By Randy Tucker
The Cincinnati Enquirer

The company that revolutionized the department store business in the 1950s is set to jettison two of the industry's most familiar names, and Cincinnati-based Federated Department Stores could bid for at least one of them.

Target Corp., which operates eight of its namesake discount stores in Greater Cincinnati but no department stores, said it will consider selling its Mervyn's and Marshall Field's stores. It has hired New York investment firm Goldman Sachs to broker a possible sale.

"As responsible stewards of the corporation's assets, we believe that it is appropriate at this time to identify and evaluate possible strategic alternatives," Target chairman and CEO Bob Ulrich said in a statement.

Federated officials declined to comment. But that didn't curb speculation from industry watchers.

"Marshall Field's would definitely be a good fit for Federated," said Joseph Beaulieu, a retail analyst with Morningstar Inc. in Chicago. "They carry similar lines and have similar clientele. I think Federated would definitely be interested in Marshall Field's at the right price. The question is, can they get that price?"

Target said its two department store divisions have a combined book value of $3.6 billion.

Marshal Field's, in particular, won't come cheap, Beaulieu said. For one thing, Target owns most of the property on which its Marshall Field's stores sit, which means a potential buyer would have to buy the land as well as the stores unless a lease arrangement could be reached.

But the payoff for Federated would be significantly increased market share nationwide and a boost to its already considerable buying power, which would allow the company to negotiate better prices from apparel vendors and other suppliers, Beaulieu said.

In addition, Marshall Field's occupies some of the best retail real estate in the country - including the coveted flagship store on State Street in Chicago. Also, because it's focused on the upper Midwest, Marshall Field's has little market overlap with Federated stores.

"The real estate is outstanding; they're in all the good malls," says Kurt Barnard, president of Retail Forecasting, an Upper Montclair, N.J.-based firm that forecasts retail trends and tracks consumer spending. "But the question for Federated is how much money would it take to integrate the business. This in not penny ante."

In addition to the purchase price, Barnard said the cost to buy Marshall Field's would be inflated by administration and personnel costs associated with integrating operations.

Taking on those costs may be more than Federated is willing to handle, Barnard said, especially in light of its continued investment in its "reinvent the store" strategy over the past two years. The plan involves such things as improved fitting rooms and directional signs; the addition of shopping carts; and redesigned juniors, young men's and children's departments.

"I think (Federated CEO) Terry Lundgren would probably be reluctant to burden himself with the need to integrate a completely new operation," Barnard said. "He has his hands full already trying to turn Federated around."

Although Federated has reported a marked improvement in sales over the past few months, the department store industry as a whole continues to see sales slide as discounters and specialty retailers eat into their market share. Federated's stock closed at $50.42 Thursday, down $1.08. Target's shares closed at $44.70, up $2.97.

Many experts believe Target wants to get out of the department store business so it can focus on its successful discount operations.

Target - formerly Dayton Hudson Corp. - introduced the concept of a department store-anchored shopping mall in 1956 when it opened Dayton's at Southdale Mall in suburban Minneapolis - the nation's first enclosed shopping center.

E-mail rtucker@enquirer.com