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Target Corporation is a growth company focused exclusively on general merchandise retailing. Our principal operating strategy is to provide exceptional value to American consumers through multiple retail formats ranging from upscale discount and moderate-priced to full-service 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. Included in this store count are Target Greatland units, which are much larger than the typical Target store, averaging 145,000 square feet versus 126,000 square feet; as well as SuperTarget outlets, which are combined discount/grocery stores, averaging 175,000 square feet. Generating 9 percent of 2002 revenues were Mervyn's 267 stores situated in 14 states, primarily in the West, Southwest, and Midwest (specifically Minnesota and Michigan). Based in the San Francisco Bay area, Mervyn's positions itself as a chain of moderately priced, family friendly, neighborhood department stores. Target Corporation's full-service department store division, contributor of 6 percent of sales, is now consolidated under the Marshall Field's banner. The 62 Marshall Field's stores (which include locations that formerly operated under the Dayton's and J.L. Hudson's names) are located in eight states in the upper Midwest, with the majority found within three metropolitan areas: Minneapolis, Chicago, and Detroit. 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.
Target Corporation bears the strong imprint of its founder, George Draper Dayton. Dayton's father, a physician in New York state, could not afford to send him to college, in part because the doctor freely gave his services to the poor. Hence Dayton set off on his own in 1873 at age 16 to work in a coal and lumberyard. A workaholic, he undermined his health and a year later had to return to the family home to recuperate. Undeterred, he went on to become a banker. Less than ten years later, in 1883, he was rich enough to buy the Bank of Worthington in Minnesota. Meanwhile he had married and had become active in the Presbyterian Church.
Dayton's connection with the Presbyterian Church proved to be instrumental to the rise of his Dayton Company. In 1893, the year of a recession that sent local real estate prices tumbling, the Westminster Presbyterian Church in Minneapolis burned down. The insurance did not cover the cost of a new building, and the only other source of income, a corner lot next to the demolished church, was unsalable because the real estate market was doing poorly. The congregation prevailed on the Dayton family, who were faithful members of the church, to purchase it so the building of a new church could proceed. Dayton bought it and eventually erected a six-story building on the lot. Casting about for tenants, he decided to buy the nearby Goodfellow Dry Goods store and set it up in the new building. In the spring of 1902 the store was known as the Goodfellow Dry Goods store; in 1903 the corporate name was changed to Dayton Dry Goods Company, then seven years later simply Dayton Company, the forerunner of Dayton Hudson Corporation and, ultimately, Target Corporation.
Eventually the store would expand to fill the six-story edifice. 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. As long as he was at the helm, the store was run as a family enterprise. Every Christmas Eve he would hand out candy to each employee of the store. 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.
Dayton Company managed to weather the Great Depression, although its jewelry company operated in the red for its duration. Dayton's son David had died in 1923 at age 43, and George turned more and more of the company business over to another son, Nelson. George Draper Dayton died in 1938. He left only a modest personal fortune, having given away millions of dollars to charity. In 1918 the Dayton Foundation had been established with $1 million.
Nelson Dayton took over the presidency of Dayton Company in 1938, when it was already a $14 million business, and saw it grow to a $50 million enterprise. 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. Nelson Dayton was scrupulous about complying with the government's wartime control of business and when, for instance, the government carried out its drive for scrap metal, he ordered the store's electric sign dismantled and added to the scrap heap. Until Nelson Dayton's death in 1950, the company was run along the strict moral lines of his father, its founder. In January 1944 Dayton's became one of the first stores in the nation to offer its workers a retirement policy, followed in 1950 by a comprehensive insurance policy.
Shedding Conservative Image, Launching Target: 1950s-60s
With Nelson Dayton's death in 1950, Dayton Company embarked on a new era. Instead of one-man rule, the company was led by a team of five Dayton cousins, although one of them, Nelson's son Donald Dayton, assumed the title of president. The prohibition of liquor in the store's dining rooms was dropped, and soon Dayton Company would be completely secularized, advertising and doing business on Sunday.
