Target Quarter Swollen by Gain

In addition, the company said that while it has closed on the sale of 62 Marshall Field's stores to May Department Stores, it expects to close on the sale of nine Mervyn's stores to May in the current quarter. Target does not expect to take a gain or a loss from that transaction.

Target added that it expects to have certain overhead charges as a result of the two divestitures, which might reduce future profits. But the possibility of the charges is "substantially mitigated by the fact that we will continue to perform services for and collect fees from the buyers of Marshall Field's and Mervyn's."

The company expects to work with May at least through the beginning of 2005 and a relationship could exist between the company and the buyers of Mervyn's for two years or more.

The company noted that the $3.2 billion it received from May was reflected in its second-quarter balance sheet and that some of the proceeds are being applied to debt reduction. The rest is in short-term securities.

The company also said that under the $3 billion share-repurchase program announced in June, it bought back 11 million shares in the second quarter totaling $472 million. Based on it current stock price, Target said on the conference call that "we would intend to be quite aggressive in the market to acquire our shares in the short run."

Regarding back-to-school season, Target said that it will introduce a "back-to-college" catalogue for the first time this fall. The catalogue will be distributed to students on college campuses and will include decorating ideas and a re-loadable Target gift card.

In terms of other initiatives, the company said its current dollar concept, called One Spot, is performing so well that it plans to roll out the segment to more Target stores in the year. It currently has the concept in about 125 stores.