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Target to discontinue operating stores in Canada
16
Jan '15
Target Corporation has planned to discontinue operating stores in Canada through its indirect wholly-owned subsidiary, Target Canada Co. (‘Target Canada’), and has filed an application for protection under the Companies’ Creditors Arrangement Act (CCAA) with the Ontario Superior Court of Justice (Commercial List) in Toronto.
 
“When I joined Target, I promised our team and shareholders that I would take a hard look at our business and operations in an effort to improve our performance and transform our company. 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,” said Brian Cornell, Target Corporation chairman and CEO.
 
“Personally, this was a very difficult decision, but it was the right decision for our company. 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 US business,” Cornell added.
 
Target Canada currently has 133 stores across the country and employs approximately 17,600 people. The company has sought approval of the court to create a Trust with a corpus of C$ 70 million (approximately US$ 59 million) from which all employees receive a minimum of 16 weeks of compensation, including wages and benefits coverage for employees who are not required for the full wind-down period. Target Canada stores will remain open during the liquidation process.
 
“There is no doubt that the next several weeks will be difficult, but we will make every effort to handle our exit in an appropriate and orderly way,” said Cornell.
 
As a result of the CCAA filing, Target Corporation has determined that Target Canada and its subsidiaries will be deconsolidated from Target Corporation’s financial statements as of the date of the filing. Target Corporation’s cash costs to discontinue Canadian operations are expected to be $500 million to $600 million, most of which will occur in the Company’s 2015 fiscal year or later.
 
As a result of the decision, Target Corporation will operate as a single segment that includes all US operations. This is expected to increase the company’s earnings in fiscal 2015 and beyond, and increase its cash flow in fiscal 2016 and beyond.
 
Commenting on Target’s decision to exit Canadian market, Henry Stupp, CEO of Cherokee Global Brands, a global marketer of style-focused lifestyle brands, said historically, Target Canada represented less than 1.8 per cent of total revenues for Cherokee, and hence the company anticipates minimal, if any, impact from the closure of Target Canada stores. (RKS)
 

Fibre2fashion News Desk - India

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