses our Retail Segment to better align with the attributes of the new program. In the three months and nine months ended October 30, 2010, these reimbursed amounts were $26 million and $60 million, respectively, compared with $19 million and $59 million in the corresponding periods in 2009. In all periods these amounts were recorded as reductions to SG&A expenses within the Retail Segment and increases to operations and marketing expenses within the Credit Card Segment.
(b)	Amounts represent the portion of average gross credit card receivables funded by Target. These amounts exclude $4,048 million and $4,461 million for the three and nine months ended October 30, 2010, respectively, and $5,520 million and $5,508 million for the three and nine months ended October 31, 2009, respectively of receivables funded by nonrecourse debt collateralized by credit card receivables.
(c)	ROIC is return on invested capital, and this rate equals our segment profit divided by average gross credit card receivables funded by Target, expressed as an annualized rate.
(d)	As an annualized percentage of average gross credit card receivables.

Spread Analysis - Total Portfolio	Three Months Ended				Three Months Ended
	October 30, 2010				October 31, 2009
	Amount		Annualized		Amount		Annualized
	(in millions)		Rate		(in millions)		Rate
EBIT	$	150	8.8%	(c)	$	83	4.1%	(c)
LIBOR(a)			0.3%				0.3%
Spread to LIBOR(b)	$	146	8.5%	(c)	$	78	3.8%	(c)

	Nine Months Ended				Nine Months Ended
	October 30, 2010				October 31, 2009
	Amount		Annualized		Amount		Annualized
	(in millions)		Rate		(in millions)		Rate
EBIT	$	454	8.4%	(c)	$	236	3.7%	(c)
LIBOR(a)			0.3%				0.3%
Spread to LIBOR(b)	$	439	8.1%	(c)	$	213	3.4%	(c)

(a)	Balance-weighted one-month LIBOR.
(b)	Spread to LIBOR is a metric used to analyze the performance of our total credit card portfolio because the vast majority of our portfolio earned finance charge revenue at rates tied to the Prime Rate, and the interest rate on all nonrecourse debt securitized by credit card receivables is tied to LIBOR.
(c)	As a percentage of average gross credit card receivables.

Our primary measure of segment profit in our Credit Card Segment is the EBIT generated by our total credit card receivables portfolio less the interest expense on nonrecourse debt collateralized by credit card receivables. We analyze this measure of profit in light of the amount of capital we have invested in our credit card receivables. In addition, we measure the performance of our overall credit card receivables portfolio by calculating the dollar Spread to LIBOR at the portfolio level. This metric approximates the overall financial performance of the entire credit card portfolio we manage by measuring the difference between EBIT earned on the portfolio and a hypothetical benchmark rate financing cost applied to the entire portfolio. The interest rate on all nonrecourse debt securitized by credit card receivables is tied to LIBOR. As a result of regulatory actions that affect our portfolio, effective January 2010, we implemented a terms change that converted the minimum APR for the majority of our accounts to a variable rate, and we eliminated penalty pricing for all current, or nondelinquent accounts. Additionally, beginning in August 2010 late fee limitations went into effect that resulted in reduced late fee revenue.

Credit Card Segment profit for the three months ended October 30, 2010 increased to $130 million from $60 million for the three months ended October 31, 2009, driven mostly by favorability in bad debt expense. Segment revenues were $379 million, a decrease of $107 million, or 22.1 percent, from the same period in the prior year, primarily driven by lower average receivables as well as reduced late fees. Segment expenses were $229 million, a decrease of $174 million, or 43.2 percent, from prior year driven primarily by lower bad debt expense due to lower actual and expected write-offs. Interest expense on nonrecourse debt declined by $3 million from last year, due to a decrease in nonrecourse debt securitized by credit card receivables.

During the nine months ended October 30, 2010, Credit Card Segment profit increased to $390 million from $162 million in the same period last year driven mostly by favorability in bad debt expense. Segment revenues were $1,220 million, a decrease of $239 million, or 16.4 percent, from the same period in the prior year, primarily due to lower average receivables as well as reduced late fees. Segment expenses were $766 million, a decrease of $458 million, or 37.4 percent, from the same period in the prior year, primarily driven by lower bad debt expense due to lower actual and expected write-offs. Interest expense on nonrecourse debt declined by $10 million from last year, due to a decrease in nonrecourse debt securitized by credit card receivables.

