Welcome to the Target Corporation's third quarter 2008 earnings release conference call. (Operator Instructions) I would now like to turn the conference over to Gregg Steinhafel, President and Chief Executive Officer. Please go ahead, sir.

Good morning and welcome to our 2008 third quarter earnings conference call. This morning I will briefly discuss our strategy and performance in the context of an increasingly challenging economic environment, then Doug Scovanner, Executive Vice President and Chief Financial Officer, will share important aspects of our 2008 third quarter financial results and describe our outlook for the remainder of the year. Next, Kathy Tesija, Executive Vice President, Merchandising, will discuss key merchandising initiatives for the upcoming holiday season. And finally, we will open the phone lines for a question-and-answer session. The increasing financial challenges and economic uncertainty facing American households continue to pressure our performance during the third quarter. Our slower pace of top line growth in our retail segment and subsequently higher write-offs and related reserve activity in our credit card segment resulted in disappointing earnings in the quarter. However, despite our soft sales, we were pleased with the operating profit performance in our retail segment as we continue to take a very disciplined approach to the management of our inventory and expenses. While we are not pleased with our overall financial performance and we are keenly focused on improving our near-term results, we remain committed to our fundamental strategy and to managing our business for the intermediate and long term. As the environment continues to deteriorate and consumer spending, especially in discretionary categories, continues to contract, we are adjusting tactics to ensure that Target remains a price leader in the market and aggressively pursue market share gain opportunities. Our dedicated team is working hard to deliver compelling reasons for our guests to shop at Target in these difficult times. We are keenly focused on offering exceptional value, presenting a bold assortment of holiday gifts, most-wanted items and well-designed basic and fashion merchandise, and ensuring that our guests…

Thanks, Gregg. As a remainder, we're joined on this conference call by investors and others who are listening to our comments today live via webcast. Following our prepared remarks, we'll conduct a Q&A session and John Hulbert and I will be available throughout the remainder of the day to answer any follow up questions you may have. Also, any forward-looking statements that we make this morning should be considered in conjunction with the cautionary statements contained in our SEC filings. In my comments this morning I plan to cover three topics: First, I'll review key aspects of our third quarter performance in our retail and credit card segments. Next, I'll discuss the proactive steps we're taking to ensure thoughtful deployment of our capital in this environment, including reductions in our pace of capital investment and our decision to temporarily suspend substantially all of our share repurchase activity. And finally, I'll share an updated outlook for our business through the remainder of the year. In our second quarter conference call I stated that the primary challenge to our near-term earnings performance was the pace of sales in our Retail segment and that our second largest challenge was the write-off rate on our receivables portfolio. Not only does that statement remain true today, our results in the third quarter also reflect the fact that both of these metrics were more challenging than we expected as we entered the quarter. In our retail segment, our comparable store sales fell 3.3% in the quarter. This decline, combined with the contribution from new stores, led to total sales growth of only 1.7%. This performance is meaningfully slower than the already soft sales performance we had experienced through the first two quarters of the year and below the expectation that we laid out 90 days ago.…

Thanks, Doug. As we head into our most important season of the year, our sales performance in the current economic climate continues to be our number one challenge. We know that many of our guests are facing significant economic difficulties and are curtailing their spending, especially on more discretionary items. As always, our goal is to respond to what our guests tell us they want and need and to maintain our relevance in this tough environment. To meet this challenge, we remain keenly focused on providing differentiated assortments that offer quality design at great prices, exceptionally low prices on national brands, and an even better value on our own brands. Our everyday and ad prices are extremely competitive with WalMart and other specialty retailers who lead their categories. We have gained market share in every quarter this year and we are confident we will gain market share again in the fourth quarter. This holiday season we're focused on giving our guests compelling reasons to visit our stores and presenting exceptional value with both price points on end caps and market leading value offerings in our circular. In toys, electronics and entertainment - three categories which account for roughly onethird of our total holiday sales - we are focused on having the right mix of must-have items and differentiated assortments at exceptional values. We will have great gift-giving items such as Blu-ray DVD players and movies, digital photo frames, and an array of Apple products, including the iPod Touch, Nano, and Shuffle. Our social and active gaming offerings, like Rock Band 2, Guitar Hero 4, and Wii Fit, also make great gifts. We are maximizing this rapidly growing trend that is being driven by women and kids, a core guest segment of ours. And in toys we have all the must-have…

The challenges facing the U.S. and global economies are unprecedented and the impact on American consumers is clearly evident. As I said at the outset, Target is aggressively pursuing market share gains and thoughtfully managing our business to emerge even stronger when the economy improves. We believe that Target remains well positioned to grow profitability and deliver substantial value for our shareholders over time. That concludes our prepared remarks. Now Doug, Kathy and I will be happy to respond to your questions.

