Target's Double-Barreled E-Commerce Deals

Mar.18.13 | About: Target Corporation (TGT)

By Brian Satterfield

In a move that underscores the continuing importance of e-commerce sales to brick-and-mortar retail chains, Target Brands (NYSE:TGT) has made its first foray into tech M&A by buying two online retailers.

Target announced on Thursday that it will acquire CHEFS Catalog and, two companies that sell kitchenware and cookware online. In its most recent earnings call, Target – which is slightly larger than Amazon (NASDAQ:AMZN), but garners only about one-third the valuation of the Web retailer – indicated that its online revenue growth was above the industry average.

Clearly, the 110-year-old retailer bought the two Internet properties to continue that progress. (We estimate that CHEFS Catalog and collectively generated about $150m in sales.) However, we might note that Target’s purchases come after a number of fellow brick-and-mortar retailers have already consolidated online retailers. In the past two years alone, we’ve seen similar purchases by retail heavyweights such as Wal-Mart (NYSE:WMT), Lowe’s (NYSE:LOW), Barnes & Noble (NYSE:BKS) and Walgreen (WAG).

CHEFS Catalog, which was founded in 1979 as a mail-order retailer, was previously owned by private equity firm JH Partners and brings 100 employees to Target. Meanwhile, southern California-based has a headcount of 50 and has collected a whopping $115m in venture funding over its 15-year lifespan, most of it during the bubble era.