The new management of Dayton Company undertook radical and costly innovations. In 1954 the J.L. Hudson Company, which would eventually merge with Dayton's, opened the world's largest shopping mall in suburban Detroit. It was a great success, and two years later Dayton Company decided to build a mall on a 500-acre plot of land outside of Minneapolis. Horrified to learn that Minneapolis had only 113 good shopping days a year, the architect decided to build a mall under cover; Southdale, the first fully enclosed shopping mall in history, was the result, with Dayton's as one of its anchor stores.
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, and in 1966 decided to enter the highly competitive market of retail bookselling, opening B. Dalton Bookstores.
In 1967 the company changed its name to Dayton Corporation and made its first public stock offering. That year, it also acquired San Francisco's Shreve and Company, which merged with J.B. Hudson to form Dayton Jewelers. In 1968 it bought the Pickwick Book Shops in Los Angeles and merged them with B. Dalton. Also in 1968 the company acquired department stores in Oregon and Arizona. The following year brought the acquisition of J.E. Caldwell, a Philadelphia-based chain of jewelry stores, and Lechmere, a Boston retailer.
Acquiring Hudson's, Mervyn's, and Marshall Field's: 1969-90
The year 1969 also saw a major acquisition: the Detroit-based J.L. Hudson Company, a department store chain that had been in existence since 1881. 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.
With the merger, the Dayton Foundation changed its name to the Dayton Hudson Foundation. Since 1946, 5 percent of Dayton Company's taxable income was donated to the foundation, which continued to be the case after the merger. The foundation inspired the Minneapolis Chamber of Commerce in 1976 to establish the Minneapolis 5% Club, which eventually included 23 companies, each donating 5 percent of their respective taxable incomes to charities. By the close of 1996 the foundation had donated over $352 million to social and arts-based programs.
Dayton Hudson bought two more jewelers in 1970--C.D. Peacock, Inc., of Chicago, and J. Jessop and Sons of San Diego. Company revenues surpassed $1 billion in 1971.
California-based Mervyn's, a line of moderate-price department stores, merged with Dayton Hudson in 1978. That year Dayton Hudson became the seventh largest general merchandise retailer in the United States, its revenues by 1979 topping $3 billion. Also in 1979 the Target chain become Dayton Hudson's largest producer of revenue, eclipsing the department stores upon which the firm was founded.
Dayton Hudson bought Ayr-Way, an Indianapolis-based chain of 50 discount stores, in 1980, and converted those units to Target stores. In 1982 the company sold Dayton Hudson Jewelers to Henry Birks & Sons Ltd. of Montreal, and in 1986 it sold B. Dalton to Barnes & Noble, Inc. In 1984, meantime, the operations of the company's two full-service department stores were combined into a new unit called the Dayton Hudson Department Store Company, though the Dayton's and Hudson's units themselves retained their separate identities. Revenues topped the $10 billion mark in 1987.
The late 1980s found the company the focus of an unsolicited takeover bid by the Dart Group, which would involve lawsuits by both parties before a stock market crash in October 1987 ended the takeover attempt. A second attempt at takeover of the company would be made nine years later, when rival J.C. Penney Company, Inc. offered more than $6.5 billion for the retailer. The offer, which analysts considered an undervaluation of the company's worth, was rebuffed. Meanwhile, Dayton Hudson continued its acquisitions, purchasing Marshall Field & Company from BATUS Inc., the U.S. subsidiary of B.A.T. Industries PLC, in 1990 for about $1 billion. Venerable Marshall Field's was as much a landmark in the Chicago area as Dayton's was in Minneapolis and the Hudson's stores were in Detroit; the acquisition added 24 department stores to Dayton Hudson's Department Store division while also doubling its department store retail space.
Launching Target Greatland, SuperTargets, and the Target Guest Card: 1990-95
While the Dayton's, Hudson's, and Marshall Field's department stores offered the monied 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 SuperTarget, 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 SuperTargets 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.
