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To Our Shareholders,
In
2002, Target Corporation delivered another year of outstanding
performance and simultaneously laid the groundwork for
our continued growth and profitability in 2003 and beyond.
• To
delight our guests on each shopping trip, we maintained
our focus on merchandise differentiation
and fashion excitement and intensified
our focus on being in-stock and priced right throughout the store.
•
We leveraged our strategic positioning and financial services expertise, strengthened our relationships with existing guests and enhanced our overall financial results through the disciplined management and growth of
our credit card operations.
• We invested $3.2 billion of capital
in new stores, remodels, technology and distribution infrastructure
to improve our guests’ shopping experiences, expand our market share, and sustain our competitive advantage.
•
We celebrated the 40th anniversary
of Target Stores, the 150th anniversary
of Marshall Field’s and our 35th year as a publicly traded company.
•
And, we produced another year
of record financial performance. Consistent with our objective to achieve average annual growth in earnings per share of 15 percent or more over time, our EPS of $1.81 for the full year represented a one-year
increase of 17 percent (excluding unusual items) and on this same basis, annualized growth of between 16
and 19 percent over the past five years,
ten years and 15 years, respectively.
As we move into 2003, our vision for Target Corporation is clear and unwavering. We are steadfastly engaged in creating greater value for our guests, for our team members,
for our shareholders and for the communities in which we operate. And we believe that our strategy and the principles that have guided us for decades will continue to provide the
foundation for our success in the future.
Our job is about creating value. For our
shareholders. For our team members.
For the people in the communities
in which we do business. And, the key
to this effort starts with creating value
for our guests...one guest at a time.
Our commitment to please our guests is at the heart of our strategy.
It fuels our drive to be agile and innovative and underlies our pursuit of opportunities that reinforce our differentiated brand. For instance, to appeal to our guest's sophisticated style and standards of quality, we infuse our assortment with fashion newness, trusted brands and
exclusive designer names. To satisfy her demand for value, we match Wal*Mart's prices on identical and similar items in local markets and price our differentiated products at deep discounts compared to other benchmark competitors. Because
we understand the importance of time in our guests' hectic lives, we deliberately invest millions of dollars in systems and training to speed
up the checkout process in our
stores. And, because we know that our guest makes her purchasing decisions based on the total shopping experience, not on product and service alone, we are uncompromising in our housekeeping standards and store presentation, distinctive and entertaining in our marketing, and deeply committed to the support
of community programs that are meaningful to our guests, including
education, social services and the arts.
Our goal is to deliver even greater value to our guests by understanding them better. Through our proprietary credit cards at Target, Mervyn's and Marshall Field's, we are able to learn more about our guests' shopping preferences, strengthen our affinity with our guests and offer them the opportunity to earn money-saving rewards. Similarly, the Target Visa
card enhances our relationship with millions of our guests by providing broader utility, increased financial flexibility and improved loyalty programs. In 2003, Target Visa card holders will further benefit from the national launch of e-coupons and the promise of customized promotional
offers using our smart chip technology.
Our focus on delighting our guests is also a key factor in driving our growth. To provide greater convenience to our existing guests and expand our ability to reach
new guests, we continue to open profitable Target discount and SuperTarget locations, even in our most highly penetrated markets.
In 2002, our store opening program included 82 total (62 net) new
Target discount stores and 32
new SuperTarget stores. In 2003, we plan to add approximately 100 total (80 net) new stores, resulting in a net square footage increase in the range of 9 percent. The allocation of this space within our stores reflects
our guests' appreciation for the convenience of one-stop shopping. We continue to expand our food offering and pharmacy service within our discount stores, and we expect SuperTarget to remain a key driver of our future net square footage growth.
To support this continued expansion and further enrich our guests' overall shopping experience, Target strategically invests hundreds of millions of dollars each year in technology and distribution. These investments benefit our guests by improving in-stock reliability, enabling receipt-less returns, accelerating our speed to market for new products and trends, leveraging operational efficiencies to offer lower prices
and increasing the functionality
and integration of our online efforts.
We believe that Target's dedication
to driving change through technology positions us as a leader in the industry and we are firmly committed to sustaining this advantage.
Our guests demand more
than differentiated merchandise, compelling value, innovative marketing and outstanding service. They believe that the companies
with whom they do business should embody unquestionable ethical standards and demonstrate a sincere commitment to the community. Target Corporation has embraced both of these values for many decades, in large part due to the leadership and legacy of the Dayton family. As a result of their vision, Target Corporation enjoys a strong Board of Directors, comprised of
highly-respected, independent members
who are actively engaged in the Corporation's strategic direction
and governance. Similarly, we
have a long heritage of community involvement that includes both financial support and team member volunteerism. For nearly 60 years,
we have contributed five percent
of our federally taxable income
to national and local non-profit programs that make our guests' communities safer and more attractive places to live and work. Today, we maintain this tradition of giving with donations totaling more than two million dollars each week and hundreds of thousands of hours in team member service. In 2002, Forbes recognized Target Corporation as America's most philanthropic company.
Our commitment to please our guests is at the heart of our strategy.
And it permeates every aspect of
our business. We recognize that our success in delivering value to our guests ultimately affects our ability
to create value for our team members,
our communities and our shareholders.
For decades Target Corporation has effectively surmounted the challenges of an increasingly complex retail business environment and produced an impressive and consistent track record of outstanding performance. We are confident that our company remains well-positioned to build on this record and to generate profitable growth and superior shareholder value well into the future.
Sincerely,
Bob Ulrich,
Chairman and Chief Executive Officer
Board
of Directors Changes
During the past year, we welcomed to our board Roxanne Austin, Executive Vice President of Hughes Electronics Corporation and President and Chief Operating Officer of its subsidiary, DIRECTV, Inc. and Elizabeth Hoffman, President of The University of Colorado System. More recently we also welcomed Calvin Darden, Senior Vice President of U.S. Operations of United Parcel Service, Inc.
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