Target to Close Down its Canadian Operations

Big news coming from the retail sector today as Target has decided to withdraw from the Canadian marketplace. Amid fierce competition from consolidating grocery chains, drug stores, and expanding everyday-low-cost retailers, Target was faced with a far more challenging business objective than they probably first realized.

Bare shelves and out-of-stock items were major hot-buttons and deemed unacceptable by their interim CEO, John Mulligan. According to Hollie Shaw of the Financial post,

“The replenishment issue is multifaceted, involving the difficult reality of rapidly launching 124 new stores last year along with a simultaneous kickoff of new IT systems and a new distribution network in Canada, where it had no past data to allow accurate forecasting for the amount of goods it should order, or knowledge of different customer profiles and traffic habits at stores.”

Another major issue was their pricing. When they first arrived, Canadians were very disappointed to find that their prices were competitive with other Canadian stores, and not their U.S. chain. Again, this is likely a result of inefficiencies in their distribution network, an area which their chief rival, Walmart, thrives.

As recently as September 2014, there were stories swirling about possible price wars between the two retail giants, but Walmart’s growth and expansion into grocery only made the chain more accessible and convenient for customers. After all, Walmart just celebrated their 20th Anniversary, have an experienced distribution network, a thriving ecommerce platform, and possess strong brand loyalty due to their 391 stores, 91,477 employees and countless appreciative customers across Canada.

As per CBC, Target is set to close all 133 stores across the country the employ over 17,000 people. The decision to put a stop to their Canadian operations will cost between $500 million and $600 million in cash from Target U.S.’s bottom line, but results in a write down of about $5.4 billion in the upcoming fourth-quarter earnings.

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