Target Rolls To $60 Ditching Credit Cards, Focusing On Core Biz

by Mercator Advisory Group 0

Reports continue that Target is likely to sell its entire credit card portfolio.

The company has confirmed that it’s looking to sell its credit card segment. In January 2011, it hired an adviser to pursue the sale of its $6.7 billion credit-card receivables portfolio. Target is expected to receive a portion of the cash from the deal, and the balance will go to JPMorgan which owns a 47% interest.

Perceptions remain that managing the credit card business is a competitive distraction for a major retailer. On the other hand, performance of the program has been improving, largely due to reduced charge-offs.

The segment’s third quarter revenues declined 8.2% from the prior-year quarter to $348 million. However, the credit card segment’s profit grew about 10% due to a steep fall of around 64% in bad debt expense. The improved economic conditions resulted in prompt credit card payments by customers.

The private label credit segment continues to be the focus of renewed interest. Most notably Capital One has made significant commitments to the segment, including the recent acquisition of the HSBC portfolio.

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