The proliferation of shopping malls and the recessionary economy of the early 1990s caused sharp changes in consumer spending patterns throughout the United States. By 1996 the country could boast 4.97 billion square feet of retail space--an average of 19 square feet per person nationwide--but retailers felt the pinch caused by such a large number of stores courting increasingly spending-shy consumers. This situation most negatively affected the mid-range and upper-range sales volumes generated by stores on the level of Mervyn's, Dayton's, Marshall Field's, and Hudson's. In response, Dayton Hudson developed new merchandising, customer service, and advertising strategies in an effort to stabilize these units' falling sales volumes. Mervyn's focused greater reliance upon national brands, coupling this with the growing use of print advertising and market expansion through the acquisition of six Jordan Marsh stores and five Lord & Taylor stores in south Florida. Dayton's, Hudson's, and Marshall Field's courted the upscale consumer through an increased mix of unique, quality merchandise, an increased emphasis on customer service, and an increased sales-floor staff, all of which heralded a return to the "old-fashioned service" on which Dayton Hudson was founded. Meanwhile, the Department Store unit worked to reduce inventories and invest in remodeling and technologically enhancing some of its older stores.
Reaching New Heights Under Ulrich: Late 1990s and Beyond
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 "boundaryless" 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.
During 1997, as part of its drive to turn around the Mervyn's chain, Dayton Hudson sold off or closed 35 Mervyn's outlets, including all of that chain's stores in Florida and Georgia. The late 1990s also saw a retrenchment on the department store front, as Dayton Hudson sold its Marshall Field's stores in Texas and also closed its Marshall Field's store in downtown Milwaukee.
Dayton Hudson also continued its efforts to give back to the communities that it served. During 1997 the corporation and its retail divisions made grants of approximately $39 million, including $2.8 million in scholarships that were given to high school seniors who had been involved in their communities. That year, the Target chain launched its Take Charge of Education program, which quickly became one of the corporation's most popular community support efforts. The program allowed Target Guest Card holders to sign up the school of their choice to receive 1 percent of their Guest Card purchase amounts. Within two years, more than 300,000 schools were registered and more than $800,000 had been given to these schools.
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 $33.7 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. For example, in early 1999 the chain began selling top-end Calphalon cookware and also launched a line of stylish small appliances and household goods designed by architect Michael Graves--the latter line becoming so popular that it quickly grew to include more than 500 items. 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.
During this same period the corporation quietly developed an e-commerce strategy that involved managing its own online distribution. It bought Rivertown Trading Company, a Twin Cities-based mail-order firm, in 1998 for $120 million to handle fulfillment, marketing, and distribution services for the e-commerce efforts of all the corporation's retail units. Online retailing gained a larger profile in early 2000 with the formation of a separate e-commerce unit called Target Direct. New store brand web sites were launched later that year.
The Internet push also played a role in more name changes. In January 2001 the corporation announced that it would change the names of its Dayton's and Hudson's department stores to Marshall Field's. Target was planning to launch an online gift registry during 2001 and wanted to do so under a unified department store name. Marshall Field's was chosen for several reasons: it was the most widely known of the three names, its base of Chicago was bigger than both Minneapolis and Detroit and was a major travel hub, and it was the largest chain, with 24 stores, compared to 19 Dayton's and 21 Hudson's.
At Target Stores (the official name of the discount division), meantime, use of the Target Guest Card began to plateau as consumers gravitated more to third-party Visa and MasterCard cards, cutting their use of private-label cards. Testing began on a Target Visa card in the fall of 2000, and by early 2003 nearly six million Guest Card accounts had been converted to the new Visa card. The Target chain itself kept expanding in the early 2000s, adding 62 discount stores to the total as well as 32 new SuperTarget stores during fiscal 2002, bringing the overall total to nearly 1,150 and the SuperTarget count to around 100. By this time, the Target Stores division was generating 84 percent of the parent company's revenues. 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.
Principal Subsidiaries: The Associated Merchandising Corporation; Dayton's Commercial Interiors, Inc.
Principal Divisions: Target Stores; Mervyn's; Marshall Field's; Target Financial Services; target.direct.
Principal Competitors: Wal-Mart Stores, Inc.; Kmart Corporation; J.C. Penney Corporation, Inc.; Sears, Roebuck and Co.; Federated Department Stores, Inc.; The May Department Stores Company; The TJX Companies, Inc.; Kohl's Corporation; Dillard's, Inc.; Nordstrom, Inc.; Saks Incorporated; Ross Stores, Inc.
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