|
 Cornell spent the weekend before Christmas making solo visits to
stores in Ontario and Quebec, Canada's most populous provinces,
according to a Target source familiar with the U.S. discount
retailer's decision to pull out of Canada.
Though the recently appointed chief executive could see signs of
operational improvements - notably, better stocked shelves - a key
ingredient was missing.
"There just weren't enough people in the stores," the source said.
"The weekend before Christmas our stores are usually packed. He
wasn't seeing enough people. The stores he visited had never looked
better, they were in stock, but there weren't enough people there."
Target said on Thursday it will exit the Canadian market after less
than two years, closing 133 stores, throwing more than 17,000
employees out of work, and leaving billions in losses.
A former Target employee in touch with vendors and existing staff at
the Canadian headquarters said everyone was blind-sided by the
decision, especially by the timing.
Target, which entered Canada hoping it would be profitable after the
first year, had invested more than C$7 billion ($5.84 billion) in
its Canadian expansion since the start of 2011, according to its
Companies' Creditors Arrangement Act (CCAA) filing.
But it wildly overestimated how readily Canadians would embrace its
arrival. A laundry list of missteps at all levels of the operation
left shoppers disenchanted.
The filing showed the company's struggle to lure shoppers resulted
in losses of between $169 million and $329 million every quarter
since it opened. Target is projecting a cumulative operating loss of
more than C$2.5 billion pretax, more than triple what they
originally expected.
Target blamed its colossal failure on four key factors: its
large-scale opening, supply chain problems, pricing and product
assortment issues, and a lack of online presence.
In the filing, Target said pace and large size of the expansion
severely hampered its ability to respond quickly and effectively to
problems.
The company had invested heavily in its supply chain operations, but
a combination of data-entry and ordering errors, poor training, and
confusion over differences between U.S. and Canadian systems
resulted in empty shelves for key merchandise and over-stocking of
other products.
The Minneapolis-based retailer considered all options as it
struggled to right the floundering Canadian rollout, adding
resources and consulting extensively since last spring.
[to top of second column] |
It considered selling assets and consolidating distribution
operations, but "even under the most optimistic scenarios," Target
said in the filing that it could not see a way to break-even in the
next five years.
On Wednesday, the Target board gathered for a regularly scheduled
meeting, according the unnamed source. Members knew that they would
be evaluating Canada's holiday performance, and that modeling was
under way to determine what it would take to make the operation
profitable.
The source said executives had weighed several scenarios, including
shutting dozens of poorly performing stores and trying to save the
profitable ones.
Instead, a full pullout was announced, and Target Canada filed for
bankruptcy protection.
On Friday, as retail analysts and the Canadian media tore into
Target for mishandling the expansion, Cornell called an all-staff
meeting at Target's Minneapolis headquarters to explain what had
gone wrong.
Taking to the podium in a massive meeting room emptied of furniture
to accommodate hundreds of staffers, Cornell spoke for 15 minutes.
Exiting Canada "was the hardest business decision I've ever made,"
Cornell told the team, according to the source. He said the focus
would now be on digital and U.S. operations.
(With additional reporting by Euan Rocha in Toronto; additional
writing by Andrea Hopkins; Editing by Jeffrey Hodgson; and Peter
Galloway)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
