Target to Exit Canada


Photo: TargetPhoto: Target

Photo: Target

Target has just announced that it will exit Canada. The company has lost over $2 billion here since it opened its first Canadian stores in March of 2013. Below is the press release which was just released by Target, as well as links to news stories from around the web. 

“We were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021” the press release says. 

Here is our article from last Friday where retail expert Antony Karabus discusses Target’s possible exit

Next week we’ll follow up this topic with a discussion of Target’s most valuable Canadian locations, and who might best utilize them. As well, below, are links to articles on the topic from other news sites: 

Target Corporation Announces Plans to Discontinue Canadian Operations [Newswire Press Release]

Target Canada files for creditor protection, plans to halt operations [CBC]

Target to close all 133 stores in Canada [Toronto Star]

Target Killing Canadian Operations [Globe & Mail]

Target Corp to exit Canada after racking up billions in losses [Financial Post]

Target pulling out of Canada after failed expansion [CTV]

Target pulls plug on Canadian stores [Global]

Target to Abandon Canada After Racking Up Billions in Losses [Bloomberg]

Target to discontinue Canada operation, seeks creditor protection [Reuters]

Target to Exit Canada [Wall Street Journal]

Target to shutter Canada stores, book a $5.4 billion charge [Fortune]

Target to Close All Stores in Canada, Conceding a Failed Expansion [New York Times]

5 Reasons Why Target Failed In Canada [Business Insider]

*[MORE ON TARGET IN OUR JANUARY 16TH DAILY NEWS]*

Target Corporation Announces Plans to Discontinue Canadian Operations

Target Canada takes steps to ensure a fair and orderly exit, seeks Court approval to begin liquidation process under the CCAA

Company provides update on fourth quarter performance in the U.S.

MINNEAPOLISJan. 15, 2015 /CNW/ – Today Target Corporation (NYSE:TGT) (the “Company”) announces that it plans to discontinue operating stores in Canada through its indirect wholly-owned subsidiary, Target Canada Co. (“Target Canada”). As a part of that process, this morning Target Canada filed an application for protection under the Companies’ Creditors Arrangement Act (the “CCAA”) with the Ontario Superior Court of Justice (Commercial List) inToronto (the “Court”).

“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.

Target Canada currently has 133 stores across the country and employs approximately 17,600 people. To ensure fair treatment of Target Canada employees, Target Corporation is seeking the Court’s approval to voluntarily make cash contributions of C$70 million (approximately US$59 million) into an Employee Trust. Upon approval by the Court, the proposed trust would provide that nearly all Target Canada-based employees receive a minimum of 16 weeks of compensation, including wages and benefits coverage for employees who are not required for the full wind-down period. Target Canada stores will remain open during the liquidation process.

As part of its application, Target Canada is seeking the appointment of Alvarez & Marsal Canada as Monitor in the CCAA proceedings to oversee the liquidation and wind-down process for Target Canada and its subsidiaries. Subject to Court approval, Target Corporation has committed to provide a US$175 million debtor-in-possession credit facility to finance Target Canada’s operations during the CCAA proceedings. Target Canada is also seeking Court approval to engage Lazard to advise Target Canada in connection with the sale of its real estate assets.

“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.”

As a result of the CCAA filing, Target Corporation has determined that Target Canada and its subsidiaries will be deconsolidated from Target Corporation’s financial statements as of the date of the filing.  Target Corporation expects to report approximately $5.4 billion of pre-tax losses on discontinued operations in the fourth quarter of 2014, driven primarily by the write-down of the Corporation’s investment in Target Canada, along with costs associated with exit or disposal activities and quarter-to-date Canadian Segment operating losses prior to today’s filing. Target Corporation expects to report approximately $275 million of pre-tax losses on discontinued operations in fiscal 2015.

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 Company has sufficient resources to fund these expected costs, including cash on hand and ongoing cash generation by its U.S. business.                                  

Target Corporation expects this decision will increase its earnings in fiscal 2015 and beyond, and increase its cash flow in fiscal 2016 and beyond.

As a result of the decision announced today, Target Corporation will operate as a single segment that includes all U.S. operations. Beginning with the Company’s fourth quarter 2014 financial results, Target will report adjusted earnings per share reflecting operating results from its U.S. operations, excluding discontinued Canadian operations, the impact of the reduction of the beneficial interest asset recognized in connection with the 2013 sale of the Company’s U.S. consumer credit card portfolio, net expenses related to the 2013 data breach, and the resolution of certain tax matters.

Target Corporation plans to provide additional information on the financial implications of this announcement in a Form 8-K to be filed with the Securities and Exchange Commission later today.

