Dayton Hudson Corporation History

Company History:

Dayton Hudson Corporation operates the well-known Target discount stores, Mervyn's moderately priced retail stores, and the Dayton's, Hudson's, and Marshall Field department stores in the Midwest. From its impecunious beginnings in 1902 on a small plot of land in Minneapolis, the Dayton Hudson Corporation had grown by the late 1990s to become the fourth largest retailer in the United States, with stores in 38 states and annual sales of more than $23 billion. Its philanthropy has been and still is legendary. In 1989 Dayton Hudson received the America's Corporate Conscience Award for its magnanimity, and in the same year, U.S. President George Bush presented the chairman and chief executive officer, Kenneth A. Macke, with the National Medal of Arts Award in recognition of the corporation's generous financial support of the arts. Committed to minimizing packaging waste through wide-ranging recycling efforts, Dayton Hudson also has been recognized for its managerial efficiency. In 1984 the University of California's School of Business Administration named it "best managed company in the U.S.A."

Dayton Hudson bears the strong imprint of its founder, George Draper Dayton. Dayton's father, a physician in New York state, could not afford to send him to college, in part because the doctor freely gave his services to the poor. Hence Dayton set off on his own in 1873 at age 16 to work in a coal and lumberyard. A workaholic, he undermined his health and a year later had to return to the family home to recuperate. Undeterred, he went on to become a banker. Less than ten years later, in 1883, he was rich enough to buy the Bank of Worthington in Minnesota. Meanwhile he had married and had become active in the Presbyterian Church.

Early Years

Dayton's connection with the Presbyterian Church proved to be instrumental to the rise of his Dayton Company. In 1893, the year of a recession that sent local real estate prices tumbling, the Westminster Presbyterian Church in Minneapolis burned down. The insurance did not cover the cost of a new building, and the only other source of income, a corner lot next to the demolished church, was unsalable because the real estate market was doing poorly. The congregation prevailed on the Dayton family, who were faithful members of the church, to purchase it so the building of a new church could proceed. Dayton bought it and eventually erected a six-story building on the lot. Casting about for tenants, he decided to buy the nearby Goodfellow Dry Goods store and set it up in the new building. In the spring of 1902 the store was known as the Goodfellow Dry Goods store; it was then named the Dayton Dry Goods store, then simply the Dayton Company, the forerunner of Dayton Hudson Corporation.

Eventually the store would expand to fill the six-story edifice. Dayton, with no previous experience in the retail trade, wielded tight control of the company until his death in 1938. His principles of thrift and sobriety and his connections as a banker enabled the company to grow. As long as he was at the helm, the store was run as a family enterprise. Every Christmas Eve he would hand out candy to each employee of the store. Obsessed with punctuality, he was known to lock the doors at the onset of a meeting, forcing latecomers to wait and apologize to him in person afterwards. The store was run on strict Presbyterian guidelines: no liquor was sold, the store was closed on Sunday, no business travel or advertising was permitted on the Sabbath, and the Dayton Company refused to advertise in a newspaper that sponsored liquor ads.

This approach did not stifle business; the Dayton Company became extremely successful. A multimillion-dollar business by the 1920s, the Dayton Company decided it was ready to expand, purchasing J.B. Hudson & Son, a Minneapolis-based jeweler, in 1929, just two months before the historic stock market crash.

The Dayton Company managed to weather the Great Depression, although its jewelry company operated in the red for its duration. Dayton's son David had died in 1923 at age 43, and George turned more and more of the company business over to another son, Nelson. George Draper Dayton died in 1938. He left only a modest personal fortune, having given away millions of dollars to charity. In 1918 the Dayton Foundation had been established with $1 million.

