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Target Exiting Canadian Market

15 Jan, 2015 By: Erik Gruenwedel

Target Corp. Jan. 15 announced it would cease operating retail stores in Canada — a move that would shutter 133 stores and idle 17,600 workers.

Minneapolis, Minn.-based Target said Canadian stores would remain open during liquidation and that with approval from the Ontario Superior Court of Justice in Toronto, it would deposit $59 million into a trust guaranteeing all Canada-based employees a minimum of 16 weeks of compensation, including wages and benefits for staff who are not required during the liquidation period.

New CEO Brian Cornell said he wants to focus on operations in the United States, where Target operates 1,800 stores. Indeed, Target expects to report a 3% uptick in fourth-quarter (ended Dec. 31) domestic same-store sales, which is 1% better than guidance and driven primarily by increased traffic and stronger-than-expected digital sales.

Target is a major retailer of packaged media, including DVD and Blu-ray movies and TV shows. Since Sept. 25, 2013, it has operated Target Ticket, a digital sales platform.

“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,” Cornell said in a statement.

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

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

About the Author: Erik Gruenwedel

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