Target Is closing down across the country
Target to close all 133 Canadian stores, gets CCAA protection
http://www.cbc.ca/news/business/targ...tion-1.2901618
arget says it plans to discontinue all operations in Canada and has been granted protection from creditors, less than two years after opening to much fanfare.
In a release early Thursday, the U.S. retail chain said it will close all its locations in Canada. There are 133 stores across the country with about 17,600 employees.
The company launched in Canada in March of 2013, not quite two years ago.
But after high expectations, the chain failed to deliver right out of the gate as customers faced higher-than-expected prices, and empty shelves as the retailer had problems with its distribution chain.
How Target missed the mark in Canada
Target's failed launch offers lessons for other Canadian retailers
Target lost almost $1 billion in its first year in Canada, and while the losses have shrank since then, the chain is still losing money daily.
Executives repeatedly promised they would get it right and reaffirmed their commitment to Canada as recently as July, but ultimately decided to pull the plug.
"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," the U.S. parent company's CEO Brian Cornell said in a release Thursday, explaining the justification for the shutdown.
Target filed an application in a Toronto courtroom for protection under the Companies’ Creditors Arrangement Act early Thursday morning. That request was granted.
DON PITTIS: The long, slow death of middle class retailers in Canada
Why did Target Canada fail? Because it wasn't the U.S. Target
The federal law allows companies that can't pay their debts the ability to restructure themselves. Without it, the companies and individuals that an insolvent company owes money to can technically start seizing assets. But because Target has applied under CCAA, that won't happen here yet.
Aaron Alt, most recently Target's senior vice-president and treasurer, has been named CEO of Target Canada to execute the winddown process under the court's supervision.
Target's shareholders welcomed the news, sending shares in the company up almost three per cent on the NYSE on Thursday. Closing up shop in Canada means the company has more money to focus its efforts on shoring up its also-struggling U.S. operations.
TARGET-CANADA/
Target was plagued with problems after launching in Canada, including empty shelves because of distribution problems. (Geoff Robins/Reuters)
And at least one analyst also hinted that it was a good idea to end the failed experiment in Canada.
"Target’s decision to exit Canada after less than two years of store operations is an admission that it has failed in its attempt to enter a new market," Moody's analyst Charlie O'Shea said. "With over $1.5 billion in … losses, it is clear that the early flaws in Target’s strategy to simultaneously open stores while building out or developing its supply chain became insurmountable."
Severance will be paid
Target has hired international consultancy Alvarez & Marsal to oversee the liquidation and wind-down process.
Most of Target's stores are in locations that were taken over from existing Zellers leases, but the company does own some real estate in Canada.
Financial advisory firm Lazard Ltd. will advise the company with regards to possibly selling its real-estate assets.
A large number of Target's locations are owned by Toronto-based RioCan Investment Trust. Units of that REIT shed about one per cent on the TSX on Thursday when the Target news came out.
The company is seeking the court's permission to set up a $70-million fund to ensure all employees affected by the move get at least 16 weeks in severance pay. The stores will remain open while the company completes the liquidation process.
LISTEN: Target failed in Canada because it expanded to far, too fast, retail analyst David Ian Gray tells CBC
"Your efforts have been extraordinary, and absolutely nothing about our decision to exit diminishes your hard work and dedication," Cornell told employees in a letter on Thursday, a copy of which has been obtained by CBC News.
Target said the decision to close shop in Canada will cost between $500 million and $600 million in cash from the U.S. parent's bottom line, but results in a writedown of about $5.4 billion from an accounting perspective in the upcoming fourth-quarter earnings.
Target is the latest retailer to go under in what's becoming an increasingly tough retail environment in Canada.
Fashion shops Mexx, Smart Set and Jacob have all announced plans to close down in recent months. Montreal-based Le Chateau hasn't officially closed, but the clothing chain has been in a tough spot of late.
http://www.huffingtonpost.ca/2014/11...n_6108418.html
Target might have Alex, but the teen heartthrob isn't enough to save some of the company's stores from getting the ax.
The retail giant said Tuesday that it plans to shutter 11 underperforming stores by next February, about six months after it closed eight other locations. That brings the total number of closures to 19 this year -- as many locations as the company opened last year, according to its annual report.
“The decision to close a Target store is only made after careful consideration of the long-term financial performance of a particular location,” the company said in a statement. “All eligible store team members are being offered the option to transfer to other Target stores.”
Employees who choose not to transfer will receive severance payments, the statement said. The stores, closing by Feb. 1, 2015, include locations scattered throughout the South and Midwest. Evan Lapiska, a Target spokesman, said each store currently employs roughly 100 workers.
Target has struggled over the past year in the wake of a massive breach of customer data, which cost its chief executive his job. The company is also facing trouble as big-box retailers lose ground with shoppers to smaller stores and e-commerce sites.
In response, Target began testing smaller, urban express stores and beefed up its digital team in July. In this case, the company appears to be trimming fat as part of its turnaround strategy.
Quote