(Operator Instructions) Your first question comes from Robert Ohmes - Merrill Lynch.

A couple of quick questions - the first was, I was hoping we could get maybe a little bit more of an update on the expanded food test and how that's going for you all. And then maybe partially related to that, if you could talk a little bit about food inflation and the role that that's been playing in your same-store sales more recently and if there is an outlook for food inflation in our same-store sales heading into next year?

Regarding our expanded food test, food continues to be a focus and a priority of ours, both in our Super Target and our general merchandise formats, and we will continue to test and evolve expanding that footprint as time goes. The small test I think you're referring to has just recently set in some Minneapolis stores and it's too early to conclude anything at this point in time. Regarding food inflation, we continue to see volatility in food price and commodity prices, and it's been up and down and we still expect some food inflation for the foreseeable future, although clearly the growth in inflation has moderated somewhat compared to earlier times this year.

Your next question comes from Neil Currie - UBS.

I just wondered if you can go into a little bit more detail on the gross margin improvement, particularly with regards to the mix enhancements? I wasn't quite able to hear the answer fully, but I wanted - given the fact that one would imagine that you're seeing greater strength in consumables - where you got those mix enhancements?

I'll address the numbers side of that, and I'll look to Kathy to provide a little color. What I had said in my prepared remarks is that against the backdrop of a 52 basis point improvement in gross margin rate for the quarter, there was a negative impact in isolation due to sales mix in the range of 40 to 50 basis points. So turning that around the other way, we enjoyed net-net a benefit of 90 to 100 basis points from factors other than mix. Some of them are category specific and some of them are timing issues. I cited as an example of the timing issue a 10 basis point improvement in gross margin rates in the quarter due to workers’ compensation expenses improvements year-over-year in our supply chain. Kathy?

Neil, as you know, we've been working on gross margin for a long period of time, and we're continuing on many key strategies. I think probably the biggest has been our disciplined approach to inventory control this year, making sure that we are in-stock, supporting our guests but yet minimizing the amount of markdowns that we're taking. We've continued to expand our segmentation strategy, which is really about customizing assortments in each of our categories across all of our stores, so we do this in many ways. Some of it is timing related, whether it's weather or holidays. Some is assortment related, you know, high volume or low volume indexing items or brands. We've done a lot of skew reduction this year. In addition, we're growing national brands, which are a higher gross margin. So a number of different initiatives that have driven our gross margin expansion.

Are you doing more [inaudible] pricing so you're managing to raise some prices in some markets while being keener in others and manage the overall pricing level a little higher?

We are raising retails where the market will bear it, but we remain absolutely committed to being priced with Wal-Mart on all identical items in local markets.

And you said that - or Doug said - in the fourth quarter that the gross margin performance may not be repeated, so what would be the major differences between the third and fourth quarter in the ability to, you know, get that underlying improvement in gross?

The major difference is our concerns about the pace of same-store sales. While we've been very tight in our supply chain, we certainly didn't anticipate the kind of sales slowdown that we've experienced, where we're coming out of the third quarter at a sharply lower pace of sales than we entered the third quarter, sharply lower than the year-to-date actuals. So net-net, that means that we have some concern about clearance markdown exposure given what might happen here in fourth quarter sales.

And then finally, you mentioned, obviously, food is a priority. In terms of the cutting CapEx for next year, will that impact your remodeling activity and trying to get more food ranges into the stores?

It really won't. The primary reduction in capital will be in non-remodel expenditures, like new store reductions, reductions in our supply chain. But we're going to continue to push and test aggressively a multitude of food expansions and remodels in other test stores to make sure that we thoroughly understand where it works, where it doesn't work.

The lion's share of this most recent change in our view on '09 CapEx is the effect in '09 of capital investment in support of new stores to open in 2010 and beyond. So we're clearly in a mode right now of adjusting our thinking about new store openers 2010, 2011, 2012, and that has a beneficial impact on 2009 CapEx.

