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LESS IS
MORE
It’s not just an adage, it’s one more way we’re bringing value to our guests. We deliver more for less with superior value, innovation, and an exceptional guest experience, a mission that consistently turns a brief shopping list into a full shopping cart. It is the excitement of finding great quality and design at an incredible price, the surprise in viewing our innovative marketing, and the joy of shopping in a clean, bright store.
M re Merchandising • We launched GO International, a series of limited-edition collections featuring highfashion international designers such as Luella Bartley and Behnaz Sarafpour; • In Home, we rebalanced and remerchandised our assortment, introduced Target Casual and Contemporary Home, and relaunched the Waverly brand. We also enhanced our in-store presentation with endcap displays of larger furniture pieces, introduced Room Essentials and upholstered seating, and expanded our home furnishings assortment on Target.com; • We significantly reinvented our Bath and Body assortment. Specifically, we added several brands typically found only in U.S. and European specialty stores, and expanded the presence of other brands, such as Boots, a line of premium quality cosmetics and skin care products; • And, in Electronics, we increased our offerings of LCD and other flat-panel TVs, portable audio electronics and high quality digital cameras and introduced convenient extended service plans at an exceptional value. We also supported the launch of new video gaming systems through our assortment of hardware, software and gaming accessories.
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M re Affordability For more than a decade, our “Expect More. Pay Less.” brand promise has been the cornerstone of Target’s guest-focused culture and strategy. In particular, our merchandise assortment embodies this brand promise by delighting our guests with unexpected quality, design and value. Through our broad selection of competitively priced consumables and commodities, combined with our offering of unique and affordable home and apparel fashion, Target strives to attract more guests with greater frequency and to give them added reasons to spend more on each visit. Exclusive Designs and Fashion Innovation In our general merchandise assortment, Target offers newness, excitement and affordability to our guests through innovative design partnerships, signature national brands and high-quality brands.
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M re Convenience In addition to Target’s focus on great quality,
We also continued to grow our Choxie line
exceptional value and unique products to
of gourmet chocolate, our differentiated
surprise and delight our guests, Target is
Wine Cube and our Sutton & Dodge rest-
also committed to providing our guests with
aurant-style, choice Angus beef. In addition,
increased shopping convenience through
to better serve our guests, we have devel-
our growing selection of food. We continue
oped unique solutions for more convenient
to expand our food assortment in our
meal preparation such as Sutton & Dodge
general merchandise stores as well as add
heat-in-the- bag roasts, and continued to
new SuperTarget locations. And, through our
increase our offering of organic and natural
frequent introductions of new owned-brand
foods. By increasing our selection of fresh,
products, we continue to increase our food
affordable food and meal solutions, and
penetration and reinforce our promise of
remaining focused on delivering a pleasant
quality, freshness and value. During 2006,
and easy in-store experience, we continue
we introduced a number of new premium
to give our guests more reasons to make
quality items from Archer Farms, including
Target their preferred shopping destination.
imported pasta and frozen pizza, frozen entrĂŠes, all-natural breads, organic coffee and snacks. We expanded our assortment in Market Pantry, including frozen seafood, cheese, Mexican food, bread, cookies, meal kits, and crackers.
Our approach to superior design and exceptional value, with the consistent execution of our strategy, helps us create the excitement Target guests expect and the shopping experience they love. We are able to increase our speed to market, assert more control over our brand and consistently offer the design and originality that our guests expect.
M re Design and Development Bringing our brand to life for our guests
innovation extends beyond the products we
requires a coordinated effort throughout
sell. In 2005, we launched ClearRx, a new
the company including marketing, merch-
pharmacy bottle design. More recently, we
andising, product design and development,
introduced a redesigned shopping basket,
sourcing and our store teams. To ensure that
and we are also currently testing a comple-
we stock our shelves with trend-right, high
mentary design for a new shopping cart.
