Dayton Hudson Forecasts Profit Dip; Mervyn’s Cited
Dayton Hudson Corp. said Tuesday that a “substantial profit decline” at its Mervyn’s division will contribute to lower second-quarter earnings.
“Based on current estimates, we will report first-half earnings that are approximately flat,” Chairman and Chief Executive Kenneth A. Macke said in a statement.
He indicated that poor earnings by the Mervyn’s unit and specialty store businesses offset “strong earnings growth” at its Dayton Hudson department store chain and its Target discount chain.
Macke elaborated on second-quarter projections in an interview with the Dow Jones News Service, saying the Minneapolis-based retailer is comfortable with Wall Street estimates of between 36 cents and 39 cents a share for the period ended Aug. 2, compared to 42 cents a share in the year-ago period.
The Mervyn’s stores were hurt by a restructuring and by slow sales in the depressed Oil Patch states and by the tough competitive environment in Southern California, Macke said. Mervyn’s, which heavily promotes items such as apparel and housewares, has 158 stores, including 38 in Southern California. It operates in 11 states, including such major oil-producing areas as Texas, Oklahoma, Colorado and Louisiana, and has plans to enter Georgia this fall with a store in Atlanta.
In an effort to cut costs, the division last March closed a merchandising facility in Plano, Tex., and moved those operations to its Hayward, Calif., headquarters. About 200 jobs were eliminated. The cost savings should become evident in the fourth quarter, Macke said.
A Mervyn’s spokeswoman said the unit is proceeding with plans to open 27 stores this year, including three in California. Mervyn’s also has announced plans to enter the Midwest market, with seven openings in Michigan slated for next year.
Macke cited two other reasons for the expected decline in quarterly earnings. In the specialty merchandising segment, B. Dalton Bookseller’s profit was reduced by a major discounting program. The company’s earnings also were reduced by 3 cents per share as a result of the closing--announced in June--of Pickwick Discount Books.
In composite trading Tuesday on the New York Stock Exchange, Dayton Hudson shares closed up $1 at $44.25.
