Daily Management Review

Target Plans for Canadian Exit


03/30/2015


Target is about to abandon its expansion in Canada, in just two years of its launch in the country.



Target is all set to bid farewell to Canada even much earlier than its plans. The company operates in almost 133 location across the nation which are expected to shut down permanently by middle of April. However, some of the locations have already been closed with nearly 17 stores abandoned in middle March and another six stores will be closed on 30 March 2015. Moreover, an additional 55 stores are likely to be shut down by April 2. It is expected that the delivery of vacate notices will speed up over the coming few weeks.

In January the announcement for the closure of Canada operations by the retail giant, Target was made. The company’s launch in Canada was a big failure and it would take several years to start generating profit from Canada’s business. Majority of the Target stores in Canada were opened in the year 2013. Moreover, the company is also facing challenges in dealing with its suppliers, creditors as well as landlords that will also be impacted by sudden closure. The company lost an amount of around $1.2 billion in its Canada business since its launch in March 2013.

The court appointed monitors in order to look after the wind up of Target’s stores in Canada. The liquidation of the company’s operation initiated in February. As stated in court’s documents, Target’s branded products cannot be sold in the liquidation process as it bears the company’s logo. However, other items belonging to the company’s stores including shopping cart corrals and electric scooters can be easily sold.

On 30 January 2015, the Canadian court will be considering about approving the intellectual properties of Target worth $2.22 million. However, the company will be able to save an amount of $1.9 million in case its US operations accepts the responsibility for disposing the branded items. Target Canada is likely to return back in store as well as outside signs, 28000 shopping cars and 912,000 shopping bags bearing Target logos to the US business. It is very difficult to remove Target branding from its intellectual property without destroying it or decreasing its value. This decision of abandoning the Canadian operations will result in an unemployment of nearly 17,600 people by April. However, the US retailer giant, Target is rushing towards exit but the company will not be able to leave without some more battles.

The Target’s team in Canada has worked hard to improve its fundamentals, build strong customer relationship and to fix its operations. Target was hopeful that the holiday season will prove to be successful for its newly launched operations in Canada. But the outcome turned out to be much different than the expectations. However, next few weeks will be difficult for the company but it will try  to handle the exit formalities in a proper manner. Target is highly positive that this decision will boost company’s earnings in 2015 and enhance its cash flows in 2016.



Tags : Target




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