TORONTO: Target has pocketed a $1.6-billion US writeoff on its American taxes as a result of the retailer’s failed expansion into Canada, a new regulatory filing shows.
In an annual report known as a 10-K filed with American regulators, the U.S. retail chain says it has “recognized a tax benefit of $1.6 billion in discontinued operations, which primarily relates to the loss on our investment in Canada.”
The retailer announced on January 15 that it would be discontinuing its operations in Canada and closing all 133 stores less than two years after opening up to much fanfare. Target’s earnings report last month revealed the chain lost more than $4 billion US on its Canadian launch.
But even the retreat hasn’t been smooth, as the retailer has been squabbling with its landlords and suppliers over money owed to them. The court proceedings that are handling Target’s wind-down have revealed that the chain is in fact one of its own biggest creditors, with almost $2 billion Cdn. owed to a subsidiary it established to handle its property and real estate assets.
Suppliers have taken issue with that, saying they should get paid first for merchandise they delivered in the month prior to Target Canada’s demise before the company is entitled to what’s left. Some suppliers allege Target knew it was going to fail as much as five months before it actually pulled the plug, but kept on ordering new goods anyway.
The tax upside is just another wrinkle to the story of Target’s failure in Canada. In the new filing, the chain says it realized most of the $1.6 billion in tax writeoffs in the first quarter of this fiscal year, and it will use up the remainder over the next three quarters.
The filing also says there could be more writedowns to come related to “claims that may be asserted against us” and possible “negotiated settlements” related to the defunct Canadian operations.
Target also says it expects to incur severance, legal and professional services costs related to its Canadian exit, costs which so far haven’t shown up on its books.
