Target (NYSE:TGT) is beating a hasty retreat from its northern neighbor, announcing plans to shutter all 133 stores in Canada.
The retailer announced plans to discontinue operating stores in Canada, closing the wholly-owned subsidiary, Target Canada Co. The unit filed an application for protection under the Companies' Creditors Arrangement Act with the Ontario Superior Court of Justice in Toronto.
It's been a bumpy ride for Target Canada ever since it acquired 220 former Zellers stores there in 2011. The retailer moved too quickly, opening 124 units in its first year, and suffered from inventory, pricing and public perception problems straight away.
Target Canada never recovered from its initial blunders.
"With the benefit of hindsight, I wished we wouldn't have opened up so many stores as we did at once," Mark Schindele, president, Target Canada told the Minneaplis Star Tribune a couple of months ago. "We probably should have scaled back from what we did to get it moving in the right direction."
Losses at Target Canada total roughly $1.6 billion to date, reported the Star Tribune.
"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," said Brian Cornell, Target chairman and CEO. "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."
Last year was a tumultuous one for Target as it struggled not only with the Canada operations, but to recover from a data breach that compromised the credit card information of 40 million shoppers and the personal information of 70 million more. Then CEO Gregg Steinhafel was fired and a series of executive appointments were designed to inject new ideas into the merchandising team.
Analysts believe that U.S. stores are on the right track with new in-store programs and a strong digital offering. But Canada has proved more problematic.
"The Target Canada team has worked tirelessly to improve the fundamentals, fix operations and build a deeper relationship with our guests. 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," said Cornell. "There is no doubt that the next several weeks will be difficult, but we will make every effort to handle our exit in an appropriate and orderly way."
"Target Corporation's cash costs to discontinue Canadian operations are expected to be $500 million to $600 million, most of which will occur in the company's 2015 fiscal year or later," the retailer said in a press release.
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