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Post Info TOPIC: Target says it will pull out of Canada after failed expansion
Nobody Just Nobody


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Target says it will pull out of Canada after failed expansion
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http://fortune.com/2015/01/15/target-to-exit-canada-market/

 

The retailer to book a massive $5.4 billion charge in the fourth quarter to reflect the loss from the investment.

Target said Thursday it will exit the Canada market, a recent expansion that has resulted in billions of losses and a move that will lead the retailer to book a massive $5.4 billion charge in the fourth quarter to reflect the loss from the investment.

The exit from Canada comes after Target TGT 1.80% moved aggressively to open over a hundred stores quickly in the market, but was criticized almost immediately for doing a poor job of replicating its American shopping experience. Though sales have been rising, the division remained deeply unprofitable.

“Personally, this was a very difficult decision, but it was the right decision for our company,” said CEO Brian Cornell. Cornell joined Target last year and wasted almost no time in angling to fix the retailer’s woes in Canada, flying up to that nation during his first week on the job as he aimed to learn as much as he could about the business before the latest holiday season.

 

But Target has decided it will fully retreat from the market, a move that signals the retailer’s top executives couldn’t justify further investing in the business with the hopes of eventually making money. In fact, Cornell said the company was unable to see a realistic scenario that would have gotten Target Canada to profitability until “at least 2021.”

The move, while likely to catch many on Wall Street off guard, has clear justification. Though sales for the first nine months of fiscal 2014 leapt 90% to $1.32 billion, the segment’s loss swelled to $627 million for earnings before interest and taxes. Losses for the business totaled $941 million in 2013, $369 million in 2012 and $122 million in 2011. With that business mired in the red, Target’s overall profitability was severely challenged.

Target Canada has 133 stores across the country and employs about 17,600 people. The stores will remain open during the retailer’s liquidation process. As a result of the move, Target is expected to report about $5.4 billion of pre-tax losses on discontinued operations for the fourth quarter of 2014, driven primarily by write-downs for the company’s investment, along with costs associated with the exit from that market. Cash costs to discontinue the Canadian operations will be $500 million to $600 million, most of which will occur in the company’s fiscal 2015 or later.

As a result of the move, Target will turn all focus to the U.S. market, where sales have been rising, albeit modestly as the retailer faces stiff competition for a slice of consumer spending.



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karl271


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Oh, the people out of work. Wish Target had done more research before they rushed in and expanded so much. I think they are a good store (I usually shop in them when I am in the US) and am sorry they have to close....

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You know, it seems about every 10 years or so, a new retail store, such as Target, opens up and becomes the go-to store in its class. Then they over expand and start a downward spiral. A few years after the next go-to chain will open. I wonder if this is the start of the downward spiral for Target?

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Lawyerlady


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I know what to do_sometimes wrote:

You know, it seems about every 10 years or so, a new retail store, such as Target, opens up and becomes the go-to store in its class. Then they over expand and start a downward spiral. A few years after the next go-to chain will open. I wonder if this is the start of the downward spiral for Target?

 Target does very well in the U.S.  They have continued to grow here.  I don't know why Canada doesn't like them. 



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flan327


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Lawyerlady wrote:
I know what to do_sometimes wrote:

You know, it seems about every 10 years or so, a new retail store, such as Target, opens up and becomes the go-to store in its class. Then they over expand and start a downward spiral. A few years after the next go-to chain will open. I wonder if this is the start of the downward spiral for Target?

 Target does very well in the U.S.  They have continued to grow here.  I don't know why Canada doesn't like them. 

 Yeah, Tig, what's up with that?

And can I just mention the heaven that is a Super Target?

flan



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Mellow Momma


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Here is the deal :

- Target opened all 130 Canadian stores at once. Huge mistake. Usually, when a company expands into a new market, they do it slowly, opening 20 stores and getting them working smoothly. Then opening 20-50 more etc until they expand as much as they want. For some stupid reason Target opened all 130 at once.

- There were supply chain issues. The shelves were empty - literally empty. Not exactly the way to sell things. Nor is it the way to impress customers.

- the prices were higher than they should have been. WalMart was able to undercut them easily. I don't know the hows and the whys of the pricing, but I know it was a big issue.

I personally am worried about several really good people that went to Canada to help turn things around. When it was clear they were struggling, Target sent a lot of really good people over to help turn it around. I hope they don't lose their jobs. Nothing like getting fired for being a team player.



-- Edited by Mellow Momma on Friday 16th of January 2015 09:24:35 AM

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Bube


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Exactly Mellow Momma. You hit that nail on the head! It is sad for the loss of jobs.

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Mellow Momma


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Bube wrote:

Exactly Mellow Momma. You hit that nail on the head! It is sad for the loss of jobs.

 5 year Target Team member who watched this whole mess unfold and told everyone this would happen. 

 

Our district sent 3 good people to Canada - they were promoted and transferred there with their consent. Then one of the best at corporare went in to help fix it. I am concerned that there are no openings for these people to return to. Besides the 17,600 in Canada losing their jobs, there are another 600 in Minneapoils whose primary job functions are Canadian operations. So they will probably lose their jobs as well. Many of them relocated to Minneapolis to take the jobs.



-- Edited by Mellow Momma on Friday 16th of January 2015 01:59:31 PM

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Nobody Just Nobody


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When I read this I thought it was so sad for the people losing their jobs. That's a huge number of people.

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Mellow Momma


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It really is. And I especially feel bad for the team members who had stable jobs here and went there to help turn things around. They will probably get pushed out - and it wasn't their fault at all.

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Southern_Belle


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That stinks. It really does. I am so worried about job security. I want to change jobs but I need security.

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elphaba


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It's been a really tough couple of weeks for Canadian retail. Target, Sony and Mexx have all announced significant store closures. Target's execution of their expansion into Canada was horribly flawed from the get-go. Here's an article from a year ago talking about the issues they were having. http://www.huffingtonpost.ca/2014/01/28/empty-shelves-target-canada_n_4681428.html

 

n-TARGET-CANADA-EMPTY-SHELVES-large.jpg

 

I don't think anyone here is surprised they're closing but the "one fell swoop" approach instead of a gradual close out of the poorest performing stores while trying to fix the better ones was unexpected.



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ed11563


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Since stores like Costco and WalMart took their business, maybe they could hire the employees ?

 



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Southern_Belle


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I went to the Target in Savannah Thurs evening. It's a huge store at the mall. It was virtually empty of shoppers and employees. The store was well stocked except for the clothing area. That area actually had three employees hanging out by the dressing rooms. When it was time to check out we had to go to the checkout by the street entrance and then all the way back through the store to go back out of the mall entrance. I was kind of irritated with that but I don't live there so I don't go there often.

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