Nelson Dayton took over the presidency of the Dayton Company in 1938, when it was already a $14 million business, and saw it grow to a $50 million enterprise. World War II did not hamper business; rather, Dayton's turned the war into an asset. Consumer goods were so scarce that it was no longer necessary to persuade shoppers to buy what merchandise was available. Sales volume increased dramatically thanks to Dayton's managers, who obtained goods to keep the store full. Nelson Dayton was scrupulous about complying with the government's wartime control of business and when, for instance, the government carried out its drive for scrap metal, he ordered the store's electric sign dismantled and added to the scrap heap. Until Nelson Dayton's death in 1950, the company was run along the strict moral lines of his father, its founder. In January 1944 Dayton's became one of the first stores in the nation to offer to its workers a retirement policy, followed in 1950 by a comprehensive insurance policy.

Sheds Conservative Image in the 1950s

With Nelson Dayton's death in 1950, the Dayton Company embarked on a new era. Instead of one-man rule, the company was led by a team of five Dayton cousins, although one of them, Nelson's son Donald Dayton, assumed the title of president. The prohibition of liquor in the store's dining rooms was dropped, and soon the Dayton Company would be completely secularized, advertising and doing business on Sunday.

The new management of the Dayton Company undertook radical and costly innovations. In 1954 the J.L. Hudson Company, which would eventually merge with Dayton's, opened the world's largest shopping mall in suburban Detroit. It was a great success, and two years later the Dayton Company decided to build a mall on a 500-acre plot of land outside of Minneapolis. Horrified to learn that Minneapolis had only 113 good shopping days a year, the architect decided to build a mall under cover; Southgate, the first enclosed shopping mall in history, was the result.

The safe, conservative management style favored by George Draper Dayton and his son Nelson passed into history; a younger, more aggressive management pushed for radical expansion and innovation would follow in its wake. The company established the large discount chain Target in 1962, and in 1966 decided to enter the highly competitive market of retail bookselling, opening B. Dalton Bookstores.

In 1967 the company, by then known as Dayton Corporation, made its first public stock offering. That year, it acquired San Francisco's Shreve and Company, which merged with J.B. Hudson to form Dayton Jewelers. In 1968 it bought the Pickwick Book Shops in Los Angeles and merged them with B. Dalton. Also in 1968 the company acquired department stores in Oregon and Arizona. The following year brought the acquisition of J.E. Caldwell, a Philadelphia-based chain of jewelry stores, and Lechmere, a Boston retailer.

Acquires Detroit Department Store in 1969

The year 1969 also saw a major acquisition: the Detroit-based J.L. Hudson Company, a department store chain that had been in existence since 1881. The merger resulted in Dayton Hudson Corporation, the 14th-largest retailer in the United States. Dayton Hudson stock was listed on the New York Stock Exchange.

With the merger, the Dayton Foundation changed its name to the Dayton Hudson Foundation. Since 1946, five percent of the Dayton Company's taxable income was donated to the foundation, which continued to be the case after the merger. The foundation inspired the Minneapolis Chamber of Commerce in 1976 to establish the Minneapolis 5% Club, which eventually included 23 companies, each donating five percent of their respective taxable incomes to charities. By the close of 1996 the foundation had donated over $352 million to social and arts-based programs.

Dayton Hudson bought two more jewelers in 1970--C.D. Peacock, Inc., of Chicago, and J. Jessop and Sons of San Diego. Company revenues surpassed $1 billion in 1971.

Mervyn's, a line of moderate-price department stores, merged with Dayton Hudson in 1978. That year Dayton Hudson became the seventh-largest general merchandise retailer in the United States, its revenues topping $3 billion in 1979.

Dayton Hudson bought Ayr-Way, an Indianapolis-based chain of 50 discount stores, in 1980, and converted those units to Target stores. In 1982 the company sold Dayton Hudson Jewelers, and in 1986 it divested itself of B. Dalton.

