Target leaves Canada after less than 2 years-17,000 jobs to be lost

HughFreakingDillon

http://winnipegfreepress.com/business/newsalert-target-to-pull-out-of-canada-close-its-133-locations-288671621.html?cx_navSource=d-tiles-2

TORONTO - Less than two years after Target Corp. threw open the doors of its first Canadian stores with grand expectations , the discount retailer is retreating back to the United States in defeat.

The Minneapolis-based company said Thursday it has decided to wind up its money-losing operations in Canada, a move that affects 133 stores and 17,600 employees across most of the country.

"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," said Brian Cornell, who became the U.S. company's chairman and chief executive last year, in the announcement.

While many retail analysts have anticipated Target's exit for months, the move raises new questions about how the company's absence will reshape the retail landscape.

Before its launch, Target was once considered the biggest threat to Canadian businesses, partly because its reputation with consumers was unique. Many Canadian shoppers would trek south of the border to wander the aisles of U.S. Target stores in search deals and products they couldn't find at home.

But when Target arrived in Canada the story wasn't the same, as complaints flooded social media about empty shelves, high prices and a selection that fell short of expectations.

Target waited until after the holiday shopping season to determine whether there was any hope in turning around its fumbled plan to become a national retailer that aspired to compete with the likes of Walmart, Canadian Tire (TSX:CTC.A) and Hudson's Bay Co. (TSX:HBC).

"They have the holiday results by now, and they know how much they lost for the year," said Antony Karabus, chief executive of HRC Advisory, a firm that consults with retailers.

"That's the time to make a decision."

Target Corp. will record about US$5.4 billion in pre-tax losses in its fourth-quarter with most it related 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.

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.

HughFreakingDillon

I really wish they'd fix the bugs in this link and quoting system on here.

Jason P

Holy crap! Talk about cutting bait.

HughFreakingDillon

yeah, it's pretty substantial. but I know why. I went into a target store here in winnipeg. the place was a dump. I went into one in Minnie. it was unreal. the similarities between them ended at the name. they opened 6 stores at the same time in winnipeg (taking over Zellers). a city of less than a million people. incredibly stupid move. and all they did was change sign and make Zellers products more expensive. fastest and most enormous fail in retail history!

PJ_Soul

Yeah, shitty. My bro-in-law is the principle real estate broker for Target in Western Canada, so sucks for his business too!

Jesus, there aren't many business moves that go THAT badly on that big a scale! Did they not do their homework or what??

HughFreakingDillon

it seems not. I guess they assumed Canadians just loved the name "Target", and nothing about the actual store. L-)

Jason P

Must not have been able to stock enough Molson and Elsinore.

HughFreakingDillon

here's an article from cnn.com:

Canada and the United States are geographical neighbors with many things in common. But for big American retailers, the Great White North might as well be another planet.

Target announced Thursday that it was closing its stores in Canada. New CEO Brian Cornell defended the decision by saying that Target (TGT) would not have been profitable in Canada until at least 2021.

But Target is not the only American retail giant to have problems in the land of hockey and poutine.

Sears (SHLD) has struggled in Canada for years, and the company announced in October it was selling a big stake in its Sears Canada (SRSC) unit in order to raise much-needed cash. (Sears isn't exactly a huge success on this side of the border either.)

Electronics retailer Best Buy (BBY) closed a bunch of stores in Canada two years ago. The company, which also owns Canadian electronics retailer Future Shop, laid off 950 workers last year in January.

And closeout retailer Big Lots (BIG) closed its Canadian stores in late 2013.

What's this all aboot? (Sorry. Couldn't resist.)

Antony Karabus, CEO of HRC Advisory, a retail consulting firm in Toronto, said some of these American retail chains expanded too aggressively.

In some cases, there just simply wasn't a need to open that many stores. After all, it's not like Canada is an emerging market with a middle class that has yet to be tapped.

Giant Tiger, Canadian Tire and London Drugs are just a few of several big Canadian retail chains that Target and others have had to face off (yes, a deliberate hockey reference) against.

"There is nothing wrong with the Canadian retail market," Karabus said. "Target just came in with all guns blazing."

Karabus praised Target for making the tough decision to leave Canada and said that it's clear that the company has "priorities south of the border."

Some American retailers get it right. Still, some retail icons that had problems in Canada have been rewarded for sticking it out and turning things around.

Wal-Mart (WMT) and Lowe's (LOW) have both reported better results in Canada lately.

Wal-Mart CEO Doug McMillon said in a conference call with analysts last November that the company's sales improved thanks to investments Wal-Mart made to remodel its Canadian stores.

And Lowe's, which faced tough competition from Canadian home improvement retailer Rona, noted in its most recent earnings report in November that its Canadian operations have now reported same-store sales increases of at least 10% for the past six quarters. (Lowe's actually tried to buy Rona a few years ago but Rona rejected the offer.)

"The best companies have adapted and learned from their mistakes," said Wendy Evans, president at Toronto-based Evans & Company Consultants, a retail advisory firm.

Karabus said several other U.S. retailers are having no problem in Canada. He noted that Apple (AAPL, Tech30) stores are a big hit and that Costco (COST) has done a "remarkable job" in Canada.

Nordstrom may actually hit the bull's eye in Canada. He also said there are early indications that luxury retailer Nordstrom (JWN) is off to a promising start with its Canadian expansion.

Nordstrom, unlike Target, is taking a gradual approach to Canada. Target acquired the leases of Canadian retailer Zellers in 2011 for $1.8 billion and used them to open up nearly all of its stores in 2013.

But Nordstrom has just one store so far. It's in Calgary and it opened in September. The company's next store will open in Ottawa in March and a Vancouver location is set to open this fall.

Nordstrom CFO Michael Koppel said at a Goldman Sachs retail conference in September that the company studied the Canadian market for years before deciding to enter the market.

"We did a very methodical purposeful acquisition of real estate. It was all done organically. We worked with partners there, and then over a several year period, we were able to get what we believe are the A plus locations," he said, adding that positive feedback from Canadian customers who shopped with Nordstrom online also helped the company.

So if other American retailers are looking to make the big jump across the 49th parallel, they probably would be better off looking at how Nordstrom is doing it than following Target's example.

Target went big. And then it had to go home

HughFreakingDillon

Jason P wrote: »

Must not have been able to stock enough Molson and Elsinore.

nice. it seems that it just isn't the canadian way to accept brash and loud american businesses who try to barge their way in without an invite.

Jason P

paulonious wrote: »

Jason P wrote: »

Must not have been able to stock enough Molson and Elsinore.

nice. it seems that it just isn't the canadian way to accept brash and loud american businesses who try to barge their way in without an invite.

This is how corporate America handles business in Canada!
~:>

https://www.youtube.com/watch?v=TnjqgiWgSsA

PJ_Soul

paulonious wrote: »

Jason P wrote: »

Must not have been able to stock enough Molson and Elsinore.

nice. it seems that it just isn't the canadian way to accept brash and loud american businesses who try to barge their way in without an invite.

Well I don't think THAT was the issue. Canadians were fairly excited about Target when they thought it would be the same as the Target they love to go to when they go to the US. The problem came when it was simply still Zellers but with a new name and unable to live up to higher expectations (at Zellers people expected it to be crap). That was a HUGE mistake, and yeah, it makes the Target bigwigs look like idiots. Or at least like condescending pricks who think that Canadians have no standards.

HughFreakingDillon

PJ_Soul wrote: »

paulonious wrote: »

Jason P wrote: »

Must not have been able to stock enough Molson and Elsinore.

nice. it seems that it just isn't the canadian way to accept brash and loud american businesses who try to barge their way in without an invite.

Well I don't think THAT was the issue. Canadians were fairly excited about Target when they thought it would be the same as the Target they love to go to when they go to the US. The problem came when it was simply still Zellers but with a new name and unable to live up to higher expectations (at Zellers people expected it to be crap). That was a HUGE mistake, and yeah, it makes the Target bigwigs look like idiots. Or at least like condescending pricks who think that Canadians have no standards.

I know. that was just a tongue-in-cheek response to jasonp's post.

PJ_Soul

Oh, sorry. I have heard anti-American people complaining about that very thing, so it came off as serious!

Drowned Out

I read that Target had lower prices than Walmart by 3.9%....but there was still a public perception that Target's crap was more expensive than Walmart's crap. Bad marketing. And yes, changing the Zellers stores was a big mistake. They should have opened a few flagship, stand-alone stores and hyped the shit out of them to see what the demand was like. They reno'd a Zellers near my house - took months to expand and re-brand, and when it opened? Looked almost identical to the old Zellers. Their colours and the appearance of the store, the products - everything was the same as Zellers! I don't care how cheap it is - I would rather shop at thrift stores than buy Nevada jeans. They did nothing new to win customers over, nor to promote their lower prices enough for people to know, until it was too late - good riddance. As for the 17k jobs....If the economy doesn't totally tank, I'm sure Loblaws/Superstore or someone else will take over these spaces and keep our TFW's employed

lukin2006

No surprise ...

Just too bad for the job's that'll be lost ...

lukin2006

Look At All The Retailers Closing Stores In Canada

http://www.huffingtonpost.ca/2015/01/15/retailers-closing-canada_n_6480972.html

dignin

We had Target here in Canada?

HughFreakingDillon

PJ_Soul wrote: »

Oh, sorry. I have heard anti-American people complaining about that very thing, so it came off as serious!

I was just playing up the stereotype like he was! I need to work on my interweb sarcasm. Lol

PJ_Soul

^^^ Smilies usually do the trick.

oftenreading

PJ_Soul wrote: »

^^^ Smilies usually do the trick.

But not that smiley, who still looks like someone poked him in the eye.

brianlux

Target, Walmart? You mean people actually buy shit from these places?