Your next question comes from Charles Grom - J.P. Morgan.

When you look at 2009, assuming unemployment continues to move above where it is today, I was just wondering what you anticipate your write-off picture to look like? And Doug, for the fourth quarter you suggested a modest increase. Could you quantify a potential range for us that you guys are thinking?

Yes. I had said in my remarks that the definition of modest would be an expectation that annualized write-off rates would increase into the range of perhaps 10% to 11% in Q4. As I mentioned last month, we expect that our write-off rate will peak plus or minus Q2 '09 and then being to tail off. And importantly, we have accommodated through the P&L and on the balance sheet appropriate reserves to anticipate that modest increase in write-offs for the next couple of quarters. So famous last words: I would expect that our GAAP reported financials for our Credit Card segment in 2009 would show a substantial improvement from 2008, in which we've experienced not only the direct impact of substantially higher write-offs but also through the P&L and onto the balance sheet the impact of accommodating expectations of heightened write-off levels in the future as well.

A couple weeks back you guys outlined a negative 6 - 9 comp for November, and I realize a lot of that's the shift from a year ago as well as the shift this year. Are you guys still comfortable with that rate and I guess if we're to do a down mid single-digit comp for the fourth quarter, what would that imply for your December expectations?

Well, negative 6 to negative 9, you have correctly observed, accommodated all of our outlook as of the beginning of the month for calendar shifts and so forth. As you know, we don't typically provide mid-month updates on sales these days, but I will observe that our sales in the front end of the month have started out much lower than we might have expected. Whether that's a good leading indicator or whether it's a function of the calendar is difficult to know at this point. Clearly, if we ended up at mid singles for the quarter, the answer to your other question is we would end up with a negative same store sales performance in the month of December.

Your next question comes from Sean Naughton - Piper Jaffray.

Briefly, you talked about food inflation earlier, but could you expand that and talk about some of the other inflationary pressures within HBA and apparel as some of the demand has clearly slowed down domestically for some of these products. And have you seen any sort of relief in that aspect?

You know, so far this year we've seen mid to upper single-digit increases in food, CPG and home. And starting this fall season we've seen increases in the low single-digit range in apparel. I think it's a little too early to determine where this is going to be headed, but obviously we've seen some differences in commodity prices lately and fuel, which will affect transportation. So at this point I would say it is more stable than it's been in the past. We are seeing some decreases, but yet to be determined where that will head.

And then just in terms of the online business, have the trends in the online business, the sales there, have they been similar to what you've been seeing in the stores? Clearly credit has become a little bit tighter. I'm just wondering if the trends are any different online.

Well, in the past our online business was growing very, very rapidly and was in the double-digit growth range consistently for many years. They have and we have experienced the same kinds of softness in the number of transactions and sessions as we have in the Retail business. So it's still positive, but it is growing at a much slower rate than it was growing last year first quarter and middle of the year.

Your next question comes from Robert Drbul - Barclays Capital.

The question I have is when you look at the run rate and the expectations heading into this fourth quarter, would it be possible to quantify the run rate of the discretionary sales trends versus nondiscretionary sales trends and how they've actually changed from Q3 into October and really what you've seen so far?

Well, I think of that in total, not in same-store terms, because that's what is captured in our mix commentary. And generally speaking, if we look at food and health and beauty as one set of numbers and home and apparel as another set, the gap between those two is about the same now as it was earlier in the year. All of those figures are growing at a slower pace. To put some dimensions around that, we just reported a quarter in which total sales grew a little under 2%; food and health and beauty combined were up a range 10%, clearly gaining market share in those categories, and for the quarter, apparel and home products, down low singles, low to mid singles. Clearly, as bad as that sounds, that is a pace that is considerably better than the U.S. market as we see estimates for the U.S. market, and so we continue gain share in those categories as well.

And then just a question on the credit business. When you look at the relationship between past due rate and late fess, how should we expect that to trend into the fourth quarter and into 2009?

I would expect that past dues, as you call it, will continue to increase moderately. I don't expect a substantial deterioration in those figures. And similarly, I think the trend in recording late fee income, flat to improved slightly. Improved is a very strange word in that context; I'd just as soon never collect a dollar of that kind of income, but I think we'll see flat to up somewhat.