quality products at competitive prices, we
Each of these items underscores the impor-
have built a strong internal product design,
tance of great design to Target’s brand and
development and sourcing infrastructure
demonstrates how we continue to infuse
with advanced technical design capabilities
innovation and continuous improvement
and strong manufacturing and supply chain
into all aspects of our business. Our unique
partnerships. We continue to invest in Target
approach to superior design and excep-
Sourcing Services to strengthen our global
tional value, combined with the consistent
sourcing resources and capacity and main-
exe-cution of our strategy, helps us create
tain our position of trend leadership. By
the excitement our guests expect and the
leveraging these capabilities, we are able
shopping experience they love.
to increase our speed to market, assert more control over our brand and consistently offer the design and originality that our guests expect. Target’s focus on
The Target brand is more than the Bulls eye and the color red— it’s a symbol of our long standing commitment to deliver trend leadership, quality merchandise, great service and compelling value to our guests and to give back to the communities we serve. We are dedicated to preserving our brand and the trust we have earned—and continue to seek new and innovative opportunities to delight guests by delivering the unexpected.
M re Than a Brand • We launched a nationwide branding effort with the color red by dominating the advertising in train and subway stations in strategic markets, by introducing the first interactive board in New York’s Herald Square subway station, and by partnering with Saturn to sponsor an all-red Internet-based scavenger hunt, with the top prize being a new SKY roadster painted in exclusive Target Red. • We introduced our third GO International collection, featuring Paul and Joe designed by Sophie Albou, with a pop-up boutique in Los Angeles that attracted celebrity guests and Hollywood-style attention. • For the 2006 Winter Olympics, we worked with Trenitalia, the Italian railroad, to create the Target Express. Red and white trains, featuring the Target Bulls eye logo, transported people throughout the Alps during the winter games. • We were part of Rolling Stone magazine’s 1,000th edition, which featured a firstof-its-kind back cover ad using lenticulargraphic technology. These innovative campaigns help solidify Target’s unique brand and reinforce our strategic focus on balancing great merchandise design with outstanding value.
M re Value in the Cards Our “Expect More. Pay Less.� brand promise
These rewards, combined with our Take
extends to Target Financial Services, where
Charge of Education program, also build
we focus on delivering financial products
guest loyalty—driving a significant number
and services that strengthen guest loyalty,
of additional store visits. Our GiftCard pro-
drive sales and generate profitable results.
gram also creates affinity with our guests.
Our strategy is thoughtfully conceived and
By offering a broad, seasonally fresh assort-
executed with the discipline, controls and
ment of distinctive GiftCard designs, we
expertise of a first-class financial services
reinforce our brand and fuel incremental sales
business, while being fully integrated into
and profits. In 2006, we issued and redeemed
our retail operations. Our Target Visa Credit
more than $1.5 billion in GiftCards. Target.com
Card and the Target Credit Card, collectively
complements our Target in-store experience
referred to as our REDcard products, pro-
and delivers value to our guests through
vide our credit-worthy guests compelling
its services, marketing and mercandising
reasons to visit our stores more often and spend more on each visit. Our rewards programs, such as Target Rewards and Target Pharmacy Rewards, provide opportunities for substantial merchandise savings while also driving redemption transactions that are approximately four times greater than our average transaction amount.
strategies. Given the increasing importance of this channel, we remain focused on developing new online prospects and leveraging synergies between our stores and Target.com.
A recent independent survey confirmed that the Bulls eye is recognized by 97 percent of Americans, but we are not standing still. Target remains steadfastly focused on strengthening our brand and delivering on our “Expect More. Pay Less.� brand promise. Through our innovative marketing, our fresh, cleanstores, our great guest service and our differentiated merchandise, we are dedicated to providing design and value for our guests and delivering a Target brand experience on every visit.
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M re Innovative Marketing Our bold advertising and distinctive
This important trend, combined with the
marketing efforts reinforce our “Expect More.
decline in home newspaper deliveries,
Pay Less.” brand philosophy and strengthen
compels us to look for new and innovative
Target’s iconic image and reputation. We
ways to reach our guests. Our marketing
strive to be innovative in our communications,
program continues to incorporate traditional
to create excitement and to be fresh, fun and
broadcast and print media, as well as new
trend right in all we do. Our weekly circular
tactics such as the rollout of our in-store
is the foundation of our differentiated
network called Channel Red, the delivery
advertising strategy, and it communicates
of direct mail catalogs to our best guests,
our balanced message of design and value
and the refinement of our Target Mail program
to our guests. Each week, it is distributed
to increase its productivity. In 2006, we cont-
to more than 50 million households, driving
inued to deliver the style, boldness and
increased traffic to our stores and to our
innovation that are inherent elements of our
Web site. The expanding influence of the
marketing strategy, generating buzz and
Internet—with more than three-quarters
enhancing brand positioning.
of all Americans having access today—is reflected in the growing number of guest visits to our online circular and our other web-based resources.
