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Marshall Field's, Mervyn's for sale
by Bill Catlin, Minnesota Public Radio
March 10, 2004

Marshall Field's, headquartered in Minneapolis, operates 62 stores in eight states in the Upper Midwest. (MPR Photo/Jeff Horwich)

Marshall Field's and Mervyn's are up for sale. Target Corporation officials say they are exploring alternatives for the two department store chains, including their possible sale to other retailers. Industry analysts say the decision is not a surprise.

Minneapolis, Minn. — The sale of Mervyn's and Marshall Field's has been the subject of rumors on and off for years. Until now, company officials have always dismissed those rumors. But in five of the past six years, both chains have posted declining sales -- the top line of a company's income statement. In a recorded statement, chief financial officer Doug Scovanner said the businesses have provided important contributions to Target for many years.

"In recent years, however, both of these divisions have experienced significant challenges to their top-line growth, resulting in unfavorable trends in their financial performance. While each of these businesses continues to generate significant profits and substantial positive cash flow, the absolute amounts are much lower than their historical levels," said Scovanner.

Mervyn's is headquartered in California, employs 29,000 people and nine of its 266 stores are in Minnesota. Marshall Field's is headquartered in Minneapolis, employs 25,000 and has 12 Minnesota stores. Target officials say it's unlikely large numbers of store closures will result from the review. They also say the result could be the sale of one, both or neither of the chains.

The announcement is no surprise to many.

It ... all started with Dayton's downtown. And that's the thing that's kind of getting lost here. There's a sentimental attachment to the place where this whole corporation came from. - Neil Cuthbert, McKnight Foundation

"This is a development, an announcement I've been waiting for for at least a decade," said retail industry analyst and consultant Kurt Barnard.

Barnard says department stores have been fighting competition from specialty stores on one side, and one the other, the rise of discounters like WalMart and Target. With the Target chain representing 86 percent of the company's total sales, Barnard says Mervyn's and Marshall Field's have been a distraction.

"A management distraction from its core business, and from its profitable business. And that is why they are finally giving in and realizing that they might be able to turn this thing around. But it would take a long time and lots of money, and as a result, they finally gave in," says Barnard.

Over the past year, Marshall Field's tried to boost results by leasing space to other retailers to create boutiques within stores. The effort began at the chain's flagship store in Chicago. The company says Marshall Field's sales have improved in recent months, but it would take years to get the business into acceptable shape, and Mervyn's faces similar challenges.

Mervyn's, the mid-price chain, also faces tough competition, says retail analyst Jeff Klinefelter with Piper Jaffray.

"Kohl's, Sears, Penneys, the mid-tier department stores -- I think that structurally some things have changed, and that's become much more competitive. Even the best companies like Kohl's have been struggling, so I'm guessing that had something to do with it," says Klinefelter.

Klinefelter says Marshall Field's Midwest location might help fill a gap for larger national companies like Federated Department Stores, which runs Bloomingdale's and Macy's, or for the May Department Stores Co., which runs Lord and Taylor and Filene's. Some investors have raised the possibility Wisconsin-based Kohl's might be interested in some of Mervyn's California locations.

The news did surprise many in Minnesota, including Lucinda Jesson, who works in downtown St. Paul and shops at the Marshall Field's there.

"I hadn't expected that. I thought I read somewhere their recent sales were better than expected. I'm really disappointed," says Jesson.

George Dayton launched the company in 1902 as Goodfellows, at the site of the current Marshall Field's store in downtown Minneapolis. It became the Dayton Co. a few years later.

In 1946, the company began the widely acclaimed practice of giving 5 percent of its pre-tax profits to charitable causes. The company launched Target in 1962, saw it become the firm's top revenue producer in less than 20 years, and then renamed the company Target in 2000.

Neal Cuthbert, arts program director for the McKnight Foundation, says the company's giving has played an enormous role in building and shaping the arts in the Twin Cities and other communities. He expects the bulk of the company's philanthropy to continue even if a sale curtails giving by the chains.

Still, Cuthbert says the loss of the department stores that gave rise to the Target behemoth feels a little like the root being pulled out.

"It kind of all started with Dayton's downtown. And that's the thing that's kind of getting lost here. There's a sentimental attachment to the place where this whole corporation came from," says Cuthbert.

Target officials say the decision to put the two chains on the block was neither easy nor hasty. They say the review process should take several months.

In addition to Mervyn's and Marshall Field's, Target Corp. operates 1,249 Target stores in 47 states.

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