The late 1980s found the company the focus of an unsolicited takeover bid by the Dart Group, which would involve lawsuits by both parties before a stock market crash in October 1987 ended the takeover attempt. A second attempt at takeover of the company would be made nine years later, when rival J.C. Penney Co. offered more than $6.5 billion for the retailer. The offer, which analysts considered an undervaluation of the company's worth, was rebuffed. Meanwhile, Dayton Hudson continued its acquisitions, purchasing the Marshall Field stores from BATUS Inc. in 1990 for about $1 billion. Venerable Marshall Field's was as much a landmark in the Chicago area as Dayton's was in Minneapolis and the Hudson stores were in Detroit; the acquisition would add 24 department stores to the Dayton Hudson group while also doubling its department store retail space.

Diversifies into New Retail Markets in 1990s

While Dayton, Hudson, and Marshall Field department stores offered the monied customer more costly and sophisticated merchandise, the popular Target and Mervyn's catered to the budget-conscious customer, offering apparel and recreational items on a self-service basis. With the approach of the twenty-first century, Target continued to be Dayton Hudson Corporation's biggest moneymaker, combining a successful business mix of clean, easy-to-navigate stores with quality, trend-responsive merchandise. The year 1990 saw the opening of the first of over 50 expanded Target Greatland stores; in 1995, following the lead of such rivals as Wal-Mart and Kmart, the company opened its first SuperTarget, which combined the chain's successful general merchandise mix with a grocery store. Along with expanding its traditional department stores along the East Coast, six new SuperTargets were planned for 1996 alone.

The proliferation of shopping malls and the recessionary economy of the early 1990s caused sharp changes in consumer spending patterns throughout the United States. By 1996 the country could boast 4.97 billion square feet of retail space--an average of 19 square feet per person nationwide--but retailers felt the pinch caused by such a large number of stores courting increasingly spending-shy consumers. This situation most negatively affected the mid-range and upper-range sales volumes generated by stores on the level of Mervyn's, Dayton's, Marshall Field's, and Hudson's. In response, Dayton Hudson developed new merchandising, customer service, and advertising strategies in an effort to stabilize these units' falling sales volumes. Mervyn's focused increase reliance upon national brands, coupling this with the growing use of print advertising and market expansion through the acquisition of six Jordan Marsh stores and five Lord & Taylor stores in south Florida. Dayton's, Hudson's, and Marshall Fields courted the upscale consumer through an increased mix of unique, quality merchandise, an increased emphasis on customer service, and an increased sales-floor staff, all of which heralded a return to the "old fashioned service" on which Dayton Hudson was founded. Meanwhile, the Department Store unit worked to reduce inventories and invest in remodeling and technologically enhancing some of its older stores.

In 1994 Target executive Robert J. Ulrich was named chairman and chief executive officer of Dayton Hudson. In that same year the company began a new strategy: developing a "boundless" corporate structure wherein resources and marketing and management expertise could be shared by each of the three divisions to create a more efficient organization.

Poised Towards Future with Efficient Organization

By 1997 the Dayton Hudson Corporation consisted of three major operating units: Target, with 735 discount stores in 38 states, represented the company's primary area of growth; the moderately priced Mervyn's chain operated 300 stores in 16 states, and the upscale Department Store Company operating 22 Hudson's, 19 Dayton's, and 26 Marshall Field's stores. Such broad-based expansion from the first six-story building in which Dayton was housed no doubt would have stunned the company's founder. Capital expansion, as well as more varied retailing, had taken their place alongside the old policies of thrift and sobriety.

Dayton Hudson's three units operate autonomously. Significant investment is made for the long term; in 1990 alone the company's capital spending program amounted to $1 billion. While there has been some speculation that the company was considering the sale of its Mervyn unit due to sluggish returns on investment, the Target stores are seen as a continuing source of growth and high profitability for the corporation.

Principal Operating Units: Department Store Division; Mervyn's; Target.

Further Reading:

• Dayton, George Draper, II, Our Story: With Histories of the Dayton, McDonald and Winchell Families, Wayzata, Minnesota, [n.p.], 1987.
• Chandler, Susan, "'Speed Is Life' at Dayton Hudson," Business Week, March 27, 1995, pp. 84-85.

Source: International Directory of Company Histories, Vol. 18. St. James Press, 1997.

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