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History of Target Department Stores

Target Corporation is the fourth largest retailer in the United States, operating 1,556 stores in 47 states. Formerly Dayton Hudson Corporation, Target has three main retail divisions: Target Stores, Mervyn’s, and Marshall Field’s. Target Stores is the number two discount retailer in the country, trailing only Wal-Mart Stores, Inc. , and has distinguished itself from its competitors by offering upscale, fashion-conscious products at affordable prices. The 1,225 Target stores, which are located in 47 states, generated 84 percent of Target’s fiscal 2002 revenues.

Target Corporation’s full-service department store division, contributor of 6 percent of sales, is now consolidated under the Marshall Field’s banner. Target Corporation’s philanthropy has been and still is legendary. In 1989 the corporation received the America’s Corporate Conscience Award for its magnanimity, and Target contributes more than $2 million each week to the communities in which its stores are located. Dayton, with no previous experience in the retail trade, wielded tight control of the company until his death in 1938.

His principles of thrift and sobriety and his connections as a banker enabled the company to grow. Obsessed with punctuality, he was known to lock the doors at the onset of a meeting, forcing latecomers to wait and apologize to him in person afterwards. The store was run on strict Presbyterian guidelines: no liquor was sold, the store was closed on Sunday, no business travel or advertising was permitted on the Sabbath, and Dayton Company refused to advertise in a newspaper that sponsored liquor ads.

This approach did not stifle business; Dayton Company became extremely successful. A multimillion-dollar business by the 1920s, Dayton Company decided it was ready to expand, purchasing J. B. Hudson & Son, a Minneapolis-based jeweler, in 1929, just two months before the historic stock market crash. World War II did not hamper business; rather, Dayton’s turned the war into an asset. Consumer goods were so scarce that it was no longer necessary to persuade shoppers to buy what merchandise was available.

Sales volume increased dramatically thanks to Dayton’s managers, who obtained goods to keep the store full. The safe, conservative management style favored by George Draper Dayton and his son Nelson passed into history; a younger, more aggressive management pushed for radical expansion and innovation would follow in its wake. The company established the discount chain Target in 1962, opening the first unit in Roseville, Minnesota. In 1967 the company changed its name to Dayton Corporation and made its first public stock offering.

The merger resulted in Dayton Hudson Corporation, the 14th largest retailer in the United States. Dayton Hudson stock was listed on the New York Stock Exchange. Also in 1979 the Target chain become Dayton Hudson’s largest producer of revenue, eclipsing the department stores upon which the firm was founded. While the Dayton’s, Hudson’s, and Marshall Field’s department stores offered the monies customer more costly and sophisticated merchandise, the popular Target and Mervyn’s catered to the budget-conscious customer, offering apparel and recreational items on a self-service basis.

With the approach of the 21st century, Target continued to be Dayton Hudson Corporation’s biggest moneymaker, combining a successful business mix of clean, easy-to-navigate stores with quality, trend-responsive merchandise. The year 1990 saw the opening of the first of over 50 expanded Target Greatland stores; in 1995, following the lead of such rivals as Wal-Mart and Kmart, the company opened its first Super Target, which combined the chain’s successful general merchandise mix with a grocery store. Along with expanding its traditional department stores along the East Coast, six new Super Targets were planned for 1996 alone.

Also introduced in 1995 was the Target Guest Card, the first store credit card in the discount retail industry. By 1998 the Guest Card had attracted nine million accounts. In 1994 Target executive Robert J. Ulrich was named chairman and CEO of Dayton Hudson. In that same year the company began a new strategy: developing a “boundary less” corporate structure wherein resources and marketing and management expertise could be shared by each of the three divisions to create a more efficient organization.

In 1996 Ulrich launched a three-year program to cut $200 million in annual operating expenses, particularly at the underperforming Mervyn’s and department store units. By early 1997 the Dayton Hudson Corporation consisted of three major autonomously run operating units: Target, with 735 discount stores in 38 states, represented the company’s primary area of growth; the moderately priced Mervyn’s chain operated 300 stores in 16 states, and the upscale Department Store Company operated 22 Hudson’s, 19 Dayton’s, and 26 Marshall Field’s stores.

Such broad-based expansion from the first six-story building in which Dayton was housed no doubt would have stunned the company’s founder. Capital expansion, as well as more varied retailing, had taken their place alongside the old policies of thrift and sobriety. Ulrich’s cost-cutting efforts, the trimming of Mervyn’s and Marshall Field’s, and–most importantly–the juggernaut that Target had grown into combined to bring unprecedented levels of profitability to Dayton Hudson by the end of the 1990s. While revenues increased to $33. billion by fiscal 1999, net income passed the $1 billion mark for the first time, reaching $1. 14 billion, translating into a profit margin of 3. 4 percent. This represented a near tripling of the 1996 profits of $463 million and a near doubling of the profit margin that year, 1. 8 percent. These results were driven primarily by the Target chain, which had become one of the hottest commodities in retailing. Ulrich had concentrated on making Target a hip chain featuring stylish products at bargain prices.

Through such innovations Ulrich succeeded in clearly setting Target apart from its discount competitors–even leading some customers/fans to use a fancy French pronunciation of the chain’s name: Tar-zhay. Meantime, the chain continued to grow at the rate of about 70 stores per year, expanding into the key urban areas of Chicago and New York City, as well as making a more widespread push into the Northeast. As a result, the 900-strong Target chain was generating more than three-quarters of Dayton Hudson’s revenues by decade’s end, compared to around half ten years earlier.

The growing predominance of the discount chain led the corporation to rename itself Target Corporation in January 2000. Profits reached $1. 65 billion, despite the continuing struggles of the Mervyn’s and Marshall Field’s divisions, where earnings were on the decline. Rumors continued to swirl about the possible divestment of one or both of these divisions, neither one of which was adding to its store count (Marshall Field’s in fact sold its two stores in Columbus, Ohio, in 2003).

Ulrich consistently denied such rumors, however, and thus far the stellar success of the Target Stores division had more than made up for the disappointing performance of Target Corporation’s other retail units. On March 10, 2004, Target Corporation announced it had hired Goldman Sachs Group to analyze options for selling its Marshall Field’s and Mervyns chains of department stores. Three months later, on June 9, 2004, Target Corporation announced its sale of the Marshall Field’s chain and several Mervyns stores to St. Louis, Missouri-based May Department Stores, which became effective July 31, 2004.

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