Skip to main content
subscribers only

Shoppers enter a Target store in Arvada, Colorado February 24, 2009.© Rick Wilking / Reuters/Reuters

Canadian retail has come full circle since the Wal-Mart invasion almost 19 years ago. Back then, established Canadian retailers were unprepared for the giant from Bentonville, Ark., which caused upheaval across the sector. Now, Wal-Mart Canada is among those that have the most to lose with discount mass merchant rival Target Corp. preparing to enter Canada next spring. But so do Sears Canada, Loblaw Cos. and Canadian Tire.

Target's planned 125 to 135 outlets in former Zellers locations will add selling space with the Canadian expansion and attract curious shoppers. That will be tough on retailers who compete directly against it in its core areas of value-priced clothing, footwear and housewares – doubly so given how sluggish consumer spending is.

CIBC analyst Perry Caicco said in a recent note that Wal-Mart should lose the most in absolute terms – an estimated $310-million, or 2 to 3 per cent of sales – but it has more than compensated for the loss by taking the leases of 39 former Zellers locations.

Canadian Tire will also lose sales, but it has proven remarkably resilient against the onslaught of not only Wal-Mart but also Home Depot, and has expanded its offerings in auto parts and sporting goods.

More at risk is Sears Canada, which has 37 per cent of its stores within a one-kilometre drive of the planned Target outlets and competes head to head in all of Target's main categories. Target could drain away as much as 6 per cent of Sears's sales, Mr. Caicco said. No wonder the retailer's stock has traded recently at its lowest level in 16 years; if any large retailer is at risk of vanishing from Canadian malls in the coming years, it is Sears, which has already sold three leases to high-end U.S. retailer Nordstrom, which plans to set down Canadian roots in 2014.

As for Loblaw, it is vulnerable on two fronts. Target spells serious trouble for its Joe Fresh line, which contributes about $1-billion to the food giant's revenues in sales of modestly priced apparel and housewares. Indirectly, Loblaw's discount grocery banners will also likely shed sales, not to Target, but Wal-Mart, which has a much stronger food offering than its U.S. rival and has been adding millions of square feet in food selling space to differentiate itself further from Target.

Perhaps most striking about Target's impending invasion is who it doesn't affect: Three Canadian retailers who weren't a factor in 1994, but are now powerhouses in their niches and have created billion-dollar fortunes for their founding CEOs: Lululemon Athletica Inc., Dollarama Inc. and Alimentation Couche-Tard Inc.

If anything, Dollarama is expected to benefit from Target's arrival by an increase in traffic to mass merchandisers in general, as it offers many of the same product lines but at a lower price point. It's a nice reminder that the arrival of foreign competitors isn't all bad news for Canadian retailers, and certainly not for shoppers.

Report an error

Editorial code of conduct

Tickers mentioned in this story