MINNEAPOLIS — Target Corp. said it expects to complete the disposals of Marshall Field’s and Mervyn’s by September.
At its annual meeting, held Wednesday at the Art Institute here, chief financial officer Douglas Scovanner promised a “definite announcement about both businesses” within 60 to 90 days. He said the company is in the process of qualifying “interested retailers and others” with whom they will share financial specifics.
This story first appeared in the May 20, 2004 issue of WWD. Subscribe Today.
But the pending sales didn’t meet with universal approval from some nostalgic Target shareholders who questioned the rationale for the sale of Marshall Field’s.
Meanwhile, in New York, analysts and consultants threw a few names in the ring of parties who would be interested in taking the two businesses off of Target’s hands.
It has been widely expected within the analyst community that May Co. or Federated Department Stores, which said it was exploring the acquisition, will pick up Field’s and that Mervyn’s may be broken up for its real estate. However, in a research note issued Tuesday, A.G. Edwards analyst Robert Buchanan said market sources indicated a group led by publicly traded investment firm Apollo Group, including former Macy’s East ceo Hal Kahn, may be interested in buying and operating Mervyn’s.
Kahn firmly denied any involvement with Mervyn’s or Apollo. “There is absolutely no truth to this whatsoever, and I would think that a quality analyst like Robert Buchanan would do more due diligence before he spreads rumors and at the very least check with me,” said Kahn. “Other than a 20-minute conversation with Apollo when I told them I was not interested in Mervyn’s, I have had no involvement — zero — with Apollo on Mervyn’s or any other ventures.”
Alan Schlesinger, the former ceo of Filene’s Basement and Lamont’s and currently a consultant, is said to be involved with Apollo on pursuing Mervyn’s. “I can’t confirm or deny it,” he said Wednesday.
There was also another report that Robert DiNicola, the retired chairman and ceo of Zale Corp., may be involved in pursuing Mervyn’s. DiNicola could not be reached for comment.
At the annual meeting, Target is acting as if it has already washed its hands of its lagging divisions. Neither Marshall Field’s president Linda Ahlers nor Mervyn’s president Diane Neil took their customary places on stage during the shareholder meeting, and neither offered a second-quarter outlook on the company’s first-quarter conference call May 13.
In a sign of where a baggage-free Target Stores is headed, chairman and chief executive officer Robert Ulrich focused on the flagship division’s performance for the past 10 years, pointing out that Target is now, at $41 billion, roughly the size Wal-Mart was a decade ago. It operates 1,249 stores across 47 states; in its strongest markets, including Minnesota, California and New Jersey, it commands 10 percent of the market or more, according to company data.
In a press session, Ulrich characterized operations at both divisions as “business as usual.”
This year, shareholders were allowed to submit questions in writing, easing some of the sting they felt last year when Ulrich unceremoniously adjourned a perfunctory 15-minute meeting without the customary question-and-answer session.
Questions focused on the rationale for the Marshall Field’s sale, which seemed to hit hardest with local shareholders mourning the last link to Dayton’s, beloved for its philanthropy here.
“The department stores are losing meaning. They’re passing them around like cards at a table,” complained Minneapolis resident and longtime shareholder Mary-Lou Robertson.
Shareholder Aaron Epstein, who flew in from North Hollywood, Calif., last year and was subsequently irate when questions were banned, asked pointedly what Target was doing to ensure it didn’t face the same “problems affecting our friends in Bentonville [Ark.],” such as illegal cleaning crews and employees forced to work off the clock.
Target executive vice president and general counsel Jim Hale said the company uses an annual survey and an 800 number, which handles thousands of confidential calls annually, to make sure proper labor policies are being followed.
Ulrich said Target’s expansion for the next decade will focus on the U.S., and he expects the company to double its footprint and triple sales in that period.
Eventually, the retailer will go international, likely starting in Canada or Mexico, but there are no immediate plans to push beyond profitable domestic territory, which Ulrich said could return the company 15 percent annually for the foreseeable future.
Along the way, Target will have to grapple with Wal-Mart for every bit of market share, even on the Minneapolis-based retailer’s home turf. Wal-Mart is building its first stores in the Twin Cities metro area, Target’s stronghold where it operates about 40 stores.
“Certainly Wal-Mart is a major threat. Personally, I wish Wal-Mart wouldn’t exist,” Ulrich said in a rare candid comment that drew whistles and scattered applause from some shareholders. “But it certainly keeps Target a sharper and more focused company than if we weren’t competing with one of the world’s biggest companies.”
— With contributions from David Moin