Target Corp. to close Canada stores
MINNEAPOLIS – Target Corp. is calling it quits in Canada.
The Minneapolis-based retailer announced Thursday morning it will shutter its 133 stores north of the border after a challenging two years with its first expansion outside the U.S.
Its Canadian operations have been plagued with problems from the start amid issues such as keeping shelves stocked and perceptions that its prices were too high. While Target initially hoped to begin turning a profit in Canada by the end of 2013, instead it has racked up about $1.6 billion in losses to date.
In a statement, Target CEO Brian Cornell said he has undertaken a thorough review of the Canadian operations since he came on board in August and could not find a realistic scenario by which it would be profitable until at least 2021.
“Personally, this was a very difficult decision, but it was the right decision for our company,” he said. “With the full support of Target Corp.’s board of directors, 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 U.S. business.”
Target said it received preliminary approval Thursday morning for its application for protection under the Companies’ Creditors Arrangement Act with the Ontario Superior Court of Justice in Toronto.
As part of that process, the court also gave approval for Target to make voluntary cash contributions of $59 million into an employee trust to give its 17,600 employees in Canada at least 16 weeks of compensation.
Target’s stores in Canada will remain open during the liquidation process. Target is seeking to appoint Alvarez & Marsal Canada to help wind down its operations there, including the sale of its stores and to oversee the liquidation. Aaron Alt, who was most recently Target’s treasurer, was named CEO of Target Canada to oversee the wind-down process.
Dustee Jenkins, a Target spokeswoman, said the company expects the liquidation process will take about 20 weeks and that stores will likely close in waves.
She said a team of Target employees and outside consultants visited each of the Canadian stores during the holiday season as the retailer weighed various scenarios such as closing some but not all stores. But as the holiday numbers came in, it was clear that the company did not see the improvement in performance it had hoped after failing to inspire Canadian customers to return to the stores.
“We went to Canada for all of the right reasons,” Jenkins said. “But the bottom line is from the beginning, our execution has not been where it should have been. We really struggled with the fundamentals.”
She said Target’s board approved the decision to exit Canada during a regularly scheduled meeting Wednesday. Target has invested $4.5 billion in Canadian dollars in the international expansion to date, she added.
Matt Nemer, an analyst with Wells Fargo, said the exit from Canada was sooner than he expected, but is likely a big “weight off the shoulders” of the company.
“It is also an indication of Cornell’s leadership style, that there are no ‘sacred cows’ and that he is willing to make tough decisions that support shareholder value,” he wrote in a research note.
Target said it expects exiting Canada to cost between $500 million and $600 million in cash that it has on hand and from resources generated from its U.S. business.