Target's loss is looking a lot like Loblaw's gain – and Canadian Tire's and Dollarama's and just about any other Canadian-based retailer.
The reason is partly related to the fact that Target Corp. is pulling up shop in Canada, following a couple of dismal years for the U.S. retailer. With more than 130 stores closing, that leaves more shoppers for the remaining players.
Perhaps there is more going on here, though. If Target misjudged the Canadian retail landscape with a format that failed to appeal to Canadian shoppers – which is the prevailing wisdom – investors should be placing more confidence in some of the home-grown talent.
On Thursday, as the S&P/TSX composite index fell about 0.3 per cent during a volatile period for the stock market, Canadian retailers took off: Loblaw Cos. Ltd. rose 2.3 per cent, Canadian Tire Corp. Ltd. rose 2.6 per cent and Dollarama Inc. rose 2.6 per cent.
Home-grown retailers have often endured struggles of their own, particularly when faced with the onslaught of aggressive U.S. expansion. Canadian Tire faced Home Depot Inc. and Loblaw faced Wal-Mart Stores Inc.'s move into fresh food.
Both retailers have survived the ramped-up competition. Canadian Tire shares are near record highs, and Loblaw shares have doubled from recent lows during the financial crisis and are nearing peaks seen a decade ago.
True, the Canadian economy is a potential obstacle. Consumers are nearly tapped out with record high debt loads, the housing market is creaking at highs that a number of critics are calling a bubble, and falling energy prices could reverberate nationwide – a trio of concerns that may have hastened Target's retreat.
But there's good news here for existing retailers: If our free-spending, credit-happy ways take a turn for the worse, other U.S. retailers eyeing Canadian expansion could think again about busting beyond their borders.
David Berman