Your next question comes from Mark Miller - William Blair & Company, LLC. Mark Miller - William Blair & Company, LLC: In the context of the sharply lower comps that we've been seeing, can you describe the movement of merchandise across the good, better and best price points? Where are we seeing the greatest slowing? And then given the current customer off tick that you're seeing, where, at the margin, do you expect making the greatest changes? In other words, are we going to see a little more product at the opening price point given the circumstances?

You know, we have seen some trade down, but it is still very mixed. So we've seen things I think we talked about this last quarter, you know, people trading steak for chicken, not buying all pieces of the bed but buying parts of it, maybe the comforter versus the duvet and all the accessories that go with it. We're also seeing strength in our own brands, which is probably a trade from some national brands. However, at the same time I'll tell you that the best brands are still performing very, very well. So things like C9 by Champion, our Converse One Star, Smith & Hawken, [Bowes], you know, I could go on and on, many high end brands still performing very well. So the key for us is really the balance within our assortments between good, better and best so that we're fitting all budgets at this time. So I don't think that you're going to see a huge change in our assortment. We are making sure that our end caps are focused on great values, single price points, more so in the past, so you'll see a slight change there.

Yes, I would just add that our strategy is essentially expect more, pay less. We are not going to dumb down our assortments in this economy. We have to continue to stay focused on innovation and fresh, new, exciting merchandise. And our value proposition is such that the majority of what we sell in our store is very, very affordable. So we're going to maintain our commitment to new product introduction, emerging designers, and having what our guests want overall. And in some cases, we're going to be strengthening our commitment to the best price points, but in all reality most of these new introductions are going to be under $20, and that's very affordable for our guest segment. Mark Miller - William Blair & Company, LLC: My other question, Doug, regarding the reduced CapEx and the implications for square footage growth, should we think of this as being an approximately proportional impact on footage growth in 2010, and is there a point where we start to anticipate more bang for the buck? At what point do you think we start to see some favorability there in terms of development costs? Just an approximate range; I know it's early for potential square footage growth 2010 through 2012 - are we down in the 2% to 4% range or any comment you might have on that would be helpful, too.

Certainly. First of all, because of the lead times involved in developing the kinds of projects that we pursue, the reductions will be bigger in 2010 than in 2009. We have a lot of high quality stores in the pipeline already for 2009 and most of those are well under way right now in terms of construction and we're not about to stop construction on great new stores that are in that current stage. Alternatively or in contrast, this would be the time that we would be developing a lot of new stores for potential opening in our March and July 2010 opening cycles, and we clearly are taking a much, much, more cautious approach to underwriting those stores at the current time. So I think that 2010, particularly in those first two opening cycles at this point, will be a much, much thinner new store program. I think the rest of the timing, the answer to the October cycles in 2010 and all of the answer for 2011 and 2012 hangs in the balance of seeing just how sharp this recession turns out to be and just how long it lasts. In the happy case that we came out of this current period of unpleasantness rather rapidly, then we could be back in more typical kids of new store opening cycles as early as late 2010. In contrast, if this period lasts considerably longer, then 2010 in total would be quite thin and we're in complete control at this point 2011 and 2012. Mark Miller - William Blair & Company, LLC: The other part of the question is just on what you anticipate for development costs. Do you foresee a point where we get more footage per CapEx dollar or is it just too early to say yet?

I don't think that's likely to happen.

Your next question comes from Nathan Rich - Citigroup.

My first question was in the past you had utilized disruptions in the competitive environment and other retailers closing their doors to be opportunistic about square footage growth. In light of the CapEx cut that you guys just announced, how should we think about how you're thinking about the competitive landscape going forward?

Oh, let me be crystal clear. If a block of stores came along at a price that allowed us to enjoy robust returns, we would pursue that block of stores regardless of any guidance we've given today. The guidance that we've given today is the guidance that's appropriate, thinking about our new store program one store at a time in the classic sense. But clearly, we have maintained ample access to liquidity and have maintained open to buy, if you will, to be able to pursue those, if in fact they develop in a way that met our strict underwriting criteria, obviously not in unlimited size. But you're hearing from us what is our best guess about CapEx moving forward. We don't start with strict aggregate top down targets and then fill out a program. We underwrite our new stores one store at a time, and we're trying to tell you what we think that will add up to become. If the facts change and opportunities develop that we don't see today, of course we'd consider pursuing them in light of our then-current business results, liquidity and underwriting model.

And then my next question is you guys have obviously done a very good job controlling expenses in this environment. Can you talk about some of the further opportunities that you see to reduce expenses in 2009?

