Target Corp. said late Wednesday that it is launching a review of "potential ownership alternatives" for its $7 billion credit card business. The company will simultaneously take a look at the use of debt in its capital structure and its share repurchasing practices.
Target's credit card portfolio includes products known as the "REDcards," the Target Visa Card and Target Credit Card, gift cards and other financial services. Since starting to offer credit cards 13 years ago, Target has grown to one of the largest credit card issuers in the U.S.
"Going forward, we are committed to maintaining the highest brand standards for our financial products and services, continuing to invest in our outstanding financial services team and delivering an exceptional and integrated credit and retail guest experience," said Bob Ulrich, chairman and chief executive officer of Target, in a statement.
The review is expected to be done by the end of December. Goldman Sachs was retained to assist Target.
The evaluation of the company's credit cards will focus on the economics of other ownership alternatives, according to the company. That will include evaluating the differences in credit risk and growth rates between a direct ownership model and other structures. The review also will include an analysis of the cost of debt and equity capital used to fund receivables and liquidity considerations, the company said. An evaluation of the pace of share repurchases is also part of the review.
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