Target Canada still needs ‘major’ improvements, it says

Target appears to be luring back some Canadian shoppers, but it still requires “major” improvements, its new boss says, and soon.

Its long-term future in Canada appears to depend on it.

The U.S. discount giant said Wednesday sales at its established Canadian stores have turned positive, reversing a slide over the past year as customers shunned the new chain, disappointed by bare store shelves and the perception of higher prices than elsewhere.

But a drop in prices across some key categories and a refreshed product assortment appears to be bringing some Canadians back. Sales at stores opened more than a year rose 1.6 per cent, a meaningful improvement from earlier this year when sales at established stores were falling.

The better trend suggests a certain percentage of customers are now making return visits.

Not good enough

But despite the positive sign, Brian Cornell, Target’s new head, says results from Canada are still disappointing and that deeper improvements must be made across all 133 stores. And the clock is ticking.

Target will be evaluating its Canadian operations over the course of what could amount to a make-or-break holiday selling season. Cornell said the U.S. discount chain will provide an update on its “long-term” objectives for the business “early next year.”

“We will need a major step change in performance,” Cornell said on a conference call. Every Canadian store will have to show measurable improvements.

MORE: Target Canada says it ‘has work to do’ ahead of key holiday season

Target is still working to iron out inconsistent stocking systems responsible for getting products on shelves, a problem that has plagued the retailer since its arrival in Canada in early 2013.

Target is also swapping out tens of thousands of products with new ones to reignite customer interest, especially within key categories such as baby products, health and wellness as well as fashion. Those lines are “signature” categories “we can — and should — be known for,” Cornell, who took over in mid-August, said.

Mounting losses

Target’s wobbly Canadian launch has led to sustained financial losses — $211 million in the latest three-month stretch. Total operating losses have now surpassed $2 billion.

The mounting toll has led to speculation the department store chain could begin shrinking in the new year.

MORE: Is Target Canada approaching its make or break moment?

Rebounding sales growth is being boosted by the fall revamp on tens of thousands of products, as well as cuts to prices on several key items designed to get customers into the stores. Those categories are among a handful Cornell said in September Target would be focusing on, while relying less on other areas, such as grocery sales.

The changes should improve the “overall sentiment” Canadians hold toward the chic-for-cheap retailer and will inform Cornell and his team “as we continue to assess our long-term commitment to Canada,” the Target CEO said.