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May 26, 2011

  • News:  Target Struggles To Sell Card Portfolio 

    Target Corporation is planning to expand to Canada despite the fact that they face challenges that could delay the sale of their credit card portfolio. In January they announced their intensions to sell the portfolio but as of a report filed Thursday with the U.S. Securities and Exchange Commission, they were having difficulties making a sale. The report stated they plan to make a deal only if the "appropriate strategic and financial conditions are met." They go on to say their ability to sell the portfolio is affected by the small number of possible buyers, an inactive market, the complexity of the deal and size of the portfolio. Target offers two cards, one is specifically a store credit card and can be used at Target Stores and Target.com, the other is a Target Visa that can be used anywhere credit cards are accepted.

    In the first quarter of this year, ending April 30, Target's credit card unit posted sales of $355 million, or 2.2 percent of the company's total revenue during that period. The unit's profit was $194 million, representing about 28 percent of the retailers total first quarter earnings. In the regulatory filing they stated that card revenues consist of finance charges, late fees and third party merchant fees, which is money received by merchants that accept payments via Target's Visa card. In 2008 Target sold off part of the credit card receivables to JP Morgan Chase for 3.6 billion.

    With the credit card unit still on the market, the store looks to their future expansion into Canada where they plan to open between 100 and 150 stores throughout Canada in 2013 and 2014. They plan to take over the leases of up to 220 Zellers store sites at a cost of $1,825 billion in Canadian currency or about $1,846 in U.S. currency.

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