Filed under: Rumors, Products and services, Target Corp. (TGT)
In what I would have considered a minor shocker a few quarters ago, Target Corp. (NYSE: TGT) is rumored to be looking for a suitor for its internal credit card division. Target frequently highlights the decent revenue its credit card operations bring in every single quarter, but with activist investor William Ackman pressuring Target’s board to get rid of non-retail assets, a sale may indeed be on the near horizon.
Now, this is where things get odd. When covering Target’s quarterly calls last year, execs (including CEO Bob Ullrich) stated many, many times that the retailer had no interest in selling its credit card operation. Why? At the time (and still today), the unit brings in a decent chunk of quarterly revenue, although receivable amounts on the books have raised investor eyebrows in some quarters. Still, why sell a profitable business and one that can partially smooth out the ups and downs of retail every year?
Target may be bowing to Ackman since he now controls just under 10% of Target’s shares. Are activist investors intimately knowledgeable about the operations of the companies they own? Perhaps, perhaps not. Unless Ackman would like to see Target operate on a retail-only business model, why would he want the retailer to shed its credit card business, which remains profitable? Would Target customers see changing service levels if the credit card business was sold to some other company with lower standards? Target has said it does not want that to happen. However, anything can happen in an effort to pacify large shareholders.
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