Article content

Target Corp. needs to make a decision about whether it wants to continue operating in Canada soon.

Sears Holdings Corp.’s recent announcement that it is exploring strategic alternatives for Sears Canada Inc. makes the decision more pressing, as the potential supply glut would dilute the value of real estate in Canada, Credit Suisse said in a report Wednesday.

We apologize, but this video has failed to load.

tap here to see other videos from our team. Try refreshing your browser, or Target Corp. should cut its losses and exit Canada — soon, says Credit Suisse Back to video

“Once a permanent CEO takes the helm, they will need to rapidly decide whether an attempt to turn around Canada is worth diverting time and capital away from the U.S. business,” analyst Michael Exstein told clients.

“We think it may be more prudent for Target to cut its losses and devote 100% of its resources on the U.S. — which comprises over 97% of the company’s current sales.”

If Target exits Canada in 2015, he estimates it will incur US$3.5-billion in charges, but generate US$1-billion in cash proceeds. Target is expected to see a roughly 10% dip in shareholder’s equity as a result, and the largest decline in free cash flow since 2007.