I want to pause here and thank the Target Canada team who worked tirelessly to make sure these changes were in place. I am very proud of what they accomplished. But the harsh reality is that both sales and profits continued to fall short of our expectations is holiday season. And we have not realized the significant improvement in Canadian consumer sentiment that we believe is necessary. Put simply, we have not seen the step change in performance we told you we needed to see.
Our assessment of Canadian operations, which began before I arrived last August, has included the exploration of multiple alternative operating scenarios including closing our worst performing stores and shrinking our footprint to allow us to operate with fewer distribution centers. In assessing these scenarios, we acknowledge that if we are going to continue operating in Canada we would need to invest additional capital in our supply chain and technology to make further operational improvements and enable Target to sell online in Canada. This is because, just like in the US, we do not believe we could become a successful Canadian retailer without being a leading Omni channel retailer. Bottom line, given these needed investments and a lack of step change in performance, we are unable to map out a scenario which would allow Target Canada to generate positive profits or cash flow until at least 2021.
So with the expectation of more than five years of continued operating losses and the need for additional capital investment, we were facing the decision to devote billions of dollars of additional resources for the Canadian segment without the realistic prospect of an appropriate return on those incremental investments. So while the situation is regrettable, we believe the decision we have announced today is appropriate as responsible stewards of this Corporation’s capital. As stated in today’s release, we’ve taken steps to ensure a fair and orderly process and we’re making efforts to balance the needs of our team, our business partners and our shareholders throughout the process. For instance, within our application for protection under the CCAA, we’ve asked the court to approve a voluntary contribution by Target Corporation [NYSE: TGT] to fund an employee trust that would provide nearly all Target Canada-based employees with a minimum 16 weeks of compensation including those who are not required for the full wind down period.
This is a very difficult day for all of us at Target, but the Board and our leadership team strongly believe that the decision we’ve announced today is in the best long-term interest of our business and our shareholders. This decision will allows to focus on our US business where we’re in the early stages of an effort to improve performance. Looking ahead, we have much more to accomplish. We need to modernize Target by building capabilities and innovating faster, driving traffic and sales will focus on improving our return on invested capital. I believe these efforts in the US will succeed over the next few years given our strong brand, loyal guests and outstanding leadership team. With today’s difficult decision behind us, we can move forward with focused priorities and the appropriate resources to build on the early momentum we’re seeing in our US performance. With that, I’ll turn it over to John who will cover in more detail on the financial implications of today’s announcement along with an update on our fourth-quarter outlook for the US business. John?
John J. Mulligan, Chief Financial Officer
Thanks, Brian. Before I turn to our updated outlook for the US, I’m going to walk through some higher level financial implications of today’s announcements. We have also provided additional detail in today’s 8-K filing. First, let’s start with the accounting considerations. With today’s announcement, Target Corporation no longer has controlling financial interest in Target Canada. Meaning that effective today, Target Canada is deconsolidated from Target Corporation’s financial statements.
Specifically in the fourth quarter, results of Canadian operations along with Target Corporation’s exit costs will be reported in discontinued operations. In addition, beyond the fourth quarter, Target Canada results will not be reported anywhere in Target Corporation’s financial statements and any costs incurred by Target Corporation related to this decision will be reported within discontinued operations. Finally, beginning with our fourth-quarter 2014 financial results, Target Corporation will operate as a single segment that includes all US operations. Today’s 8-K includes pro forma financial statements reflecting these changes.
