NEW YORK ( TheStreet) --New Target (TGT) Chairman and CEO Brian Cornell is poised to make one of the biggest decisions of his professional career: whether to pull his new employer completely out of Canada, where it currently has 133 stores.
"We know that to succeed in Canada we will need a major step change in performance, and the fact is, given where we are performing today, we need to see improved financial performance from every Target store in Canada over time," said Cornell on the company's third-quarter earnings call in November. Cornell took over the reins of Target on Aug. 12.
The former Wal-Mart (WMT) and PepsiCo (PEP) exec foreshadowed that Target would communicate its vision for its future "early next year" following a thorough review of both the Canadian and U.S. businesses. That would suggest the fate of Target Canada will be shared at the very latest on the company's fourth-quarter earnings call on Feb. 25.
Target Canada has been dead weight to the financial statements since the company spent $1.8 billion in the fall of 2011 to acquire the chain's leases from department store retailer Hudson's Bay (HBAYF) . The stores were formerly occupied by defunct Hudson's Bay holding company Zellers.
From 2011 through the third quarter of 2014, Target Canada has lost about $2.1 billion as the company battled empty shelves in everyday essential categories. It also fought a perception that its food, apparel and home goods were not priced competitively compared to Wal-Mart and Loblaws.
Further, Target, which is known for its affordable fashions and housewares in the U.S., failed at setting its merchandise apart in Canada compared to Wal-Mart, Sears (SHLD) and Sears' Kmart. The sorry state of affairs in Target's Canadian operations led Cornell to visit the team and stores almost immediately upon joining the company on Aug. 12.
The decision on whether to completely leave Canada by unloading stores or vacating the worst-performing spots will be made after Target threw the kitchen sink at righting the ship this past holiday season. According to Target, of the 70,000 items offered for sale in one of its Canadian stores, roughly 30,000 items were new for the holiday season. Target added more exclusive items and designer partnerships to boost what it calls "newness."
To address barren shelves in the food and household cleaning departments, Target retrained its employees to better identify when things had to be re-ordered. The company also ramped up efforts to comparison shop its prices vs. competitors on a greater number of items more frequently, and instituted a price match policy that included online and local competition.