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Wall Street Considers the Possibility of a Target Exit from Canada

Wall Street Considers the Possibility of a Target Exit from Canada

MINNEAPOLIS, MN – Is Target considering saying “sayonara” to Canadian retail? In light of the difficulties it has encountered in this venture, speculation has abounded in investment circles as to the possibility of a store sale.

Brian Cornell, Chairman and CEO, Target Corporation

Optimism was high at Target approaching the holiday season. After early signs of improvement in its Q3 2014 financial report, Chairman and CEO Brian Cornell commented, “In Canada, we’ve made improvements to our operations, pricing and assortment in time for the holiday season, and we’re eager to measure how our guests respond. The entire company is energized as we approach the peak of the holiday shopping season, and we are looking forward to delivering an outstanding store and digital experience to our guests.”

Canadian retail segment sales had risen 43.8% compared to the previous quarter. While an abundance of work remained, some analysts began to speculate Target had begun to turn a corner in Canada.

Recent analysis from The Street of Target Canada's holiday performance is far more bearish. Analysts predict a 20% gross margin for Target Canada, well short of the company's goal of 28%. Anecdotal evidence quoted by The Street also notes Target's continued logistics difficulties.

Noting the personal and professional ties between Cornell and Wal-Mart's President and CEO Doug McMillon, The Street's Brian Sozzi speculates that a store sale may be in Target's future. The precedent for this move has already been established with Target's transfer of 39 store leases to Wal-Mart during the company's initial Canadian expansion. In addition, Wal-Mart already operates 391 stores in the region and has the necessary logistics capacity to support the broad swath of Target stores it would be purchasing.

For now, however, these suspicions remain firmly rooted in the realm of the “what if?” Should concrete evidence of Target's plans emerge, however, you can count on AndNowUKnow to bring you the news first. Stay tuned.