Target Corporation

founded: 1902

Contact Information:

headquarters: 1000 nicollet mall minneapolis, mn 55403 phone: (612)304-6073 fax: (612)304-5104 toll free: (888)304-4000 email: [email protected] url: http://www.targetcorp.com

OVERVIEW

The Minneapolis-based Target Corporation is among the largest general merchandise companies in the United States. It employs more than 281,000 people in 47 states and operates approximately 1,400 stores nationwide.

Formerly Dayton Hudson, Target Corporation developed the concept of the "upscale discounter," and it promotes its Target stores as an inexpensive department store that offers more selection and class than similar retail outlets such as Kmart and Wal-Mart.

The Corporation is an acknowledged retail empire and the Target stores are the centerpiece of its operations. Target Corporation's three operating divisions include Target, Mervyn's, and the Department Store Division (DSD), which consists of Dayton's, Hudson's, and Marshall Field's. In 2001, the Target division generated about 80 percent of retail sales and operating profits, while Mervyn's generated about 12 percent of revenues and 8 percent of profits, and the Department Store Division generated about 9 percent of sales and 12 percent of profits.

Target Corporation has regional offices in Los Angeles, Dallas, Richmond and Minneapolis. Its distribution centers are located in Huntsville, Alabama; Maumelle, Arkansas; Fontana, California; Ontario, California; Woodland, California; Pueblo, Colorado; Tifton, Georgia; Indianapolis; Fridley, Minnesota; Albany, Oregon; Tyler, Texas; Stuarts Draft, Virginia; Oconomowoc, Wisconsin and Wilton, New York.

COMPANY FINANCES

For the fiscal year that ended February 2, 2002, Target Corporation's revenues rose 8 percent to $39.89 million. Net income rose 9 percent to $1.37 billion. Revenues reflected increased revenues at Target due to the opening of new stores. Earnings also benefited from improved operating margins. Revenues for 1999 were $36.903 million. In 1998, they were $33.702 million. In 1997, revenues were $30.662 million, and were $27.487 million in 1996.

ANALYSTS' OPINIONS

Overall, analysts have commented that Target has attractive value on the market because of its ability to keep capital costs within reason, which results from the fact that it does not have an excessive amount of financial leverage. A high degree of combined leverage indicates a company might be in financial trouble. Target, with its low degree of combined leverage, has lower financial risk and increased market value. The corporation's earnings per share have grown around 15 percent each year, which represents a low level of risk.

Indeed, Wall Street has liked Target's continued growth and earnings. One analyst from www.NYSE.com remarked that Target Corporation "is a wonderful company. They have a great growth vehicle in Target stores, which have a significant amount of growth potential left."

Value Line and Standard & Poor's also rated Target high because of its average earnings growth over the past decade, and they indicated the company had projections for 15 to 17 percent growth over its next five years.

HISTORY

The Target Corporation's history dates back to 1902, when a man named George Dayton opened a store called Goodfellows in Minneapolis, Minnesota. He changed the name of his business to the Dayton Company in 1910. Later, in 1956, the company would create a milestone in the retail industry when it built the world's first fully-enclosed shopping mall.

The seeds for the Target concept were planted in 1961, when Dayton's saw a demand for a store that sold less-expensive goods in a quick, convenient format. A year later, the first Target discount store was opened in Roseville, Minnesota. It became the first retail store to offer well-known national brands at discounted prices.

The Dayton Company initial public offering (IPO) took place in 1967. In 1969, the Target Corporation, as it is known today, really came into existence when the Dayton Company merged with Hudson Company, another department store organization, to form the Dayton-Hudson Company (DHC). Like the Dayton Company, the Hudson Company started in the early 1900s. And also like the Dayton Company, Hudson's founder became successful by replacing bargaining with price marking, and offering return privileges and liberal credit. Target now controls Dayton's and Hudson's stores along with the Target, Mervyn's, and Marshall Field's stores.

By 1971 revenues topped $1 billion, and DHC acquired Mervyn's of California to become the seventh largest retailer in the United States. During the decade, the Target stores broke new ground for the industry when they implemented electronic cash registers storewide to monitor inventory and speed up service. Target also began hosting an annual shopping event for seniors and people with disabilities.

The 1980s were marked by rapid growth. Revenues in 1982 topped $5 billion. By 1987, that figure doubled.

In 1990, DHC acquired Marshall Field's. By 1994, revenues topped $20 billion. Also during the decade, DHC launched the first Target Greatland store, and its Club Wedd bridal gift registry went nationwide in 1995. In 1996, Target's Mervyn's subsidiary was forced to cut costs or face restructuring. Within its one-year deadline, it replaced 70 percent of its senior management, improved customer services, and reintroduced discontinued product lines such as women's dresses. The efforts paid off and Mervyn's survived.

