Target is closing all of its 133 stores in Canada less than two years after launching there, the U.S. discount retailer said on Thursday
Target Chairman and CEO Brian Cornell said the company was unable to find a realistic scenario in which the 133-store Target Canada would become profitable before at least 2021.
Cornell, in his first major decision since becoming CEO in August, said it was a difficult decision "but it was the right decision for our company."
The surprise retreat that will put more than 17,000 employees out of work, and the company said it expects to report about $5.4 billion in pretax losses for its fourth quarter, which finishes at the end of January.
Losses are mostly due to the writedown of the Canadian investment, along with exit costs and operating losses.
Target expects cash costs for the exit to be between $500 million and $600 million, with most of those costs taking place in fiscal 2015 or later.
No. 2 U.S. discount chain
Minneapolis, Minnesota-based Target, the No. 2 discount chain in the United States, has struggled in Canada since its 2013 launch.
There were costly regulations, a slow economy and increasing competition. Cornell said on his blog, called A Bullseye View, that when Target Canada first opened the company knew that many Canadian consumers already shopped its U.S. stores and liked the brand.
Cornell said on his blog that Target "is in a very healthy financial position, but our Target Canada business had reached the point where, without additional funding, it could not continue to meet its liabilities. Simply put, we were losing money every day."
But its supply problems disappointed shoppers, who had eagerly anticipated the retailer's arrival in a market where the discount space had long been dominated by Wal-Mart stores.
The failed international expansion bodes poorly for Target's long-term growth prospects, said Jim Danahy, director of the Center for Retail Leadership at York University's Schulich School of Business in Toronto.
"There isn't a bigger implosion and it needs to be really understood this it's entirely their fault," Danahy told Reuters.
Target's experience in Canada hasn't been unique, though. Big Lots and Best Buy have shuttered stores there and Wal-Mart has seen its sales in Canada weaken.
Target has acknowledged it took on too much too fast in Canada and the disastrous launch spurred the exit of top executives last year.
Target said stores would remain open during liquidation, and that with court approval, it would pay all of its Canadian employees a minimum of 16 weeks of compensation.
Shares of Target, which was granted creditor protection for its money-losing Canadian subsidiary, rose 3 percent after the news.
The company has 1,801 stores in the U.S.
Material for this report came from Reuters and AP.
