Target Canada needs more work to get better, executives say

Target is still missing the mark in Canada.

Executives at the retailer said Wednesday that while the chain has made progress in Canada, a lot more work is needed if the chain is going to have a bright future here.

The discount chain launched to much fanfare in early 2013, opening dozens of stores across the country and adding more in quick succession. But the reaction from consumers was underwhelming, with tales of higher-than-expected prices and empty store shelves rampant.

After a year of operations, the chain said it had lost almost $1 billion here. Worse still, the chain's U.S. performance weakened at the same time, meaning the retailer was facing a two-front war with no source of strength to support itself.

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"We know that to succeed, we will need a major step-change," Target's chair and CEO Brian Cornell told investors and media on a conference call discussing the chain's quarterly results on Wednesday. "The fact is,given where we are, we need to see an improved financial performance from every store in Canada over time."

The numbers suggest the chain is indeed moving towards fixing its problems in Canada, albeit slowly. The companynarrowed its loss from its Canadian operations to $211million US in the three months up to October. That's downfrom $238million in the same quarter last year. On the sales front, there was positive momentum, as sales jumped almost 44 per cent to $479million from $333million.

Target now has 82 stores in Canada that have been open for more than a year, and on the whole, those locations posted same-store sales gains of 1.6 per cent.

There is much more work to be done- Target CEO Brian Cornell on the chain in Canada

But add it all up, and the chain is still losing money. "While this improvement is encouraging, financial results in this segment remain unacceptable," chief financial officer John Mulligan said.

Adata breach last year in which information from 40 million of the chain's customers was stolen didn't help, nor did news that the chain hadlet go its inaugural Canadian CEO Tony Fisherbarely a year after the chain camenorth.

One of the chain's biggest problems early on in Canada was a supply chain issue that saw stores run out of popular merchandise, angering customers. What goods they did have were more expensive than what Canadians were expecting, given the chain's comparatively rock-bottom U.S. prices.

"The team in Canada has been working diligently to making improvements to operations and pricing in prep for Q4," Cornell said. "Webelievewe`re better positioned to serve our guests at a time when traffic will naturally be higher."

Target earned its fame largely on the back of cheap grocery offeringsand affordable fashion apparel. But the chain has been left behind as consumer tastes changed.

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Over the past eight years, fashion and home furnishings sales have dropped from a combined 47 per cent of Target's sales, to 36 per cent of total sales today. At the same time, food, pet supplies as well as household essentials rose from 30 per cent, to 46 per cent of total sales, according to UBS retail analyst Michael Lasser.

Amid Target's problems, questions have arisen that the chain may not be in Canada long term, unless performance improves. And the CEO acknowledged that the chain is making no assumptions for the long term.

"Guest responses to these changes both in buyingbehaviour and overall shopping sentiment will inform Target as we assess our longer term potential in Canada," Cornell said.

"There is much more work to be done," he added.