Target Canada closure: What you can expect
Liquidation to take 4 to 5 months, employees get at least 16 weeks' pay
Target joined a growing list of retailers to close their stores in Canada after the U.S. chain obtained creditor protection on Thursday and announced it will halt its Canadian operations.
The announcement came less than two years after Target launched in Canada in March 2013. There are 133 stores across the country with about 17,600 employees.
As analysts, fans and critics reacted to the chain's short-lived Canadian experiment and discussed the future of Canada's retail landscape, #Target became a trending topic on social media.
Here’s what shoppers, employees and industry watchers can expect as Target pulls the plug.
When will the stores close?
Target will begin a court-supervised process to wind down its Canadian operations. Aaron Alt, most recently Target's senior vice-president and treasurer, has been named CEO of Target Canada to execute the liquidation and wind-down process. International consultancy Alvarez & Marsal will serve as a court-appointed monitor.
The liquidation process is expected to take between four and five months until the doors are closed for good, a spokesperson for Target told CBC News. Target Canada stores will remain open during that process.
Target employees approached by CBC News were reluctant to speak, but some employees at a Target store in St. John's said they have heard the store would liquidate some stock and send what it can’t sell back to the U.S.
What happens to the 17,600 employees?
The court has approved a $70-million employment trust to ensure all employees affected by the closures get at least 16 weeks of severance pay.
"We do not take lightly the impact that our decision to discontinue operations in Canada will have on Target Canada's team members who have worked tirelessly to make improvements to the guest experience. That is why we took the unique step of establishing the employee trust," said Brian Cornell, CEO and chairman of U.S. parent company Target Corp.
Jason Kenney, minister of employment and social development, said the federal government will provide “direct assistance” to affected employees.
"Service Canada will be working with stakeholders and all levels of government to ensure that these workers have all the supports they need at this difficult time," he said.
Kenney said the government will:
- Offer information sessions to ensure workers know what types of jobs are in demand and where they should look for them.
- Ensure the workers know what benefits and services are available, including training for in-demand jobs.
- Provide information on the government's Job Bank, including Job Alert and Job Match, which connect workers directly with jobs.
This is the largest private sector layoff in recent memory, said Jerry Dias, national president of Unifor, Canada’s largest private sector union.
The union urged Kenney to provide emergency EI access for Target workers who will not qualify otherwise. It also called on all provincial governments to help laid-off workers.
"More than 17,000 people suddenly losing their jobs is nothing short of a catastrophe. The government must take immediate measures to address this disaster unfolding in communities across the country," Dias said.
What happens to Target's Canadian locations?
Financial adviser Lazard Ltd. will advise the company on the possibility of selling its real estate. The company will get rid of about $1.2 billion in debt just from getting out of the leases, Cornell said in a conference call with analysts.
Most of Target's stores were taken over from Zellers leases, but the company does own some real estate in Canada. A number of Target's locations are owned by Toronto-based RioCan Investment Trust.
However, a retail analyst said there is no obvious suitor for the stores.
"I don't know who could replace them," said Mandeep Malik, a business professor at McMaster University’s DeGroote School of Business. "Nobody's going to act in haste I doubt that very much."
Why did Target decide to pull the plug?
Despite much press and high expectations, Target Canada failed to deliver the shopping experience its U.S. counterpart provides, analysts said.
Target’s entry into Canada was troublesome to begin with. It opened 124 stores in less than a year – a pace analysts said was far too fast to execute properly.
- How Target missed mark in Canada
- Target Canada's failed launch offers lessons for other retailers
- Why did Target fail in Canada? It wasn't the U.S. Target
Higher prices and a lack of products are also to blame. Many shoppers complained that the chain's Canadian prices were significantly higher than Walmart's and those of chains such as Canadian Tire and Loblaws. Distribution chain problems also caused empty shelves.
"After a thorough review of our Canadian performance and careful consideration of the implications of all options, we were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021," Cornell said in a release Thursday.
What are the implications of the closures?
Target’s failure is a lesson for U.S. retailers who already have operations in Canada or are eyeing the market north of the border, but it also has implications for struggling Canadian retailers.
“The question seems to be was this a problem specific to Target or has something changed for all U.S. players,” said CBC senior business correspondent Amanda Lang.
The threat of big U.S. players is often cited as the reason for the brutal competition, Lang said, but now one of them is backing out.
“With the Canadian dollar weak and looking to stay that way, the economics of doing business here may have deteriorated for any retailer purchasing goods outside this country for sale inside,” Lang said.
“So now the question is, if the U.S. retail interest in our market wanes, can some of our struggling retailers stage a comeback?”