Target Exits Canadian Retail Landscape

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Current Events Chatboard

Target Exits Canadian Retail Landscape

by Weeky Lee

Jan 15, 2015

Grim-faced Target employees huddled in a 10-minute staff meeting this morning inside Victoria’s Hillside Centre to get updated on the company’s plan to close 133 stores across Canada. Minneapolis-based Target is leaving Canada due to billions of dollars in losses after fewer than two years since a much-hyped launch. As of this morning, the company is in creditor protection. Target Corp. said it will record about US$5.4 billion in pre-tax losses in its fourth quarter with most it related to the Canadian operation. Five stores on Vancouver Island will shut: Hillside Centre and Tillicum Shopping Centre in Greater Victoria, as well as locations in Nanaimo, Courtenay and Campbell River. The manager of the Hillside Target store would not comment this morning, referring reporters to a national media number. She did say, however, “we are business as usual and we are still going to run a great store.” Each Target store has about 150 employees. Mexx latest fashion retailer to file for ba...See MoreGrim-faced Target employees huddled in a 10-minute staff meeting this morning inside Victoria’s Hillside Centre to get updated on the company’s plan to close 133 stores across Canada. Minneapolis-based Target is leaving Canada due to billions of dollars in losses after fewer than two years since a much-hyped launch. As of this morning, the company is in creditor protection. Target Corp. said it will record about US$5.4 billion in pre-tax losses in its fourth quarter with most it related to the Canadian operation. Five stores on Vancouver Island will shut: Hillside Centre and Tillicum Shopping Centre in Greater Victoria, as well as locations in Nanaimo, Courtenay and Campbell River. The manager of the Hillside Target store would not comment this morning, referring reporters to a national media number. She did say, however, “we are business as usual and we are still going to run a great store.” Each Target store has about 150 employees. Mexx latest fashion retailer to file for bankruptcy protection in Canada, abroad Shawn O’Keefe of Saanich, who was at Target this morning to return a lamp, said, “I think about the employees first of all. All these people who are going to be out of work and looking for work.” Target stores never felt as though they had fully opened, he said. “It always felt kind of sparse in here. I always wondered if it could make a go of it.” The two-storey, 147,000-square-foot Hillside store was rebuilt in place of a previous Zellers store. “It is a big store, though. It almost seemed like Target couldn’t fill it. It seemed like the shelves were half-stocked,” O’Keefe said. Echoing others who have pointed to Target’s shelf-stocking problem, he said that it seemed to be a problem for the company since the start. The 122,000-square-foot Tillicum Target was the first of the two to open in Greater Victoria, on May 7, 2013, after an $11-million facelift. Close to 100 shoppers were at the doors, waiting to rush in for the opening. By mid- afternoon, traffic was gridlocked in the parking lot, where excited shoppers, many who knew the store from the U.S., filled shopping bags. Target stores also opened in Nanaimo and Campbell River the same day. The Hillside Target opened in March. Melissa Lane, one of the early Hillside Target shoppers today, is sorry to hear it is closing. She’s a neighbour and a regular shopper, buying baby supplies for one-year-old Owen. “It’s really too bad because the staff here are really helpful.” Staff range from high school students who work full-time to older employees close to retirement, she said. Lane is thinking of those people, saying it must be difficult for them, especially those who went through the closing of the Zellers store in 2012 and have worked to try to make Target a success. Closing all its Canadian stores will put 17,600 employees across most of the country out of work. “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 of deals and products they couldn’t find at home. But when Target arrived in Canada, the story wasn’t the same and 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 of turning around its fumbled plan to become a national retailer that aspired to compete with the likes of Wal-Mart, 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.” 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.

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