The challenge for Target remains pretty much the same as it’s been throughout the past decade: remain competitive on price while exceeding consumer expectations on trend-right exclusive merch-andise offerings. …It’s a time-honored balancing act, one that Target seems to have mastered.” — DSN Retailing Today, December 11, 2006
M re Strategic Growth Guided by our disciplined and strategic approach to site selection and property development, Target annually invests billions of dollars in new stores and store support infrastructure. For many years, we have added approximately 8 percent to our annual square footage, net of closings and relocations, and at our current size, this pace of growth translates into approximately 100 net new stores per year. During 2006, we opened 72 net new general merchandise stores and 19 new SuperTarget locations, bringing the total number of stores at year end to 1,488. At our current growth rate, we expect our total U.S. store count to be about 2000 in 2011, and longer term, we believe the potential for profitable U.S. Target stores may be as many as 3,000 or more. Given this potential for domestic growth, we are not currently pursuing opportunities for international expansion. We remain focused on executing our U.S. strategy to preserve our brand and our financial performance—and we expect this new store growth, combined with the contribution from our comparable store sales, to continue generating a double-digit, top-line increase and profitable market share gains for the foreseeable future.
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M re Service Best for Our Guests To deliver on our goal to provide Target guests with an outstanding shopping experience on each visit, we work diligently to maintain the physical attributes of our stores and preserve the integrity of our brand through new-store construction and remodels of existing stores. In addition, to keep our stores fresh and exciting for our guests over time, we introduce a new store design every few years that represents an innovative and more efficient concept for delivering our “Expect More. Pay Less.” brand promise to our guests. We believe that incorporating great design into our stores— making them inviting, easy-to-shop, clean and bright—is as important in sustaining our competitive advantage as maintaining the right balance of differentiation and value in our merchandising.
Each aspect of our stores enforces our commitment to the Target brand with our strong financial discipline. From the exterior look and overall store design to the bright interior lighting, the innovative graphics and signing and spacious aisles, each element supports our objectives to deliver a superior guest experience and a superior shareholder return.
M re Stores Supporting Our Growth To support Target’s
way we achieve both elements of our
ongoing store growth, we also continue to
“Expect More. Pay Less.” brand promise,
make significant investments in our supply
delivering greater speed, consistency,
chain and technology infrastructure. In 2006,
in-stock reliability and value throughout
we added three distribution centers to our
our company. Among many other
network, resulting in a total of 29 facilities at
benefits, these invest-ments enable us
year end. In 2007, we will further strengthen
to improve the flow and accuracy of
our distribution network with the opening
information, reduce expense and leverage
of two additional distribution centers. As
the resources of our global work force—
Target’s food business continues to grow and
including Target Sourcing Services, our
evolve, we also plan to expand our internal
global sourcing organization and Target
food distribution capabilities, in addition to
India, our overseas technology support
maintaining partnerships with key vendors
and business services operation. We
and wholesalers. Target already distributes
believe that these investments reinforce
virtually all dry grocery products through our
our brand strength and position us for
own distribution network, and in the summer
continued growth and profitability in the
of 2008, we expect to finish construction of
foreseeable future.
a Target owned, and third-party operated, perishable-food distribution center that will serve Target stores in southeastern states. Continued investment in technology is one
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Our dedication to the social, environmental and economic well-being of the global communities in which we do business is integral to our strategy, our reputation and our erformance. As we continue to strive to deliver superior value for our guests, our team members, our com-munities and our share-holders, we remain firmly committed to these long standing practices.
