Welcome to the Target Corporation’s first quarter earnings release conference call. During the presentation all participants will be in a listen only mode. Afterwards you will be invited to participant in you will be invited to participant in a question and answer session. (Operator Instructions) As a question and answer session. (Operator Instructions) As a reminder this call is being recorded Wednesday May 20, 2009. I would now like to turn the call over to Gregg Steinhafel, Chairman, President and Chief Executive Officer.

Welcome to our 2009 first quarter earnings conference call. This morning I will review our first quarter performance, provide an update on our strategy and outlook for 2009 and describe the current status of our proxy contest with Pershing Square. Then, Kathy Tesija, Executive Vice President Merchandising will discuss key initiatives underway that are already benefitting our business as evidenced by our first quarter results as well as initiatives planned for implementation in the coming months. Next, Doug Scovanner, Executive Vice President and Chief Financial Officer will review our first quarter financial results and describe our expectations for the second quarter and the back half of the year. Finally, we will open the phone lines for a question and answer session. As a reminder, we are joined on this conference call by investors and others who are listening to our comments today live via webcast. Following this conference call John Hulbert and Doug will be available throughout the remainder of the day to answer any follow up questions you may have. Also, as a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainties, the most important of which are described in our SEC filings. Most of our comments this morning will be focused on our first quarter results, the initiatives within our business and our outlook for the second quarter but, first I would like to spend a few minutes talking about the proxy contest initiated by Pershing Square to replace the four current directors of our board who terms expire at our annual meeting of shareholders next week. We firmly believe that Target’s four director nominees: Mary Dillon; Dick Kovacevich; George Tamke; and Sol Trujillo have significant leadership experience that is highly relevant to delivering continued profitable growth and generating significant shareholder value…

We are already seeing evidence that many of our new initiatives are benefitting our business and we are optimistic that initiatives we plan to implement later in the year will also drive favorable results. These efforts demonstrate that Target is not being complacent, that we are aggressively pursuing opportunities to delight our guests and to enhance our sales and profitability. Our continuing brand research which I’ll discuss more in a few minutes shows that our expect more pay less brand promise is more relevant than ever. While we continue to deliver the differentiation our guests have come to expect, we are also aggressively delivering the value she demands. Our merchandising and marketing efforts are keenly focused on letting her know that we understand her needs and we are uniquely positioned to help. Our commitment to deliver an exceptional, affordable, everyday shopping experience combined with our drive for speed, innovation and execution are helping us drive traffic, generate profitable sales and satisfy loyal Target guests while attracting new guests to our stores. While Target continues to experience shifts in spending due to the economy, our guest research shows both very favorable signs of guest affinity for our brand and indications of some rebounding of consumer confidence. Satisfaction among Target guests continues to be among the highest in the industry and more than 50% of guest’s rate us as one of their favorite places to shop. We lead our competition on measures of emotional engagement, shopping experience and guest service. Store performance scores and guest satisfaction scores continue their upward trends and are at all time highs affirming that our thoughtful expense management has not negatively impacted the guest experience. Upholding these standards is very important because the Target guest has high expectations. She tends to be more affluent, associates Target strongly…

In my remarks today I plan to discuss the drivers of our performance in each of our two business segments in the quarter and I’ll also provide an outlook for our cash flow and earnings for the remainder of the year. At the time of our earnings call about 90 days ago we had just ended a quarter in which weak and volatile economic conditions created unique challenges in both of our business segments. In our retail segment we had just finished a period in which our sales results were much harder to predict whether by day or across geography or across merchandise categories than had been true in the past. You’ll now doubt also recall that our fourth quarter same store sales were weaker than in any other quarter in modern history. Yet, there were some modest positive signs as we entered 2009, our inventory levels were exceptionally cleaned, our planned quantities of fresh fashion merchandise were appropriately conservative, January sales had been better than the holiday season and our daily sales volatility had begun to moderate yet, a lot of uncertainty remains particularly about the overall economic environment that we might be facing going forward. Against that backdrop, our first quarter retail profit measured in EBITDA or EBIT, whether in dollars or expressed as a percent of sales turned out to be much better than our expectation at that time. These results were driven by slightly better than expected sales and by much better than expected gross margin and expense performance. Focusing first on our sales, total results were up slightly and same store results were down 3.7%. Same store sales in turn were driven by a decline in transactions of a little more than 1% with the remainder due to a decline in average transaction size measured…

