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January 15, 2015




Target to pull out of Canada, close all 133 stores

Target says it will discontinue operating stores in Canada -- a market that it entered only two years ago. The U.S. based retail company currently has 133 Canadian locations and 17,600 employees across the country. The company says the stores will remain open during a court-supervised liquidation period and it's working to ensure surplus employees are paid at least 16 weeks of severance. Target says it will also work with an advisor to sell its real estate. Target Canada has struggled from the start and there has been speculation in business circles that its days were numbered.

Target's press release on discontinuing its Canadian operations

One of, if not the biggest missteps in retail history
U.S. retailer Target has announced it is going to close all 133 of its Canadian locations. "After a thorough review of our Canadian performance and careful consideration of the implications of all options," said CEO Brian Cornell in a press release this morning, "we were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021." Target Canada stores will remain open during the liquidation process. The company currently employs 17,600 people in Canada. As part of its wind-down, Target says it will place $70 million into a trust to provide for a minimum of 16 weeks of pay and benefits for laid-off employees.

Further text from Target's press release:

"When I joined Target, I promised our team and shareholders that I would take a hard look at our business and operations in an effort to improve our performance and transform our company. 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. Personally, this was a very difficult decision, but it was the right decision for our company. With the full support of Target Corporation'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," said Brian Cornell, Target Corporation Chairman and CEO.

Canadian Business columnist Bruce Philp warned in a June 2013 column that Target would have a tougher time making it in Canada than its optimistic projections claimed:

"[Target Canada's launch] unfolded just as it always does when a big American brand wades ashore to colonize our retail marketplaces. There was hype and excitement. People camped out. Cameras rolled. First purchases were recorded for posterity. Not since the arrival of Krispy Kreme had a launch like this promised to quench our perpetual national envy. But as Krispy Kreme can attest, an opening act is just that. After that first sugar rush, reality sets in.

You have to wonder at the blind optimism of anyone who runs a mid-market department store anywhere in the galaxy, never mind in Canada. It's tenuous ground even in the U.S., where it's generally accepted that the department store's future looks either posh like Nordstrom or cheap like Walmart. In Canada, the prospects seem dimmer yet. Target intends to inhabit space abandoned by Zellers—whose surrender should have been a clue as to the wisdom of that strategy. History is littered with the companies who tried to make mass merchandising work here, going all the way back to Eatons' near-instant failure with its Horizon brand in the 1970s."

You can't put lipstick on a Zellers - cause it's still a Zellers  Target's announcement in 2011, that it had bought 220 Zellers locations from Hudson's Bay Co., and was coming to Canada, was met with excitement by retail analysts. Canadian shoppers too looked forward to nabbing the great deals they had come to love at Target stores south of the border. But the company's debut in Canada was marred by significant inventory problems that left many shelves bare, and shoppers frustrated. Canadian consumers also complained they were disappointed with the prices at Target Canada stores, which were at times markedly higher than in the U.S. outlets. Target terminated the president of its Canadian operations back in the spring and replaced him with a U.S. company veteran, Mark Schindele,and vowed to address inventory issues and woo back customers. Cornell said Thursday the company spent the last year working to "improve the fundamentals" and "build a deeper relationship with our guests" in Canada. But sales over the Christmas shopping season were disappointing. "We hoped that these efforts in Canada would lead to a successful holiday season, but we did not see the required step-change in our holiday performance," Cornell said. Company executives said in the fall that while they saw signs of improvement in its Canadian operations as its operating losses narrowed to US$211 million from $238 million a year earlier, it would use holiday season sales to determine its long-term strategy in Canada.

(Jan. 2011) Target buys 220 Zellers leases for $1.8B from Hudson Bay Co.
U.S. retailer Target said Thursday it is buying the store leases of Canadian discount retail chain Zellers from the U.S. investor who owns the Hudson's Bay Co. assets for $1.8 billion. Under terms of the deal, Minneapolis-based Target will make two payments of $912.5 million in cash, in May and September 2011, to acquire the leasehold interests of 220 Zellers locations in Canada. The Zellers locations will continue to exist under that brand name for "a period of time," HBC said in a release. But Target will convert 100 to 150 of those Zellers locations to Target stores in 2013 and 2014 and possibly sell the rest of the current Zellers network of store leases to other retailers.

Stay tuned to the Daily for our ongoing coverage of this story.

Today's Special Report is sponsored by Protection 1.




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