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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 November 1, 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 November 1, 2003 was 911,461,876.

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. In the third quarter, the company refined its implementation of this accounting standard, resulting in a financial statement reclassification of certain consideration received from vendors within our consolidated results of operations. The effect of this reclassification was to reduce third quarter and year-to-date cost of goods sold by $36 and $98 million, respectively, and to increase third quarter and year-to-date selling, general, and administrative expenses by like amounts. These reclassifications had no impact on our sales, net earnings, cash flows or financial position for any period. On November 25, 2003, the FASB ratified the EITF's consensus on Issue 03-10 "Application of Issue 02-16 by Resellers to Sales Incentives Offered to Consumers by Manufacturers" which amends EITF 02-16. According to the amended guidance, if certain criteria are met, consideration received by a reseller in the form of reimbursement from a vendor for honoring the vendor's sales incentives offered directly to consumers (i.e. manufacturer's coupons) should not be recorded as a reduction of the cost of the reseller's purchases from the vendor. We do not believe the adoption of EITF 03-10 will have a material impact on our net earnings, cash flows, or financial position.

In April 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies accounting for derivative instruments, and is effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 had no material impact on our net earnings, cash flows or financial position.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 clarifies the classification and measurement of certain financial instruments with characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003, or otherwise for the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 had no material impact on our net earnings, cash flows or financial position.

Per Share Data
(Millions, except 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 42 million shares of our common stock at a total cost of approximately $1.2 billion ($29.39 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 third quarter or year-to-date 2003 net earnings or financial position.

Long-term Debt and Derivatives

During the first nine months of 2003, we repurchased $297 million of long-term debt with a weighted average interest rate of approximately 7.8 percent. These transactions resulted in a pre-tax loss of about $15 million (about $.01 per share), which is included in interest expense in the Consolidated Results of Operations. There were no long-term debt repurchases during the third quarter.

During the third quarter, we entered into two interest rate swaps with notional amounts of $400 million and $500 million. The swaps hedge the fair value of certain debt by swapping a fixed rate to a variable rate. The fixed rates we will receive for the duration of the swaps are each 4.4 percent and the variable rate applicable to the quarter for each swap was 1.3 percent. We also terminated an interest rate swap with a notional amount of $400 million. These transactions did not have a material impact on net earnings.

During the second quarter, we issued $500 million of long-term debt maturing in June 2013 at 4.00 percent. 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. Also during the first quarter, concurrent with the issuance of the $200 million of 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, set at 1.2 percent for the third quarter.

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 third quarter or year-to-date related to these instruments. At November 1, 2003, the fair value of our existing swaps was $52 million, compared to $110 million at February 1, 2003 and $114 million at November 2, 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 $411 million at November 1, 2003, compared to $399 million at February 1, 2003 and $360 million at November 2, 2002.

Stock Option Plans

In the first quarter, we adopted SFAS No. 123, "Accounting for Stock-Based Compensation," in accordance with the prospective transition method prescribed in SFAS No. 148, "Accounting For Stock-Based Compensation—Transition and Disclosure." The fair value based method has been 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 third quarter or year-to-date 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: