Target’s Department Store Sale

Mar 11, 2004
George Anderson

By George Anderson

Target Corp. announced yesterday it has hired Goldman Sachs to help it explore the possible sale of its Marshall Field’s and Mervyn’s department store divisions.

Bob Ulrich, chairman and chief executive officer of Target Corporation, said in a prepared statement, “We have dedicated significant effort to increasing sales and profits at
Mervyn’s and Marshall Field’s over many years. As responsible stewards of the corporation’s assets, we believe that it is appropriate at this time to identify and evaluate possible
strategic alternatives and our Board of Directors concurs with this direction. While we remain committed to the creation of shareholder value over time as our primary performance
objective, our evaluation of potential alternatives will also weigh the effect on our guests, our team members and the communities we serve.”

Target’s decision follows years of rumors speculating on when the company would try to sell one or both of its department store businesses.

David Brennan, a marketing professor at the University of St. Thomas and co-director of its Institute for Retailing Excellence told the Pioneer Press, “I think the handwriting
has been on the wall for Mervyn’s. They have put a lot of time and money into retooling Meryvn’s and financial results have not come through.’

Moderator’s Comment: What are your thoughts on Target’s decision to pursue a possible
sale of Marshall Field’s and/or Mervyn’s?

Both businesses should find suitors. Mervyn’s generated $160 million in pretax profits and Marshall Field’s added another $107 to Target Corporation’s results.

We personally think it would be a mistake for Target to sell off Field’s.

One of the key differentiators Target has always had in the market from Wal-Mart, Kmart and others is that its department store heritage has been evident
in its discount environment. Divorcing itself from that direct influence would eventually rob the business of that resource.

We don’t share the same qualms, however, about Mervyn’s.

As a chain that seeks to fill the middle position, Mervyn’s is out-of-step with a polarized market that favors discounters or luxury merchants. The chain
either needs a completely new start or an owner that can be happy with the type of results it can deliver.
Anderson – Moderator

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