Wal-Mart’s Canadian unit said Friday it would buy 13 of the former Target Canada locations and a distribution center in Cornwall, Ontario for C$165 million (US$140 million). The mega-retailer will also spend another US$150 million to renovate the stores, for a total investment of US$290 million.
The announcement comes just a few months after Target revealed its plans to exit its money-losing operations in Canada.
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Target’s exit from Canada
As reported by ValueWalk, Target Corporation disclosed that it would close all 133 stores in Canada in late January. The stores are owned and operated through its wholly-owned subsidiary Target Canada. Target, the No. 2 U.S. distribution chain, filed an application for protection under the Companies’ Creditors Arrangement Act with a Toronto court.
Target Canada owned 133 stores and had around 17,600 employees in Canada. Target Corporation has indicated that its decision to close its Canadian operations will increase earnings in fiscal 2015 and beyond, as well as cash flow in fiscal 2016 and beyond.
Target lost a total of $2 billion from its Canadian operations. In a statement, Target Corporation Chairman and CEO Brian Cornell said: “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.”
Wal-Mart, the world’s largest retailer, said Friday that it would buy and renovate 13 former Target Canada locations and a distribution center. The retail giant will pay about C$165 million for the warehouse and stores, and plans to hire approximately 3,400 new employees across Canada.
Wal-Mart indicated that its latest investment will be in addition to the C$340 million it’s spending on 29 big-box stores in Canada, announced in February.
Target’s struggle in Canada since 2013
Exuding confidence over the deal, Dirk Van den Berghe, CEO of Wal-Mart Canada said: “Wal-Mart is committed to the Canadian market, and this agreement helps us accelerate our growth plans”.
Target Corp. racked up billions in losses after less than two years in Canada. The No. 2 U.S. discount chain closed the last of its 133 retail stores in Canada on April 12. The retailer’s exit triggered a $5.1 billion quarterly charge. Target is not alone in retrenching, as electronics retailer Best Buy. said in March that it will close 66 of its Future Shop electronics stores and rebrand the remaining 65 under its own name.
Interestingly, Canadian retailers Metro Inc. and Hudson’s Bay Co. have also evinced interest in leasing Target’s properties. Earlier this week, Canadian Tire Corp disclosed its intention to buy leases for 12 properties previously held by Target Canada for $17.7 million.