Target has announced that it plans to close all of its 133 stores in Canada, laying off more than 17,000 employees, ending a venture that launched less than two years ago.
According to the story from the CBC, "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. 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."
"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 Target CEO Brian Cornell in a press release. The CBC reports that "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."
According to the story, "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 says it is setting 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."
According to the story from the CBC, "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. 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."
"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 Target CEO Brian Cornell in a press release. The CBC reports that "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."
According to the story, "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 says it is setting 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."
- KC's View:
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Well, it was just a couple of days ago that we had a story about how Cornell was contemplating this possibility, and the commentary went like this:
Pulling the plug on Canada would be an extraordinary repudiation of previous management's priorities … it is all going to depend on what Cornell believes will be the impact on the bottom line. And if he's going to do it, better to do it now. Just rip the bandage off.
Well, I can't help but think that he probably got it right ... better to make the decision, live with the damage, and get focused on priorities where you can have measurable and tangible success. Hell, Cornell can't even guarantee that he'll be running Target in 2021 ... that's forever in CEO years.
But there's a better shot that he will be for having made the tough decision.