M re Corporate Responsibility Corporate Responsibility Target has a long standing tradition of giving back to the communities we serve. Since 1946, we have given back 5 percent of our income to support education, the arts and social services. Today, our charitable giving totals more than $3 million each week. Nationwide, Target team members volunteer millions of hours annually to more than 7,000 programs that strengthen families and build healthier communities. Signature programs include: • Take Charge of Education, a school fund-raising initiative that has contributed more than $200 million to more than 108,000 schools across the country since its inception in 1997. • Target Field Trips, which fosters learning beyond the classroom by granting 800 educators $1,000 each to cover costs for a field trip related to their curriculum. • Ready.Sit.Read!, a national initiative that focuses on reading as a foundation for lifelong learning, and includes book festivals, grants for reading programs, and celebrity authors to help raise awareness of the importance of early reading. • Sponsorship of more than 1,500 free days annually at major cultural institutions across the country, such as the Brooklyn Museum of Art, the California African American Museum and The John F. Kennedy Center for Performing Arts in Washington, D.C. EXPECT MORE. PAY LESS. • Target & Blue and Safe City programs, which reduce crime and create safer communities by strengthening alliances between Target and local law enforcement agencies. • Target House, which provides long-term housing for families whose children are receiving life-saving treatment at St. Jude Children’s Research Hospital.
M re Giving Like our commitment to charitable giving,
perspectives, have opportunities for career
we have adhered to disciplined ethical and
growth, and are judged objectively and
financial standards for decades—to guide
rewarded appropriately for their performance
our business conduct, drive superior per-
is essential to the consistent execution of our
formance, and preserve and enhance our
strategy and continued delivery of profitable
corporate reputation. As we strive for lasting
growth. We strive to design stores that inte-
excellence with our guests, team members,
grate into the communities we serve and
communities and shareholders, we remain
are considerate of local environmental
dedicated to our fundamental strategic
conditions. Where appropriate, we employ
principles and to being effective stewards
resource preservation techniques in our
of our corporation’s assets over time. Target
stores and distribution centers to improve
is dedicated to providing an inclusive and
energy efficiency, minimize waste, reduce
respectful workplace for our team members
water consumption and incorporate
and a welcoming shopping environment for
materials with recycled or reused content.
our guests. Our ability to attract and retain
In addition, we are increasingly focused
a high-caliber, diverse work force with a
on offering our guests a greater selection
rich variety of strengths, perspectives and
of products that are organic and natural.
lifestyles is a key factor in our success with our guests. We believe that creating a workplace in which our team members feel valued for their unique contributions and
For decades, Target Corporation has been guided by beliefs and devoted to strategies, that are intended to enhance our long-term financial performance and success. We have maintained a steadfast commitment to initiatives that fuel consistent maturation over time because we believe that managing our business this way continues to generate substantial value for our shareholders.
To Our Shareholders For decades, Target Corporation has been guided by principles, and devoted to strategies, that are intended to enhance our long-term financial performance and success. We have main-tained a steadfast commitment to initiatives that fuel consistent growth over time because we believe that managing our business this way continues to generate substantial value for our shareholders. Bob Ulrich Chairman and Chief Executive Officer
• We opened 118 new stores, including 33 SuperTarget stores, to offer more guests a uniquely relevant Target shopping experience in convenient, attractive stores; • We continued to invest in technology and infrastructure, including implementation of enhanced systems and construction of new perishable-food and general merchandise distribution centers and our second Target.com fulfillment center; • We positioned Target Sourcing Services as global sourcing experts to deliver the consistently trend-forward, high-quality, affordable merchandise that symbolizes the Target brand, and we continued our disciplined commitment to the safety of our guests by expanding our multistage testing process to enable earlier testing of our owned-brand products, such as luggage, toys and children’s products; • We offered a broad array of products to meet our guests’ wants and needs, including limited-time-only fashion from emerging designers, an upgraded assortment of digital electronics, a growing selection in food and pharmacy and a variety of sustainable products across many categories, including certified organic bedding and natural cleaning products; • And, we strengthened our one-of-a-kind brand by continuing to offer a compelling online presence through Target.com, by offering the many benefits of REDcards which continue their outstanding record of profitability, and by creating a succession of uniquely innovative marketing campaigns.
