Hedge Fund Increases Its Stake in Target

Date: Thursday, December 27, 2007
Author: Reuters

The hedge fund Pershing Square Capital Management said on Monday that it had raised its stake in the discount retailer Target to nearly 10 percent and had met with management to discuss ways to bolster the company’s share price.

Pershing, which is managed by William A. Ackman, recently raised a $2 billion fund to invest in Target. It now holds a 9.97 percent stake, up from about 9.6 percent in July, according to a Securities and Exchange Commission filing.

Pershing said it had also invested in Target swaps and options, which combined with the stock give the fund an economic exposure equal to a 12.6 percent stake.

Mr. Ackman said in November that he had raised his stake in Target, but declined to say by how much.

Pershing said it might meet with Target’s management again to discuss the company’s strategy, business, assets, operations, capital structure or financial condition.

When Pershing disclosed the 9.6 percent stake in July, analysts speculated that Mr. Ackman would pressure Target to sell its credit card portfolio or real estate assets. In September, Target said it was weighing a sale of its credit card assets.

But this month, the company said it was taking longer than expected to determine whether to sell its $7 billion in credit card receivables, given prevailing market conditions.

Target also warned on Monday that its December sales at stores open at least a year were below expectations and that it now expected sales in the range of down 1 percent to up 1 percent.

While more consumers came to its stores at the end of the third week of the month, the increase was not enough to make up for weak sales after Thanksgiving that carried over into December, the retailer said.

Given the lower forecast, Target said December sales were likely to fall “well short of the meaningful improvement” it had earlier said was needed to achieve growth in fourth-quarter earnings per share. The retailer had forecast December same-store sales would rise 3 to 5 percent on a calendar-adjusted basis.