1. Target SSG Presentation to the Cincinnati Model Investment Club by James Hurt

2. Standard SSG Presentation A discussion of the industry. A discussion of Target. –Who they are. –What they do. –Who their competitors are. A discussion of my SSG for Target. A discussion of SSG’s for competitors. A conclusion of sorts.

3. Retail Store Industry Comparable-store sales and profits at most leading department store chains have been hurt by weak consumer demand for high- end apparel and home furnishings. Major discount chains have seen their same- store sales rebound to levels near the peaks achieved in the late Nineties.

4. Retail Store Industry The current economic scenario is working to the advantage of discounters, and we look for solid top- and bottom-line momentum at the two leading players, Wal- Mart and Target. Wal-Mart and Target’s near-term earnings prospects have been enhanced by Kmart’s bankruptcy filing.

5. Target Formerly known as Dayton-Hudson. HQ in Minneapolis. Three operating segments: –1107 Target Stores, mainly in the upper Midwest. 82% or revenues. –264 Mervyn’s stores. –64 Marshall Field’s stores.

6. Target Stores in every state save Alaska, Hawaii, and Vermont. Highest density in Minnesota, upper Midwest, and Arizona. Plan 81 new super stores this year and 75 more next year. Last years revenues were $40 Billion.

7. Wal-Mart Mass merchandising stores Segments –Wal-Mart discount stores. –Super Centers –SAM’s Clubs –Neighborhood Markets 3244 stores, in every state. Starting to build stores overseas. Last year’s revenues were $218 Billion.

8. Kohl’s Family oriented specialty department stores. –Fewer departments than full-line department stores. –Moderately priced apparel, shoes, home products. –Middle income shoppers 420 stores, mainly in the Midwest. Last year’s revenues were $7.5 Billion.

9. SSG For Target No preferred stock. 900 Million shares outstanding. Insiders own 1.3% (12 Million shares). Institutions own 83%. $10 Billion in debt, 57% of capitalization. Trailing Twelve Months Growth –Sales 15.1% EPS 35.7%

10. SSG For Target 10 year sales line is straight at 9.5% growth. EPS ten year growth 20.0%. Pre-Tax Profit margin even at 5.3%. –5.1% for Wal-Mart and 9.2% for Kohl’s. Return on Equity roughly even at 18.5%. –20.1% for Wal-Mart and 16.0% for Kohl’s.

11. Projections For Target Projected sales growth to continue at 9.5%. Projected EPS growth to match sales growth. Projected EPS to be $2.46 in 2006. Projected High PE of 28.0 and Low PE of 16.0.

12. Five Year Price Range for Target Projected High Price $68.90 Projected Low Price $25.00 Current Price is $33.66, in Buy range Upside-Downside ratio is 4.1 to 1 104.7% price appreciation. Total Five Year Return is 18.4% per year.

13. SSG For Wal-Mart No preferred stock. 4,500 Million shares outstanding. Insiders own 38.9% (1.7 Billion shares). Institutions own 35.4%. –Insiders + Institutions own 74.3%. $22 Billion in debt, 34% of capitalization. Trailing Twelve Months Growth –Sales 14.4% EPS 19.4%

14. SSG For Wal-Mart 10 year sales line is straight at 15.9% growth. EPS ten year growth 15.5%. Pre-Tax Profit margin even at 5.1%. –5.3% for Target and 9.2% for Kohl’s. Return on Equity roughly even at 20.1%. –18.5% for Target and 16.0% for Kohl’s.

15. Projections For Wal-Mart Projected sales growth to continue at 14.0%. Projected EPS growth to match sales growth. Projected EPS to be $2.87 in 2006. Projected High PE of 30.0 and Low PE of 15.0.

16. Five Year Price Range for Wal-Mart Projected High Price $86.10 Projected Low Price $22.40 Current Price is $54.11, in Hold range Upside-Downside ratio is 1.0 to 1 59.1% price appreciation. Total Five Year Return is 11.8% per year.

17. SSG For Kohl’s No preferred stock. 1,100 Million shares outstanding. Insiders own 13.3% (146 Million shares). Institutions own 83.3%. –Insiders + Institutions own 96.6%. $1.1 Billion in debt, 27% of capitalization. Trailing Twelve Months Growth –Sales 25.7% EPS 40.9%

18. SSG For Kohl’s 10 year sales line is straight at 24.2% growth. EPS ten year growth 31.0%. Pre-Tax Profit margin even at 9.2%. –5.3% for Target and 5.1% for Wal-Mart. Return on Equity roughly even at 16.0%. –18.5% for Target and 20.1% for Wal-Mart.

19. Projections For Kohl’s Projected sales growth to continue at 15.0%. Projected EPS growth to match sales growth. Projected EPS to be $2.92 in 2006. Projected High PE of 30.0 and Low PE of 20.0.

20. Five Year Price Range for Kohl’s Projected High Price $87.60 Projected Low Price $29.00 Current Price is $69.77, in Hold range Upside-Downside ratio is 0.4 to 1 25.6% price appreciation. Total Five Year Return is 5.3% per year.

21. Conclusions All three companies are very good companies, with Kohl’s having perhaps the best overall management. Current prices for Kohl’s (PE = 45.6) and Wal-Mart (PE = 34.9) are to high. Target has lowest growth potential, and the lowest PE (PE = 20.3). Target’s price is in the buy zone. Target may have a problem with debt.