Target Canada to close all locations
Published Thursday, January 15, 2015 8:42AM EST
Last Updated Thursday, January 15, 2015 8:08PM EST
Target Canada has announced it will soon be closing all its stores in Canada after a failed expansion.
The retail chain has a disastrous launch in Canada, opening 133 stores beginning in March 2013, including 26 in Quebec.
Target lost some $2 billion in less than two years. The store closures will mean nearly 18,000 people will be out of work, including 3,500 in Quebec.
There were many early indications the chain was struggling, with a Forum poll in Sept. 2013 showing only 23 per cent of customers were very satisfied with their purchases at the store. Complaints from customers included higher prices and less selection.
Many consumers said Target's prices were higher than their U.S. counterparts, and they were not happy with the lack of products.
“Target in the United States […] is perceived to be sort of a high and retailer, it wasn't perceived that way at all in Canada,” said retail expert Jacques Nantel.
As a result, Target became just another competitor to Walmart.
And when Target even announced they were coming into Canada, Walmart went into war mode, said Lorne Steinberg, president and portfolio manager at Lorne Steinberg Wealth Management.
“[Walmart] decided to spend hundreds of millions to open new stores and really go into a big expansion to battle Target even before the first store opened. Target was under the gun at the beginning and they never recovered,” he said.
In August 2014 the chain admitted the chain's entry into Canada had been dismal, with the chief financial officer saying Target bit off more than it could chew, and should have started by opening a handful of stores instead of more than 100 in its first year.
At that time CFO John Mulligan said Target Canada had underestimated the retail market in Canada, and the chain had never looked at basic products and ensured its prices were comparable with other stores.
In November 2014 Mulligan said the chain would need good sales over the holiday period, and would then re-evaluate its long-term goals.
The anticipated increase in sales did not happen.
"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 Target Corp. Chairman Brian Cornell in a written statement.
"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 Cornell on the company's blog.
Target has made a court application to shut down its stores and pay each of its 17,600 employees at least 16 weeks severance pay. Alvarez & Marsal Canada will monitor the closure of the Canadian portion of the chain.
The stores will stay open while liquidating inventory.
Target expects shutting down its Canadian operations will produce $5.4 billion in losses in fiscal 2014, with cash costs of up to $600 million U.S. in 2015.