Skip to main content

A Target store is under construction at the Square One Shopping Centre in Mississauga, Ont. This location, along with several others, is scheduled to open in March, ushering the long-awaited U.S. retail giant into Canada.

Fred Lum/The Globe and Mail

With U.S. discounter Target Corp. poised to open its first outlets in Canada in the next few weeks, the defensive response from established retailers is under the microscope.

Two of Canada's most iconic retail outlets – Canadian Tire Corp. Ltd. and Loblaw Cos. Ltd. – unveil their fourth-quarter earnings reports this week, and they will be drawing close scrutiny to see if they are ready for the big-name competitor's imminent arrival.

Both have been preparing for the onslaught for many months, tweaking their product offerings and trimming costs.

Story continues below advertisement

While neither Canadian Tire nor Loblaw is a direct competitor to Target – unlike Wal-Mart Canada Corp. where the overlap is much broader – each of the two does have product lines that could come under threat.

Target will compete directly with Loblaw's Joe Fresh line of clothing and accessories, for instance, and some Target stores will likely have groceries. Canadian Tire will face-off with Target on small appliances, and its Mark's Work Wearhouse Ltd. subsidiary will compete with Target for clothing sales.

If the two retailers are not in solid financial shape before Target arrives, there could be concern that they will be vulnerable when the new chain opens this spring.

Both Loblaw and Canadian Tire have gone through recent cost-cutting exercises to help reduce their expenses. In October, Loblaw said it was eliminating about 10 per cent of its head office and administrative jobs, about 700 positions. The impact of those cuts may show up in the fourth-quarter results being released Thursday.

In late November, Canadian Tire also trimmed its ranks, mainly among senior management. Several long-time executives left the company, which told employees at the time that it was trying to "streamline our structure and responsibilities as we enter one of the most competitive retail environments in our history."

The cost cutting both Canadian Tire and Loblaw have gone through shows they are in "a bit of a hunker-down-for-battle mode," said retail analyst Keith Howlett at Desjardins Securities. By eliminating what they see as non-essential personnel, it is clear "they've got that gird for battle mentality," he said.

With Target set to open within weeks, most of the changes Canadian Tire and Loblaw – and other competitors – have made are already complete, he added. "At most of these companies, their work is 90-per-cent done preparing for Target. Now they will be fine-tuning their promotional and weekly offers once they see what the Target store looks like and what Target is promoting."

Story continues below advertisement

Still, in the earnings calls with analysts this week, Target's arrival "will definitely be a hot button topic," Mr. Howlett said. However, "I'm not sure we'll get much out of them," he added, noting that Canadian retails are usually hesitant to talk in any detail about their competition.

Another major retailer whose results will be carefully parsed this week is Rona Inc. The Quebec hardware and home goods company has been in a state of turmoil since it turned down a takeover offer from Loew's Cos. Inc. last year, and its board was then shaken up by activist shareholders.

Recently appointed executive chairman Robert Chevrier has been looking for a new CEO, but he said recently he is having trouble finding the right person.

Rona has said it will "unveil additional information regarding its three strategic priorities" during its earnings conference call on Thursday. It is expected to sell some of its ancillary businesses and close or shrink its least profitable outlets, including some big box stores outside Quebec. Job cuts are a certainty.

Some analysts also expect to see Rona's results dented by the recent weakness in the housing market, which could add more pressure for change at the retailer.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter