In what could be a brilliant move if the recession and drop in retail sales worsen, Target (TGT) has agreed tot sell $3.6 billion of its credit card loan portfolio to JP Morgan (JPM). According to Bloomberg, the entire value of the Target consumer debt pool is $8.2 billion.
Target will probably use the capital for buying back shares and supporting expansion of new stores. The second of those programs would seem like a poor idea under current economic conditions.
Bloomberg writes "A sale will also help protect it as consumer credit declines and the U.S. economy moves closer to a recession."
Investors in Target will take almost any bone the company will throw them The retailer’s shares are off 8% during the last six months. Stock in rival Wal-Mart (WMT) is up 30%.
Douglas A. McIntyre