TORONTO – Target says it will close its stores in Canada – a market that it entered only two years ago.
The U.S.-based retail company has 133 Canadian locations and 17,600 employees across the country.
Target Canada has struggled since its opening in March 2013, with consumer complaints of near-empty shelves and higher prices compared to U.S. Target stores, and there has been speculation that its days were numbered.
Brian Cornell, who became the U.S. company’s chairman and chief executive last year, said that despite working “tirelessly” to fix the problems that weighed down its sales, Target did not see the “required step-change” in its performance over the holiday period to convince the discount retailer to stay in Canada.
“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 said in a statement.
“Personally, this was a very difficult decision, but it was the right decision for our company.”
RBC analyst Irene Nattel said it is unclear who would be in a position to take over Target’s 133 stores.
“In our view, there is unlikely to be any single operator that takes over the leases, the location quality of which is mixed at best,” Nattel said in a note.
“Rather we could see existing retailers including Wal-Mart Canada and Canadian Tire perhaps picking up selected locations.”
Target says the stores will remain open during a court-supervised liquidation period and it’s working to ensure employees are paid at least 16 weeks of severance.
The company says it will also work with an adviser to sell its real estate and expects to spend between US$500 million and US$600 million in cash to end its Canadian operations.
Target Corp. will also record about US$5.4 billion in pre-tax losses in its fourth-quarter, mostly related to the Canadian operation.
The company said it would provide US$175 million of credit to fund Target Canada’s operations while it winds down under the Companies’ Creditors Arrangement Act, or CCAA, which is one of the Canadian equivalents to the U.S. Bankruptcy Act.