Target might sell Marshall Field's and Mervyn's chains. Minneapolis-based Target Corporation says it's considering the possible sale of its struggling Mervyn's and Marshall Field's chains. The Minneapolis-based retail chain says it's hired the Goldman Sachs firm to review the stores' future. Marshall Fields has stores in North Dakota's major cities. Industry watchers have expected the move. Guests on the program are University of St. Thomas marketing professor David Brennan, and Pioneer Press columnist Dave Beal.
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(00:00:00) Memorial in East Meadow New York Massachusetts lawmakers are meeting today (00:00:05) for a second time this year to craft a constitutional amendment Banning gay marriage legislators are reacting to a ruling by the state's highest court which said the state's Constitution as currently written allows (00:00:16) marriage by same-sex Couples from Member station (00:00:19) WBUR, Audie Cornish (00:00:20) reports. The state legislature is reacting to a ruling by the Massachusetts high court allowing same-sex couples marriages by this met their last debate ended in deadlock, but Massachusetts lawmakers will now reconvene with a compromise Amendment on the agenda the measure aims to define marriage as being between one man and one woman while at the same time establishes civil unions for same-sex couples. It's still unclear whether the measure penned by a bipartisan group of legislative leaders as the necessary votes to pass any Amendment proposal to the States Constitution would have to pass two different legislative sessions before reaching voters as a ballot question in 2006 for NPR news. I'm Audrey Cornish in Boston the Food and Drug Administration is cracking down on a steroid like (00:01:05) supplement androstenedione or and row that some athletes have used to build muscle the FDA told companies to quit selling it unless they can prove it's not dangerous. The FDA is expected to say that as a steroid (00:01:16) precursor used by the body (00:01:18) to make testosterone testosterone and reposes the same health risks as using an anabolic steroid. Likely Democratic Presidential nominee. John. Kerry is on Capitol Hill today working to solidify his support among Congressional Democrats this morning. He met with Congressional Black Caucus members. He's scheduled to meet with former rival John Edwards today. The DOW Industrials were down twenty nine points at 10,000 267. This is NPR news support for NPR comes from the Doris Duke charitable Foundation seeking to improve people's lives by supporting the Performing Arts Environmental Conservation medical research and Child Abuse (00:01:52) Prevention for Minnesota Public Radio. I'm Greta Cunningham minneapolis-based. Target is considering selling its Mervyn's and She'll field divisions industry Watchers say the move has been expected for quite some time. Target has hired Goldman Sachs to explore its options and to try to find buyers for the to retail chains three years ago Target change, the name of Dayton's department stores to Marshall Fields many customers said they were sad to see the Minnesota family name taken off the stores Cathy. Lohr of St. Cloud is a frequent Marshall Field's customer and a former employee of Dayton's she says she sad to hear the news about the possible sale of the department store. I'm not surprised. I think the customer is more going towards a Target in customer. I think most department stores now it used to be where you had to go to date and to get something and now you can get it at any retail establishment. And so I think we're seeing kind of the demise the large Department Store Marshall Field's operates 62 stores in eight states in the Upper Midwest a Minnesota Senate committee has approved a bill that would forbid the state from offering State contracts to businesses that Outsource 100 or more jobs to other countries. The bill would forbid state and local governments from entering into contracts for seven years with businesses that choose to Source jobs opponents of such restrictions a global trade helps the economy of other countries while making Goods less expensive in the u.s. Minneapolis customers have echostar communications will once again be able to watch the local CBS affiliate echostar and Viacom have settled a fee dispute that had left millions of customers of a co-stars Dish Satellite service without several popular channels the forecast for Minnesota calls for a chance of light snow or flurries in the East it'll be windy in the west today with highs ranging from 18 in the north to near 27 in the South right now in Fargo. It's sunny and to above Rochester ports light snow and 10 above some flurries and Duluth and eight degrees and in the Twin Cities partly cloudy Sky 6 above from Minnesota Public Radio, I'm Greta Cunningham. All right. Thanks Greta, six minutes past 11:00. (00:03:55) And good morning. Welcome to midday on Minnesota Public Radio. I'm Gary eichten. Glad you could join us for a long while the tail has been wagging the dog. And now the tail is decided to get rid of the dog (00:04:06) altogether. Just three years after watching all those Dayton signs come down. It's time to get ready for another big change in the world of retail the target Corporation. As you heard on the news Target Corporation is putting its department store divisions Marshall Field's which used to be Dayton's Marshall Fields and Mervyn's up for sale experts in the field say they aren't surprised many say they're pleased but today on. Midday, we're going to take a closer look at the demise of the ones proud Dayton's department store chain and what (00:04:37) this sale if it goes through (00:04:38) might mean for retail in our region will be taking your questions and comments, of course, but first, here's Minnesota public radio's bill. Catelyn with more on the news from Target the sale of Mervyn's and Marshall Fields 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 skull Vanner 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. Mervyn's is headquartered in California employees 29,000 people and has nine of 266 stores in Minnesota. Marshall Field's is headquartered in Minneapolis employees, 25,000 and as 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. This is an announcement. I've been waiting for for at least a decade retail industry analyst and consultant Kurt Barnard says traditional department stores, like Marshall Field's have been fighting competition from specialty stores on one side and the rise of Discounters like Wal-Mart and Target on the other with the target chained representing 86% of Target