IS FOREWARNED FOREARMED?
Targets’ Canada demise was foreshadowed by many others who had foundered in the Sargasso Sea of Canada’s northern economic woes. Many Foreign investors like Target, and foreign trade deals quickly go south, as in fail, spectacularly in this uber northern tundra of fiscal uncertainty. The tongue in cheek Canadian response is that many U.S. retail executives have had difficulty understanding the subtleties of the Canadian retail market. This remark refers to Canada not being the 53Rd state. That the realities north of the 45th parallel are indeed surreal enough, show me the money, when there is none. Politics plays a great role that may undermine fiscal realities. Canada says it’s open for business, and invites foreign investiture but there is a high failure rate due to the below average performance of the stalled Canadian economy. TD Securities Analyst, Craig Alexander opines “In our view, Target Canada’s failure is not simply a reflection of a weak retailing environment in Canada. This new-country expansion was of an unprecedented scale by any retailer comparable only to Wal-Mart’s entry to Canada in 1994 by taking over 122 former Woolco stores; even Wal-Mart hit many bumps in its early years. In hindsight, we believe it large size and complexity substantially reduced the odds of it achieving success.”
Economists use many different methods to measure how fast the economy is growing. The most common way to measure the economy is real gross domestic product, or real GDP. GDP is the total value of everything – goods and services – produced in our economy. The word “real” means that the total has been adjusted to remove the effects of inflation and put forth the best version. Recently, The International Monetary Fund is downgrading its 2015 growth forecast for the Canadian economy as it lowers its overall outlook for global growth.
Canada had traded heavily on the ill-fated Harper inspired Key stone Oil sands debacle a controversial pipe line that was touted as being a Midas touch for the Canadian economy. US President Obama finally followed up his nay saying with the formal declining of the proposed Bill. The Keystone pipeline was a horribly flawed endeavor much as TARGET’s aggressive investiture in 133 stores across Canada. January 15, Target announced that it would be closing all of them, putting 17,000 out of work. This pattern of job feast and unemployment famine places about $6.6 Billion of the federal government’s Canada Social Transfer to the provinces and territories to be for welfare and social programs.
Canada is now a relatively poor working class country. Land rich, but cash poor and the so called mineral and other wealth creating potentialities are only such possibilities. It’s Currier and Ives post- card image is an outdated l’image of post Trudeau confection. Canada has lapsed into becoming a massive welfare state where Targets niche market the Middle class had shrunk by 67% in this one of the worst recessions of this current millennium. A new OECD paper shows Canada is among the worst in the developed world in terms of the widening income gap.
The analysis shows income inequality has grown in most advanced economies represented in the Organization for Economic Co-operation and Development over the past three decades. The OECD says the top one per cent of Canadian pre-tax income earners captured 37 per cent of the overall income growth between 1981 and 2012, and now account for 12.2 per cent of the country’s total annual income. So in many ways the picture painted was clear. Investing in Canada was going to be fraught with financial slight of hands a gamble.
Target employed several long standing bureaucracy tricks, a smoke and mirrors of financial illusion before calling it quits.
The economies of Canada and the United States are similar as they are both considered developed countries and are each other’s largest trading partners. But key differences exist that undermine that superficial similarity in population geography, government policies and productivity all create unique economies.
When did Target know it was in trouble in Canada? Reports indicated that one year into this venture Target changed its US CEO Tony Fisher by firing him and a new Canadian president Mark Schindele was hired thinking to stall the inevitable crises.From the start, customers complained about higher prices in Canadian stores compared with U.S. locations, empty shelves and a lack of assortment of products. Target US CEO John Mulligan said the company underestimated the competition already in place in Canada.
“As we’ve said for a long time, even prior to going in there. There are a lot of really good retailers in the Canadian marketplace and they operate extremely well. There’s less per capita than in the U.S. but the operators there are very strong,” he said. In lay man terms the market was already saturated. Did Target misread the maybe not so Bullish signs that quickly turned Bearish or did they buy into Canadian investment campaigns? The Canadian economy as compared to the US economy has been in a slump from 2008. The US Commerce Department said Friday that Gross Domestic Product, the broadest measure of economic output, grew by only 2.2 percent in the fourth quarter of last year, down from an earlier estimate of 2.6 percent and a sharp fall from earlier quarters.
