Target's Credit-Card Sale: Bad Timing?

As recently as last November, Target (TGT) steadfastly said it had no intention of selling its $7 billion credit-card portfolio, one of the last ones held by a retailer. That changed late on Sept. 12, when the trendy discounter disclosed it would explore letting it go. The trouble is, Target is a little late to put out the for-sale sign.

Target's portfolio, which consists largely of its Target Visa receivables, has shown some of the most serious deterioration in credit quality of any major card company over the last year and a half. That will weaken the price Target can command, particularly as worries about a consumer-led recession grow. At the same time, the turmoil in the overall credit market sparked by the subprime mortgage meltdown will dampen what potential buyers are willing to pay. "Target may have gotten a higher price just six months ago," says Nathon Powell, a credit analyst at the Center for Financial Research and Analysis (CFRA).