Minneapolis, MN, Mar. 11--Target Corp. is considering selling its lagging department store divisions, Mervyn's and Marshall Field's--an announcement some industry watchers have long expected.
Minneapolis-based Target said it has hired Goldman Sachs to review "strategic alternatives," including the possible sale of one or both divisions.
As responsible stewards of the corporation's assets, we believe that it is appropriate at this time to identify and evaluate possible strategic alternatives," Target chairman and CEO Bob Ulrich said Wednesday in a statement.
Minneapolis-based Marshall Field's operates 62 stores in eight states in the Upper Midwest. In 2003, Marshall Field's produced revenues of $2.6 billion and pretax segment profit of $107 million.
San Francisco-based Mervyn's--a mid-priced chain--has 266 stores in 14 states, primarily in the West and South. In 2003, Mervyn's generated $3.6 billion in revenue and $160 million in pretax segment profit.
Target said the review is still in its early stages and "it is not yet certain that any transactions will occur as a result of this review.
"Additionally, if this review results in one or more transactions, it is possible that a meaningful accounting gain or loss would result," the retail chain said.
Revenue from Target's namesake upscale discount stores has consistently dwarfed the company's other chains. In the fourth quarter, Target stores reported revenue of $13.43 billion compared with Mervyn's $1.1 billion and Marshall Fields' $791 million.
Target's announcement was hardly a surprise, said Kurt Barnard, president of Retail Forecasting LLC in Upper Montclair, NJ.
"It is a continual source of wonderment for us why Target didn't do this any sooner," Barnard said Wednesday evening. "This is a huge step toward helping Target get rid of sideshows that are neither profitable or worthwhile pursuing."
Mervyn's was never a winner, and department stores are no longer the favorite vendor of today's shoppers, instead discount chains like Target stores--the No. 2 U.S. discounter behind Wal-Mart Stores Inc.--are taking the market share, he said.
Target's move reflects an industry change with companies like Sears, Roebuck & Co. opening off-mall stores and efforts by J.C. Penney Co. to shed its Eckerd drugstores, Barnard said.
Target Corp., which operates 1,249 Target stores in 47 states, changed its name from Dayton Hudson Corp. four years ago to reflect the company's top moneymaker since 1977.
A year later, Target changed the names of its Dayton's and Hudson's department stores to Marshall Field's to increase the company's brand and to strengthen its competitive position.
