One year after publicizing its intent to sell off its credit card portfolio, Target has revealed that those plans are temporarily on hold. The second-largest discount retailer in the United Sates was in talks with a few potential buyers, although interest in the credit card receivables portfolio was limited. According CEO Gregg Steinhafel`s 2011 announcement, the plan was for Target to use the cash generated by the sale to purchase more stock and pay down some debts. Their announcement to hold off on making a sale caused shares to drop by 2.4%.
As of Wednesday, Target is opting to shelve efforts to unload the portfolio in order to focus on paying off financing it has with Chase. They will pay Chase close to $2.8 billion to retire the financing in advance of the initial payoff date in late 2013. Target gave no other explanation for their delay in selling the portfolio. The discount retail chain now anticipates the sale of receivables to go through either late this year or in the early part of 2013, roughly one year later than originally hoped.
“Our desire to sell the portfolio on appropriate terms remains the same today as it was when discussions began, but we believe that now is not the time to finalize a transaction,” said Target`s CFO Douglas Scovanner, according to Business Week.
Scovanner is set to retire on March 31and as of yet no successor has been named. He has been with the company for 15 years. He has a big supporter of the sale.
Target is only looking to sell off the debt owed by cardholders while retaining control of credit card operations. Those credit cards are an integral part of one of their key marketing strategies.
Target has been struggling on a number of fronts recently. Management turnover, weak in-store traffic, issues with their website leading to a disruption in Internet and a second weak holiday season in a row are a few of the more pressing problems. Their December same-store sales numbers rose just 1.6% as opposed to the 3.3% gain analysts forecast.
By adding PFresh grocery sections and offering shoppers 5% all purchases on debit and credit cards issued by the company, Target managed to boost sales.