Target Corp. released a statement yesterday saying that it will be closing down its Canadian operations. The discount retailer was unable to recover consumer confidence in the brand after being criticized often for having higher prices and a smaller assortment of product than U.S. Target stores. It also faced issues with low inventory and empty shelves at several stores.
Target entered Canada in 2013, while Walmart has been here since 1994 and had years to build a steady consumer fan base before facing the competition Target offered. Now that Target will be leaving, Walmart will have to pick up the slack left by the departing company as the remaining large discount retailer in the country.
Target currently operates 133 stores and employs 17,600 people under Target Canada. The discount retailer is voluntarily making $70 million in contributions to an Employee Trust that will provide a minimum of 16 weeks of wages and benefits for almost all Target Canada employees during the wind-down period.
What will happen to those stores and employees? While other U.S. retailers such as Saks Fifth Avenue and Nordstrom are making a move into Canada in the coming years, there is the possibility that they will take over at least some of those storefronts. Another possibility is Walmart Canada expanding further by taking over those vacated locations.
Meanwhile, Target stores in the U.S. are doing well, especially after their recent record-breaking holiday season. Target expects that the decision to close its Canadian branches will increase its earnings starting this fiscal year, as well as its cash flow in fiscal year 2016.
“Personally, this was a very difficult decision, but it was the right decision for our company,” said Target Corp. Chairman and CEO Brian Cornell in a statement. “With the full support of Target Corporation’s Board of Directors, we have determined that it is in the best interest of our business and our shareholders to exit the Canadian market and focus on driving growth and building further momentum in our U.S. business.”
