17 hours ago | By Sandra Halliday
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Jan 16, 2015
In a dramatic admission of failure US value retail giant Target is to close all of its 133 stores in Canada almost two years after launching there, affecting 17,60 jobs.
Filing for bankruptcy protection, Target Canada said the closure was in the “best interest of the business” after chalking up losses there of around $1bn a year.
Chief executive Brian Cornell said: “After a thorough review of our Canadian performance and careful consideration of the implications of all options, we were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021.”
Cornell, who admitted on Target’s corporate blog that its Canadian arm was losing money every day, said the focus now would be on “driving growth” in the US, where it has 1,801 stores.
Target shares rose 8% in early trading following the news and closed the day up 1.8%.
Cornell, named chief executive six months ago replacing Gregg Steinhafel, said: “It was a difficult decision but it was the right decision for our company.
“We have determined that it is in the best interest of our business and our shareholders to exit the Canadian market and focus on driving growth and building further momentum in our US business.”
Problems began almost immediately when it opened more than 100 stores in the first year of its Canadian debut. Shoppers complained of shortages of basic goods, not being able to buy products available in US stores, and that prices were too high.
Target said Thursday that it expects about $5.4bn in Q4 losses from discontinued operations in Canada plus a further $275m in fiscal 2015.
Target expects cash costs for the exit to be between $500m-$600m, mostly taking place in fiscal 2015 or later. The retailer said it has enough money to fund those costs.
The company said it received court approval to voluntarily make about $59m in cash contributions into an employee trust that would give almost all of Target’s Canada workers at least 16 weeks of compensation, including wages and benefits for redundant staff.
Target Canada stores will stay open during liquidation.
With nearly 15m sq ft of retail space and 5m sq ft of office and industrial warehouse space across Canada, Target’s decision to shutter its Canadian operations has plunged the commercial real estate industry into uncertainty, according to analysts. The news came as a shock to most of Target’s approximately 20 landlords, many of whom say they expected the company to close some underperforming stores, but expand others in key markets, reports The Globe & Mail. “I don’t think any one of us suspected that it would be this way,” said Rai Sahi, chief executive officer of Morguard Corp, the commercial landlord that had leased 15 locations to Target, representing 2% of its total revenue. However, some landlords say Target’s collapse is an opportunity to refresh their portfolios: “I sense an opportunity to grow our revenues by putting in some smaller tenant and box stores,” said Patrick Sullivan, chief operating officer of Primaris, a division of H&R REIT, which leased nine locations to Target. “But it’s a sad day for Canada when such a significant retailer [shuts down].”
Sony Corp is to close all 14 of its Sony Stores across Canada as the company continues to reshape its business. The company made the announcement on Thursday in a message to the stores’ employees saying they will cease operations within the next two months. Sony did not say how many jobs are affected by the decision.
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