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MINNEAPOLIS - Target Corp. completed the sale of its Mervyn's department store division -- a promotional, middle-market department store with 257 stores in 13 states primarily in the West and South -- to an investment consortium, as well as the divesture of Mervyn's $475 million credit card receivables to GE Consumer Finance.
Target said it will post a pre-tax gain of about $270 million, or 18 cents per share, on the sale, whose sale price for both transactions totaled $1.65 billion in cash. The investment consortium includes Sun Capital Partners Inc., Cerberus Capital Management LP and Lubert-Adler and Klaff Partners LP.
In 2003, Mervyn's generated $3.6 billion in revenue and $160 million in pretax segment profit. Mervyn's will continue to operate from its headquarters in Hayward, Calif.
Following the sale of Mervyn's, Target Corp. will continue operating its flagship Target Stores consisting of 1,272 stores in 47 states, as well as its online Target.com unit.
In other Target news, the company reported that its net retail sales from continuing operations for the four weeks ended Aug. 28, 2004 increased 8.4 percent to $3.442 billion from $3.175 billion for the four-week period ended Aug. 30, 2003. "Sales at Target Stores were on plan for the month of August," said Bob Ulrich, chairman and c.e.o.
The retailer posted a 1.8 percent quarterly gain in same-store sales, a bit better than the 1.2 percent that analysts forecast, while Target's total sales rose 8.3 percent.
Target is one of the few retailers which fared well during the start of this year's back-to-school shopping season, which has been a disappointment for several major retailers like Wal-Mart Stores, Inc. and Costco Wholesale Corp. Based on its disappointing sales, Wal-Mart said it believes third-quarter profits will be at the low end of the 52 cent to 54 cent range. Analysts expect 53 cents per share, while Costco reported a 4 percent gain in same-store sales, missing Wall Street's 7.3 percent forecast. Costco's total sales were up 7 percent.