Receivables Rollforward Analysis	Three Months Ended						Nine Months Ended
	October 30,			October 31,			October 30,			October 31,
(millions)	2010			2009			2010			2009
Beginning gross credit card receivables	$	6,988		$	8,293		$	7,982		$	9,094
Charges at Target	811			799			2,295			2,445
Charges at third parties	1,409			1,648			4,357			5,080
Payments	(2,643		)	(2,870		)	(8,350		)	(9,071		)
Other	165			178			446			500
Period-end gross credit card receivables	$	6,730		$	8,048		$	6,730		$	8,048
Average gross credit card receivables	$	6,859		$	8,197		$	7,166		$	8,418
Accounts with three or more payments (60+ days) past due as a percentage of period-end gross credit card receivables	4.9		%	6.5		%	4.9		%	6.5		%
Accounts with four or more payments (90+ days) past due as a percentage of period-end gross credit card receivables	3.5		%	4.6		%	3.5		%	4.6		%

Allowance for Doubtful Accounts	Three Months Ended						Nine Months Ended
	October 30,			October 31,			October 30,			October 31,
(millions)	2010			2009			2010			2009
Allowance at beginning of period	$	851		$	1,004		$	1,016		$	1,010
Bad debt expense	110			301			445			900
Net write-offs(a)	(186		)	(280		)	(686		)	(885		)
Allowance at end of period	$	775		$	1,025		$	775		$	1,025
As a percentage of period-end gross credit card receivables	11.5		%	12.7		%	11.5		%	12.7		%
Net write-offs as a percentage of average gross credit card receivables (annualized)	10.9		%	13.7		%	12.8		%	14.0		%

(a) Net write-offs include the principal amount of losses (excluding accrued and unpaid finance charges) less current period principal recoveries.

Our period-end gross credit card receivables at October 30, 2010 were $6,730 million compared with $8,048 million at October 31, 2009, a decrease of 16.4 percent. Average gross credit card receivables for the three months ended October 30, 2010 decreased 16.3 percent compared with the same period last year. In response to regulatory changes and credit card industry trends, we have undertaken risk management and underwriting initiatives that have reduced available credit lines for higher-risk cardholders. Additionally, we have experienced an increase in payment rates and a decrease in charge activity resulting from reductions in card usage by our guests.

Other Performance Factors

Net Interest Expense

Net interest expense was $194 million for the three months ended October 30, 2010, increasing $3 million, or 1.4 percent from the same period last year due to a higher average net portfolio interest rate, partially offset by lower average debt balances reflecting lower average credit card receivables. Net interest expense was $567 million for the nine months ended October 30, 2010, decreasing $21 million, or 3.6 percent from the same period last year due to lower average debt balances reflecting lower average credit card receivables, partially offset by a higher average net portfolio interest rate.

Provision for Income Taxes

Our effective income tax rate for the nine months ended October 30, 2010 was 35.2 percent compared with 37.0 percent for the nine months ended October 31, 2009. The third quarter effective tax rate decreased to 30.8 percent in 2010 from 36.1 percent in 2009 primarily due to the favorable resolution of various state income tax matters, which reduced income tax expense by $45 million.

Analysis of Financial Condition

Liquidity and Capital Resources

Cash flow provided by operations was $2,852 million for the nine months ended October 30, 2010 compared with $3,027 million for the same period last year. This cash flow, combined with our year-end cash position, allowed us to fund capital expenditures, pay dividends to shareholders, and continue our share repurchase program.

Our period-end gross credit card receivables were $6,730 million at October 30, 2010 compared with $8,048 million at October 31, 2009, a decrease of 16.4 percent. This change was driven by the factors indicated in the Credit Card Segment discussion. This trend and the factors influencing it are likely to continue for the remainder of 2010. Due to the decrease in gross credit card receivables, TRC, using cash flows from the receivables, repaid JPMC $110 million and $530 million for the three and nine months ended October 30, 2010, respectively, under the terms of our agreement with them as described in Note 4, Credit Card Receivables. No payments were made during the nine months ended October 31, 2009. To the extent the receivables balance continues to decline, TRC expects to continue to pay JPMC a prorata portion of principal collections such that the portion owned by an affiliate of JPMC would not exceed 47 percent.

