In a recent announcement that shook the international retail industry to its core, representatives for the U.S.-based chain store Target announced that the company would be closing all of its Canadian locations. Even though the company has only operated in Canada for less than two years, financial reports have shown that the Canadian stores experienced losses for the majority of that time, totaling about $2 billion collectively.
With 133 store locations spread across the country, Target’s decision will leave an estimated 17,600 people without jobs. Target officials state that the company is trying to create a funding plan worth $70 million in order to provide its employees with 16 weeks’ worth of pay after stores close (although it’s unlikely that Target’s senior executives will earn the full $160,000 paycheck that Canadian financial executives often receive per year).
The company has already stated that it has filed for — and received — legal protection under the federal Companies’ Creditors Arrangement Act (CCAA) regarding outstanding debts. Under this legislation, Target will be given time for restructuring before lenders can begin demanding repayments.
Analysts estimate that it will cost the company between $500 million and $600 million to shut down its Canadian stores, but because the company is already facing billions of dollars worth of sales losses, the total cost of shutting down operations could be as much as $5.4 billion.
The decision has come as a bit of a shock to many Americans. It’s no secret that Target has struggled with management in its Canadian stores, but many consumers and retailers alike forget although the two countries may share a border, that doesn’t ensure that they’ll share consumer tastes and overall success.
Target is now joining retail clothing companies Maxx, Smart Set, and Jacob, which have already closed their Canadian stores due to poor sales.
According to chairman and CEO Brian Cornell, Target is hopeful that the closings of Canadian locations will allow the company to concentrate more on the future success of its American stores.