The decade also saw the opening of the first Super-Target store, which combined groceries and special services with a Target Greatland store. The Target Guest Card was also introduced during that period. In the meantime, revenues kept climbing. In 1996, they hit $25 billion. In 1998, they reached $30 billion. That same year DHC acquired Rivertown Trading, the direct marketing company. In 1999 the company ventured into e-commerce when www.target.com was launched.

In 2000 DHC changed its name to Target Corporation. Early that same year, target.direct, the direct merchandising and electronic retailing organization of Target Corporation, was launched. The enterprise involved the merging of Target's e-commerce team with its direct merchandising unit into one integrated organization.

STRATEGY

Target Corporation's principal operating strategy is to provide exceptional value to consumers through multiple retail formats ranging from upscale discount and moderately priced to full service department stores. Target's financing strategy is to ensure liquidity and access to capital markets, to manage the amount of floating-rate debt, and to maintain a balanced range of debt maturities.

Target's growth strategy involves achieving average annual earnings per share growth of 15 percent or more over time. Heading into 2001, the company had consistently demonstrated growth. In the previous five years, its earnings per share had increased to around 13 to 15 percent each year. It was expected, by both the company and analysts, that it would achieve 15 to 17 percent growth over the next five years.

One of the ways that Target Corporation keeps its revenues and earnings growing is through its commitment to store expansion, which it achieves primarily through its Target and SuperTarget stores. Another way is by setting itself apart from the competition through its differentiated merchandise and its multiple retail segmentation. Target stores offer more upscale merchandise than similar organizations like Wal-Mart or K-Mart. The result is that Target reaches a broader and more affluent consumer base.

Further, the company's e-commerce efforts have helped fuel its growth. At first, Target was reluctant to try and skeptical about the Internet, but by 2001 it was operating seven Web sites that supported store and catalog brands.

INFLUENCES

Target's business model combined with its approach has proven to be effective. It has a formula that other retailers wish it would bottle: Target Corporation provides a traditional retail business offering good customer service, and it combines this with excellent financial standing, tremendous growth and profit potential, superb financial ratios, management that is business savvy, and a demonstrated ability to adapt to changing times.

CURRENT TRENDS

Target plans on increasing its number of new stores. At the same time, sales in its existing stores are rising. Industry observers say that this combination will result in even more growth for Target Corporation. The company opened 74 new stores in 2000 and planned on opening about 70 more in 2001, despite a weakened economy. Actually, Target seemed somehow impervious to the country's economic situation. While other large retailers experienced slower sales growth or even negative sales growth, Target Corporation consistently showed gains. Observers reasoned that since Target customers tended to be more affluent than the typical Wal-Mart or Kmart shopper, a national spending downturn didn't impact the corporation too significantly. True, the corporation's other divisions weren't quite as strong as the Target stores, but they still provided the Corporation with access to even more affluent shoppers. This gives Target Corporation a decided advantage over Wal-Mart.

FAST FACTS: About Target Corporation

Ownership: Target Corporation is a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: TGT

Officers: Robert Ulrich, Chmn. and CEO, 57, 2001 salary $2.2 million; Gerald Storch, VChmn., 44, 2001 salary $1.1 million; Douglas Scovanner, CFO and EVP, 45; Gregg Steinhall, Pres. of Target Stores, 46, 2001 salary $1.6 million; James Hale, VP, Gen. Counsel and Sec., 60

Employees: 281,000

Principal Subsidiary Companies: Target Corporation operates stores under three business divisions including Target, a discount chain with more than 1,000 stores; Mervyn's of California, mid-range department stores; and the Department Store Division, which includes Marshall Field's, Dayton's, and Hudson's. The Target chain includes subsidiaries SuperTarget and Target Greatland. Target Corporation also owns catalog retailer Rivertown Trading and apparel supplier Associated Merchandising Corporation, and it operates an electronic retailing organization, targetdirect.

Chief Competitors: Target Corporation operates in the service sector of the retail industry. Its top competitors include Ames, Federated Department Store, J.C. Penney, Kmart, Kohl's Corporation, Sears & Roebuck, and Wal-Mart.

9/11 AFTERMATH

Following the September 11, 2001 attack on New York City and subsequent terrorist threats against symbols of U.S. capitalism, Target Corporation announced that it planned on retiring its very recognizable logo: a big red bull's eye.

PRODUCTS

Products available in the Target Corporation stores include men's, women's and children's apparel; toys; small appliances; dress, casual and athletic shoes; health and beauty aids; school and office supplies; jewelry and accessories; candy, snacks, and soda; stationery, party home decor and gifts; cameras, phones, and automotive accessories; housewares, commodities, audio and video equipment; hardware, paint, and wallpaper; bicycles, outdoor sports and fitness accessories; music, movies, and books; bath and bedding supplies; rugs; luggage; pet supplies; furniture and lighting; patio and lawn care products; pharmacy services; holiday and seasonal products; and food service.

