Target's exit will ripple through economy: analyst
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Jan 15, 2015  |  Vote 0    0

Target's exit will ripple through economy: analyst

‘It’s not a small closure or a mom-and-pop operation. We’re talking about a magnitude of losses that will definitely feed through to the coming labour market reports’


The decision by Target Corp. to close its Canadian operations, throwing approximately 17,600 employees out of work, comes as a blow to the country’s already-sluggish labour market.

“It’s not a small closure or a mom-and-pop operation. We’re talking about a magnitude of losses that will definitely feed through to the coming labour market reports,” Nick Exarhos, economist at CIBC World Markets, said in an interview.

The closures come as the falling price of oil is prompting resource companies in Western Canada to cut back their operations, and as governments hold the line on hiring.

Target’s move “adds to some negative pressures that we were already going to see, not only from energy in the oil patch but also on the government side with budgets under some strain,” Exarhos said.

“It’s adding to the bad news right now.”

Federal Finance Minister Joe Oliver sympathized with the plight of Target employees but cautioned that the company’s departure from Canada should not be seen as a signal of broader economic woes.

“First, we’re of course concerned and empathize with those who have or will lose their employment. We’ve been talking to Service Canada to make sure they work with the people who find themselves unemployed to provide them with every assistance they can and to help get them new employment,” Oliver said during an event in Calgary Thursday.

“This is a private sector decision in a highly competitive industry and I don’t think it has broader implications,” Oliver said.

Target wasn’t the only company to announce job cuts on Thursday. Electronics maker Sony said it will close all of its 14 stores across the country over the next six to eight weeks, throwing about 90 people out of work. Montreal-based aerospace giant Bombardier Inc. announced plans to eliminate 1,000 jobs, though those would come at its operations in the U.S. and Mexico.

Target said that all of its 133 stores in Canada will likely be closed within 16 to 20 weeks.

The move comes after a botched debut 22 months ago, which was followed by missteps on pricing and lack of inventory that left Canadian customers disappointed and heading for the exit.

The chain said it would take another six years to turn a profit here.

“It’s a wake-up call that Canada is not just another part of the U.S. It’s a distinct culture with distinct values,” said Michael McLarney, founder and editor of Hardlines, a trade magazine that focuses on the retail home improvement industry.

“It’s also a testament to Canadian retailers. They are not to be underestimated.”

Target Canada filed for protection under the Companies’ Creditors Arrangement Act in Toronto on Thursday. The application means that the Ontario court will oversee the winding down of the Canadian stores.

“That could wreck havoc with the receivables of the vendors. There’s going to be compromise for these vendors and they will take a hit,” McLarney said.

The impact will depend on the supplier, said Martin Gooch, chief executive officer of Oakville-based Value Chain Management International. “It won’t be one scenario fits all suppliers. It will be different by supplier, by category, by whether they’re currently supplying other retailers.”

Sobeys Inc., which supplied Target Canada with dairy, frozen, and other grocery items said “the loss of this wholesale account will not have a material impact” on its results.

Target said its workers will receive 16 weeks’ compensation. That is the minimum required under the Ontario Employment Standards Act for terminations that affect more than 500 employees.

Service Canada is currently working to set up a special Employment Insurance code in order to expedite Target employees’ claims, Alexandra Fortier, director of communications for Minister of Employment Jason Kenney, told The Star’s Sara Mojtehedzadeh in an email.

However, Unifor, Canada’s largest private sector union, argues that most of the Target workers who have lost their jobs won’t qualify for EI.

The qualifying threshold, which depends on a worker’s experience and where he or she lives, can be very difficult for part-time workers to reach.

Emergency EI access for Target workers should be followed by legislative changes to the system, Unifor national president Jerry Dias said in a statement released Thursday.

“Target’s time in Canada has been a sad story for workers from the beginning,” Kendra Coulter, an associate professor at the Centre for Labour Studies at Brock University, said in an interview.

An estimated 22,000 Zellers workers lost their jobs when the retailer formerly owned by Hudson’s Bay Company shut down in 2011.

Though Target stores opened in the same locations, Zellers workers were not guaranteed those positions, though many had spent decades working in retail, said Coulter, who describes herself as an advocate for workers, is also the author of Revolutionizing Retail: Workers, Political Action, and Social Change.

Target also battled the United Commercial and Food Workers Union, which took the company to court in British Columbia in an attempt to force it to honour union agreements from the former Zellers stores. The court sided with Target.

By contrast, when Walmart set up shop in Canada in the mid 90s, it maintained its inherited workforce from Woolco, Coulter said.

Target would go on to hire about 17,600 workers, most of them frontline retail workers. The retailer pays minimum wage or slightly above, Coulter said, to mostly part-time workers who have erratic hours and don’t earn enough to sustain a household or a family.”

“Target spent a significant amount on marketing when it arrived and tried to convince us they are our neighbour. The fact is that the men and women in these stores are our neighbours and now they don’t have jobs,” Coulter said.

- With files from Bruce Campion-Smith and Toronto Star wire services

Toronto Star

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