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MINNEAPOLIS -- Target Corp. announced three weeks ago it was reorganizing its department store division and bringing all stores under a single brand. The move has been applauded as a sound business decision that may help raise the profile of an otherwise lackluster channel with brighter prospects for the future, particularly in relation to on-line synergies with Target Stores.

Although a timetable has yet to be revealed, the company will begin renaming its Dayton's and Hudson's department stores Marshall Fields later this year, combining a total of 64 units under one flag. The respective Web sites inform customers of the pending change. The explanation, as offered by the company, is fairly straightforward.

"One name gives us the opportunity to focus on a single brand at all levels of our business," said Linda Ahlers, president of Dayton's, Marshall Fields and Hudson's. "This is particularly important for our Internet initiatives and the launch of our on-line gift registry that give us a presence beyond the markets where we have stores. These initiatives will be strengthened by a national brand."

Now, only Target offers customers on-line access to its Club Wedd and Lullaby Club baby registries. But bridal registries have long been a staple of department stores, which have been losing market share year after year to specialty operations such as Crate and Barrel and Williams Sonoma.

In contrast, Target's Club Wedd continues to grow. Offering consumers access via the Internet and in-store kiosks to Target and Marshall Fields registries on the same operating platform holds significant upside. Sid Doolittle, partner at McMillan/Doolittle, said the program could expand sales in the Marshall Fields division into markets where it has no store presence and offer a wider range of product.

Combining the three units holds few obstacles. "The companies have [already] been moving together over time, said Mark Miller, analyst with William Blair. All three feature the same private-label programs, including Frango chocolates and Field Gear apparel for men, originated at Marshall Fields. Each Web site is virtually identical, from graphics to departments to promotions. "It's just the progression of the department stores rolling out with their Internet pieces," Miller said.

It's a smart move for Target to strengthen a division that has been underperforming off and on for years. For the fiscal year ended Jan. 29, 2000, the department store division had sales of $3.074 billion and earnings of $296 million, an increase of $17 million from the year before. For the completed third quarter of fiscal year 2000 ended Oct. 28, 2000, the division posted sales of $739 million, a decrease of 2.4% from the year before. For the nine months ending Oct. 28, 2000, sales decreased 3.4% from the prior year to $2.067 billion. Comp store sales also declined 4.2% for the nine-month period.

At its conference in November, management forecasted low- to single-digit comp store increases through next year, but is not expecting a profit increase for the department stores. In spite of this, the division is cash flow positive and a benefit to the company, said analysts.

"They need it for the cash flow," said one buy-side analyst. "On an EVA basis, it costs less to keep the division open than go external to get financing."

"It is one of the components of their business," said Miller. "The department stores and Mervyn's allow the total corporation to leverage the fixed cost of operations." It also helps in the credit business. Nearly half of all existing credit accounts come from Mervyn's and department store card holder; a profitable and growing component of Target's business, although nearly all the growth is coming from the Target card.

Although some speculation abounds that the company is cleaning up the division to sell it off, most agree it isn't a priority. "I don't believe they undertook this change with that in mind," said Miller. "It's an ancillary benefit were that to happen."

"Although, it certainly gives them more flexibility," said Doolittle. "You never know what the future holds, and it's wise to be prepared."