Target Misses the Mark in Canada, Will Close Stores - Global Trade Magazine
  January 16th, 2015 | Written by

Target Misses the Mark in Canada, Will Close Stores

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Less than two years after opening it first operation in Canada, retail giant Target says it will shutter all of its 133 stores in the country over the next six months. The exact timing of the closures “will vary on a store-by-store basis,” in a move that will idle almost 18,000 employees from British Columbia to Ontario, according to a statement released by the Minneapolis, Minnesota-headquartered retailer.

“We have not realized the significant improvement in Canadian consumer sentiment that we believe is necessary,” says Target CEO Brian Cornell. “Put simply, we have not seen the step-change in performance we told you we needed to see.”

Target had high hopes bolstered by the perceived shopping habits of Canadian consumers who routinely crossed the southern border to stock-up on bargains at the company’s stores in the U.S. The company spent a full five years planning its Canadian expansion strategy, which included the 2010 acquisition of most of the real estate assets held by failed Canadian retailer, Zellers.

But Target’s grand design drew significant criticism from analysts who said that management had skimped on researching the expectations of Canadian consumers looking for a U.S.-style shopping experience, the ins and outs of Canada’s complex business regulatory structure, and the ensuing corporate migraine that could result from opening 100 stores in the very first year of operations in the country.

Concerns were validated as Canadian shoppers, relieved of the need to cross an international border to do their shopping, started to complain almost immediately of inflated prices, chronic shortages of basic consumer goods from toothpaste to toilet paper, and a lack of the name brands they’d grown used to in Target’s U.S. stores.

The final blow came when the company’s lackluster holiday season melded with the realization that it couldn’t realistically expect to turn a profit on its Canadian operations for at least another six years. Shuttering the stores is expected to cost Target more than $5 billion in pre-tax losses in its fourth quarter, as well as between $500 million and $600 million in cash.

Target has received court approval to voluntarily make about $59 million in cash contributions to an employee trust to give the affected workers at least 16 weeks of compensation, including wages and benefit coverage for employees not needed during the store closure process.