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Target interim CEO says Canadian web store won't launch this year

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TORONTO - While executives at Target Corp. strategize how to boost sales in Canada, the temporary head of the U.S.-based retailer says those plans won't include a web store any time soon, even though competitors are stocking up their online arsenals.

"It won't be this year, no, but it's definitely on our list of activities," John Mulligan, the company's interim CEO said during a media conference call on Wednesday.

"Right now we're just very focused on improving the operations and getting our sales moving (in) the right direction."

Massive changes have taken hold at the third-largest retailer in the United States as it works to recover from a massive security breach in the U.S. that hurt its reputation, and a bungled Canadian rollout last year that failed to ignite sales.

Mulligan stepped into the interim CEO role earlier this month after serving as the company's chief financial officer, following the resignation of Gregg Steinhafel.

He explained that Target Canada is heading back to the drawing board to come up with new competitive strategies, though all of those efforts will be dedicated to bricks and mortar stores for now.

"We recognize that we've disappointed Canadian guests," Mulligan said.

"We think we're a great retailer. We have not lived up to our potential nor our expectations."

When Target launched in Canada last year, the company's priorities focused on catering to Canadian sensibilities while it was unwavering on an ambitious plan to open 127 stores across the country.

At the same time, executives seemed to be missing fundamental problems with the supply chain, which included a faulty inventory management system that left some shelves bare.

"I've been in the stores and I've seen them," Muligan said. "It's unacceptable."

Target has declined to say why it struggled to fill store shelves with inventory from its three distribution centres in Milton and Cornwall, Ont., as well as Calgary. This isn't the first time management reassured customers the problem would be resolved either.

"One of the pillars of retail operations is supplying stores with goods," said James Smerdon, vice-president of retail consulting at Colliers International.

"The only thing Target had to do was make the first experience of every Canadian shopper entering their stores a good one, and they failed at that in many cases."

Executives also haven't recognized some crucial differences between Canadian and American shoppers, one of them being the popularity of online shopping, added Brynn Winegard, a marketing analyst at Winegard and Company.

"Time and time again they seem to be ignoring what's staring every other retailer in the face," she said.

"If it's not available on your shelves, at least comfort your patrons with some notion they can get what they're looking for online."

Today, shoppers can only browse a limited selection of product images on the Target website as well as access the weekly flyer and coupons, which appear dramatically limited when compared with most other major retailers.

Department store Hudson's Bay (TSX:HBC) redesigned its web store while Canadian Tire (TSX:CTC.A) recently established a platform that lets customers order items online before they pick them up at the store.

Sears Canada (TSX:SCC) CEO Douglas Campbell said a department store's website should be about more than just selling products online.

He said that's why Sears is improving a series of web tools to help customers select appliances that suit their needs. For example, a questionnaire about buying fridges will ask shoppers about their lifestyle, such as whether they entertain friends at home and if they use a lot of ice.

"Most people, when they shop for major appliances, want to touch and feel it in the store, but the first place that Canadians go is the Internet," Campbell said.

"I know that if I provide you the right tools to select a fridge, you're going to come and see us in the store."

Target Canada hopes different strategies will encourage shoppers to give them another chance. The company's revamped flyer, for example, will emphasize items that keep customers returning to its stores more frequently, like detergent, diapers and groceries.

On Tuesday, Target Corp. announced that Mark Schindele would become leader of the Canadian operations, after previously holding the position of senior vice-president of merchandising operations. He replaced Tony Fisher who was fired from the job.

Target is also searching for a Canadian executive to fill a newly created role that will support to the president of Target Canada and advise on the local market.

On Wednesday, Target Corp.'s overall first-quarter profits declined 16 per cent to US$418 million, or 66 cents per share, and the company reduced its annual profit outlook and issued a second-quarter projection that fell short of analysts' expectations.

In the Canadian division, operating losses increased 3.1 per cent to $211 million as bad weather and weak sales over the Easter season affected results. Sales grew 357 per cent to $393 million on the back of more store openings, but still missed Wall Street estimates of $432 million.

Target characterized its Canadian results as in line with its own expectations.

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