I would say that we're going to continue on the path that we've been on and that is centered around enterprise-wide initiatives, so we will continue to look for ways to increase productivity in our stores without compromising the guest experience. And that will center around really labor and scheduling and supply chain and improving productivity where we've made technology investments in the past, particularly around mobile technology. We will look at all aspects of our headquarters and other work centers to find ways to reduce travel and other kinds of expenses. So all areas of Target are very, very focused on that and we are being very careful, thoughtful but very aggressive and we believe that we can continue to make some progress on expense reduction efforts, but a lot will depend upon what the sales environment is next year to determine whether we're able to leverage that to our advantage or whether the sales environment is so challenging that even with strong expense management we will be deleveraging. So that will be determined as we move through the fourth quarter and into first quarter of next year.

Your next question comes from Gregory Melich - Morgan Stanley.

I have two questions, one on payables and then on traffic. First, Doug, on the payables, they were down 3% year-over-year. Could you try and split that into any changes in terms versus your buying for the fourth quarter?

No, it really isn't a change in terms, but rather a slowing down the pace of goods flowing into our supply chain and paying on our normal terms has produced the result you see - inventory up very little versus the same point last year and given the calculus, given the rate of change in the flow of goods into our supply chain, the payables result just comes out of normal application of payment terms.

And then on traffic, if you look at the second quarter, comps were negative 0.4. If I remember correctly, traffic was a slight negative and ticked a slight positive. Is it fair to say that the comp we just did, the negative 3 - 3, that all the shift in that was traffic and, if so, anything you can do to address it?

Yes, I would say that those same trends exist today and the majority of our sales shortfall is very much due to the traffic trends. And the transaction amount is slightly higher than last year due to a slightly better mix, but slightly fewer items per basket. We have been very focused on all aspects of our frequency strategy and we've been working very hard at trying to draw consumers into our stores in a very, very challenging environment. And I think Kathy outlined many of the initiatives that we've been focused on in order to do that, but right now the consumer is more than hesitant. They're very stressed right now and we, like other retailers, are all struggling from the inability to get to motivate and inspire people to come into our stores.

Your next question comes from Uta Werner - Sanford Bernstein.

I wonder if you could give us an update on the geographic performance in Retail as well as the Credit Card? I remember four states stuck out last time. I wonder if you can update us on what's happening there now.

Yes, you're certainly referring to the fact, as we've observed before, that our sales shortfall and our credit card risks have been more heavily concentrated in Florida, Arizona, Nevada and parts of California than in the rest of the country. That remains true today, although I'd probably add a few to that list, certainly Georgia and the Carolinas, Tennessee, are much less healthy than they once were, and Michigan, Ohio is another area that is very unhealthy from both a sales standpoint and a credit card risk metric standpoint.

Your next question comes from Peter Benedict - Wachovia Capital Markets, LLC.

Doug, given the changes in credit card terms and the outlook for consumer spending, how likely is it that we could see year-over-year growth in credit card receivables turn negative next year?

That is certainly plausible. It would not be a baseline forecast that I would generate as of today, but clearly plausible.

And then over to the mix impact, which was 40 to 50 basis points, that was on top of the first real big drop you saw a year ago. I know there'd been some underlying mix for a long time with you guys. Is it safe to say that you're thinking maybe 40 to 50 on an ongoing basis now until the macroeconomic changes or is there anything that you're doing specifically that could help change that over the next few quarters?

Well, Kathy and her team work diligently every quarter to produce results that offset the adverse mix impact, but there's no doubt that this kind of adverse mix impact will be with us until the economy improves. It is simply the result through our picture of sharply lower apparel and home sales in this country in stark contrast to the growth that we're experiencing in food and health and beauty categories, in line with macro trends in U.S. retailing. I'll add one more comment to help put some of that into perspective. If you add together food and health and beauty, in our case in the aggregate those categories, as large as they are, remain smaller than the aggregate of apparel and home products. That's why the algebra works against us in the current environment in reporting sales.

Your next question comes from Adrianne Shapira - Goldman Sachs.

Doug, on the buyback it seems, you know, halting the buyback seems prudent in the current environment. Perhaps share with us what you would need to see to reinstate the program.

