Target Canada announced today it will be closing all of its 133 stores in Canada. The big box American retailer, which employs about 17,600 people countrywide, launched its first Canadian stores in the spring of 2013, but wobbled early, losing nearly $1 billion in its first year.
“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,” said Brian Cornell, Target Corporation Chairman and CEO.
The stores will stay open during liquidation, a process which is expected to cost from $500 million to $600 million.
Target Canada also filed for creditor protection and the corporation expects approximately $5.4 billion in pre-tax losses in the fourth quarter of 2014. The news was followed with Sony announcing it would shutter all 14 of its stores in Canada over the next six to eight weeks.
The Target pull out points to the larger shake up in the retail real estate landscape. In 2014, department store Sears Canada moved to close up a number of its stores after seeing profits slide.
With Sears disappearing, Target leaving, and other large-scale retailers such as K-Mart, Woolco, Eaton’s and Zellers now long gone, the commercial real estate industry is wondering which companies will step into these very big, vacant spaces.
Jeremiah Shamess, a Redevelopment and Development Land Specialist at Colliers, points out that stores like Target or Sears tend to be anchor tenants at malls or centres.
“Unless they’re going to find grocery store anchors, or Walmart starts taking up those spaces, which is also very likely, there’s going to be a big pull out,” he said.
“I’m not really sure what’s going to happen. My personal opinion would be to cut up the space and use it for smaller retailers.”
Although Target’s failed Canadian expansion has been attributed to a number of issues, including price gaps between American and Canadian stores, the retail industry is undergoing a shake up.
Shamess says there’s a “revolution” coming with more and more people choosing to buy goods online, and patronizing brick-and-mortar stores for specialty items.
Another big change: location. While suburban shopping malls and Smart Centres won’t be going extinct any time soon, many large retailers are clambering to get into big cities.
“Retailers are now much more aggressive in the urban areas, and that’s been because of the condo situation. Where there have been multiple developments, the retail tends to follow the condos,” he said.
“We’re starting to see a slight shift away from the big box retail and [large retailers] are looking for new opportunities. Even Smart Centres are moving away from the suburban big box areas; though to be fair it’s because they’ve kind of attacked all markets.”
Target Canada was aware of the trend and had planned to move into downtown Toronto with a 145,000-square foot store in Harbour Plaza, just south of Union Station.
As the company shutters stores across Canada, we’ll be following the story closely to see which retailers will step into the void.