Corporations. Total sales. Barnard says Mervyn's and Marshall Field's have been a distraction management distraction from its profit of a 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 Target officials say 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 competitions as retail analyst Jeff kleinfelter with Piper. Jaffray Cole fears pennies, the moderate or mid-tier department stores. I think that structurally some things have changed and that's become much more competitive. Even the best companies like coals have been struggling kleinfelter 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 Met department stores company which runs Lord & Taylor and filene's some investors have raised the possibility wisconsin-based Cole's might be interested in some of Mervyn's California locations. The news did surprised 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'd read somewhere that their recent sales were better than that expected. I'm really disappointed. Dayton launched the company in 1902 As Good Fellows at the site of the current Marshall Field's store in Downtown Minneapolis. It became the Dayton company a few years later in 1946 the company began the widely acclaimed practice of giving 5% 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 two decades and then rename the company Target in 2000 Neil 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 two divisions still he 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. That's the thing. That's kind of getting lost here. There's so there's a Sentimental attachment to kind of The place that this whole Corporation came from 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. I'm Bill Catlin, Minnesota Public Radio. We're joining us now to talk some more about targets announcement and what it might mean for our region is Dave Brennan. He's a marketing professor at the University of st. Thomas. He is also the co-director of the institute for retailing Excellence at the University of st. Thomas and here in the studio long time st. Paul Pioneer Press business columnist, Dave Bill. We also invite you to join our conversation. If you have a question or a comment about targets decision to sell its department stores. Give us a call. Our Twin City area number is 6512276 thousand 6512276 thousand or you can call us on our toll free line. That number is 1-800-218-4243 Stern. Just go to our website, Minnesota Public Radio down. Org and then click on send a question. They build a Brennan. Thank you for coming over today. Appreciate it. Thank you. Thank you (00:09:53) for having us (00:09:54) few nuts and bolts questions first before we get into big picture stuff. First of all Professor. Brennan is a sale (00:10:02) inevitable. I don't think the sale is inevitable. I think if you take a look at it, the Mervin situation has been festering now for over a decade and it's probably long overdue and it's most likely the most acute thing because the results just have not been improving over that period of time in the case of the Marshall Field's they've basically just repositioned that and rebranded it and really re merchandise and add some excitement to it in a test fashion with their State Street store in downtown Chicago. So I think that there's a great deal of growth and development and more optimism there than there is with the Mervyn's operation. Would you agree to Bill yes, I think that sales declines have been sharper at Mervyn's. I think that there is more competition from Kohls pennies other other stores that are in that Niche for Mervyn's and I'm not sure that Mervyn's has ever fit very well into the culture of Target. They build know what is it most (00:11:11) likely that the target folks will take into account here just to sell or not to sell just a matter of how much money they can get for it or do they take other things into consideration? (00:11:20) Well, I think how much money they can get for it is a very big very big factor and and may be a factor in delaying the sale was there the the invest the the proposal to sell Was the fact that they didn't think they could get enough money for it. And so I certainly think that that would be a very leading Factor. Hmm. Hey Brandon would with the target (00:11:43) officials likely take anything else into account. I don't know impact on the community or the employees and like (00:11:49) a I'm sure those would be a considerations but that would also be part of whatever deal was struck. I think there's something in overarching issue that that has not been addressed by the media at this point. And that is why after a number of years has Target Corporation decided that they want to consider unloading both of these chains and I think it goes back to we're getting down to two major competitors in the discounting area. It's Walmart versus Target with Kmart in a very strong declining mode. They've lost over the last year their total sales have declined by 26% So I think it's getting to be Head-to-head War now with Walmart and they're going to need those additional resources to bolster up against the to try to match those of Walmart. I think the simplest way to look at it is that Target is up against two walls Wall Street and Walmart up against enormous pressure and have been from Wall Street to keep performing well and they're up against enormous pressure from one of the biggest corporate juggernauts the country's ever known Walmart, and it's a very direct head-to-head competition. Dave is right. It's emerged that way with Kmart dropping out of what was once a big three race and it's hoggett has the focus focus focus on what accounts for 90% of its sales the Target the Target stores and and the area that is the growth (00:13:25) area. Well, let's assume for a moment. The Marshal feels sale goes through to somebody is it likely that (00:13:32) All (00:13:32) the Marshall Field's stores that we know around here will stay open or would that new buyer take a look at some of these stores especially like the one in st. Paul? I would think downtown st. Paul and Zach. It's a money loser. Let's get out of the business. (00:13:45) Well having worked in the site location area for Target Corporation a few decades ago. They definitely whoever was to purchase them or even if they are retained by Target Corporation will review each of the individual chains and turn individual stores in the chain to make sure of its not only short term viability but long-term viability the the wonderful thing about the Marshall Field's stores is that there they are located in three major metropolitan areas in which there is very little coverage of would-be suitors for those and so it's