Target opened 124 stores across 10 provinces last year and now seeks to add another nine locations in Ontario, Quebec, Manitoba, Alberta and British Columbia, the company said on Wednesday.
But the Minnesota-based group’s much-hyped first major international foray, on which it said it would spend just over $4bn in 2013, has had a troubled start, as costs escalated and sales remained weak.
“Target has failed miserably in Canada,” said Brian Sozzi, chief equity strategist at Belus Capital Advisors. “They have invested a lot more than expected in the business, but the main problem is they didn’t tailor stores to the market.”
Canadian customers have stayed away as merchandise has not met local tastes, analysts said. Prices at Target – renowned for bringing cheap chic to low-price retail – are also too high. Near-empty shelves have been another criticism as a result of restocking problems.
This month Target said lacklustre sales at its Canadian stores would have a bigger impact on fourth-quarter results than it had initially thought as it slashed prices to clear out unsold goods, hurting gross margins.
Department store Sears has also been hampered by poor Canada sales, warning it faces a hefty loss for the fourth quarter. Sears Canada has been winding down operations at several stores and selling off merchandise at discounted rates.
For Target, the data breach in which the credit card details and personal data of tens of millions of customers were stolen has only complicated efforts to control spending. Industry watchers have said Target’s costs are set to increase as a result of litigation, upgraded technology, fraud reimbursement and card reissuance.
Target, which has 361,000 employees, announced 475 job cuts last week and said it would eliminate 700 posts in its Minneapolis headquarters, in the largest round of corporate job cuts since 2009. It also said it would no longer offer health insurance for part-time employees.
“Target is facing battles on many fronts. The main challenge for them is getting the store traffic back in the US where it has more than 1,700 stores,” said Michael Monatani, analyst at ISI Group.
“As for Canada, Target has to learn from the mistakes of the last year and correct problems over time, which I’m confident it will do. The company is in a crisis situation and needs loyal customers.”
Target shares have fallen almost 15 per cent since mid-November to $57.08.
Despite its struggles, the retailer, which has eyed the Canadian market for more than a decade, says it remains committed to its push across the border.
Tony Fisher, Target Canada president, said: “As we head into 2014, we will continue to enhance the guest experience at all stores, while continuing to expand our presence in new Canadian neighbourhoods.”
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