Target will walk away from Canada less than two years after opening stores there, putting an end to a mismanaged expansion that racked up billions in losses.
The Canadian division, which employs 17,600 people, is seeking court approval to begin liquidation, the Minneapolis-based retailer said today in a statement. Dismantling operations north of the border will lead to a $5.4 billion writedown this quarter, though it will boost profit by next year, Target said.
Fixing the Canada unit, which had amassed more than $2 billion in operating losses since 2011, has been a top priority for chief executive Officer Brian Cornell. After taking the reins in August, he spent a portion of his early days at the company touring operations in the country. The woes plaguing the company’s 133 stores there ranged from empty shelves to prices being higher than at locations in the US.
“We were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021,” Cornell said today. “This was a very difficult decision, but it was the right decision for our company.”
The shares gained as much as 4.3 per cent to $77.50 today, the biggest intraday gain since 19 November. The stock had already been rebounding under Cornell, helped by signs it was recovering from a data breach that hit during the 2013 holiday season. The shares gained more than 20 per cent in the 12 months through yesterday.
The Canadian expansion was part of Steinhafel’s bid to revive growth at the discounter. The expansion, along with adding more groceries to stores and a discount card, were supposed to help the chain boost sales across the company.
Bloomberg News, edited by ESM