Update on expected fourth quarter U.S. performance
Based on performance through November and December, Target Corporation now expects to report fourth quarter 2014 U.S. comparable sales of approximately 3 percent, better than prior guidance of approximately 2 percent, driven primarily by increased traffic and stronger-than-expected digital sales. The Company expects to report fourth quarter adjusted EPS, reflecting results from continuing operations, of $1.43 to $1.47, about 6 cents ahead of expectations for U.S. Segment performance at the beginning of the quarter. 

The Company is not able to provide an estimate of its expected fourth quarter 2014 GAAP EPS. However, GAAP results are expected to include:

  • Losses related to liquidation of Target Canada, as described above, net of taxes
  • Net expenses related to the 2013 data breach, which are not expected to be material
  • Impact of the reduction of the beneficial interest asset recognized in connection with the 2013 sale of the Company’s credit card portfolio, which is expected to reduce GAAP EPS by approximately 2 cents

Cornell and John Mulligan, Target Corporation’s Chief Financial Officer, will host a call with investors today, approximately two hours after the conclusion of the Court hearing of the CCAA application. Target Corporation will issue a press release following the Court hearing and post details for the call on target.com/investors under “Upcoming Events and Presentations.”

Miscellaneous
Statements in this release regarding expected earnings and cash flow and other financial impacts of exiting the Company’s Canadian operations, and fourth quarter 2014 sales and adjusted earnings guidance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date they are made and are subject to risks and uncertainties which could cause the Company’s actual results to differ materially. The most important risks and uncertainties include those relating to the consequences of discontinuing Canadian operations and the risks described in Item 1A of the Company’s Form 10-K for the fiscal year ended February 1, 2014, as updated in the Company’s Form 10-Q for the quarter ended November 1, 2014.

The adjusted earnings per share expectation for fourth quarter 2014 excludes the items identified above.  The Company’s measure of adjusted earnings per share is not in accordance with, or an alternative for, generally accepted accounting principles in the United States.  The most comparable GAAP measure is diluted earnings per share.  Management believes adjusted EPS is useful in providing period-to-period comparisons of the results of the Company’s U.S. operations.  Adjusted EPS should not be considered in isolation or as a substitute for an analysis of the Company’s results as reported under GAAP.  Other companies may calculate adjusted EPS differently than the Company does, limiting the usefulness of the measure for comparisons with other companies.

About Target
Minneapolis-based Target Corporation (NYSE: TGT) serves guests at 1,934 stores – 1,801 in the United States and 133 in Canada – and at Target.com. Since 1946, Target has given 5 percent of its profit to communities, that giving equals more than $4 million a week. For more information, visit Target.com/Pressroom. For a behind-the-scenes look at Target, visit ABullseyeView.com or follow @TargetNews on Twitter.

SOURCE Target Corporation



For further information: Media Contact: Dustee Jenkins (612) 696-3400; Investor Contact: John Hulbert (612) 761-6627

Today’s Retail News From Around The Web: January 15, 2015

Article Author

Craig Patterson
Craig Patterson
Now located in Toronto, Craig is a retail analyst and consultant at the Retail Council of Canada. He's also the Director of Applied Research at the University of Alberta School of Retailing in Edmonton. He has studied the Canadian retail landscape for the past 25 years and he holds Bachelor of Commerce and Bachelor of Laws Degrees. He is also President & CEO of Vancouver-based Retail Insider Media Ltd.

More From The Author

Exterior of Psycho Bunny store in the US. Photo: Psycho Bunny

Edgy Men’s Fashion Brand ‘Psycho Bunny’ to Open Canadian Stores

The unique brand, known for its polo shirts with a logo featuring a maniacal-looking rabbit over a skull and bones, will launch standalone stores for the first time in Canada.
Rendering of 1140 Yonge Street. Designed by Audax for Devron Developments. Rendering: Urban Toronto

Landmark Mixed-Use Development in Toronto’s Rosedale Area to Feature Unique Retail...

A former Staples store, which once hosted TV shows Front Page Challenge and Mr. Dressup, will be redeveloped into a stunning residential building with unique commercial space at its base.

RECENT RETAIL INSIDER VIDEOS

14 COMMENTS

    • It’s actually a worse situation for the luxury department stores. Everyone in Canada could afford to buy from Target, they just didn’t. And Target really had very little in the way of competition here.

      Only a very small minority of Canadians can afford to shop at holts/saks/nordstroms/simons/the bay and all these majors are all chasing this same very small group of Canadians.

      • It’s true that there are few luxury shoppers… but it only takes a few very wealthy people to keep these businesses profitable. Case in point – Holt Renfrew currently enjoys sales in excess of $1,000/square foot annually, with several locations in excess of 120,000 square feet.

      • Nordstrom’s approach to entering Canada however is quite different than that of Target so to say it’s the same situation and that they’ll suffer the same outcome is completely false. Their store fits right in between The Bay and Holt’s so not a complete overlap. Also, they have a lot of exclusive lines that only they carry. As I said before,they’ll do just fine.

