Aiming at the Bull’s-Eye: Target Move Signals New Strategy in Retail

Some see Target Corp.’s decision to sell its Marshall Field’s and Mervyn’s units as a sign that the era of retail conglomerates is coming...

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KSA’s Aronson said, “The logical contenders [for Field’s] are Federated and May, which have coveted having a major penetration in the Midwest. Marshall Field’s has locked both of these companies out of it.”

He believes both Federated and May “are ready, willing, able to justify a deal, and whoever writes the bigger check will get them.” He believes there’s a good match-up with either company, since Field’s has a “good, better, best” operation, which is similar to what May and Federated have.

As for the 266-store Mervyn’s, KSA’s Aronson believes Kohl’s would be interested in some of the locations, but not all of them. He said Target or Wal-Mart could take over some of the sites.

“There are enough big-box players in different categories, such as Linens ‘N Things and Bed Bath & Beyond. It’s less likely there’s one customer for all of the stores,” said Aronson.

Hastings ranked Federated as the best fit culturally for Field’s, but wouldn’t rule out a management-led buyout, citing the number of stores and the relatively reasonable purchase price. He believes May Department Stores should not take on another flagging department store.

“May Department Stores needs to pay attention to their own issues,” he opined.

Walter Loeb, president of Loeb Associates, a retail consultancy, said, “As far as Marshall Field’s is concerned, I think it will be a bidding war between May and Federated. Both are interested and would like to own Chicago.”

Field’s, a traditional department headquartered in Minneapolis, celebrated its 150th anniversary last year. The chain operates 62 stores in eight states in the upper Midwest. Over the past three years, Field’s has experienced a prolonged pattern of declining revenues and profits. Sales were $2.58 billion in 2003, down from $2.69 billion in 2002, $2.78 billion in 2001 and $2.97 billion in 2000.

Operating profits in 2003 came to $107 million, representing 4.1 percent of revenues, against $135 million in 2002 (5 percent of revenues), $133 million in 2001 (4.8 percent of revenues) and $190 million in 2000 (6.4 percent of revenues).
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