Target Corp. will take preliminary offers on its Field’s and Mervyn’s divisions, with first bids said to be due Monday. This raises the possibility of completing deals in the summer, according to retail and financial sources.
While there’s not expected to be an outpouring of widespread interest, the two Target Corp. divisions could command healthy prices despite being underperformers. That’s because Federated Department Stores and May Department Stores are seen battling it out over the 62-store Field’s, which could be sold at a premium — $2 billion or more — and certain investment companies are believed to be interested in Mervyn’s as an ongoing business or real estate play. Before, Mervyn’s was widely perceived as just a breakup candidate.
For years, the industry has been expecting Target Corp. to put Field’s and Mervyn’s up for sale so it could concentrate its efforts and resources on its much larger and more successful Target discount chain. Target Corp. officially put them on the selling block in March.
The performance of Field’s and Mervyn’s has been up and down, yet Field’s in particular has experienced a prolonged pattern of declining revenues and profits. Field’s pretax profits in the year ended Jan. 31 plunged 21.1 percent to $107 million, while its sales fell 4 percent to $2.58 billion. Mervyn’s saw its pretax profits decline 32.6 percent to $160 million on a 6.9 percent fall in revenues to $3.55 billion.
But Field’s towering State Street flagship in Chicago remains one of the world’s premier department stores. Target Corp. invigorated the store last year with floor renovations, leased shops with limited distribution, unconventional adjacencies and an eclectic assortment with everything from Australian homemade ice cream to Thomas Pink shirts from England, across the 812,000 square feet of selling space. However, State Street, the second-largest store in America next to Macy’s Herald Square, doesn’t stand by itself. Field’s 61 other stores are of widely varying size from less than 100,000 to 500,000 square feet. Many are mired in weak local economies and have not received the level of upgrades seen on State Street.