Key questions from the fourth quarter earnings call conducted by Target Corporation on February 26, 2008.

Jeffrey Klinefelter (Piper Jaffray): How are you thinking about that balance of comp gains between the first half and the second half ?

Douglas Scovanner: You can model this by taking a careful look at our sales pace in 2007. The sales strength will build throughout the year and will likely be much stronger, particularly in the fourth quarter as we cycle against much weaker numbers in the fourth quarter of 2007. So the base of performance is what is behind our comments, not some kind of macroeconomic judgment call. The make-up of our same-store sales performance between same-store traffic and growth in average ticket, I think that 2008 will continue a string of many years where the bulk of our improvement in same-store sales will likely be made up from growth in average ticket as opposed to same-store transaction counts or traffic.

Jeffrey Klinefelter (Piper Jaffray): Are you making any assumptions in your plan for a rebound of traffic in the second half of the year like some other retailers?

Douglas Scovanner: Traffic was weak in the fourth quarter so I would expect traffic to be much improved in the fourth quarter of 2008 than the trend going into it, again having everything to do with the 2007 base.

Jeffrey Klinefelter (Piper Jaffray): In terms of your sourcing initiatives, you are going to move to hard lines and look for opportunities for margin expansion there through TSS. Can you give an update on that and what the margin implication may be for 2008?

Gregg Steinhafel: We are not expecting any margin expansion in 2008. We are fully penetrated in Apparel and we are reasonably penetrated now in the bulk of hard lines categories, particularly in Home. The margin expansion gains in those categories, we benefited from over the last two or three years.

Jeffrey Klinefelter (Piper Jaffray): Are there any other sourcing initiatives on the horizon that you would highlight?

Gregg Steinhafel: It will be a continuation of our efforts to improve our cycle times and get greater control of raw materials in the sourcing process and do what we can to mitigate costs due to raw material input, currency issues, elimination of subsidies and things like that.

Robert Ulrich: We are looking for some market expansion there but that will be the off-set by adverse mix as we continue to expect the lower margin commodities to continue to grow at a higher rate.

Charles Grom (JP Morgan): The composition of the inventory levels is higher than expected. How long do you expect it will take to align your receipts with the comp trends that you spoke to?

Douglas Scovanner: Our square footage is up 8% year-over-year. Our revenues on a constant period basis are up about 8% and our inventories are up 8%.

Gregg Steinhafel: Our composition is excellent now. We turned the corner into 2008 in good shape and we have been transitioning to an all fresh in current assortments of Apparel, Home and other hard lines categories. We feel good about where we are, today, at the end of the first month of a new fiscal year.

Charles Grom (JP Morgan): Are the call options that you did purchase included in your fully diluted share count because that would be anti-dilutive?

Douglas Scovanner: It is not that they are anti-dilutive; it is they have not been exercised so there is no impact on our current share count or on the weighted average share count for the period’s just ended of this activity. It will lead to significant share repurchase in April, May and June and that is the point in time where these transactions would reduce our share count.

Charles Grom (JP Morgan): Could you speak to your assumptions for inflation that are imbedded in the 2008 outlook that you provided particularly in the Home area?

Douglas Scovanner: We do not have a precise and explicit inflation assumption but I would observe that in the year just ended we experienced modest amount of net deflation in our top-line - about 2%. There are some categories that are inflating, food products come to mind in particular, but we do not sell a lot of food compared to some of our competitors and that food inflation was more than amply offset by deflation in hard lines categories. I think electronics in particular. Looking into 2008, I believe that this equation is reasonably neutral where we continue to have some significant inflation in some categories but on an overall basis I do not think it will be meaningful to our aggregate sales picture.

Charles Grom (JP Morgan): Would 0-4% inflation rate in Apparel seem about right relative to a year ago?

Gregg Steinhafel: I would say that sounds about right. We are seeing some pressure there, but our best estimates at this point in time would say you are in the right range with more of the pressure coming in the second half of the year than in the first half of the year.

Gregory Melich (Morgan Stanley): What do you expect CapEx to be this year?