Target lost some US$5.1 billion in all on its ill-fated Canadian venture, but Uncle Sam is softening some of the blow, to the tune of $1.6 billion.
That’s the size of the tax break Minneapolis-based Target expects to see in the U.S. this year as a result of its writedown of Canadian assets, according to a filing with the U.S. Securities and Exchange Commission, first obtained by the Minneapolis-St. Paul Business Journal.
The documents show Target had $1.2 billion in sales in Canada in 2013 and $1.9 billion in sales in 2014, and recorded pre-tax losses of $1 billion and $869 million, respectively, in those years.
By comparison, Walmart Canada is estimated to have about $23 billion in annual sales (the Arkansas-based company doesn’t break out separate Canadian sales numbers). This would suggest sales volumes at Target Canada were about 1/20th that of Walmart Canada.
Target announced its departure from Canada in January, applying for creditor protection in an Ontario court and rolling out a four-month plan to close down its 133 locations in the country.
The retailer announced a $70-million fund to pay employees for the remainder of Target’s Canadian operations, though that figure was criticized by some who noted the 17,600 Canadian employees would be sharing a pool of money no bigger than a former Target CEO’s severance pay.
Target Canada’s court proceedings have been the subject of acrimony, particularly since it was revealed that the company’s largest creditor is itself.
Prior to filing for creditor protection, Target set up a separate company, Target Canada Property LLC, and transferred ownership of its Canadian real estate to it.
This division of Target is now claiming it is owed $1.9 billion by Target Canada. That has prompted many other creditors, such as suppliers, to fear they will be passed over in favour of Target’s own claim.
Under pressure from increasing online sales and a consumer shift away from big-box retail, Target is in the midst of a turnaround effort that saw the retailer lay off 1,700 U.S. employees this month.
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