US discounter Target promises to be a leaner, more aggressive opponent for Wal-Mart, after scooping US$1.65 billion (£904 million) from the sale of mid-market department store chain Mervyn's.
The new slimline Target is now free to devote all management attention to the core 1,272-store general merchandise chain, having shed excess department store baggage.
It completed the disposal of Marshall Fields to May Department Stores for US$3.2 billion (£1.75 billion) in July.
The 257-store Mervyn's chain has been acquired by an investment consortium made up of Sun Capital Partners, Cerberus Capital Management and Lubert-Adler/Klaff and Partners. Target has also sold the credit card business to GE Consumer Finance for US$474 million (£259.7 million).
The future of the US$3.6 billion (£1.97 billion) turnover Mervyn's business looks uncertain, with industry sources predicting a 'scorched earth turnaround plan'. Sun Capital closed 150 stores when it purchased US entertainment chain Sam Goody last year.
Target intends to use the US$3 billion (£1.64 billion) net proceeds for share buybacks over the next two to three years, with the remaining $1.1 billion (£602.7 million) used for debt reduction.
Target's sales for the five weeks to July 3 rose 8.1 per cent to US$4.5 billion (£2.47 billion), with same-store sales up 2.3 per cent on the same period last year.
Similarly, department store group JC Penney plans to use a windfall from selling drugstore chain Eckerd to buy back shares and wipe out debt.
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