Inventory levels increased $168 million, or 1.8 percent, from October 31, 2009 to October 30, 2010, reflecting higher inventory levels required to support comparatively higher retail square footage, as well as to support traffic-driving strategic initiatives. Accounts payable increased by $121 million, or 1.6 percent over the same period.

Capital expenditures for the three months ended October 30, 2010 were $616 million compared with $399 million for the three months ended October 31, 2009. This increase was driven by higher capital expenditures for store remodels, partially offset by lower expenditures for new stores. Capital expenditures for the nine months ended October 30, 2010 were $1,607 million compared with $1,440 million for the nine months ended October 31, 2009, due to higher capital expenditures for store remodels, partially offset by lower expenditures for new stores.

During the three and nine months ended October 30, 2010, we repurchased 15.2 million and 40.2 million shares, respectively, of our common stock for a total cash investment of $793 million and $2,093 million, respectively. During the three and nine months ended October 31, 2009, we repurchased 0.3 million and 1.5 million shares, respectively, of our common stock for a total cash investment of $14 million and $56 million, respectively.

We paid dividends totaling $181 million and $432 million during the three and nine months ended October 30, 2010, respectively, an increase of 41.5 percent and 17.3 percent, respectively, from the same period last year. We have paid dividends every quarter since our first dividend was declared following our 1967 initial public offering, and it is our intent to continue to do so in the future.

Our financing strategy is to ensure liquidity and access to capital markets, to manage our net exposure to floating interest rate volatility, and to maintain a balanced spectrum of debt maturities. Within these parameters, we seek to minimize our borrowing costs. As described in Note 6, in July 2010, we issued $1 billion of long-term debt at 3.875% that matures in July 2020.

An additional source of liquidity is available to us through a committed $2 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 2010 or 2009 under this credit facility.

Most of our long-term debt obligations contain covenants related to secured debt levels. In addition to a secured debt level covenant, our credit facility also contains a debt leverage covenant. We are, and expect to remain, in compliance with these

covenants. Additionally, at October 30, 2010, no notes or debentures contained provisions requiring acceleration of payment upon a debt rating downgrade, except that certain outstanding notes allow the note holders to put the notes to us if within a matter of months of each other we experience both (i) a change in control; and (ii) our long-term debt ratings are either reduced and the resulting rating is non-investment grade, or our long-term debt ratings are placed on watch for possible reduction and those ratings are subsequently reduced and the resulting rating is non-investment grade.

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets an amendment of FASB Statement No. 140” (SFAS 166), codified in the Transfers and Servicing accounting principles, which amends the derecognition guidance in former FASB Statement No. 140 and eliminates the exemption from consolidation for qualifying special-purpose entities. We adopted this guidance at the beginning of fiscal 2010 and adoption had no impact on our consolidated net earnings, cash flows or financial position.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (SFAS 167), codified in the Consolidation accounting principles, which amends the consolidation guidance applicable to variable interest entities. The amendments will significantly affect the overall consolidation analysis under former FASB Interpretation No. 46(R). We adopted this guidance at the beginning of fiscal 2010 and the adoption had no impact on our consolidated net earnings, cash flows or financial position.

Outlook

Our outlook is based on the application of business judgment in light of current business trends, our assumptions regarding the macroeconomic environment, and estimates of the impact of current initiatives, the most significant of which are our store remodel program and the new 5 percent REDcard rewards program.

Beginning October 2010, guests receive a 5 percent discount on virtually all purchases at check-out every day when they use a REDcard at any Target store or on Target.com. Target’s REDcards include the Target Credit Card, Target Visa Credit Card and Target Debit Card. This new REDcard rewards program replaced the existing rewards program in which account holders received an initial 10 percent-off coupon for opening the account and earned points toward a 10 percent-off coupon on subsequent purchases. These changes are intended to simplify the program and drive incremental sales.

