Dayton Hudson, Citing Profit Concerns, To Cut 1988 Capital Spending by 25%
Dayton Hudson Corp. reduced its capital spending plans for fiscal 1988 by 25% from this year's level and said it would concentrate on improving its sagging earnings.</br></br>The move marks a shift in strategy for the Minneapolis-based retailer, which has sacrificed profits over the past two years to lead the industry in capital spending. Last month, however, Dayton Hudson narrowly escaped a hostile takeover; the experience apparently influenced it to focus harder on its short-term earnings.</br></br>At a news conference in New York, the company said for the year ending Jan. 28, 1989 it would invest about $600 million in new facilities, remodeling projects and new technology, compared with $800 million this year. The move also represents a retreat from the company's plans earlier this year to spend $5 billion between 1987 and 1991.</br></br>Dayton Hudson cited the uncertain outlook for consumer spending as one factor in its decision. But some analysts attributed it mainly to internal problems. "I think there are reasons for their scaling back that have to do with more than just the economy," said William Smith of Smith Barney, Harris Upham & Co.</br></br>The company, once considered among the best-run retailers in the nation, has been hurt in recent years by merchandising errors at its rapidly-expanding Mervyn's department store unit. Analysts believe management was slow to recognize the problems at Mervyn's and too optimistic in predicting a turnaround. As a result, Dayton Hudson's earnings from continuing operations declined 9% in fiscal 1986 to $2.62 a share and Mr. Smith predicted the figure could fall an additional 8% to $2.40 a share this year.