UPDATE 1-Target's first misstep in Canada may have been wrong footprint

Thu May 8, 2014 4:36pm EDT
 
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(Adds link to FACTBOX on Target Canada prices vs U.S.)

By Susan Taylor, Solarina Ho and Andrea Hopkins

TORONTO May 8 (Reuters) - Target Stores Inc's problems in Canada may have started with its first step: deciding to occupy the premises of a failed discount chain that didn't have the panache Canadians anticipated they would find in a retailer renowned for its "cheap chic."

Target, which ousted chairman and chief executive Gregg Steinhafel this week after a massive data breach shook the confidence of its U.S. customers and hurt its sales, also reported an almost $1 billion 2013 operating loss by its Canadian stores. Target, which opened 124 stores in Canada in 2013 - compared with just 15 in the U.S. - built them on the bones of the now defunct Zellers chain, whose store leases it bought in 2011 for $1.8 billion.

Trouble with that was, the stores were often smaller than those in the United States, and found in down-market malls rather than up-and-coming retail destinations. Some analysts said that Target's Canadian woes began with that footprint, while the company's inability to stock the stores with items Canadians want at the prices they expected is what ultimately alienated customers.

"Canadians were expecting the U.S. Target experience," said Doug Stephens, president of Retail Prophet Consultants in Toronto. "Instead they got Zellers with lipstick."

Canadian shoppers also complain that prices are higher than they thought they would be, that there's inadequate selection of goods on the shelves, and that the company's supply chains don't meet the expectations drummed up by its advertising.

"For Target, every time they have something on sale in the flyer, they don't have it when you get to the store," said Katie Witzell, 31, who was shopping at a Toronto Wal-Mart with her toddler.

EMPTY SHELVES   Continued...