As you’ve heard this morning, Target remains focused on delivering continuous innovation and outstanding value. We are encouraged by the positive signs we are observing in both our retail and credit card segments and we are actively pursuing initiatives to capitalize on opportunities in the market place that leverage our brand and fuel our continued profitable growth. We remain committed to delivering a shopping experience that resonates with our guests, that sustains our competitive advantage and that creates substantial value for our shareholders over time. Before we take your questions, I want to publically congratulate Doug for his recent ranking by Institutional Investor as the top CFO within our category. Those of you who know Doug will certainly agree that this honor is well deserved. 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 Gregory Melich – Morgan Stanley. Gregory Melich – Morgan Stanley: Could you get in to a little bit more Doug in terms of SG&A? I know that there were a few things that helped that you said were timing related, should we still be thinking that SG&A dollars this year could grow maybe 2% or 3% or is it possible to keep it actually flat or even slightly down?

That’s a great question and it depends heavily on the pace of sales. I think it’s still good advice to think we will favorably leverage SG&A for the year at say 1% or so same store sales performance and deleverage to the extent that same store sales are below that. So, it really has a great deal to do with our pace of same store sales. Gregory Melich – Morgan Stanley: Then on the gross margin side, the mix hit about 80 bips, if I remember correctly that’s a little bit more than its actually been running, is that just straight because of comps or did some of the mix actually change within the categories that hurt that?

It’s comps across the categories and it’s a little worse but we’re talking about a handful of basis points compared to some of our most recent experience. For the year last year it was 60 but, there were periods that were obviously more than 60 during the year.

Your next question comes from Charles Grom – JP Morgan. Charles Grom – JP Morgan: Just to follow up on that last question, just on the timing of certain expenses Doug, can you just share with us in either dollar amount, percentage or basis points how much it is going to shift back in to 2Q?

The single biggest timing issue for us I mentioned in my remarks which is marketing and advertising expense give or take benefited Q1 by about 30 basis points. Some of that meaningful part of that will turn around in Q2. Charles Grom – JP Morgan: That’s basically the only timing expense during the quarter?

There are always a big list of timing issues but, generally speaking they obviously cancel out across the year. In the quarter we had other issues of a timing nature that ran both ways but, that one rises far above the rest. Charles Grom – JP Morgan: Then Gregg, just on the top line you referenced stability and I don’t recall you saying that in the past few conference calls. Could you talk to maybe the magnitude of how much the day-to-day volatility of sales is compressed? And also, any trends in the California and Florida markets?

By stability we’re referring to the fact that our same store sales have been consistently in the mid single digit decline range. But, we are also seeing that the sales pattern variability either within category or between the categories are less than they had been in the past, the daily sales variability are less volatile than what we’ve experienced in the past and the geographic variability has been less volatile than what we’ve seen in the past. Some of the hardest hit states are still underperforming the average of the chain but they are not nearly as negative as they were in 2008 and in particular the third and fourth quarter. Charles Grom – JP Morgan: Then one for Kathy, just Pennys and Kohls have both talked to sourcing costs down anywhere from 3% to 10% in the back half of ’09 and even more so in 2010. I’m just wondering, I know you guys have a little bit of a different sourcing by region, I’m just wondering if that’s a decent ballpark for you and a little bit of sense of how you think that could support gross profit margins in the back half of the year?

I would say that’s within the range of what we expect. I would guess probably more like 5%, to 7% or 8%. We’ve seen some of that already this year but we believe it will grow as we move through the quarters here. In terms of how that translates to gross profit, I think a lot of that will be reinvested in pricing to make sure that we’re offering the best value to our guest. So, at this point it’s hard for me to tell you exactly what I think will flow through but I would say that most of that is going to be reinvested in the product.

