Less than two years after opening its first stores in Canada, American mass retailer Target has announced it will shutter all 133 doors and cease operations. Target Canada was a wholly-owned subsidiary of Minneapolis-based Target Corporation.
So what led to this decision made so quickly after the launch?
There have been a number of reasons cited including:
- pricing structure: merchandise was more expensive than at its American couterpart
- supply chain: operational difficulties at the beginning were only partially addressed by the time the stores opened, often leaving stores with empty shelves or broken size runs
- poor planning: it is said the sales plan expected stores to generate more than was feasible for a company just launching
- oil prices: with oil prices in a seeming free-fall over the past year, it would mean less disposable income in shoppers hands in provinces like Alberta where oil is the biggest industry
- new CEO: a new CEO brought in to right the Target ship, had to take a hard look at financials. In 2014, the Target Canada division generated a loss of $1 billion. It was further determined that it would likely be 2021 before the division became profitable.
All of these reasons contributed to Target's abrupt decision to close down the Canadian division which at the time of the announcment was operating 133 stores (January 16, 2015). Two additional stores under construction were halted as well.
Target is expected to take a $5.4 billion writedown related to shuttering the Canadian stores in the current period (2014 4th quarter), with the balance (expected to be around $800 million) to be charged to fiscal 2015.