For the Target stores, the focus is on basic merchandise: the everyday items that consumers use and need most. Products sold include all merchandise categories, from apparel to personal care, and home decor to automotive. The merchandise focus for Marshall Field's is fashion. Mervyn's merchandise focus is on moderately-priced apparel and home fashions.

CORPORATE CITIZENSHIP

Target Corporation has established the Target Foundation to maintain its history of five-percent giving in the Minneapolis/St. Paul metropolitan area. The foundation supports the arts and social services.

Target also established the Family of Giving programs at Target Stores, Marshall Field's, Mervyn's and Target Foundation. The programs support nonprofit organizations in the Minneapolis/St. Paul metropolitan area.

The company has been recognized for its philanthropic efforts. In 1998, it was named one of "America's 25 most generous companies" by The American Benefactor magazine. In 1999, it received the American Association of Museums Medal for Distinguished Philanthropy, which honors organizations or people who have made outstanding contributions to museums. It has also been named as one of Business Ethics magazine's "100 Best Corporate Citizens."

Target also embraces positive environmental stew-ardship. Through its environmental initiative, it seeks healthy, long-term corporate growth through energy conservation, increased efficiency, recycling, waste reduction and respect for the ecosystems of the communities its serves.

GLOBAL PRESENCE

Target Corporation's Associated Merchandising Corp (AMC) subsidiary is a global sourcing organization that works with other global sourcing companies to source garments and other goods for the parent company. AMC, which employs 1,200 people, has 27 full-service offices, 48 quality-control offices and seven commissionaires around the world.

EMPLOYMENT

Target Corporation is among America's top 20 employers in the private sector, with over 280,000 employees. It has received national recognition for its comprehensive team member benefits, productive work environment, and commitment to diversity. The company provides training, development and advancement, and family-friendly benefit programs. Diversity efforts are monitored by its board of directors.

CHRONOLOGY: Target Corporation

1902:

George Dayton opens the Goodfellows store in Minneapolis, Minnesota

1910:

Goodfellows becomes the Dayton Company

1956:

Dayton opens the world's first fully enclosed retail mall

1962:

The first target store opens in Roseville, Minnesota

1969:

The Dayton Company merges with the Hudson Company to form the Dayton-Hudson Company (DHC)

1971:

DHC revenues hit the $1 billion mark

1990:

DHC acquires Marshall Fields

1998:

DHC acquires Rivertown Trading

1999:

DHC goes online

2000:

DHC changes its name to Target Corporation

Each of the organization's three divisions has its own program of human resources policies and benefits, but they all have several common features that include pretax salary set-asides to help pay for dependent care; child care resource and referral information; alternative work arrangements (telecommuting, job-sharing, work-at-home, flextime, part-time); sick leave and pregnancy leave; 401(k) plan and stock option/stock ownership plans; a pharmacy discount program, including mail order access for maintenance prescriptions; a vacation values program; and automobile/homeowners insurance through payroll deduction.

SOURCES OF INFORMATION

Bibliography

hoover's online. "target corporation capsule," 10 april 2002. available at http://www.hoovers.com/co/capsule/0/0,2163,10440,00.html

catron, v., culver, a., demore, m., et al. "financial analysis: target corporation," august 2000. available at http://www.history-=buff.org/target%20corporation.ppt

forbes.com. "company details: target corporation," 10 april 2002. available at http://www.forbes.com/finance/mktguideapps/compinfo/companytearsheet.jhtml?tkr=tgt

u.s. business reporter. "target corporation business description," 2000. available at http://www.activemedia-guide.com/pkg_target.htm

henssler.com. "target corporation." money talks with dr. gene, 2001. available at www.henssler.com/market/equity/topten-stocks/target.htm

yahoo! finance. "target corporation," yahoo! market guide, 10 april 2002. available at http://biz.yahoo.com/p/t/tgt.html

dpi. "target corporation announces emergency logo change." susannah's soap box, 2001. available at http://www.susannassoapbox.com/nstarget.html

For an annual report:

on the internet at: http://www.targetcorp.com/targetcorp_group/investor-relations/investor-relations.jhtml

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. target corporation's sics are:

5311 department stores

5331 variety stores

5651 family clothing stores

5399 misc. general merchandise stores

5961 mail order houses

also investigate companies by their north american industry classification system codes, also known as naics codes. target corporation's naics codes are:

448140 family clothing stores

452110 department stores

452990 all other general merchandise stores