In our Retail Segment in the fourth quarter, we expect that comparable-store sales will increase in the 2 percent to 4 percent range. This is driven by our expectation that our store remodel program will contribute over a full percentage point of incremental comparable store sales in the fourth quarter, and separately that our new REDcard rewards program will add about a full percentage point of incremental comparable fourth quarter sales. Our store remodel and new rewards strategies are designed to contribute incremental sales at lower gross margin rates and SG&A expense rates than our base business. We expect that this effect will be more pronounced in the fourth quarter than in prior quarters as the initiatives more fully roll out. On an overall basis, we expect to produce an EBITDA margin rate in the fourth quarter 2010 consistent with the fourth quarter 2009, due to favorable leverage of SG&A expenses offsetting the gross margin rate declines associated with our store remodel and new rewards strategies. Additionally, we expect a slightly better EBIT margin rate in the fourth quarter compared with the same period last year and into 2011, due to continued favorable leverage of depreciation and amortization expenses.

In our Credit Card Segment in the fourth quarter, we expect continued improvement in segment profit. We expect year-over-year receivables declines in the fourth quarter to be in line with our year-to-date experience, inclusive of a small increment of high credit-quality receivables resulting from the 5% REDcard rewards program. The dollar value of expected write-offs is expected to be consistent with our third quarter experience. We expect that the allowance for doubtful accounts will continue to decline in the fourth quarter, with the extent of that decline dependent on continued improvement in portfolio risks and reflective of seasonal factors.

Effective with the October 2010 nationwide launch of our new 5% REDcard rewards loyalty program, we changed the formula under which our Credit Card segment reimburses our Retail Segment to better align with the attributes of the new program. The overall effects of this change are not expected to be significant.

We expect to continue to execute against our share repurchase plan, the pace of which will be dependent on market conditions and the amount of future net earnings and cash flows. We expect our 2010 capital expenditures to be approximately $2 billion, reflective of projects we will complete in 2010 as well as initial spending for our 2011 and 2012 new store programs. Approximately half of our expected 2010 capital expenditures relate to 341 remodeled stores under our store remodel program.

Forward-Looking Statements

This report contains forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words “expect,” “may,” “could,” “believe,” “would,” “might,” “anticipates,” or words of similar import. The principal forward-looking statements in this report include: for our Retail Segment, our outlook for comparable-store sales trends, gross margin rate, SG&A expense rates, and EBITDA and EBIT margin rates; for our Credit Card Segment, our outlook for segment profit, gross credit card receivables, write-offs, allowance for doubtful accounts, and bad debt expense; on a consolidated basis, the expected compliance with debt covenants, our expectations related to our new REDcard rewards program and store remodel program, the continued execution of our share repurchase program, our expected capital expenditures, our intentions regarding future dividends, and the expected outcome of claims and litigation.

All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth on our description of risk factors in Item 1A to our Form 10-Q for the quarter ended July 31, 2010 and our Form 10-K for the fiscal year ended January 30, 2010, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Form 10-K for the fiscal year ended January 30, 2010.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly 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 and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the Securities and Exchange Commission (SEC) under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Control Over Financial Reporting

We have initiated a multi-year effort to upgrade the technology supporting our financial systems. As part of this effort, we have licensed enterprise resource planning (ERP) software from SAP AG and have begun a process to expand and upgrade our financial systems. There were no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The following governmental enforcement proceedings relating to environmental matters are reported pursuant to instruction 5(C) of Item 103 of Regulation S-K because they involve potential monetary sanctions in excess of $100,000:

We are a defendant in a civil lawsuit filed by the California Attorney General and a number of California District Attorneys in June 2009 alleging that we did not handle and dispose of certain unsold products as a hazardous waste and that we have violated California’s hazardous waste laws. The case is in the discovery phase and the Court has issued a preliminary injunction requiring that Target comply with all California hazardous waste laws.

We are the subject of an ongoing Environmental Protection Agency (EPA) investigation for alleged violations of the Clean Air Act (CAA). In March 2009, the EPA issued a Finding of Violation (FOV) related to alleged violations of the CAA, specifically the National Emission Standards for Hazardous Air Pollutants (NESHAP) promulgated by the EPA for asbestos. The FOV pertains to the remodeling of 36 Target stores that occurred between January 1, 2003 and October 28, 2007. The EPA FOV process is ongoing and no specific relief has been sought to date by the EPA.

For a description of other legal proceedings, see Note 5 of the Notes to Consolidated Financial Statements included in Item 1, Financial Statements.