        • yes, luxury for everyone! there’s no possible way it couldn’t work!

          Except Canadians don’t like department stores, never really have, not like the Americans anyway. Eaton’s, Zellers, Sears, The Bay, Simpson’s, Target, etc. have all had very public troubles and bankruptcy’s. Even Holt’s is closing stores (and had the PR working overtime to make everyone believe that these closings were great news for the company).

          And as proven over and over again American business’s can’t adapt their business to a working Canadian format, and shareholders don’t give them time to make it work.

          Nordstrom will be another casualty of the fickle Canadian consumer (prices will never be the same between our two countries John Q Public. We have different laws and a different currency, it is madness that you would expect parity pricing), no matter how much of a "luxury is always amazing, and there’s enough super rich to make the luxury sector never stop growing" head in the sand mindset you want to take about this.

          • You can’t compare exact numbers of department store closures in our country to a country ten times larger than ours. You arguably should know that.
            My point is: The US has Macys, Lord & Taylor, Saks, Nordstrom, Neiman Marcus, Bergdorf Goodman, Bloomingdales, plus a large number of regional only chain department stores all selling higher priced goods. What do we have? The Bay? The Bay is far worse than all of those American stores listed. Holt Renfrew? It is definitely comparable and better than most on that American list, but they had to close in their founding city this year (Quebec), as well as in Ottawa (a city of 1 million plus residents).
            If this was the states, any of of those American chains would thrive in a million plus city with literally zero competition like Holts had in Ottawa, heck they would even prosper with tons of competition, and they do.
            So what is the difference? Canadians are cheaper and don’t enjoy the department store shopping experience like their American counterparts. Nordstrom’s plans are just as dangerous as Targets in that they have secured and announced their plans when/where they are opening. Yes they might not all be opening on the same day like Target, but they are still on the hook for those leases even before they know if anything/what is going to work. They are also doubling down on Toronto waaaay too aggressively. There is currently no city in America that has as many Nordstroms and as close together as Toronto will have. Read the Google/Yelp reviews of the Calgary Nordstrom and you can already see the cracks: not as big as their stores in US, no plus size section like in the states, not the same brands as their American stores, no different brands than The Bay and Holts already carry, etc.
            Is it a guaranteed failure? no. Is it a guaranteed success like most of you pie in the sky commentators believe? Far from it.

  1. Best thing Target could have done. Canadians were whining as soon as the first stores opened. Sure Target made mistakes but a little support would have helped. Think Walmart didn’t have trouble when they bought Woolco. They had 20 years to get where they are. Good luck to you Target you’ll be fine. Enjoy your filthy Walmarts dear Canadians.

  2. I feel its unfair. If the stores were stocked properly and matched their stores in the U.S.A. (the same way that Wal-Mart and Costco does) They would be doing well at the moment.
    Sadly I prefer Target to Walmart but Target is more expensive WAY MORE expensive.

    I feel Nordstrom will do well their not as upscale as Holts but still a step above The Bay, kind of like Eaton’s and Woodwards, but they didn’t have happy endings did they? (eek)

    • Nordstrom likely won’t meet the same fate as Woodward’s and Eaton’s. Nordstrom has managed to secure exclusives and differentiate itself from the competition – something Woodward’s and Eaton’s failed to do.

      Regardless of fairness, Target’s Canadian demise it its own doing. Poorly run stores, lack of compelling merchandise, and significant competition.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

RECENT ARTICLES

Canadian Retail News From Around The Web For March 3, 2021

Sobeys partners with Oliver & Bonacini for frozen delivery, industrial boom amid ecomm, LCBO reopening Mondays, Montreal fashion brand returns, and other news.

Edgy Men’s Fashion Brand ‘Psycho Bunny’ to Open Canadian Stores

The unique brand, known for its polo shirts with a logo featuring a maniacal-looking rabbit over a skull and bones, will launch standalone stores for the first time in Canada.

How a Small Retailer in the BC Interior Amassed Over a Million Social Media Followers in 4 Months

JJs Fashions in Trail began posting videos about its "hot boss" leading to explosive growth in social media interaction and brand awareness.

Subscribe

* indicates required
Get Connected

MOST-READ ARTICLES

International Retailers Continue to Enter Canadian Market Despite Pandemic [List/Analysis]

Retail Insider analysis of the international retailers that have entered Canada over the past 12 months as the industry looks to an uncertain future.

Canadian Footwear Brand Maguire Opens First Toronto Store

The Montreal company anticipates lower rents and as a result, plans to selectively open more locations while also significantly growing e-commerce.

Big Changes Coming for Canadian Grocery in 2021 and Beyond: Expert

Expansion of omnichannel development and greater use of predictive analytics and machine learning to help shape the grocery experience of tomorrow.
- Advertisement -
- Advertisement -
- Advertisement -