Here comes major US retail competition in Canada. Soon to come.. Wal-Mart vs Target.
Ok, for those who know Zellers, they really suck and I am actually surprised they’re still in business. But as Canada becomes more Americanized with more and more brick and mortar American gaints opening up shop in Canada, you’re not going to get the same quality and merchandise as if you’re were to walk into their US based store. Wal-Mart, Lowe’s, Best Buy, Home Depot just to name a few, the products are different, not the same. Just go to both .com and ca websites and compare. The stuff is much better in the US. So even though Target is opening up, it will be the lousy Canadian version, kinda like Canadian entertainment..Crappy. Mediocre. Hey, you can’t have everything.
Nonetheless, most Canadians are quite excited Target is heading to Canada.
‘Black Friday’ shoppers wait for a Target store to open in Lanesborough, Mass., in this Nov. 26, 2010. The retail chain plans to open more than 100 locations in Canada beginning in 2013.
In a move that will redraw the Canadian retail landscape, cheap-chic discount department store retailer Target Corp. has confirmed it will enter the Canadian market through the purchase of Zellers’ leaseholds.
The deal, valued at $1.825 billion, will allow Target to open its first Canadian stores in 2013, the retailer said Thursday.
The complex arrangement, which could see other retailers take up some of Zellers’ stores, puts Target in front of the race among U.S. chains to enter the Canadian market.
Marshalls, Kohls, and Dick’s Sporting Goods have all expressed interest in expanding outside the saturated retail U.S. market, with Canada their first stop.
“We’re thrilled that ultimately we ended up in the first position,” Gregg Steinhafel, Target’s chairman, president and chief executive officer, said in an interview.
Target said it has the option to purchase up to 220 leaseholds from Zellers’ parent, the Hudson’s Bay Co. HBC operates 279 Zellers stores.
HBC owner Richard Baker, head of New York based NRDC equity partners, said the deal with Target puts HBC in its strongest financial position since its founding in 1670.
The proceeds will be used to pay down debt and also invest in its remaining retail chains, including the Bay, Home Outfitters and Fields, as well as Lord and Taylor in the U.S.
“We’re not looking to sell any of our other business,” Baker said in a telephone interview.
NRDC is thought to have paid $1.1 billion for HBC in July 2008, and has since invested at least $500 million rebuilding the once iconic Canadian retailer.
Most of its Zellers locations are currently ‘cash flow positive’ and profitable, Baker said. He has said he hopes to take HBC public with an initial stock offering.
Last year, Target said it was weighing an expansion into either Canada or alternatively Mexico and Latin America.
“The Canadian consumer went into the recession in much better shape than the U.S. consumer,” said Paul Taylor, chief investment officer at BMO Harris Private Banking.
“I think there would be a number of U.S. retailers that would feel that there is opportunity to make some inroads” in Canada.
Target said it plans to convert at least 100 to 150 Zellers stores to its brand, investing up to $1 billion in renovations, expansions and relocations.
The remaining sites may be converted to other retail brands, the company said in a statement Thursday.
The stores will continue to operate as Zellers for the time being under a leaseback arrangement between Target and HBC.
The $63.4 billion (U.S.) a year retailer, the second largest U.S. discounter after Wal-Mart, said discussions with HBC began “a few months ago.”
The deal with Zellers will allow Target to open clusters of stores quickly, Steinhafel said, rather than building one store at a time from scratch. The latter approach has seen U.S.-based Lowes home improvement retailer open just 16 stores in six years here, he noted.
Target and Zellers have similar business models, offering a broad range of national brands and exclusive merchandise, as well as food, at discount prices.
Both try to differentiate themselves from Wal-Mart by offering somewhat more upscale merchandise.
But Target is seen to be more successful. Target’s customers refer to the chain as “Tar-Jay,” a nickname that reflects its efforts to offer high-end design at low-end prices.
One of the company’s first tasks will be hiring a Canadian president and assembling an executive team under the direction of Michael Francis, Target’s chief marketing officer.
It has 240 days to conduct a site by site analysis to determine how many and which Zellers’ locations it will take up.
“This transaction provides an outstanding opportunity for us to extend our Target brand, Target stores and superior shopping experience beyond the United States for the first time in our company’s history,” Steinhafel said in a statement. (Target Australia has no affiliation with Target Corp.)
“We believe our investment in these leases will strengthen the surrounding communities as well as create strategic and financial value for Target stakeholders.”
The fate of the remaining 59 Zellers locations has yet to be decided, but many could be sold to other retail giants like Wal-Mart Stores Inc. or remain in the hands of Hudson’s Bay, HBC spokeswoman Freda Colbourne said in a telephone interview.
“The company still has plans to operate a portfolio of Zellers stores in some communities across the country,” she added.
One likely scenario would see Target taking up high traffic leases in urban and suburban areas, while HBC would maintain ownership of smaller locations in rural areas, including northern communities.
“The company is still going to run a chain of Zellers stores, it just might be a little bit different than today, but for the next 12 months nothing is changing,” Colbourne said.
With files from Canadian Press