The American Jobs Creation Act of 2004 requires SEC registrants to disclose if they have been required to pay certain penalties for failing to disclose to the Internal Revenue Service their participation in listed transactions. We have not been required to pay any of the penalties set forth in Section 6707A(e)(2) of the Internal Revenue Code.

Item 1A. Risk Factors

Other than as described in our Form 10-Q for the quarter ended July 31, 2010, there have been no changes to the risk factors described in our annual report on Form 10-K for the fiscal year ended January 30, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to purchases of Target common stock made during the three months ended October 30, 2010, by the Corporation or any “affiliated purchaser” of the Corporation, as defined in Rule 10b-18(a)(3) under the Exchange Act.

Since the inception of our share repurchase program, which began in the fourth quarter of 2007, we have repurchased 143.8 million common shares of our common stock, for a total cash investment of $7,413 million ($51.55 average price per share).

						Total Number		Approximate
						of Shares		Dollar Value of
						Purchased as		Shares that
	Total					Part of		May Yet Be
	Number		Average			Publicly		Purchased
	of Shares		Price Paid			Announced		Under the
Period	Purchased	(b)	per Share		(b)	Program	(b)	Program
August 1, 2010 through August 28, 2010	3,371,000		$	51.06		132,011,395		$	3,207,496,908
August 29, 2010 through October 2, 2010	6,814,286	(a)	51.90			138,757,471		2,857,342,156
October 3, 2010 through October 30, 2010	5,044,453		53.62			143,801,924		2,586,865,984
	15,229,739		$	52.29		143,801,924		$	2,586,865,984

(a) The number of shares above includes shares of common stock reacquired from team members who wish to tender owned shares to satisfy the tax withholding on equity awards as part of our long-term incentive plans or to satisfy the exercise price on stock option exercises. For the three months ended October 30, 2010, 68,210 shares were acquired at an average per share price of $52.71 pursuant to our long-term incentive plan.

(b) The table above includes shares reacquired upon settlement of prepaid forward contracts. For the three months ended October 30, 2010, 0.5 million shares were reacquired through these contracts. At October 30, 2010, we held asset positions in prepaid forward contracts for 1.2 million shares of our common stock, for a total cash investment of $53 million, or $43.87 per share.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Reserved.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

(3)A	Amended and Restated Articles of Incorporation (as amended Jun 10, 2010)(1)

(3)B	By-laws (as amended through September 10, 2009)(2)

(10)A*	Target Corporation Executive Excess Long Term Disability Plan (restated effective January 1, 2010)

(12)	Statements of Computations of Ratios of Earnings to Fixed Charges

(31)A	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(31)B	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(32)A	Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32)B	Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase


101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.LAB	XBRL Taxonomy Extension Label Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

*	Management Compensation plan required to be filed as an exhibit to this Form 10-Q.

(1)	Incorporated by reference to Exhibit (3)A to the Registrant’s Form 8-K Report filed June 10, 2010

(2)	Incorporated by reference to Exhibit (3)B to the Registrant’s Form 8-K Report filed September 10, 2009

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TARGET CORPORATION


Dated: December 3, 2010	By:	/s/ Douglas A. Scovanner
		Douglas A. Scovanner
		Executive Vice President,
		Chief Financial Officer
		and Chief Accounting Officer

EXHIBIT INDEX

Exhibit	Description	Manner of Filing

(3)A	Amended and Restated Articles of Incorporation (as amended June 10, 2010)	Incorporated by Reference

(3)B	By-Laws (as amended through September 10, 2009)	Incorporated by Reference

(10)A	Target Corporation Executive Excess Long Term Disability Plan (restated effective January 1, 2010)	Filed Electronically

(12)	Statements of Computations of Ratios of Earnings to Fixed Charges	Filed Electronically

(31)A	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed Electronically

(31)B	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed Electronically

(32)A	Certification of the Chief Executive Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed Electronically

(32)B	Certification of the Chief Financial Officer As Adopted Pursuant to 18 U.S.C. Section 1350 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed Electronically

101.INS	XBRL Instance Document	Filed Electronically

101.SCH	XBRL Taxonomy Extension Schema	Filed Electronically

101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed Electronically

101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed Electronically

101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed Electronically

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed Electronically