This followed the announcement by the Labor Department on Thursday that consumer prices fell by 0.7 percent, the largest fall since December 2008. Over the past 12 months, prices have fallen by 0.1 percent, the first annual deflation figure posted since October 2009. These current values reflect the pre Target invasion into Canada. The news was not good then and still is not good.
Target it seems “guestimated” or misinterpreted the Canadian market on many fronts. Such as projected economic growth, retail consumer confidence and overall global financial growth. I knocked on the doors of TD Banks Economic advisory team, Desjardin Financial, Scotia Bank, the analysts of the Economic forum and the hard questions where left unanswered. Deliberately unanswered.
Stephen Knight, Manager, Corporate and Public Affairs Unfortunately, we don’t have a spokesperson available” Keeping the economic analysts from this crucial interview as Canada cannot respond based on its inability to put forth a firm budget plan for the fiscal year 2015. At risk are the International investors being alerted to a Canadian reality that the economic spin doctors are working on. The good news is that there is no good news. And Mums the word for very good reasons. China has many pending investment deals triumphantly blasted from the roof tops of Canadian Prime Minister Stephen Harper on Parliament Hill to the rosy chambers of erstwhile Ontario Premier Kathleen Wynn and the newly elect Toronto Mayor John Tory. Toronto is due to become a trading hub for the Yuan and is courting many Chinese investment suitors. Releasing Targets failure on top of the many of recent past foreign investment failures can cause a giant ripple effect of reluctance for any savvy investor to boycott Canada or shy away.
Target is leaving behind Multi millions in debt for Canadian manufactures, retailers and suppliers. Yet it has an aggressive employee benefit plan in place to pay out its staff. Its plan to raise funds by heavily discounted Liquidation sales also failed to raise the necessary capital to repay the Canadian investors. It’s a “Bubkes” situation. No money in and losses that are mounting. The final tally is at least a year away.
Economists generally now forecast growth of 2 per cent or lower in Canada this year. As oil companies slash spending and lay off workers amid the shocking plunge in oil prices.
That’s the “direct blood,” as JPMorgan’s Kevin Hebner puts it.But there will also be a ripple effect, and the threat of something far uglier.Mr. Hebner, JPMorgan’s chief foreign exchange strategist, and technical analyst Niall O’Connor, warned in their new report of both the impact and the threat, using the Bank of Canada’s own numbers released last week. That’s when Bank of Canada Governor Stephen Poloz unveiled a surprise interest rate cut, which he dubbed an insurance policy amid the uncertainty in the oil market. The US is influencing the Canadian markets. But the fact that Canada has a “teeny tiny” market is still not understood. Economic forecasting in Canada lies in the hands of its governments sorcerers, still trying to cast a spell on the worlds markets. Canada cannot have its AAA credit rating really mean a catastrophic failure of economic policy.
The US Commerce Department said Friday that Gross Domestic Product, the broadest measure of economic output, grew by only 2.2 percent in the fourth quarter of last year, down from an earlier estimate of 2.6 percent and a sharp fall from earlier quarters.
This followed the announcement by the Labor Department on Thursday that consumer prices fell by 0.7 percent, the largest fall since December 2008. Over the past 12 months, prices have fallen by 0.1 percent, the first annual deflation figure posted since October 2009.
Summarily Target’s failure was a predictable response based on many established weakness in the Canadian economy to support an aggressive retail invasion. As misery loves company the saga of esteemed failure extends to Sony, Radio Shack, Kmart, Big Lots- Liquidation World, Zellers, Columbia House, Sears, Sams Club and Future Shop. The Canadian economy is going the way of the DODO and the U.S sensing blood in the water rushed in back in the good old days to capitalize on the past losses. Loses used to mean opportunity as the pundits would say but that was a lure, a sirens call that resulted in many a US retailer crashing on the very real rocks of an impoverished Canadian nation. Canada’s glory days said sayonara with NAFTA and the back water economic rafting of India and the Philippines as the derriere offices of North America. Jose can you see of the star spangled banner met the WOE Canada the true north that went Scot free into lyrical if not true bankruptcy. Stay tuned more to come. is the Yuan Hub here to stay?
Written by Cristoph De Caermichael