I would agree, we expect these same kinds of price decrease that we’re experiencing, other retailers are going to get the same kind of pricing decrease so it’s really about making sure that we’re competitive, that we’re growing our market share particularly in these profitable discretionary categories. So, that’s really the number one priority, to be right in terms of price in the marketplace and if we can flow a little bit to the bottom line, that’s an additional benefit. But, first and foremost is being competitive and increasing our market share.

Your next question comes from Adrianne Shapira – Goldman Sachs. Adrianne Shapira – Goldman Sachs: A few questions first for Kathy, the way you had described your customers it seemed a bit of a shift with your higher end customers shopping perhaps a little less frequently but adding to perhaps or picking up a little more of a value oriented customer. Can you just talk about how then you’re assorting the mix? Where you are do you have the right mix to address what seems to be a little bit of a shift in customer demographics?

Adrianne I don’t think it’s necessarily a shift, I think we’re probably describing it more fully now as we’ve seen this trend continuing for some time. Our best guest, the highest income guest bought lots of discretionary, took many discretionary trips to Target throughout the year and as her budget got tighter we saw her start to be a little bit more choosey about some of those trips. So, that’s just continued on and I think we understand it better today. Our guest count is up so we do not believe that we are losing guests, we believe that they are choosing to take fewer of those discretionary trips and I described that a little bit in my comments where they might be picking up an accessory when they come in versus making an apparel trip where they’re going to buy a whole outfit. In terms of the low end, I don’t believe that we’re picking up more at the low end than we are at the high end, I think that we’re just increasing guests overall or increasing trips in the non-discretionary side and guests are being a little bit more particular of how many trips they take on the discretionary side.

The other thing we’re seeing Adrianne, as we commented, while we’re still attracting new guests they are being far more particular and disciplined in their spending patterns within store. So, we’ve observed more guests shopping with the circular, circling the items that they want, they’re coming in to our stores, they have lists and they’re very disciplined in terms of making sure that they don’t go beyond what they have on their lists and I think that’s what we’re seeing in terms of slightly fewer items in the basket, is due to the discipline and the regime that they’re subjecting themselves to in this economic environment. Adrianne Shapira – Goldman Sachs: Then just shifting a little bit in terms of the pricing environment out there, you’ve done a great job on inventory control as has your competitors. Give us a sense, characterize how promotional it is out there? Clearly, it’s intense focus on price value but where you thought it was going to be and to your point about favorable mark down and improved mark up, you know, your thoughts in terms of ability to flow some of that to the bottom line going forward?

I would start by going back to the third and fourth quarter of last year and talk about the fact that there was such a glut of inventory in the marketplace as a result of the steep declines in same store sales after everybody had booked their receipts for the latter half of the third and fourth quarter. So, what we observed during that time frame was the liquidation of inventory levels that were just too high within the marketplace. What we’ve now observed is most retailers, Target included, have reset their inventory levels and their receipt flow is in much better balance with their sales. So, we’re experiencing somewhat of a more normalized environment, the environment that we have typically experienced throughout 2007 and the first part of 2008. So, it’s still competitive and people are aggressive and there’s a fair amount of promotional activity but it is not at the same levels of intensity and the deep discounts and the additional pages and broadcast levels that we were experiencing in the fourth quarter in particular last year. Adrianne Shapira – Goldman Sachs: Just lastly Doug, in terms of store growth plans you had mentioned you’re still in the planning stages but perhaps just revisit the range. I think we had heard five to 30 in 2010, is that still the right range and depending on where you come out that’s how we should think about openings in 2010?

Yes, we have committed to five stores in 2010 at this point. That was the same number that we disclosed 90 days ago, we haven’t put any new stores in to that pipeline during that period. We said 90 days ago we have the potential to add as many as 25 more for the October 2010 cycle. We still have the potential to add lots and lots of stores in the October cycle but probably not as many as 25 at this point.

Your next question comes from Wayne Hood – BMO Capital Markets. Wayne Hood – BMO Capital Markets: Doug, I had a question for you on the credit side and then I guess related to the new prototypes. On the credit side, could you give us some sense of the pace of decline that you expect managed receivables to be tracking in the second quarter and in to the back half of the year? Then, can you speak to a lot of credit card providers that we talk to today are seeing the same thing where they had favorable early stage delinquencies but defaults continued to rise and that’s the most troubling thing to them is getting their hands around that not the early stage delinquencies. So, I guess could you speak to that, about why you feel more comfortable than they would about being able to manage those defaults even though they’re experiencing the same thing in early stage delinquencies? Then, I had a question around the new prototypes.

