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Retail meltdown: Target Canada goes belly up

mmntech

mmntech

Lifer
Yet another big chain goes tits up. Target Canada announced this morning that they were pulling operations out of Canada, closing all 133 stores and laying off 17,600 people.

Target says it plans to discontinue all operations in Canada and seek 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 the spring of 2013.

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, 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," CEO Brian Cornell said in a release Thursday, explaining the justification for the shutdown.

Target says it filed an application in a Toronto courtroom for protection under the Companies’ Creditors Arrangement Act.

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.

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.

"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.
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http://www.cbc.ca/news/business/tar...rotection-plans-to-close-all-stores-1.2901618

I'm not shocked. They over-promised and under delivered. They came in without an established supply chain. Stores were constantly running out of stock. They were supposed to be like Wal-Mart super centres with groceries and everything. They weren't. They were more expensive than Wal-Mart too.

I was in Target on Boxing Day (Canada's equivalent to Black Friday). It was busy but no more so than Wally World on a typical weekday. It's the biggest retail meltdown in this country since Eaton's went defunct in 1999. There is a fairly credible rumour that Hudson's Bay will buy them out. HBC used to have their own chain of discount retailers but sold them off to Target.

Was also reading this morning that Radio Shack is finally going to declare bankruptcy next month after circling the drain for years.
 
Too bad, I actually liked Target up here. Good source for cheap stuff.

KT
 
I'm not surprised... People were expecting Target US in Canada and that isn't what they got. I knew that wasn't going to be the case before it opened.
 
I wish I had gone ahead and invested in Target last year when they had the security breach. I really thought about it for a while, but didn't quite. Now I see that the market appears to be reacting positively to this news, and the stock is up to about $76. From the $55 level less than a year ago, this would have been a nice 38% gain in under 12 months.
 
And K-Mart/Sears just announced that they are closing the K-Mart Distribution Center in this town. I remember being surprised when the local K-Mart was included in a round of store closing a early on since distribution costs were obviously cheaper but the DC kept trucking until now.

Oh! But the recession is over, folks! Markets are making money so that means all other kinds of businesses are making money too! 🙄
 
mmntech said:
They were more expensive than Wal-Mart too.
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They're more expensive than Walmart in the US, too. Not drastically so, but enough that I don't do any grocery shopping there.

Outside of groceries, their house brands and even the name brand goods are definitely a notch above those of Walmart, so being a little more expensive there is expected. I don't tend to buy clothing or much in the way of home goods from discount stores, but if you do, at least there are better low-priced options than Walmart.
 
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Carson Dyle said:
They're more expensive that Walmart in the US, too. Not drastically so, but enough that I don't do any grocery shopping there.

Outside of groceries, their house brands and even the name brand goods are definitely a notch above those of Walmart, so being a little more expensive there is expected. I don't tend to buy clothing or much in the way of home goods from discount stores, but if you do, at least there are better low-priced options than Walmart.
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The company came in under the impression that they were going to have US style pricing. That's why Target had become popular with cross border shoppers. It was a notch above Walmart but still cheaper than any store here.

Of course anybody with half a brain knew that wasn't going to be the case simply due to the higher cost of doing business in Canada. In fairness, Target never said they were going to offer that kind of pricing, but people still thought that anyway.

A lot of US retailers are under the false impression that moving up north is easy, but Canadian shoppers are fickle. They're not the first to try and fail. Just the biggest.
 
GunsMadeAmericaFree said:
I wish I had gone ahead and invested in Target last year when they had the security breach. I really thought about it for a while, but didn't quite. Now I see that the market appears to be reacting positively to this news, and the stock is up to about $76. From the $55 level less than a year ago, this would have been a nice 38% gain in under 12 months.
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Same thing happened with BP during the oil spill. The company lost half its value over a $20 billion oil spill. Like $52 to $26 per share. Except their revenue is more like $230 billion. Their profits evaporated for a quarter or two yea... but it didn't warrant the company losing half its value. It went back up to $48. Its not like they were going to slap BP so hard it would disrupt their operations. Its an oil company.
 
