Retailer-Run Card Operations Shrinking

If Sears succeeds in finding a buyer for its entire card portfolio later this year, there may be a significant re-thinking on the part of the shrinking list of retailers who still own and operate their own portfolios. With over $22 billion in outstandings, the Sears proprietary card portfolio is nearly 10 times bigger than the next largest player remaining. The table below displays the top 10 private label card portfolios in the U.S. as of the end of 2001 (source: The Nilson Report).

Fourth on that list with $2.28 billion in receivables at the time was Spiegel, which operated its portfolio out of its First Consumers National Bank division in Beaverton, Oregon. However, Spiegel was told in February by the Office of the Comptroller of the Currency to stop marketing its cards due to spiraling credit quality problems. Spiegel issues MasterCard products as well as private label cards for Eddie Bauer stores and Crate and Barrel, as well as the catalogue brands Spiegel and Newport News. Subsequently, the company told its customers it would not honor charges made on the cards after March 31. It has been seeking a buyer for the portfolio. However, the portfolio chargeoff rate soared in 2002 to 18.2%, up from 7.9% as recently as 1999.

So, the list of large in-house portfolios continues to shrink. A spokesman for Target Corp. told the American Banker that it had no plans to sell its card business. Although it, too, has experienced rising chargeoffs, a spokesman for the company attributed it to general economic conditions, and not additional risk-taking in marketing cards. Target exec Cathy Wright told the American Banker, "Compared to Sears, we sourced with our active guests. We didn't do direct mail solicitations. We did not bring people to this card through teaser rates or balance transfers. We don't offer any of those things. They are risky, and we obviously knew our guests before we offered them the card."