August 20, 2014 12:47 pm

Is Target Canada approaching its make-or-break moment?

Target Canada's first store, in Guelph, Ontario, opened last spring. Sales at stores open more than a year in Canada fell 11 per cent over the summer, Target said.

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Target Canada continues to disappoint both itself and its Canadian customers, the discount giant’s new leader says, but he’s banking on all that changing by the end of the year.

That may be how much time Target Canada has left to get things right before the lights start going out.

“No one is happy with our current performance,” Brian Cornell, the new CEO of Target, said on a conference call Wednesday. “We’ve clearly disappointed our Canadians guests.”

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Canadian shoppers still miffed by perceived higher prices than what they saw at U.S. Targets continued to show a cold shoulder to Canadian stores this summer, with sales in the three months up to Aug. 2 falling short of expectations.

Sales at stores that were opened in the first wave of last year’s launch are down, as well — a telling sign that Target is struggling to win sustained business from returning shoppers.

MORE: Target’s biggest headache in Canada? Bare shelves

The Canadian chain, which has launched more than 130 stores since March 2013, continues to deal with “lumpy” inventory stocking issues in stores, Target execs say – an ongoing problem that’s left store shelves bare one moment, followed by heavily discounted fire sales to burn off excess product the next.

The situation has disrupted momentum and helped plunge Target Canada deep into the red through its first year in business.

Sense of urgency

With little to no let up in a stream of disappointing results, experts and analysts have started to speculate that Target could potentially exit Canada, or at least close weaker stores.

The U.S. behemoth “has started to talk about the possibility that if it cannot get Canada on a path to profits, it could be closed down,” experts at Janney Capital Markets said in a recent research note.

Cornell’s comments Wednesday suggest the clock is ticking. “We have to have a sense of urgency here,” he said.

MORE: Target outlines plan to win Canadian shoppers back

The Canadian management team is working around the clock to correct its supply chain woes, he said, as well as develop new price monitoring processes that will give stores greater ability to respond when rivals – chief among them Walmart Canada – lower their prices on the same or comparable product.

Cornell said that he’ll personally be “working closely” with the Canadian team “as we move toward that holiday season.”

Throughout the call there was an emphasis on the Christmas shopping season being critical to Target Canada’s turnaround.

Fall revamp

There’s plenty in the pipeline, Target says, with roughly 30,000 new products being introduced in Canadian stores to  help rekindle shoppers’ interest.

New designer deals are being inked for clothing and homecare products that mirror “what we’re known for in the U.S.”, with a slew being readied for launch in September.

Still, the “highest priority” in Canada is ironing out inventory issues, John Mulligan, Target’s CFO said — “in time for the holiday season.”

Target took another big operating loss in the second quarter, bringing total losses from operations to upwards of $1.4 billion since launch.

“The financial performance in Canada remains unacceptable,” Mulligan said.

© Shaw Media, 2014

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