Forget inventory issues, better prices may be in store at Target Canada
Canadian shoppers at Target Corp. stores can expect deep discounts on some products to continue for a short while longer as Target attempts to usher out the door “lumpy” or built-up inventory levels.
After that, more attractive pricing overall may replace the fire sales, experts suggest.
Company officials said Wednesday they are quickly getting a handle on a stocking issue that has impeded Canadian sales and tarnished the U.S. retailer’s reputation shortly after the U.S. retail giant launched its stores here fourteen months ago.
“We are still lumpy, we still have levels to clear, but we’re getting our arms around that,” said Kathryn Tesija, executive vice-president of merchandising and supply chain.
Target has opened 127 stores in Canada to date, up from 24 last spring.
Tesija said now that Target has some “history under our belt” north of the border, “we can now forecast more accurately” to make sure store shelves don’t sit empty – the biggest complaint among disappointed Canadian shoppers.
Target has said little about the exact causes of its inventory woes in Canada, which have forced the retailer to discount heavily at times to clear items only to see shelves sit bare at others.
But its actions speak volumes. Canadian president Tony Fisher was fired on Tuesday amid a shakeup that will include hiring a domestic retailing executive to give Target a deeper insight into how to win in the domestic market place.
A Reuters report suggested shipments began stacking up at distribution centres early last year because of computer glitches that saw barcodes on incoming items not match up what was in the centre’s computer system. Items like 12-packs of T-shirts would be scanned as units of 24 shirts, for example.
Target has three main distribution centres in Canada, according to the report, one located near the Quebec border, one outside of Toronto and another in Western Canada just outside Calgary. The centres are owned by a third-party company named Eleven Points Logistics.
Target’s early stumbles have led to more than a billion dollars in operating losses, while spoiling much of the goodwill it had managed to generate with Canadian shoppers ahead of its high-profile entry into Canada.
WATCH: Can Target turn around disappointing sales in Canada?
John Mulligan, Minneapolis-based Target’s chief financial officer— who finds himself in the role of interim CEO following the dismissal of long-time chief Gregg Steinhafel two weeks ago— said Wednesday the exec shuffle has created a “faster” timeline to get its Canadian stores on track.
“We must dramatically improve our Canadian segment performance,” Mulligan said.
Better deals ahead?
Analysts say that once the fire sales have cleared out excess inventory, prices could generally become more attractive to shoppers as well.
Another major knock against Target has been its pricing, considered high compared to the “cheap chic” retailer’s pricing in the United States. In response, Target has installed Mark Schindele, a 15-year merchandising veteran with Target.
“The new guy is a merchant, and pricing has been identified as a problem, so we would expect much more aggressive pricing in the second half of the year,” Perry Caicco, an analyst at CIBC World Markets said.
But Caicco cautions: “In appointing another American in-house solution, it is not clear [Target] really understands the massive disconnect it has with Canadian consumers.”
WATCH: Target is meeting unforeseen challenges in its first foray into Canada. Tony Tighe reports.
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