Target lost $2.6 billion US, or $4.14 per share, in the three months ended Jan. 31, dragged down by huge costs associated with shutting down its poorly executed Canadian expansion, the U.S.-based retailer says.
In a move announced last month, Target is pulling the plug on its 133 stores in Canada, less than two years after launching here with much fanfare, because it had yet to turn a profit and couldn't envision that happening for several more years.
The chain is liquidating its assets in Canada, one of many factors racking up huge losses. Specifically, Target says it recorded a pretax impairment loss and other charges of more than $5.1 billion in the quarter, costs directly associated with shutting down operations in Canada.
For the fiscal year as a whole, Target lost more than $4 billion in Canada, after taxes.
That weakness was offset by some modest improvement in the U.S. operations, but the $2.6-billion loss for the company as a whole contrasts sharply with the $520 million profit it posted during the same period a year earlier — a key stretch for retailers because it includes the Christmas shopping season.
Outside Canada, the discount retailer recorded strong sales as shoppers bought more clothing and other items over the holiday period. Same-store sales increased by 3.8 per cent over the previous year's level.
The decision to close the Canadian business is the first major move by CEO Brian Cornell, who took over last August and is charged with reclaiming the retailer's image as a purveyor of cheap chic fashions.
The results also show how the Minneapolis-based company is successfully moving past a massive data breach disclosed a week before Christmas 2014 that compromised millions of credit and debit cards. That caused shoppers to flee for months, and hurt sales and profits. That was one of the major reasons behind the abrupt departure of CEO Gregg Steinhafel, who resigned last May.
In addition to its own problems, Target is also grappling with tough issues facing all retailers — the chain's core demographic of middle-class shoppers haven't benefited from a resurgent economy in the form of wage gains, which gives them less spending money to for places like Target.
Target also has seen a rapid shift among its shoppers to buy and research on their mobile devices. The discounter has been playing catch-up. It's revamping its apps and just lowered the threshold for free shipping.
"We're seeing early momentum in our efforts to transform Target and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experiences while controlling costs," said Cornell in a statement.
Even before Cornell took the helm, Target had begun to reassess its operations, sprucing up its baby departments and adding mannequins to its fashion areas.
Cornell wants to double down on a handful of areas like children's products and furniture. It is also reimagining its grocery area and wants to focus on products unique to Target.
Target is set to unveil more details of its strategy to investors on March 3.
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