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Fitch affirms Target on Canada closings
Fitch Ratings said it affirmed the long-term issuer default rating on Target Corp. at A-, short-term issuer default rating at F2, its senior unsecured debt rating at A- and bank credit facility rating at A-.
The outlook is stable.
As anticipated, Target announced it will be discontinuing its Canadian operations. Cash costs associated with exiting the business are expected to total $500 million to $600 million, Fitch said.
Target also will be taking a $5.4 billion charge during the fourth quarter, the agency said.
The disposition of this business is a credit positive as it will result in the elimination of significant operating losses and lease obligations in Canada, Fitch said.
Putting Canada behind them, management will be able to focus on the domestic business where the challenge will be to return comparable store sales growth to a sustainable 2% to 3% and EBITDA margins to their historical level of 10%, the agency said.
Fitch also said it expects Target’s near-term results will benefit from cycling against the data breach that was announced one week before Christmas 2013 and from the impact of lower gasoline prices.
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