By Shelly Banjo And Rita Trichur
Updated May 8, 2014 6:43 a.m. ET

Nadia Yee grew up driving from Ontario to Detroit to shop at Target. But when the chain finally opened up in Canada, she was deflated.

The new Toronto store was understocked, and the selection of the items from pajamas to jewelry was limited. Her experience wasn’t isolated. Canadians who camped out the first night to shop at Target drifted away after being disappointed by high prices, uninspiring products and bare shelves.

“You’d go sometimes and the racks would be empty,” said the mother of two who works for a drug company. “I’ve been a little bit disappointed.”

That, in a nutshell, is how Target Corp.’s first international expansion turned into a first-year flop. The discount chain had told investors that its Canadian business would be profitable by the end of 2013.

Instead, losses are expected to reach $2 billion by the end of this year, according to Tiburon Research.

The botched entry into a market that was hungry for Target’s products and where rival Wal-Mart Stores Inc. is expanding contributed to the company’s decision to part ways with Chief Executive Gregg Steinhafel and presents a major challenge for the new management team, headed by interim CEO John Mulligan.

In an interview on Tuesday, Mr. Mulligan said the company is committed to staying in Canada and needs to get to its goal of generating $6 billion in annual sales north of the border by 2017.

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