Dayton Hudson Plans $4-Billion Expansion

Dayton Hudson Corp. said Tuesday that it plans to spend $4 billion expanding its retail operations from 1986 through 1990, with growth concentrated in its successful Target Stores and Mervyn’s divisions.

The spending plan, which was announced to securities analysts in New York, represents a 25% boost from the $3.2 billion projected in the retailer’s previous five-year plan for the period through 1989. The plan will more than double the number of stores in the Mervyn’s chain and add about half again as many to the Target division.

The new plan also cuts back sharply on proposed expansion of the company’s B. Dalton Bookseller and Pickwick bookstore chains.

Entering Other States

Kenneth A. Macke, chairman and chief executive, told analysts that Mervyn’s will open about 160 stores between now and 1990, up from 140 in the earlier plan, and that Target will start up 117 outlets, compared to 72 in the previous plan.

The fast growth will give Hayward, Calif.-based Mervyn’s a more national scope. Mervyn’s, which now has stores in 10 states on the West Coast and in the Southwest, will enter the Tulsa, Okla., and Atlanta markets in 1986 and establish a store in Florida in 1987. Spokeswoman Valerie Cooke said the chain later will announce new locations in the Midwest as well. Mervyn’s is an apparel and housewares retailer that offers brand-name and private-label goods, often heavily promoting discounted items.

Of Mervyn’s existing 148 stores, 83 are in California.

Minneapolis-based Target, a so-called upscale discount merchandiser, will be adding 21 stores next year, including six in the Los Angeles area. California is now the chain’s second-largest market with 32 of 226 stores.

“The excitement really is with Mervyn’s and Target,” said Walter F. Loeb, an analyst with Morgan Stanley & Co. in New York.

N. Richard Nelson, an analyst with Duff & Phelps in Chicago, said: “Both Target and Mervyn’s are extremely successful concepts.” He said Target’s sales and earnings have risen at a 26% compounded annual rate during the last five years, while Mervyn’s sales have grown at a 27% compounded rate and its earnings at a 33% annual rate. Growth prospects for both divisions are “very good looking over the next five years,” he said.

Fewer New Bookstores

Meanwhile, the luster is off the B. Dalton and Pickwick bookstores. Boake A. Sells, president of Dayton Hudson, said B. Dalton, which now operates 746 stores, will add only 150 more during the five-year period, down from a planned 200 stores in the five years ending in 1989. Pickwick, the company’s experiment in discount bookselling, has 38 stores and is not expected to add any during the next five years. Under the earlier plan, it would have opened 100 stores.

Sells acknowledged that the book retailing division is facing stiff competition from chains that sharply discount prices.

Dayton Hudson stock closed Tuesday on the New York Stock Exchange at $39.25 a share, up $1.125.