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Target Reports Fourth Quarter and Full-Year 2015 Earnings 24 February 2016

Results demonstrate that Company is focused on the right strategic priorities

Target Corporation has announced its fourth quarter and full-year 2015 results. The Company reported adjusted earnings per share from continuing operations1 (Adjusted EPS) of $1.52, an increase of 2.1 percent from $1.49 in 2014. Full-year Adjusted EPS of $4.69 was 11.3 percent higher than $4.22 in 2014. GAAP earnings per share (EPS) from continuing operations were $2.31 in fourth quarter and $5.25 for full-year 2015, compared with $1.49 and $3.83 in 2014, respectively. Fourth quarter 2015 GAAP earnings per share from continuing operations include the gain on the sale of the pharmacy and clinic businesses and data breach and restructuring expenses that were excluded from Adjusted EPS. The attached tables provide a reconciliation of non-GAAP to GAAP measures for fourth quarter and full-year 2015. All earnings per share figures refer to diluted EPS.

“With traffic growing for five consecutive quarters and our signature categories of Style, Baby, Kids, and Wellness leading our growth, Target’s results demonstrate that we are focused on the right strategic priorities,” said Brian Cornell, chairman and CEO of Target. “I want to thank our teams across the company for giving our guests a great holiday season, driving consistent growth throughout the fourth quarter and delivering on the sales and profit goals we laid out at the beginning of the year. While we have made a great deal of progress in 2015, we are excited about the opportunity in front of us to provide a more seamless experience and accelerate profitable growth.”

Fiscal 2016 Earnings Guidance

In first quarter 2016, Target expects both GAAP EPS from continuing operations and Adjusted EPS of $1.15 to $1.25, compared with first quarter 2015 GAAP EPS from continuing operations of $1.01 and Adjusted EPS of $1.10. For full-year 2016, Target expects GAAP EPS from continuing operations and Adjusted EPS of $5.20 to $5.40, compared with full-year 2015 GAAP EPS from continuing operations of $5.25 and Adjusted EPS of $4.69. First quarter and full-year 2016 GAAP EPS from continuing operations may include the impact of certain discrete items, which will be excluded in calculating Adjusted EPS. In the past, these items have included data breach expenses, restructuring costs, and certain other items that are discretely managed. The Company is not currently aware of any such discrete items.

Segment Results

Fourth quarter 2015 sales decreased 0.6 percent to $21.6 billion from $21.8 billion last year, as a 1.9 percent increase in comparable sales was more than offset by the impact of the sale of the pharmacy and clinic businesses in December to CVS Health. Digital channel sales grew 34 percent and contributed 1.3 percentage points to comparable sales growth. Segment earnings before interest expense and income taxes (EBIT) were $1,554 million in fourth quarter 2015, a decrease of 2.2 percent from $1,590 million in 2014.

Fourth quarter EBITDA and EBIT margin rates were 9.8 percent and 7.2 percent, respectively, compared with 9.8 percent and 7.3 percent in 2014. Fourth quarter gross margin rate was 27.9 percent, compared with 28.5 percent in 2014, as the benefit from a favourable merchandise mix was more than offset by investments in promotions. Fourth quarter SG&A expense rate was 18.1 percent in 2015, compared with 18.6 percent in 2014, as investments in store labour were more than offset by continued expense discipline across the organization.

Interest Expense and Taxes from Continuing Operations

The Company’s fourth quarter 2015 net interest expense was $152 million, compared with $151 million last year. Fourth quarter 2015 effective income tax rate from continuing operations was 29.6 percent, compared with 33.0 percent last year, reflecting the impact of the gain on the sale of the pharmacy and clinic businesses.

Capital Returned to Shareholders

The Company returned $1,604 million to shareholders in fourth quarter 2015, representing 113 percent of net income from continuing operations.

In the quarter, the Company paid dividends of $345 million, an increase of 4.4 percent from $330 million last year.

The Company repurchased 17.3 million shares of common stock in the fourth quarter, at an average price of $72.70, for a total investment of $1,259 million.

For 2015, the Company repurchased 44.7 million shares at an average price of $77.07, for a total investment of $3.4 billion. Under the current $10 billion share repurchase program through fourth quarter 2015, the Company has repurchased 94.6 million shares of common stock at an average price of $69.57, for a total investment of approximately $6.6 billion.

For the trailing twelve months through fourth quarter 2015, after-tax return on invested capital (ROIC) was 16.0 percent, compared with 12.4 percent for the twelve months through fourth quarter 2014. Excluding the net gain and related tax impact of the sale of the pharmacy and clinic businesses, ROIC was 13.9 percent, reflecting higher profits on a stable base of invested capital. See the “Reconciliation of Non-GAAP Financial Measures” section of this release for additional information about the Company’s ROIC calculation.

Discontinued Operations

Fourth quarter net earnings from discontinued operations were $5 million, compared with after-tax losses of ($3,600) million last year. Fourth quarter 2015 net earnings from discontinued operations primarily reflect tax benefits related to investment losses in Canada, whereas 2014 results included impairment losses and other charges related to the Company’s plans to discontinue operating stores in Canada.