I think this failure has to do with the strength of the Canadian dollar encouraging shoppers to go across the border more rather than stay at home to shop. This has changed, but even then prices at Target Canada are still way higher than Target USA. It isn't a discount store in Canada. It was just a store.
 
CZroe said:
And K-Mart/Sears just announced that they are closing the K-Mart Distribution Center in this town. I remember being surprised when the local K-Mart was included in a round of store closing a early on since distribution costs were obviously cheaper but the DC kept trucking until now.

Oh! But the recession is over, folks! Markets are making money so that means all other kinds of businesses are making money too! 🙄
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Don't blame shitty companies closing doors on the recession. I've never been in a K-mart that wasn't filthy and disorganized. There's way better stores to shop at than K-mart. It doesn't matter how the economy is doing when even Walmart feels cleaner than your store.
 
gorcorps said:
Don't blame shitty companies closing doors on the recession. I've never been in a K-mart that wasn't filthy and disorganized. There's way better stores to shop at than K-mart. It doesn't matter how the economy is doing when even Walmart feels cleaner than your store.
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Yea KMart is failing because they offer no compelling reason to shop there over Walmart or Target. And Kmart's failure has been a long time coming anyway. They were failing before the last recession and they continue to fail now.
 
trmiv said:
Yea KMart is failing because they offer no compelling reason to shop there over Walmart or Target. And Kmart's failure has been a long time coming anyway. They were failing before the last recession and they continue to fail now.
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They've been literally failing for twenty years or more. I remember when a friend of my Dad's was managing a KMart in Connecticut back in the early nineties and things were falling apart even then.
 
I remember K-Mart. They've been out of Canada for years now. Never had very many stores though. They're owned by Sears IIRC. Boy, has Sears gotten really junky in the last couple of years. I used to like shopping there. Could get decent clothes cheap. Go in there now and the stores are just a pig sty.
 
Only time I've ever been in Target in my adult life is to get stocking stuffers. What a disaster. 18k jobs created and destroyed in 2 years time.
 
CZroe said:
And K-Mart/Sears just announced that they are closing the K-Mart Distribution Center in this town. I remember being surprised when the local K-Mart was included in a round of store closing a early on since distribution costs were obviously cheaper but the DC kept trucking until now.

Oh! But the recession is over, folks! Markets are making money so that means all other kinds of businesses are making money too! 🙄
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Recession has been over. It's time to stop using it as an excuse. All other kinds of business have been making money. Look at the record profits reported by public companies the last couple of years.

When I drive around town, all I see are new cranes and construction happening everywhere.
 
The Target in my town had no stock. I bet half the shelves were empty. This was not a new store they moved into an old KMart.
 
mmntech said:
Yet another big chain goes tits up. Target Canada announced this morning that they were pulling operations out of Canada, closing all 133 stores and laying off 17,600 people.


http://www.cbc.ca/news/business/tar...rotection-plans-to-close-all-stores-1.2901618

I'm not shocked. They over-promised and under delivered. They came in without an established supply chain. Stores were constantly running out of stock. They were supposed to be like Wal-Mart super centres with groceries and everything. They weren't. They were more expensive than Wal-Mart too.

I was in Target on Boxing Day (Canada's equivalent to Black Friday). It was busy but no more so than Wally World on a typical weekday. It's the biggest retail meltdown in this country since Eaton's went defunct in 1999. There is a fairly credible rumour that Hudson's Bay will buy them out. HBC used to have their own chain of discount retailers but sold them off to Target.

Was also reading this morning that Radio Shack is finally going to declare bankruptcy next month after circling the drain for years.
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wow.. in the US, target is higher priced than walamrt, yet they hold their own.

distribution chain problems.
that's probably what probably did them in.
 
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