Target Corporation announced on Thursday, January 15th that that it was planning to close all 133 stores in Canada. The stores are owned and operated through its wholly-owned subsidiary Target Canada. The firm’s statement noted that Target Canada filed an application for protection under the Companies’ Creditors Arrangement Act with a Toronto court.
Details on Target Canada store closings
Target Canada currently owns 133 stores and has around 17,600 employees in Canada. Target is seeking the court’s approval to voluntarily make a contribution of C$70 million (US$59 million) into an Employee Trust. The proposed trust would provide almost all Target Canada-based employees a minimum of 16 weeks of compensation, including wages and benefits coverage (some employees will remain for the full wind-down period).
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Of note, all of the Target Canada stores will remain open until the liquidation is finalized.
Target Canada has requested the appointment of Alvarez & Marsal Canada as the official Monitor in the CCAA proceedings for the liquidation and wind-down process. Parent Target Corporation has also agreed to provide a US$175 million debtor-in-possession credit facility to finance operations during the CCAA liquidation proceedings. The firm has also requested court approval to hire Lazard to advise Target Canada in regarding the sale of its considerable real estate assets.
Target Corporation notes the decision to close its Canadian operations will increase earnings in fiscal 2015 and beyond, as well as cash flow in fiscal 2016 and beyond.
Statement from Target CEO
Brian Cornell, Target Corporation Chairman and CEO, explained his decision in Thursday’s statement. “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. 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 U.S. business.”
“The Target Canada team has worked tirelessly to improve the fundamentals, fix operations and build a deeper relationship with our guests. We hoped that these efforts in Canada would lead to a successful holiday season, but we did not see the required step-change in our holiday performance,” Cornell continued. “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.”