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Target Corp. keeps 'A' debt rating

Citing solid sales momentum at Target discount stores, Fitch Ratings has affirmed its "A" rating on about $8.7 billion in corporate debt at parent Target Corp.

Additionally, the corporate credit rating agency maintained its "stable" outlook on Target's credit rating.

Fitch said the "A" rating reflects 'the strength of its growing Target division and its solid financial profile. The ratings also consider the rapid growth of the company's credit operations, and the weaker performance of its two smaller divisions in an intensely competitive retail environment."

The credit rating agency said, "The Target Stores division has successfully differentiated itself as the upscale discounter and has generated strong comp-store sales growth of 4.1 percent in 2001 and 6.8 percent in the first quarter of 2002. Solid sales momentum is expected to continue over the balance of the year, though not at the same pace achieved in the first quarter."

Fitch said, "Target's strong results have offset inconsistent performance at its other two divisions — Mervyn's and Marshall Fields — which represented 14 percent of consolidated operating profits in 2001, compared with 41 percent in 1993. Target's credit profile is expected to remain solid despite a continuing high level of capital spending. Higher capital expenditures are supporting faster growth at the Target Stores division, which is building out the 35 former Ward's store sites acquired in 2001. Following these openings, the pace of square footage growth is expected to decline from 12 percent in 2001 to the targeted level of 8 to 10 percent in 2003 and beyond. About 40 percent of the company's square footage growth in 2002 represents new SuperTargets."

Fitch pointed noted that "Target's credit business is also growing at an accelerated rate as the company continues to add new Target cardholders and convert its better Target cardholders to the Target Visa."

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