Target Corporation (NYSE:TGT) announced yesterday that it will be shutting down its Canadian operations, after only two years of entering the country. The discontinuation will entail closures of 133 stores, and with it, the layoffs of nearly 17,600 employees, marking it one of the largest retreats from Canada by a leading retail chain from the US.
The retailer has said it will seek the court’s approval to conclude the transition, while the outlets will remain operational until all the legal formalities are sorted out. Following the news, Target traded higher during trading yesterday, closing up 1.8% at $75.67.
Target has long been struggling to gain traction in the Canadian market since it first opened its doors to the other side of the border back in 2013. Despite being a discount retail chain, customers there had criticized it for overly high prices, unavailability of required products, and empty outlet shelves. Consequently, it never really established itself in the northern part of the continent; instead, it lost over $2 billion in the two years that it was present there. Hence, the company decided to discontinue operations there, concluding that profitability was far from being obtained – at least up until 2021.
Sony
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In addition to Target, even Sony Corp. (ADR) ventured into Canada but couldn’t really make it work there. The same day that Target revealed its plans to leave Canada, Sony also announced it will shut down all 14 of its stores across the country over the next six to eight weeks.
Sony did not divulge any details regarding its decision to leave Canada. The Japanese electronics company has affirmed its products will still be available for sale on its e-commerce platform and other retail chains. The discontinuation is likely to affect 90 employees in the country.
Sears
In October last year, parent company Sears Holdings Corp. decided to completely separate itself from its Canadian operations, Sears Canada Inc. The troubled US chain announced it would sell a majority of its stake from the unprofitable unit in Canada through a rights offering to raise as much as $380 million.
The problems kept mounting at the American retailer’s Canadian division, where it had constantly been reporting losses for the last umpteen quarters. November’s third-quarter results followed the recurring trend, when Sears Canada reported losses of $118.7 million, as revenues fell 15% year-over-year (YoY) to $834.5 million.
The separation of Sears from its Canadian operations is therefore a way for it to divert its focus to its domestic operations, which have been facing deteriorating financials themselves. The company hopes to turn itself profitable while addressing increased concerns from lenders, suppliers, and financial institutions.
So, while Sears Canada grappled with its inability to withstand the tough retail environment in the country, Sears thought it better to leave before matters got worse.
Long before this, Sears also had 100 Kmart stores in Canada, which it later sold off to Hudson’s Bay Company in 1998.
Best Buy
In January 2013, the consumer electronics retailer Best Buy Co Inc. announced the closure of 15 of its outlets in Canada and a 5% layoff rate as part of its efforts to reorganize its business there.
Wal-Mart’s Sam’s Club
Wal-Mart Stores Inc. plucked out its Sam’s Club warehouse division from Canada in 2009 after giving in to intense competition from Costco Wholesale Corporation. The company had only six locations in the country but had been struggling against the warehouses company for five years, failing to catch up to its success.
So, while these retail chains have had their rough patches in Canada, fashion specialty retailer, Nordstrom Inc. just ventured into the country with its first store in Calgary last year. The exit by Target could possibly scare the fashion retailer, who has high hopes for its northern operations and is slated to inaugurate its second store in March this year.
Date: January 16, 2015