unlikely that there would be a very much of a closing closing of those stores. I think Marshall Fields is far more likely to go as a H if it's so then Mervyn's would be and that's right in Detroit in the Twin Cities in Chicago Federated for example is not represented. Well, they have Bloomingdale's but other than that and Bloomingdale's is really a niche above Fields. They have very little for example here Federated has only Macy's and Bloomingdale's Macy's at the Mall of America and we long speculated on how long it would be that Macy's and Nordstrom's would go in this market having only one store because it's more efficient to spread the costs over more than one store. If you have if you're in an area a department store, and so that's one reason why it would make sense for Federated in particular to come into this Market add the field stores to the Macy's stores the spread the cost. May I ask (00:15:32) you one? They're question here given the pressures from the walls as you put a Dave Bill if Target can't sell the Marshall Field's chain. Are they likely to start closing their stores here in (00:15:45) Minnesota? Hmm. I don't know what to say about that. I mean I happen to think that they would be able to sell Marshall Fields It's a Wonderful brand name. And so I mean I guess they haven't thought very much about that that option. I'm sure it's on the minds of many people working in the field stores and I would have had on my mind too. Hey Brennan, I think that for the most part most of the 62 stores would be kept there might be a couple and probably the one of the weakest would be the downtown st. Paul store on the other hand. They've just remodeled it into a new format after having compacted the store from five floors 23 and make it much more contemporary and open which is the current style of most department stores. So I I think that they would not act rashly or very fast and if they did do any closings talking this our about the potential sale (00:16:46) I had the target Corporation of targets big department store divisions Marshall Fields and Mervyn's what that might mean for our area. We're talking with the day Brennan a marketing professor at the University of st. Thomas co-director of the institute for retailing Excellence the University of st. Thomas De Bill is with us as well. (00:17:05) He is a (00:17:06) business columnist for the st. Paul Pioneer Press. If you'd like to join our conversation number to call is six-five 12276 thousand 6512276 thousand if you're calling from outside the Twin Cities, we have a toll-free number. That number is 1-800-222-8477 Weston or comment online go to our website, Minnesota Public Radio dot org and click on send a question Pete. You're up. First. Go ahead, please I would just observe ation. I worked for both Target and Mervyn's in the mid to late 80s and both here in Minnesota as well as in the southwest and what I can tell you about working for them. Is that the The Mervyn's people were never comfortable within Target Corporation within the date and Hudson family and it was always a bad fit mainly because the the Mervyn's people their way of doing business was much more laid-back less disciplined and not nearly as aggressive and well-managed as Target Target is always been a better manage entity. I can't speak to Marshall Fields, but I can tell you that that Mervyn's was always a bad fit for Target and even as early as the mid to late 80s after they had been acquired there were discussions about something. Okay. Thanks, Pete, Pete Dave Brennan. Does that come as a surprise to you? No, (00:18:29) not at all. I think that when you look at Mervyn's coming out of the Bay Area in California, it does have a more relaxed type of an atmosphere. They fit very well from a Marketplace standpoint into that mid-market, but that mid-market Korea has really deteriorated witness what's happened with Montgomery Ward now gone pennies, which is struggled. Although it's come back a little bit at late but still struggling is the Sears so that Middle Market is a difficult one in increased pressure on the west coast as well as their stores in the Midwest of made a pretty tough for for Mervyn's. I think if you just walk through Rosedale, for example, and you walk through the Mervyn store and you walk through pennies, you can see a difference. I mean in pennies you see many many people you don't see many many people in Mervyn's (00:19:26) this is what accounts for that just bad management or lack of name recognition or if they're selling essentially the same products at essentially the same price. Why does one store do so, you know relatively. Well, the other one doesn't do very well at all. (00:19:42) I'd defer that plus that went to be on Okay, essentially what happened is as far as Cole's was in this market before Mervyn's came in established themselves pretty firmly. They've got a different direction in terms of their merchandising. It tends to be much more promotional more hard Goods in the like but in addition to that when the decision was made to bring Mervyn's here, it was done number for two reasons one was it was a defensive move to take up those former traditional Department Store Slots open operated by Carson Pirie Scott, so that other traditional department stores couldn't come in the market. Secondly the idea of having bringing Mervyn's into the market to carefully tweak and develop and redevelop them as Mervyn's California was another intent obviously the the one on the former by keeping other department stores largely, but they lost on the other. The they have just not been able to develop a format that is acceptable here. But certainly it's less. So even in the California Market which colds I entered two years ago. Hmm, (00:20:58) not just to clarify that the higher end type department stores the Marshal fields and so on are there turning a profit are they not? (00:21:08) Yes, they are. However, the level of profitability with traditional department stores, like Marshall field has declined over the last five years. It's been very very soft and it was exacerbated by the most recent recession in 2001 and in the extenuating circumstances that occurred after that period of time, so they're not out of the woods at this particular point, but certainly the Middle Market is much greater impacted than ours the traditional department (00:21:39) store and de bâle in your columnist (00:21:41) morning. You you you (00:21:42) point the finger at Walmart. You call Walmart the devil what? (00:21:46) I mean by that well, I was probably having a little bit of fun. I mean we call Walmart the devil we blame a lot on Walmart these days. I mean not just in retailing manufacturing they have enormous clop with manufacturers and with other sectors of the economy. And so it's I guess it's easy to blame Walmart as the Fall Guy what I mean is basically that they're in a head-to-head that Target finds itself, you know in a very very tough head-to-head competition with Walmart. I mean Walmart is now they initially had their stores in small towns in a Minnesota came in in terms of the Minnesota Market came into the suburbs and now they're actually moving right into st. Paul not far from the Target store in st. Paul. They have gone into groceries and in with their larger stores and Target is going into that area now to compete and and Walmart. Is put enormous pressure on target? I don't mean it so much in the sense that they are directly stealing customers from Fields as more in the sense that they are putting have put enormous pressure on target, which is done very well, but they're up against this this, you know, probably the biggest corporate giant that we've ever had. Hmm Craig guy your question, please (00:23:14) it's just I was wondering who possible buyers would be for a marshall Field's Mervyn's combination. I mean would it do they have to be sold together? And and I mean, there's sex stores in the Twin Cities Saxon her burgers, and I don't know what other ones are in the Twin Cities that are part of that group. But I mean would that be something that they'd be interested in buying and shutting down because then they wouldn't have the competition or would you see a store like coals maybe want to Branch out and have a higher Line Store as well. I know. I (00:23:46) think there'd be too many potential buyers for both both Mervyn's and Fields. I think that there could be a number of buyers for Fields. Most prominently Federated also possibly may maybe Dillard's but I don't think it would but I can't think of too many people who would want to buy them (00:24:09) both. What about the idea of Dave Brennan of buying somebody buying these stores and then closing them so you reduce the competition your (00:24:17) face. I think that's very unlikely to the asset valuation of each of the individual operating units is 1.8 billion dollars each to spend three point six or three point six billion dollars to close doors doesn't make a whole lot of sense. I think it's more likely in the case of the department stores like Marshall Field's that Federated is the most likely candidate May Company typically is very strong. In terms of a conservative approach. They've also launched into specialty stores with David Bridle and a tuxedo operation last year Dillard's his in no position to make any kind of an acquisition of either one of the chains in terms of Mervyn's I think a couple of things certainly a number of those stores could be acquired by Cole's especially on the west coast other. Other than that if there's no other Suitor I could see a spin-off to shareholders of the Mervyn's operation. Well, that's not the most desirable that would be a way of detaching it from the parent company Target Corporation. (00:25:24) Sober Mervyn's would become a free Status company, (00:25:28) right? But would you see a number of the stores closing under under that scenario? I think you might see some I think depending on the strength of those stores here in the Twin Cities that certainly some of those stores might be closed as you suggest. This is probably one of the Bourbons weakest markets and so that would might leave some of those spots up for grabs here in the Twin Cities. It's that California thing (00:25:56) Angela's on the line with a comment Angela. Go ahead please. Hi. I wanted to call in and it was a comment and a question. First of all, I would disagree with two collars prior to you. I have worked at Target headquarters for Mervin and I think the synthesis between Mervyn's and target has been wonderful. I mean the working relationships that I had were just amazing with the target people. And actually we were probably more closely aligned with Target than say Marshall field, but the other thing that I would add is that the stores here and I you started on this a second ago, the stores here are not representative of the Mervyn's Market when I lived in California, there are no high volume stores from ervin's here in the Twin Cities the stores. There are mostly high volume a hundred and See, I think of the stores former ovens are in California. And if you look at the California economy, it is so bad that I think that's some of the reason they've lost dollars. But the question I would ask is How likely do you believe that Mervyn's would be spun off to one of the shareholders or another group? Okay. They brought a new raise the issue How likely is that scenario? (00:27:12) Well, I think that if you'd asked that question a couple of years ago a year or two ago, certainly, I think Cole's would have been a very very good fit for it in the like given Kohl's is weaker a performance of late. I think they would only be interested in selective sales and they've also entered the California Market itself and maybe that accounts for part of their weakened retails sales. So I think the the chances of doing a spin-off are increased especially over the last couple of years and there is No would be a Suitor that seems a likely to come in and snap them (00:27:50) up related question that came in online from John and Roseville who asks instead of selling. Why doesn't Target Corporation form a new department store company to focus on Marshall Fields. (00:28:04) Well, I think part of the answer is that they need to focus on Target and that that's what the pressure is on them from Wall Street to do and they they to some extent it distracts them from the focus that they want to put on an are being pressured to put on On Target. What about that spin-off (00:28:25) idea? Would that work for a Marshall Fields? (00:28:29) I think in terms of the value in terms of what the amount that they could get. I think they could get a lot more money for Marshall Field's than for Mervyn's and particularly. I think that Federated being the primary souter and pretty well healed. There's Pretty good opportunity. There are also some other perhaps private investors that might have an interest in it. One of the caller's mentioned in terms of sacks shutting and down. The question is sex holding whether or not they would have an interest in acquiring Marshall Field's that would be a more akin to the fish five pound fish swallowing a 15 pound fish and that's just unlikely to happen. So I don't see the spinning off of Marshall field as a real likelihood. What do you think Dave? I mean, I think that they could get some suitors and that they would that would be their preference and they would would be more financially feasible for them to do that. And so I think that's (00:29:35) right cocking this our about the Target Corporations announcement that it's department store divisions Marshall Fields and Mervyn's are officially up for sale talking with Dave Bill and Brennan about what that might mean for our area Dave Beal is longtime business columnist for the st. Paul Pioneer Press day. Brennan is the co-director of the institute for retailing Excellence at the University of st. Thomas again, if you would like to join our conversation the number to call six five one two, two seven six thousand or one eight hundred two, four two two eight two eight. You can also send in your question online but a Minnesota Public Radio dot org and click on send a question and we'll get to more of your questions here in a couple minutes programming is supported by pic Wisconsin and the McGuire agency serving Physicians dentists in hospitals with professional liability insurance and Risk Management Solutions in Minnesota and throughout the Midwest on the web at Pi C Wisconsin.com. (00:30:34) I'm Bill Clinton president of Minnesota Public Radio during the drive. You heard the voices of just some of our members I listened to Minnesota Public Radio. When I do (00:30:43) most of my work radio in the milk house I have already won. Arne I like to listen to public radio when I'm building things in my garage, (00:30:50) I like to personally thank them and thank you for supporting Minnesota Public Radio because you keep us strong we're able to keep you informed with in-depth news and Analysis. Thank you again from all of us at Minnesota Public Radio (00:31:03) catch up on the latest headlines. Now, here's greater greater Cunningham Greta. Thanks Gary. Good morning. Spain's prime minister calls today's attacks in Madrid mass murder and says the government will not negotiate with the bombers José María aznar blames the Etta Basque separatist group for the series of ten bombs that killed more than 180 people along a commuter train line more than 900 people were wounded us intelligence official says it's too soon to know who planted the bombs. The US House is moving toward a vote later today on a measure aimed at cracking down on a decent radio and television broadcast the measure appears headed for a bipartisan approval with more than 145 co-sponsors. It stiffens penalties for indecent programming by Finds to as much as $500,000 Federal prosecutors say an American woman accused of acting as an Iraqi spy got thousands of dollars for her work Suzanne lindauer has been arrested on charges that she acted as a spy before and after the US invasion of Iraq prosecutors say she accepted payments from the araki's totaling $10,000 including 5,000. She got during a trip to Baghdad where she allegedly met with Iraqi Intelligence Officers in Regional news in Minnesota house committee has passed a bill that would send the state's worst sex offenders to prison for life other sex offenders would get open-ended sentences under the bill the house Judiciary finance and policy committee endorsed the bill on a divided Voice vote it now goes to the house civil law committee. Some members questioned. The bills costs are report says the bill would cost the state more than 18 million dollars in 2007 and those costs would increase over time. There's a chance of light snow or flurries in eastern Minnesota today with windy conditions in the west highs today will range from 18 in the north to near 27. In the cell right now in Sioux Falls. It's mostly sunny and 17 degrees still reporter some light snow in Rochester and 10 above it's sunny in Duluth and 11. And in the Twin Cities scattered flurries with a temperature of 12 degrees Gary. That's a look at the latest news. All right. Thanks a lot Greta. It's 25 minutes before twelve over the noon hour. We have a new series that we're going to be debuting. Minnesota Public Radio has started a new live event series called a literary view. It involves noted authors talking about a variety of subjects will last night. First the kickoff event was up at Saint Ben's College of st. Benedict. And st. Joseph's Bill home was the featured author and talk about music and literature in the rest. Apparently a great program. Well, we'll find out what it sounded like over the noon hour today. So I hope you'll be able to stay tuned this hour we're talking about the latest Thunderbolt in the world of retail in our region Target Corporation announcing that it's Decided to try to sell its department store divisions Marshall Fields and Mervyn's joining us here in the studio to talk about what that might mean for our region de Brennan marketing professor at the University of st. Thomas co-director of the University's Institute for retailing excellence and long time st. Paul Pioneer Press business columnist. Dave bill is with us as well. If you'd like to join our conversation again, 6512276 thousand or one eight hundred two, four two two eight two eight or go online at Minnesota Public Radio dot org and click on send a question. Why is it before get back to our listener calls here Y is a Walmart and for that matter Target so wildly popular with the consumer. Is it purely a question of price price price or is there more to it than that? (00:34:37) I think it's mostly price price price people love those low low prices and it's also good management. I mean both Target and Walmart are extremely well managed and know what people want and need and Market to them. And and so those would be the biggest two reasons that fly into my mind. They brother. I think what's happened since the 1950s and thereabouts we've gone from a having high-quality products today to products that are functional that have less expenses associated with them both in terms of the production and the distribution and as a result people are willing very easy and very willing to make the deal that this is a this is got 90% of the value that it used to have but the price is Alpha what it used to be. I'm willing to buy on price rather than to pay full value for something that might have a little bit more whiz-bang to (00:35:44) it. Hmm. Now the top-flight department store is at the other end of the spectrum. Are they still providing the kind of classy service that used to be associated with those places where it might be worth paying a little bit more because you're treated like a king (00:35:59) for the most part. I don't think so. I think a lot of customers and people who are Shoppers at Dayton's four years