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May Buying Marshall Field's From Target

MINNEAPOLIS - May Department Stores Co. announced yesterday that it will pay $3.24 billion in cash to purchase the Marshall Field's division from Target Corp., according to the Associated Press.

The move gives St. Louis-based May a much larger Midwest footprint, with 62 Marshall Field's stores, mostly in the Chicago, Detroit, and Twin Cities areas, as well as three distribution centers, nine Mervyn's locations in the Twin Cities, and about $600 million owed on Marshall Field's credit cards.

According to analyst Robert Buchanan of A.G. Edwards & Sons in St. Louis, May will be able to run the stores more efficiently, and therefore more profitably, than Target had. The company already runs 438 department stores, including Lord & Taylor and Filene's.

"This is a banner day for May," company chairman and chief executive Gene Kahn told AP. "I think that it makes us a stronger company. It fills in a vital geographic hole within the Midwest market."

May intends to keep the Marshall Field's name and run it as a stand-alone division based in Minneapolis. The company said it would offer jobs to all 25,000 Marshall Field's employees. "We fully intend to retain the distinctiveness of Marshall Field's as an upscale retailer," Kahn said.

Target plans to repurchase $3 billion worth of stock over the next two to three years.

May said it expects the sale to close in late July or early August, with Marshall Field's raising earnings beginning in fiscal 2005.

Target said in March that it would review "strategic alternatives" for Marshall Field's and Mervyn's, its San Francisco-based midpriced chain. The review of Mervyn's is ongoing. The nine Twin Cities Mervyn's stores being sold to May will close, according to Target. May spokeswoman Sharon Bateman said the Mervyn's stores would either become Marshall Field's or be redeveloped. She added that the company wouldn't bring any of its other stores into the Twin Cities at those locations.

The closures will leave 780 employees jobless, but Target said it would allow them to apply for other positions within the company.

Although Marshall Field's was a good buy for May, it's perhaps not such a good fit, according to George Whalin, president of Retail Management Consultants in San Marcos, Calif. "May Co. typically has run down-and-dirty department stores that jam a lot of merchandise and run them pretty lean without much help, so they don't have a lot of service," he said. That's a world away from the upscale image Target has cultivated at Marshall Field's, he added.
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