With respect to total receivables, sometime in the next several months, the next couple of months we will cross over with receivables about equal to last year’s level on a gross basis. Obviously, with our larger allowance this year on a net basis that’s obviously different timing. By the time we get in to the back half of the year, by the time we get to the end of the year I continue to expect gross receivables to be down somewhere in the $500 million to $1 billion range. There are obviously a lot of factors that will affect that outcome, please don’t be too harsh if we end up somewhat outside of either end of that range. There actually could be some very favorable dynamics that would cause us to be outside of that range. On your question about early stage delinquencies and how that flows through to write offs, I think in many cases our portfolio over time is showing some signs that we’ll end up flowing in to the many of the money center bank portfolios later. The issue that you’re describing was a profoundly important issue for us three to six months ago as our late stage delinquency and write off experience was far worse relative to early stage delinquencies than it had been historically. I don’t think you need to look any farther than the quarter just ended in which we correctly assess the flow rates across these different levels of delinquencies and predicted within a fraction of 1% what our net write offs for the quarter would be. I feel quite good about making the same second quarter predictions about net write offs that we made 90 days ago. So, I think ultimately you’re seeing at minimum some stability in our portfolio, perhaps some net improvement as we get out later in the year in this net write off statistic. Our enthusiasm is only tempered by continued deterioration in some of the macroeconomic statistics that are tightly correlated with write offs. If it weren’t for expectations of further deteriorations in unemployment rates, we’d be a little more bullish about our likely net write off experience in the third and fourth quarters. Wayne Hood – BMO Capital Markets: My second question Doug relates to the prototype stores, do you have any refinement in the capital costs around those remodels both maybe from a capital standpoint and just a pure labor expense standpoint? As you think about that, as you roll those out in ‘010, whatever number it may be does it change the leverage point at which you think you can lever comps? And, when can we expect the inventory start flowing through the P&L or through your balance sheet as you begin to prepare for that?

Several points there, generally as we have incorporated all of our newest thinking in to our new store prototypes, the increment of capital compared to our discount stores in the past, runs in a range of $1 million. As we think about how much capital we would invest per store to remodel existing discount stores, the number ranges beyond that figure as we incorporate other elements of remodeling throughout the store because once we’re in to a store it just makes a lot of sense to take care of some other unrelated things. While there’s a wide range, I think that it’s safe to say give or take $3 million is probably a good working figure at this point per copy. Your leveraging comment is a fascinating one because on the one hand certainly there’s expense related to execution and there’s some increment of ongoing expense but of course the denominator is changing as well, there’s a lot of extra sales. After all, we wouldn’t be doing this if it didn’t drive uniquely higher sales. Net/net once we get a little deeper in to this year, we’ll pull together analytically all the pieces of that analysis and talk about it. While at the margin it’s an interesting issue, big pictures this is not some kind of fundamental driver of earnings in the short run that you should have any concern about. On your inventory question, at the margin of course this is much faster turning product than the average product in our stores and therefore even though it adds a modest amount to inventories, it will add a commensurately modest amount to payables and so it really isn’t a cash flow issues nor any kind of inventory that carries any form of fashion risk.

Your next question comes from Deborah Weinswig – Citi. Deborah Weinswig – Citi: A few questions, one I know you haven’t broken it out historically but how should we think about your comp on your grocery related merchandise? And, also assuming it becomes an increasingly important category, shed some light on what you are doing to drive your price message here? Some of the food retailers are now offering free food or other significant kinds of discounts to drive traffic and share?

Food is still of course only about 15% of our overall sales so today it’s considerably smaller than home or apparel to pick a few not so random examples. Obviously, it’s growing faster and in our case, even against the back drop of a -3.7% combined same store sales experience in Q1, across the board we were quite positive in food categories, quite positive in Rx, quite positive in OTC so these frequency building categories continue to drive very interesting and highly and perfectly acceptable same store sales performance.

