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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 May 3, 2003

Commission file number 1-6049

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, (2) has been subject to such filing requirements for the past 90 days, and (3) is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of common stock as of May 3, 2003 was 910,756,174.

TABLE OF CONTENTS

TARGET CORPORATION

PART I. FINANCIAL INFORMATION

See accompanying Notes to Consolidated Financial Statements.

*    The February 1, 2003 Consolidated Statement of Financial Position is condensed from the audited consolidated financial statement.

See accompanying Notes to Consolidated Financial Statements.

Amounts in this statement are presented on a cash basis and therefore may differ from those shown elsewhere in this 10-Q report.

See accompanying Notes to Consolidated Financial Statements.

Accounting Policies

The accompanying consolidated financial statements should be read in conjunction with the financial statement disclosures contained in our 2002 Annual Report to Shareholders throughout pages 28-36. The same accounting policies are followed in preparing quarterly financial data as are followed in preparing annual data. 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.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Due to the seasonal nature of the retail industry, quarterly earnings are not necessarily indicative of the results that may be expected for the full fiscal year.

New Accounting Pronouncements

During 2002, the Emerging Issues Task Force reached a consensus on Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor." Under the new guidance, if the consideration received represents a payment for assets delivered to the vendor, it should be classified as revenue. If the consideration is a reimbursement of a specific, incremental, identifiable cost incurred in selling the vendor's product, the cost should be characterized as a reduction of that cost incurred. Generally, all other cash consideration received from a vendor should be classified as a reduction of cost of sales. As required, we adopted this guidance in the first quarter of 2003 and its adoption had no material impact on our sales, net earnings, cash flows or financial position.

Per Share Data

Share Repurchase Program

We maintain a share repurchase program under which our Board of Directors previously authorized the repurchase of $2 billion of our common stock. Since the inception of our share repurchase program, we have repurchased a total of 41 million shares of our common stock at a total cost of $1,199 million ($29.27 per share), net of the premium from exercised and expired put options.

Common stock repurchases under our program have been essentially suspended. Consequently, common stock repurchases did not have a material impact on our first quarter 2003 earnings and financial position.

Long-term Debt and Derivatives

During the first quarter, we repurchased $2 million of long-term debt with a weighted average interest rate of approximately 9.88 percent. This transaction resulted in a pre-tax loss of less than $1 million (less than $.01 per share), which is included in interest expense in the Consolidated Results of Operations.

Also during the first quarter, we issued $500 million of long-term debt maturing in March 2008 at 3.38 percent and $200 million of long-term debt maturing in May 2018 at 4.88 percent. Proceeds from these issuances were used for general corporate purposes.

Concurrent with the issuance of the $200 million long-term debt maturing in 2018, we entered into an interest rate swap with a notional amount of $200 million. The effect of this swap converts our interest expense to a floating rate, initially set at approximately 1.2 percent. The fair value of our outstanding swaps is reflected in the financial statements as a component of other long-term assets. No ineffectiveness was recognized in the first quarter related to these instruments. At May 3, 2003, the fair value of our existing swaps was $116 million, compared to $110 million at February 1, 2003 and $42 million at May 4, 2002.

Accounts Receivable

Accounts receivable is recorded net of an allowance for expected losses. The allowance, estimated from historical portfolio performance and projections of trends, was $407 million at May 3, 2003, compared to $399 million at February 1, 2003 and $297 million at May 4, 2002.

Stock Option Plans

In the first quarter, we adopted Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." In accordance with the prospective transition method prescribed in SFAS No. 148, the fair value based method will be applied prospectively to awards granted subsequent to February 1, 2003 (the last day of our 2002 fiscal year). Awards granted in fiscal year 2002 and earlier years will continue to be accounted for under the intrinsic value method, and the pro forma impact of accounting for those awards at fair value will continue to be disclosed until the last of those awards vest in January of 2007. The adoption of this method did not have a material impact on our earnings in the first quarter.

Historically, and through February 1, 2003, we applied the intrinsic value method prescribed in APB No. 25, "Accounting for Stock Issued to Employees," to account for our stock option plans. No compensation expense related to options was recognized because the exercise price of our employee stock options equals the market price of the underlying stock on the grant date. The expense related to the intrinsic value of performance-based and restricted stock awards issued was not significant to first quarter 2003 net earnings, cash flows or financial position. If we had elected to recognize compensation cost based on the fair value of the awards at the grant date, net earnings would have been the pro forma amounts shown below.

Segment Disclosures (millions)

Revenues by segment were as follows:

Pre-tax segment profit and the reconciliation to pre-tax earnings were as follows:

Analysis of Operations

First quarter 2003 net earnings were $349 million, or $.38 per share, compared with $345 million, or $.38 per share, for the same period last year.

Revenues and Comparable-Store Sales

Total revenues for the quarter increased 7.6 percent to $10,322 million compared with $9,594 million for the same period a year ago. Total comparable-store sales (sales from stores open longer than one year) decreased 0.1 percent. Our revenue growth reflected Target's new store expansion and the growth in our credit card operations.

Year-over-year changes in comparable-store sales by business segment were as follows:

Gross Margin Rate

Gross margin rate represents gross margin (sales less cost of sales) as a percent of sales. In the first quarter, our gross margin rate overall was essentially unchanged from the prior year. Gross margin was slightly favorable to last year at Target stores and modestly lower than last year at both Mervyn's and Marshall Field's.

Operating Expense Rate

Operating expense rate represents selling, general and administrative expense as a percent of sales. It includes buying and occupancy, advertising, start-up and other expense, and excludes expenses associated with our credit card operations and depreciation expense because these items are separately disclosed in our Consolidated Results of Operations. In the first quarter, our operating expense rate was unfavorable to the first quarter of last year due to a lack of sales leverage at all three divisions.

Pre-tax Segment Profit

Our first quarter pre-tax segment profit increased 2.0 percent to $777 million compared with $762 million for the same period a year ago. Target's pre-tax profit increased 8.2 percent. Mervyn's pre-tax profit declined 54 percent and Marshall Field's pre-tax profit declined 39 percent. We define pre-tax segment profit as earnings before LIFO, interest, other expense and unusual items. A reconciliation of pre-tax segment profit to pre-tax earnings is provided in the Notes to Consolidated Financial Statements.

Other Performance Factors

In the first quarter, total interest expense was $142 million, representing a $7 million increase from the first quarter of 2002. The increase in interest expense was due to higher average funded balances, partially offset by the benefit of a lower average portfolio interest rate.

The estimated effective income tax rate was 38.0 percent in the first quarter of 2003 and the first quarter of 2002.

Analysis of Financial Condition

Our financial condition remains strong. We continue to fund the growth in our business through a combination of internally generated funds and debt.

During the first quarter, total gross receivables increased $1,436 million, or 33.8 percent, over the first quarter of last year. Inventory increased $379 million, or 8.3 percent, over the first quarter of last year primarily reflecting new square footage growth at Target. The inventory growth was more than fully funded by a $726 million, or 19.7 percent, increase in accounts payable.

Capital expenditures for the first three months of 2003 were $674 million, compared with $697 million for the same period a year ago. Investment in Target stores accounted for 93 percent of current year capital expenditures.

We contributed $100 million to our defined benefit plans in both the first quarter of 2003 and the first quarter of 2002.

Credit Card Operations (millions)

Our credit card programs strategically support our core retail operations and are an integral component of each business segment. Therefore, included in each segment's pre-tax profit is revenue and expense from its credit card operations.

Credit card contribution to pre-tax segment profit was as follows:

Total receivables were as follows:

The allowance for doubtful accounts on receivables was as follows: