Today Target Corporation announced that it plans to discontinue operating stores in Canada through its indirect wholly-owned subsidiary, Target Canada Co. and an application for protection under the Companies’ Creditors Arrangement Act (CCAA) has been made to protect Target Canada from it’s creditors.
I’m shocked, and sad.
With 133 stores across the country and around 18,000 employees many saw this news coming, and now that it has arrived, it’s still left many with their mouths open in shock.
According to Target’s press release, and to ensure fair treatment of their Canadian employees, Target Corporation has asked the courts to approve a contribution of $70 million (Canadian) into an Employee Trust which would provide nearly all Target Canada-based employees 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, which is expected to begin immediately. Speculation is that as stock is sold, stores will continue to close until there are few left with merchandise which will be either sold off or returned to Target’s inventory.
One of the leading factors behind this decision is the $5.4 billion of pre-tax losses in the fourth quarter of 2014 alone.
Additional factors leading to this decision include the poor introduction into the Canadian market after much excitement, when locations chosen were poor, shelves empty and prices much higher than prices in US Target locations or in rival Wal-Mart stores (which entered Canada nearly 20 years ago).
It will cost Target Corporation between $500 million to $600 million to leave Canada (less the sale of any real estate assets) and this is not expected to have any impact on US operations nor should any customers south of the border see an increase in prices to cover these costs.
With the departure of this big box brand, it will be difficult to see what could replace Target in the locations it held. With K-Mart and Zellers, Simpsons, Woolco, Eatons and Sears leaving Canada it could spell the end of the this business model. I did, however, notice on a recent trip through Western New York, that many malls had replaced their big box retailers with activities like mini-golfing and go-karting and they were packed with people.
Having had the opportunity to meet and become friends with some of Target Canada’s management team, I can say that this is a very sad day for us not only having to say goodbye to a business which failed in Canada, but to some really great people who tried their hardest to make it work.
See you in Minny!