That seems to be the growing trend in retail, signaled by Target Corp.’s disclosure last week that it has hired Goldman Sachs to review “strategic alternatives” for both its department store divisions, Marshall Field’s and Mervyn’s.
Federated Department Stores could emerge as the likely candidate to swoop up Marshall Field’s — giving Federated a strong foothold in the Midwest — but May Department Stores might give it a run for its money, said industry experts. Some believe Mervyn’s is more apt to be sold piecemeal to a big-box retailer such as Linens ‘N Things or Best Buy, or rivals such as Kohl’s and J.C. Penney Co., although Target’s preference would obviously be to sell Mervyn’s as a package.
Carol Sanger, a spokeswoman for Federated, declined comment on its interest in buying the Field’s or Mervyn’s chains. Sharon Bateman, a spokeswoman for May Co., said the company had no comment.
Analysts estimate Marshall Field’s could fetch as much as $3 billion, while the more beleaguered Mervyn’s could go for as little as $700 million and as much as $1.2 billion. Target said assets of Mervyn’s and Field’s are worth $1.8 billion apiece. The review process is expected to take several months.
Wall Street, for its part, cheered the proposed divestiture. The stock has been trading up since the disclosure Wednesday after the markets closed. Shares of Target closed Friday at $45.63, up 93 cents, or 2.1 percent, in trading on the Big Board.
In Target’s decision to sell off its long ailing Mervyn’s and Field’s divisions, some see a larger trend — specialization and the death knell of the retail conglomerate. Department stores, in general, have continued to consolidate, lose market share and suffer from merchandise sameness and slim comp-store gains. As reported, total retail sales of department stores, including national chains such as Penney’s and Sears, fell 5 percent to $319.3 billion last year, from $336.1 billion in 2000, according to the U.S. Census Bureau.
“There was a retailing habit of putting together different business in the hopes of synergy,” noted Richard Hastings, vice president, retail sector at research firm Bernard Sands. “What they’re finding out is there is no synergy. Penney’s is selling Eckerd, Target is dropping its side businesses, the Limited is smaller than what it was, and even Wal-Mart sold its [grocery] distribution business [McLane’s] to Berkshire Hathaway.”