Our pace of execution in our share repurchase program remains squarely focused on the same three variables it always has - our liquidity, our share price, and our business results. And we keep a keen eye on our credit ratings. We have said before that we would intend to take no intentional actions that would threaten or jeopardize, in particular, our short-term credit ratings. It's our judgment that if we continued to execute our share repurchase plan at the pace that we once envisioned that that would constitute doing something that's within our control that might well have an adverse impact on those short-term credit ratings, and so it seems only intelligent for us to pause and be very careful until we see some improvement in our underlying business results to be able to once again fire up the share repurchase program. I continue to fully expect that we will complete that program within the next several years, but clearly our original timetable that we outlined in the fall of '07 when we launched the program is no longer the correct outlook.

And then just some questions on the gross margin commentary, the approximate 90 basis point improvement you saw ex the mix impact. Could you perhaps more specifically quantify how much was related to the timing benefits? You had alluded to about 10 basis points. If you can share with us how much was timing versus how much was category improvement.

Yes. It gets to be a bit gray in the middle; the world isn't quite as crisp as timing versus category specific activities. But as a rule of thumb I would tell you that of that 90 to 100 basis points, perhaps a third is timing and two-thirds is due to the direct activities of Kathy and her team.

And then just following up on the gross margin, am I correct - it sounds as if in the past we had talked about gross margin pressure had been predominantly mix related, but now it seems as if some more markdown vulnerability. How does this make you think about placing inventory plans going forward?

Well, the markdown vulnerability is clearly the result of the differential between our fresh, current, near-term outlook and the outlook that we had for Q4 when we made these inventory commitments. Clearly, we are taking a much more conservative view of the front half of 2009 as we make commitments to be able to continue to preserve our margin rate equation to the extent that it's possible to preserve it. The number one challenge remains retail sales.

Okay, and then just lastly, a question for Gregg. You had alluded in your opening remarks about being very sharp on pricing. If you could perhaps talk about the competitive environment, where you want to be priced versus Wal-Mart, what you're seeing, how aggressive it is out there.

Well, we expect this holiday to be equally if not more aggressive than prior holiday seasons. I think there is and will be perhaps a slightly heightened sense of desperation by some of the other retailers. So our approach typically has been and will continue to be that we will meet WalMart on all like and identical items in local markets. That commitment has not changed, and so, as you know, there's ups and downs and some volatility and that marketplace is somewhat fluid, but we remain very, very committed to ensuring that our prices are rock solid day in and day out. From a promotional standpoint, we have taken a very aggressive point of view this year in terms of our promotional pricing, so we expect to be price leaders on selected items in our circular. This is not unlike what we've done in the past, but given the current environment and recognizing how challenging it is, we will be even sharper than we have in prior years. So we expect, as Kathy said, to gain market share throughout this fourth quarter and we are investing more of our markdowns into promotional pricing and we look to offset that in other ways, by reducing either the number of items or other ways within our P&L so that that markdown investment is really net neutral. So we expect it to be aggressive. We're going to be right with the best of them on a promotional standpoint and we're going to be with Wal-Mart on an everyday basis.

Your next question comes from Daniel Binder - Jefferies & Co. Daniel Binder - Jefferies & Co.: First on the expectation that the write-offs will peak in Q2 next year, I was just curious - are you assuming that unemployment gets modestly worse from here or stays about the same? That's the first question. The second question is on credit. Recognizing you have to protect the profitability of the Credit Card business, I would imagine that all this tightening will have some sort of impact on your ability to generate comp store sales. Just curious if you've put any math behind that.

First of all, the comment about the likelihood of our write-off rate peaking somewhere around Q2, I don't mean to imply with such precision that I - fundamentally, Q2 plus or minus a quarter, is the right way to interpret that forward-looking statement - the major assumption behind it is the product change dynamics from 2007. Certainly, we've talked about geography, but the impact is especially profound in those geographies in the accounts that were product changed in 2007 and from a timing standpoint it is pretty clear that most of that or the bulk of that problem will be behind us by Q2 '09. Certainly if unemployment were to rise hundreds and hundreds of basis points, then, of course, despite this seasoning of those accounts, then the unemployment change would become a dominant feature and that would defer the point in time that we turn the corner in write-off rate. Daniel Binder - Jefferies & Co.: And then with regard to the tightening of credit and the potential impact on sales?