Our financial performance in 2010 fell short of our expectations as the pace of sales and earnings growth in the first six months slowed considerably in the second half of the year. Overall, revenues in 2007 grew 6.5 percent to $63.4 billion and diluted earnings per share increased 3.9 percent to $3.33. As we faced the challenges posed by an increasingly difficult economy, we remained focused on disciplined execution of the core elements of our business and continued to invest thoughtfully in our growth.While we were disappointed in our 2010 results, we remain confident in the relevance of our strategy, the strength of our brand, the dedication of our talented team and in our ability to continue to deliver strong profitable growth over time. We believe we are well-positioned for more rapid growth in 2008 and beyond. This belief is founded in our Expect More. Pay Less. promise to our guests, which is a guid-
every decision we make reinforces the uniquely Target experience that is our competitive advantage
ing principle behind every decision we make as a company. It is the expression of our commitment to exceptional quality, accessible design at a superior value, and doing business in a way that goes far beyond the products we sell. Each element of our strategy is thoughtfully conceived, and every decision we make reinforces the uniquely Target experience that is our competitive advantage. As we look ahead, we will remain focused on the fundamentals of our business while continuing to pursue innovative solutions and establish new best practices throughout the company. Specifically, in 2010, we are diligently working to drive top-line growth and thoughtfully manage our expenses. By prioritizing our investments and focusing our resources on areas that increase speed and efficiency, and reduce work and cost, while preserving our brand and overall shopping experience for our guests, we will rise above the current economic challenges. We will also remain committed to providing a workplace that is preferred by our team members and investing in the communities where we do business to improve the quality of life. Our long history of giving is reflected in the ways we serve our communities, including team member volunteerism and giving more than three million dollars a week in charitable contributions to education, the arts and social services. Target also has a long history of strong corporate governance, and this disciplined stewardship and commitment to strategic continuity is evident as Target transitions to new leadership in 2008. Gregg Steinhafel’s tremendous experience, combined with his passion and unwavering devotion to the Target brand, make him an outstanding choice to be our next chief executive officer. The strength of this company’s reputation and performance is attributable to Target brand managers throughout the world whose talent and dedication consistently bring our Expect More. Pay Less. brand promise to life for our guests and sustain our unique competitive advantage. By maintaining a steadfast commitment to delight our guests in every store, every day, Target will continue to grow and prosper for many years to come! Sincerely,
Bob Ulrich, Chairman and Chief Executive Officer
Bob Ulrich’s leadership has been instrumental in defining the Target brand, driving our growth and establishing our position as a leader in the industry. I have been fortunate to have had the opportunity to learn from him, and I am honored to lead the next phase of growth at Target.
To Our Shareholders Our legacy of balancing continuous innovation with skillful execution positions us well for the challenges of the future. We know we cannot meet our guests’ needs tomorrow by providing the same solutions we offer today. While the guardrails of our strategy remain firm, we recognize the importance of having the flexibility and foresight to continually adjust and refine our tactics, and take the calculated risks Gregg Steinhafel President
that will make us faster, more efficient and better able to offer a differentiated shopping experience that will ensure our relevance as we grow. • To ensure we are offering the right products when and where our guests want them, we are working to balance our overall efficiency with the unique needs of our guests by effectively segmenting our supply chain and assortments with localized strategies. • To drive continued profitable market share growth, we are committed to efficient expense management with focused attention on both delivering results today and preparing for our future. • And to provide a consistent flow of fresh, unexpected merchandise at incredible values, we continue to enhance our exclusive owned brands, signature national brands and designer assortments. Our future success depends on our continued ability to fulfill our Expect More. Pay Less. brand promise with passion and discipline, and deliver outstanding value for our guests, team members, shareholders and communities. To maintain our unique position in the marketplace, we must consistently deliver the differentiated brand experience that has driven our success for decades. We know we have the right strategy for Target. Our collective passion for our guests, team members, shareholders and communities makes us uniquely Target—and will guide us toward a successful future built on our successful past. Sincerely,
Gregg Steinhafel, President