The going-out-of-business sales at Target Canada will begin on Thursday after the insolvent retailer came to an agreement with its landlords over the liquidation process.
On Wednesday, Justice Geoffrey Morawetz of the Ontario Superior Court gave Target the green light to start its liquidation sales the following morning when its stores open for business at their regular time.
The sales will offer up to 30 per cent off regular prices, Target Corp. spokeswoman Molly Snyder said in an interview. However, refrigerated items such as milk and eggs are no longer being shipped to Target outlets and are already out of stock.
The merchandise in all 133 stores goes on sale as the U.S. discounter prepares to close its operations in Canada by May 15 after only about two years in this country. Unable to see a path to profit until 2021, Target received court protection from its creditors on Jan. 15 and will let go its 17,600 employees by the spring.
Landlords raised concerns Target's liquidation sales would hurt the image of their malls and steal business from their other retail tenants.
But Justice Morawetz indicated he didn't have much patience with delaying the process, as some landlords had suggested. "I think all parties are exaggerating their positions," he said earlier in the day. He called the various arguments "posturing," noting that on each side "all of you know the issues."
The landlords came to an agreement with Target that prevents suppliers that are not currently the retailer's vendors from shipping extra inventory for the sales, said David Bish, a lawyer for Torys LLP who represents landlord Cadillac Fairview Corp. Otherwise, the liquidators are permitted to augment Target's merchandise by 5 per cent of its wholesale value. As well, the landlords came to a compromise with Target over the extent of signage the liquidators can use to tout their sales, in a bid to keep the promotions to a minimum.
Landlords also are worried about a lack of clarity about the final deadline for the sale of their Target leases under a court-monitored process.
"We want to know there's a date we get our stores back or a new tenant," Mr. Bish said in an interview. The judge will deal with this and other matters next week.
An array of rival retailers, from Wal-Mart Canada Corp. to Canadian Tire Corp. Ltd. and Loblaw Cos. Ltd., are believed to be interested in picking up at least some of the locations.
Wal-Mart has already moved quickly in the bankruptcy proceedings to acquire Target's pharmacy patient records at its three corporately owned drugstores. Its other pharmacies are run by franchised pharmacists, who are responsible individually for selling their patient files. The franchisees, who are scrambling to find new homes, are asking Target for some financial relief and an extension of the roughly one month it has given them to leave their stores.
In the liquidation process, some suppliers also are worried about the negative image that the liquidation sales will create for their brands, said Lou Brzezinski, a lawyer at Blaney McMurtry who represents the Canadian operations of major vendors such as Nintendo, PepsiCo, Universal Studios, Mars and Wrigley. He has set up the website blaneystargetccaa.com to keep suppliers abreast of the bankruptcy proceedings.
Blaney's blog says a New York hedge fund that originally offered to purchase suppliers' and other unsecured creditors' claims for 10 to 15 cents on the dollar is now offering to purchase those claims for 38 cents on the dollar.
The potential transaction would involve creditors assigning their claims to the hedge fund, with the hedge fund assuming all risks with regard to the amount of distribution in the insolvency proceedings, the blog says.
Under Target's agreement with its liquidators, the chain is guaranteed a 74-per-cent recovery of its inventory's wholesale value.