The promotional intensity and frequency by which competitors use food to draw traffic is really not that dissimilar to what we’ve already been experiencing in other non-food commodity categories whether its household chemicals or paper goods. So, there are garden variety of ways to promote food and other frequency categories. I would tell you that first and foremost we’re committed to maintaining an everyday competitive position in the marketplace just like we have for decades in our non-food categories and so we’re going to be focused on ensuring that day in and day out our food prices are equal to or better than our primary competitors which is Wal-Mart. Then, we will deploy the same kinds of promotional tactics as we have traditionally as it relates to exposing and promoting food. We’ll look at opportunities in print with our circular or direct mail pieces, when we had the right kind of critical mass in certain markets we will develop broadcast campaigns to convey that or even receipt tape marketing campaigns. We’ll use the entire Target toolbox to promote food as we increase its presence and density as we roll out fresh in to more stores throughout this year and in to 2010 and beyond. Deborah Weinswig – Citi: Then the home category has been quite strong in a lot of your competitors. Can you just talk about the trends in the category and what you expect to see going forward as well?

I’m not sure what quite strong means. I think what has been described as the deeply negative same store sales have become less negative or perhaps in some time frames they may have even become slightly positive. So, it is still really not a healthy industry overall and part of the same store sales increase or decrease is dependent upon the base period of analysis. What we’re seeing is there is underlying stability and our business is less negative than it has been in the past but, as Kathy described it’s more about the replacement part of the business so we’re selling more sheets and towels and pillows and pillow cases and we’re doing less redecorating of rooms or full lifestyle kinds of merchandising. So, it’s still under pressure because it’s such a highly discretionary category but we have seen some signs of stability and some categories are actually performing better than they have in the past. So, it’s getting better, it’s still not where we would like it to be.

The other thing that I would add to that Deborah is just some of the categories with families eating out less and staying home more we’re seeing some of those categories pop in home, cookware or pantry ware, things of that nature that allow them to do more cooking at home or entertaining of their friends.

Your final question comes from Daniel Binder – Jefferies & Co. Daniel Binder – Jefferies & Co.: My questions pertain to credit, I wanted to try and better understand what the likelihood, if any, is that we see the reserve for bad debts come in at a lower pace than write offs going forward? Obviously, you reserved well in excess of write offs and presumably at some point that can reverse. I’m just curious if you can give us a little bit of color on that? Then secondly, as it pertains to the spreads over LIBOR that you achieved in Q1, well known at this point, I was wondering if you can share with us your thoughts of what that might look like going forward taking in to consideration some of the policy changes recently?

Well, those of course are related questions to the extent that we expense less than we write off, our spread to LIBOR will increase and our allowance would decrease. Back to some of my earlier remarks, today we have just a shade over $1 billion in our allowance. Clearly, if I looked solely at our internal metrics I would be very encouraged about the likelihood of reserve reductions later in the year as this early stage delinquency favorability that we’re currently experiencing to a fairly substantial extent would flow through our thinking and our assessment of the future write off potential of our portfolio at the end of Q2, at the end of Q3 and so forth. I only temper that enthusiasm for fairly meaningful potential decreases in our allowance by observing that it’s a tough world out there and it’s a tough world in a lot of respects. It is a tough world especially in employment and unemployment statics which have historically been very highly correlated with industry write off metrics. Separately but in a highly related sense, currently our net write off experience is being adversely affected by aggravated levels of personal bankruptcy. It’s much hard to predict the timing of how that flows through our portfolio than the more scientific approach to figuring out the portion of gross write offs due to aging. But, net/net clearly the reserve is not likely to increase. The question is to what extent and over what time might it decrease? We’ll stay on top of this and be as clear as we can moving forward but certainly there’s some potential for some interesting developments in this portfolio, favorable developments from a profitability and a spread to LIBOR sense to the extent that we feel comfortable that it is appropriate to reduce the reserve in light of improving risk metrics if that were to occur in the back half of the year. I think Gregg has a few concluding remarks and we’ll let everyone get back to their day.

That concludes Target’s first quarter 2009 earnings conference call. Thank you all for your participation and ongoing support for our strategy, management and board.

This concludes today’s conference call. You may now disconnect.