Well, as I mentioned in this very call 90 days ago, tightening of credit across all U.S. credit card issuers has already had a very important adverse effect on our sales and I'm sure it will continue to do so. This will not be a new phenomenon looking forward. After years and years of fairly steady growth in penetration of our overall sales, the percentage of our sales charged on anyone's card - one that we issue together with all other cards, from VISA, MasterCard, Discover and Amex - fell for the first time in many, many years in Q2 this year, and I expect that trend to continue for awhile. Daniel Binder - Jefferies & Co.: And then one last question - recognizing that every quarter is different, we're in fourth quarter about to lap, I guess, some more aggressive cost management activities on your part and at the same time we're seeing comps go a bit more negative. Is there any sort of broad guidelines you can give us on how much you deleverage on SG&A per negative point of comp?

I think that every quarter is different and I wouldn't begin to predict today what some of the unique timing issues might be to our fourth quarter this year. But in light of the ifthen statement that I made in my prepared remarks - if negative mid single-digit comps, then likely $0.90 to $1.00 at that kind of level I would expect some modest deterioration in gross margin rate due to clearance markdowns and likewise I would expect some modest deleveraging - think 10, 20, 30 basis points, not 50 to 100 - in SG&A rate as well.

Your next question comes from Joe Feldman - Telsey Advisory.

I also wanted to follow up a bit on credit, two questions. One is, you know, given what seems to be a greater usage of credit these days, is that in fact the case? I mean, I know your credit revenues are up but is it because more people are paying late fees or is it really that people are using the credit more?

No, credit revenue is up because the portfolio is up. As you know, we have a variable rate card portfolio, so revenue is not up nearly to the same extent as receivables because our APRs are lower today than they were a year ago. Actually, if you look to the schedules of our press release you'll see that credit usage, both inside our stores and outside our stores, is down in total and down quite significantly when correlated with the receivables base.

And then the other part of the question, then, is also on the way you guys have been provisioning for the write-offs. It seems like the provision is keeping a pretty wide margin above where the write-off rate is lately, and I guess I'm wondering, is that because you're still playing a little bit of catch up or is it because you're anticipating things to get precipitously worse in the next couple of months?

I don't think we're playing catch up at all, but let's take the current quarter as an example. Clearly, our risk metrics deteriorated during the quarter. We've already seen all of the major banks report their credit card results for their calendar third quarter; their risk metrics deteriorated as well. They, like we, added meaningfully to reserves in the quarter in order to properly account in the current period for the risks of the period end portfolio. So, quite specifically to your question, yes, we have anticipated that write-off rates will continue to deteriorate modestly and we have correctly and, in our view, appropriately, booked the amount of additional expenses - booked the bill to the reserve, if you will - to an appropriate level for our quarter end position. In our case that added $104 million during the quarter to expense over and above what our write-off amounts were during the quarter. And at this point we probably have time for one more question to stay within our time slot.

Your last question comes from Todd Slater - Lazard Capital Markets.

My question's on the sourcing side. Over the past year there's been a lot of pressure on sourcing costs, and now it appears that raw material costs are coming down significantly and a lot of excess factory capacity, that seems to be increasing quite a bit, and I'm wondering if you can talk about how you are taking advantage, if at all, of the changing sourcing environment and when you might realize some beneficial impact?

Well, I would tell you that there are a lot of ups and downs in that sourcing equation. For every raw material piece good that is going down and energy costs going down, there are other factors that come into play, whether it's currency or whether it's labor rates and things like that. We look at this category by category. We maintain a balanced sourcing network throughout the globe. And we will continue to pursue the opportunities country by country, and we're pushing very hard to make sure that our manufacturing base is supporting us but still profitable. So it's an equation that's very, very fluid, and we saw a lot of pressure on cost increases this year. As Kathy said, they're starting to moderate and go the other way right now. Now how fast and how far they will go is anybody's guess, but at least it's stabilized and it costs are going in the proper direction right now.

Well, net-net of all the variables, can you quantify a little bit the order of magnitude.

It's really too difficult to quantify that, because it really is business by business. And while we have some going up, some are stable, some going down, and it changes on a month to month basis. So it really is difficult to give you a precise estimate in terms of what's happening from a pricing standpoint. Doug?

As important as these issues are, they are very small relative to the question of sales. The pace of sales in our Retail business remains our dominant variable. Our margin rates have been quite resilient in spite of all kinds of challenges this year.

Okay, that concludes Target's third quarter 2008 earnings conference call. Thank you all for your participation.

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