Target Corp. (TGT) put its 62-store Marshall Field's chain and lower-end Mervyn's stores up for sale in March in a move to get more time and money to focus on its more profitable namesake discount stores.
The move strengthens May's presence in the Midwest, giving it Marshall Field's stores mostly in Chicago, Detroit and the Twin Cities. The company already operates 438 department stores, including Lord & Taylor (search) and Filene's (search).
May said it would keep the Marshall Field's name and operate it as a stand-alone division based in Minneapolis. It said it would offer jobs to all 25,000 Marshall Field's employees.
Target said it would use the money to repurchase $3 billion worth of stock over the next two to three years.
St. Louis-based May said it expects the sale to close in the second or third quarter of fiscal 2004. It said it expects the purchase to boost earnings beginning in fiscal 2005.
Targetannounced in March that it would review "strategic alternatives" for Marshall Field's and Mervyn's, its San Francisco-based mid-priced chain. Target said on Wednesday that the review of Mervyn's is continuing, and said there might be a development in two to three months.
Target said the nine Twin Cities stores being sold to May would be closed. May did not immediately announce its plans for those locations. Analysts have said that Mervyn's, with 266 stores in 14 states, might be valuable mostly for its real estate.
Many analysts had expected Federated Department Stores Inc. (FD) to buy Marshall Field's, and Federated acknowledged in April that it was considering a bid.
May bid $800 million for Marshall Field's in 1990, just $200 million less than the winning bid from then-Dayton Hudson Corp., which operated Dayton's and Hudson's.
Target stores began as an outlet in a Minneapolis suburb for Dayton's department stores in 1962. By 1977, Target stores were the company's biggest moneymaker, and Dayton Hudson (search) changed its name to Target Corp. in 1999. In 2001, the company adopted Marshall Field's as the name for all of its department stores.
Growth at the company's flagship Target stores has far outpaced Mervyn's and Marshall Field's for years. In the first quarter of 2004, Mervyn's revenue and comparable-store sales both dipped 1.4 percent, with revenue of $793 million. Revenue increased 4 percent to $614 million at Marshall Field's, and comparable-store sales were up 6.1 percent. Meanwhile, revenue from Target stores increased 14 percent to $10 billion.