Target Canada raised prices on scores of products, from furniture to beauty supplies to pet food and cleaning detergents, in the days and weeks leading up to the failed retailer’s high-profile liquidation sales, a move that would maximize how much revenue was reaped from the still-ongoing sales – cash that ultimately may be recovered by Target’s U.S. parent.
Lynn Dewilde, a 57-year-old shopper at the North Village Way location in Barrie, Ont., said she bought a couch cover for $119.99 at the liquidation sale but peeled back the price tag to discover the item cost $106.99 before being raised on Dec. 13 – just weeks before Target Canada filed for bankruptcy protection.
A price check by Global News on several products at Target locations in Toronto suggests dozens of products saw meaningful hikes in cost in the immediate lead-up to Target Canada’s filing on Jan. 15. Many prices were altered on the very day of the filing.
A 2.27 kilogram bag of IAMS dog food jumped to $12.29 on Jan. 15 from a price of $9.89 set on Oct. 12. Copies of popular DVDs, such as Anchorman starring comedian Will Ferrell, jumped to $10 on Jan. 9 – six days before the filing – from an original price of $7.99 set on Sept. 27.
A wide range of other products, from Off! mosquito repellent to L’Oreal hair colour, experienced material price increases ahead of Target Canada’s liquidation sales at locations around the Greater Toronto Area.
Molly Snyder, a spokesperson for Target, declined to comment other than to say the company has handed over the liquidation process to third parties. Target said it awarded the store wind up process to three insolvency specialist firms in Gordon Brothers Group, Hilco Global and Great American Group, on Jan. 27, according to a press release. The liquidators began promotional sales on Feb. 5.
At a 10 per cent discount, the cost Dewilde paid for her new couch cover was $122.03, including tax. But the full cost of the cover before the price hike, with no discount, would still be less at $120.89.
Shoppers lined up at Target’s 133 Canadian locations as liquidations sales commenced last month, packing stores and checkout lanes. But customers criticized the sales from the outset suggesting even with discounts of between 10 and 30 per cent, merchandise was still cheaper at rivals like Walmart, Canadian Tire and Sears who were not holding sales. Some, like Dewilde, said they felt misled and deceived.
“You feel betrayed. There was nothing on sale,” the Barrie resident said. “Then you hear about the suppliers who aren’t getting the money they’re owed.”
Competition lawyers who spoke to Global News said they would be surprised if Target Canada made a concerted effort to broadly lift prices ahead of a filing under the Companies’ Creditors Arrangement Act, suggesting consumers would shun the sales if they detected the promotional events weren’t providing much, if any, savings (thereby limiting how much merchandise Target ultimately sold).
Such a move wouldn’t likely break any laws under the Competition Act or other legislation, either. But the practice wouldn’t be “fair” to consumers, said Lou Brzezinski, a lawyer representing a handful of supplier companies Target Canada owes $10 million to.
“It’s not fair, you don’t raise prices then tell people it’s 10 to 30 per cent off, when it’s not,” Brzezinski said. “It’s probably a deceptive consumer practice.”
A spokesperson for the Competition Bureau, the federal regulator responsible for policing Canada’s retail market place, said: “The Bureau takes all allegations of false or misleading representations very seriously. As always, we encourage anyone who feels they have been misled by false or misleading representations to contact the Bureau.”
Liquidation sales are now offering merchandise at up to 50 per cent off across the chain, with Target eyeing full closure of the network by May. Court proceedings could drag on for longer though as suppliers fight to be paid millions of dollars for merchandise they sent to Target Canada in the weeks ahead the Jan. 15 bankruptcy filing.
“Our position is that suppliers are the ones who’ve paid the biggest price,” Brzezinski said. Consumers may feel deceived, but many suppliers feel cheated, he said. “This is peeling back a few price tags – what about $100 million?”
Complicating the claims process is the fact that a subsidiary company set up by Target is the Canadian chain’s biggest creditor. Target Canada Property LLC, an entity controlled by Minneapolis-based Target, says it is owed an intercompany payment of $1.9 billion from the Canadian operations for terminating its contract, as well as for store renovations and rent.
The giant claim could significantly dilute whatever cash is recovered for suppliers, Brzezinski said.
At the same time prices were moving higher in stores, Target increased order volumes from his clients in the weeks leading up to the retailer’s bankruptcy filing, the lawyer said.
“It’s our view that Target knew of Dec. 15 that they were going out of business. And when they ordered that product they were never going to pay for it.”