here that kids would say that the old Dayton's was provided more and better service than Fields has been providing. I mean, I don't think it's bad service at fields and it's a great name. It's a great store, but there are various things that they have done to trim back on the service here and there that I think a number of Shoppers notice de bruyne know what what's your thinking? I would concur in that and I would add a few things that I think what's happened with the traditional department store. First of all with the competition that they've had with not only the specialty stores but also the Discounters in the like that they've been forced to take a sharp pencil to their expenses and one of the area's that's been hard hit has been the employee area. So they have cut down the number of employees which is reduced the service level significantly. They've also cut out certain things that they used to provide free or in a very nominal cost in addition. The merchandising has changed and how it's changed is first of all, most of the department stores handle the same Goods whether or not it's a Liz Claiborne Jones New York, and they sell it for the same price. And if you look at a lot of other things they've really lost the point of differentiation compared to a lot of stores in addition to Pete again with the Discounters they brought in more of their private label merchandise and they've positioned that instead of being at a higher quality. They position it more in the mid range so that they can get higher gross margins and begin to so that that can contribute to their profitability Jerry your question, please (00:37:58) yes, well first comment and that is that I concur with what's been said just now that I think people have noticed a downgrading and in Marshall Fields in their advertising and services when I look through the Flyers on Sunday, there's often nothing that would bring me into the Marshal fuel store. But the target flyer is usually has something which which would and I don't think that the Marshall Fields has fit the Minnesota culture like Dayton's did and people still refer to the stories even as as Dayton's. I think I worked for Dayton's in Rosedale briefly. In it was often the highest in sale in the whole system. So I think if well managed and and not cutting back on some of the services that actually bring people into the stores that it would be that it would be a good one. I wondered if there's any local group that's looking at it. Local group that's looking I suppose maybe to buy by the chains. (00:39:04) I don't know who that would be. I mean, I don't think there's any local group that would be would emerge as a logical buyer. That is in that business of department stores. I don't see any either. I don't see any financial interest that would have the capability or the interest in doing it and certainly somebody coming from outside the retail area the chances of them being successful be pretty (00:39:29) remote retro from st. Paul who sent in an online question noting that your guests and I guess I would be you Dave Bill said that Target and Walmart are both well managed, but Rich says they seem very different to me when I compare visits to each store. Do you agree? (00:39:47) I don't see Walmart enough. I don't go into Walmart that much and so I don't I don't know how good a response I could could give to that but I think the target emphasizes a more upscale kind of a mix than does Walmart and more is is more fashion conscious and that that's one difference that I guess I would sense day Brennan Walmart generally tends to emphasize hard Goods to a greater extent. They also have a much wider number of store keeping units in terms of a greater variety of those and so it has a more generic appeal but it's basically for the lower middle income Shopper and below and in terms of any of the price oriented Shopper true price oriented Shopper is more likely to go to Walmart than Target where you're probably for similar product will paste. Play more for the folks that do shop Target. They like the aisles nice neat and clean. It's bright well-lit merchandises well presented and they also have unique soft goods and that's really their their strength is in the apparel area. (00:41:04) Hmm diminishing Minnesota Shoppers care at all that in this instance. Target is a locally owned company Walmart isn't so that they'd say, ah, I better go to the local guy. Does that make any difference to Shoppers anymore? (00:41:16) I mean, I think they have a certain pride in the fact that Target is here. The Roseville store is the number one target out of 1249 stores now and there's a certain pride in knowing that that was that that company grew up here and there's a wonderful history. We haven't said anything about this, you know, we're always trying to figure out what's going to happen next but it's hard to talk about these things without acknowledging the history of Of Target and of Dayton's and and rare rare is it that you can find the kind of history that the Target and the Dayton stores have of all the things that Target and the date and says done for the community over the years the successes that Dayton's had in surviving as a department store operation when other department store companies retailers flopped in city after City, it's been a wonderful (00:42:17) story for the Twin (00:42:19) Cities and I don't think it went when these kinds of occasions rise, (00:42:23) but we should just (00:42:26) you know, write it off as past history. I mean, it's something to continually celebrate and and I think it's good that we have target-based there. How much is that count for in in bringing Shoppers in I think a fair amount. I mean Tarjay is is part of the (00:42:43) culture they run out of sort of (00:42:46) having seen the numbers. The in a previous lifetime having worked for a Target Corporation. There is a truly a distance Decay that occurs typically in a in the Home Market a company does exceptionally well, they are well respected. But as one moves farther and farther away, it takes longer and longer and they have less impact in the productivity levels generally tend to diminish somewhat. I think there's something else here that in terms of this whole issue will will Mervyn's and Marshall Field's be sold it we can take a look at the past history. Formerly Dayton Hudson has had some experience in terms of with us before and bring up RJ Brandon's in the case where they was a home decorating type of unit that they experimented with down in the south Florida area. And ultimately what happened is it got to about 15 stores? They shut it down. It was not an expandable type of a concept. They did the same thing with a high-end discount women's apparel store out in the LA Basin area and that didn't go they ended up selling that to a Suitor in the case of be Dalton booksellers. They did the same thing and sold that to Barnes and Noble they did that with the jeweler's they also did that with the the center's property development and they also did it in terms of the selling off of there there Dale's and lands in the case of shopping centers in the case of Minneapolis and Detroit. I think the message is clear that very clearly that over time if if those assets are not providing the kinds of returns that are necessary. There's a tendency to sell those office in to refocus more narrowly for And they've gone through this before with others. So this is nothing new. It's just a matter that these units have as Dave is just kind of recanted is far as Dayton's has got a wonderful reputation that they've enjoyed here for over a hundred years now. And so I think that we're kind of revisiting one of those periods of time of re-examination and a refocusing (00:45:12) speaking of the refocusing can we expect in a dramatic change and the level of philanthropy from Target (00:45:19) Corporation? I don't think so. I mean, I think that it's proven to be make sense for them bottom line to give away five percent of their pre-tax profits. And as I mentioned inside Notre Dame my column today, I think that Milton Friedman the famous economist who argues that the shareholders money shouldn't be given away like that is not in the interest of the company. I think some companies General Mills Be another one here have proven them wrong. I mean, I think that it is it has helped their reputation with the things that they do on bought them enough business and they can show that in various ways that it makes sense for them economically to do the philanthropy that they have been doing. However, they're doing it all over the country. Now as they expand all over the country. They may be giving more in Minnesota than they were in the past. But as a portion of all of their giving it's much less in Minnesota because they're so Nation (00:46:16) alone. Mmkay, Brennan, do you anticipate any change one way or the other in the philanthropic levels of giving (00:46:22) no, I would agree with Dave. In fact, I would go in say one additional thing that the Dayton's individually as a family but also as a department store company are the heart and soul of philanthropy in the Twin Cities and that has not been diminished. Even with the passing of the family. Members are T your question, please (00:46:47) Thank you for taking my call. My question is how much say does the date and family have in this can they say that we own the store? You took the name away changed it to Marshall Fields know you're selling the Marshall Field's. I mean that hurts us. Does this have any (00:47:02) value none? I mean basically the Comfort the family is gone. It's like with a lot of other companies that have gone from family ownership to being public and then being owned by most of the big institutions Pension funds mutual funds. So the family is gone when it can date was the last family member to be involved and that was I think in the 80s some time that he stepped away and so the family really has no influence (00:47:35) press so your question, please thank you. I can only imagine the anxiety that the employees of both Mervyn's and Marshall Field's are feeling right now. All this speculation just adds to the sadness. Sorrow that we still mourn over the loss of Dayton's and many other retailers both big and small who are long gone. I deeply resent the Cavalier attitudes of those on Wall Street who say this is welcome news the big Discounters leave a whole lot to be desired and their lack of selection and service. Thank you. All right. Thanks Chris. I sort of agree that Wall Street is pretty (00:48:11) Cavalier in its attitudes and and not very sympathetic to the workers and does not think of very much beyond the bottom line and the stock price Rena and I think that to reinforce that a lot of it is results now not necessarily for the long term. So what might be good for today six months from now if performance changes those same same folks might be saying something else in terms of the actions or the Of of a given retail firm (00:48:50) and in this case the folks at heading up Target Corporation. Are they in a position as the running the company of saying the heck Whittier, we're going to we're going to run this for the what we believe to be the long-term good of the company, even if it hurts our stock price is that even within the bounds of what they're allowed to do. (00:49:12) I think you could go back to the 1987 and look at the haft takeover deal and at that particular point in time the target the date and Hudson Corporation was really going on a long term basis in terms of their strategic planning in the like and they hit some bumps in the road and we're not providing the kinds of financial results That Wall Street wanted and it gave an opportunity for the halfs to come in and make a hostile bid for them. And so I think that underscores The problem that you have is if you do that you run the risk of depressing your stock value and making it attractive for another firm to come in by the firm and to sell off the assets and perhaps operate to the remaining assets as a different unit or even sell that off they bail. Well, I don't think that's right. I don't think it's a very happy marriage these days between Wall Street and a lot of the workers of America that is running issue that we see stories about every day in the paper and there are a lot of favorable forces working for Capital as opposed to labor these days and you see that in situation after situation online question raises an (00:50:36) interesting issue. I think David from Rochester has a question for the to Dave's here in the studio. He says the internet is changing how we For goods and services. He says I buy most of my specialty items online longer term. What kind of impact is internet going to have in all of these stores? (00:50:59) It's already having an impact. If you took a look at sales for the most recently completed year was about fifty four billion dollars in sales were done through e-commerce. And that's up 20 little over 25 percent from the previous year. If you look at what's happening with the target Corporation, they have expanded their catalog operations initially as well as purchasing Rivertown trading in the catalog area. They have now jettisoned some of the individual catalogs and are trying to move people from catalog Shoppers into internet Shoppers because of the cost of doing business on the Internet is so much less expensive. Plus it also does something that Marshall field is trying to Not only with the stores, but they can and the internet they can stock many more store keeping units or individual products than they possibly could in individual stores. So they're trying to make it more of a virtual store and and operate that way. So it's a less costly and add some value in terms of the product selection. Mmm. Hey Bill, I mean, I think it's happening. But what's the percentage of the sales of Target that are over the internet at this point is it's not it's still single digit, isn't it? Yeah, it's pretty pretty small. In fact, if you looked at internet sales as a percent of total retail sales last year was one point five percent. I think the key is that it's growing its growing in rapidity and that over time what it's doing is eroding the the increase in sales. So it's it's undermining the growth potential which undermines that not only the top line number for retail stores, but Bottom line because of the expense structure continues to grow (00:52:50) Linda a quick question here before I wrap up. I wanted to ask in particular about the St. Paul Marshall Field's store. I think I remember that when it was Dayton's the city offered the company some kind of a deal to keep that store open and I'm wondering if a new owner would be expected to honor that. (00:53:09) Well, I think the new the city would certainly want the new owner to honor that. I don't know what the legalities of the deal are the city subsidized Dayton's and help them and Marshall Field's to stay downtown here and it's a good question and we should look the answer up for (00:53:30) paper. Any guess day Brennan. (00:53:33) I think that would be a negotiable thing. I think one of the one of the one of the problems I think in terms of the downtown st. Paul store is a recognition that it is not heavily shopped and it's primarily for the folks that work downtown and perhaps live downtown but it's not a destination for a most Shoppers. They're more likely to go to Rosedale or one of the other Marshall Field's (00:54:00) stores. Pretty much catastrophic though. Wouldn't it Dave bailiff if that store closed in Downtown st. Paul? (00:54:06) Basically all that's left in terms of retail. It would certainly be a huge loss any (00:54:12) danger that the target Corporation will move its headquarters out of Minnesota in the ever-evolving world of retail. (00:54:21) I don't I don't see any danger of that at this point. I don't know why they would want to do that. They have all these assets buildings here people and it wouldn't it wouldn't make very much sense. Hmm. I think Brennan I think it's very unlikely. I think you know, not only because for historical reasons, but they have got so much infrastructure both hard infrastructure in terms of two brand new Office Buildings in Downtown Minneapolis as distribution centers, but they also have a large number of corporate employees that are are here and we're talking probably something on the order of about 5,000 people to move that number of people to someplace else. I don't know that that makes a whole lot of sense Mmm (00:55:09) Yeah. Somebody buys the Marshall Field's department stores. Is there any chance that whoever buys this will say? Hey, let's put the Dayton's name back on those stores at least here in Minnesota. (00:55:22) I don't think so. Well, I don't think so. It seems like he'd be (00:55:26) at least here you'd be able to sell a heck of a lot (00:55:28) more. Well, they've already been rebranded as field stores and whether someone like a Federated would want to Rebrand them as Macy's stores given that they have a Macy's here already. Should they buy them? I don't know that might be an issue for them. But that would be more the question. I would think than whether they would want to go back to Dayton's but it's an interesting thought kind of a fun one to play with and maybe be a good column but he begged a bright-eyed out that for one of the for one reason is a lot of the merchandise in there would bear the name of the the parent firm whether or not it's am a company or a Federated Federated as an example has is going through the process now, they've kept I mean Dale's but all of the traditional department stores that are under the Federated deal are being changed to blank in terms of Macy's. So all the stores are becoming Macy's stores with a - (00:56:26) well, it seemed like a good idea. Hello Maisie bottom line your gentleman for people who tuned in late very briefly Dave Brennan. Do you expect these two divisions to be sold when all is said and done? (00:56:42) It's a matter of time. But I think that it's more likely something in there's more pressure. As far as the Mervyn's to be sold. I think they're if it isn't sold say within a year or so, I think it will be it's very likely that it'll be spun off in the case of Marshall Fields. I think there is a good possibility. It will be sold a veil. That sounds reasonable to me (00:57:06) gentlemen. Thanks for coming over today and thank Continue to pump for the Dayton's idea talk talking this our about the Target Corporations announcement that it is put its department store divisions Marshall Fields and Mervyn's up for sale. We take a break for news when we come back. We're going to hear from a Minnesota original Bill home programming is supported by the Minnesota Association of Realtors committed to being a voice for real estate in Minnesota representing 18,000 professionals involved in all aspects of the residential and Commercial Real Estate Industries. This is Minnesota Public Radio. Have any does this make us any less buried? I truly hope not thanks to everybody who wrote most weeks we read from. Well that was supposed to be that was Neal Conan, of course and that was supposed to be one of those slick radio promos telling us what to Neal was going to have on his program it obviously wasn't that and frankly off the top of my head. I don't remember what Neil's going to have on at one o'clock. We just got program talking the nation one o'clock here on Minnesota Public Radio your to 91.1 Cantor wfm Minneapolis. And st. Paul gotta love that live radio flurries and nine degrees above windchill 11 below here in the Twin City area. And the Weather Service says we can look for a partly cloudy Sky through the afternoon. It might get up to 15 degrees, but those strong winds will make it feel a lot colder tonight partly cloudy overnight low just 5 degrees above zero tomorrow. It will warm up partly cloudy with a high near 35.