Target's Drive Into Canada Could Involve 200 Stores

Target Corp. (TGT) is preparing to enter Canada, with as many as 200 stores said to be considered as the company's makes its first move beyond U.S. borders.

The discount retailer gave its loudest signal yet that it is headed north when its representatives spent the last few days meeting with Canadian developers at a shopping center trade show in Toronto.

Target is looking at a couple of hundred stores over the next 10 years, Fred Waks, chief operating officer with RioCan, the largest public real estate developer in Canada, told the Winnipeg Free Press. Waks could not be reached for comment, but RioCan Chief Financial Officer Rags Davloor confirmed the number.

Davloor also confirmed that Target is looking to open six to 10 stores in late 2014 or 2015. "We're talking about possible locations where we can accommodate them," he said.

Target earlier this year expressed interest in moving into Canada. On Wednesday, company spokeswoman Amy Reilly said only that the retailer is "optimistic that our first stores could open by mid-decade."

Target's presence at the International Council of Shopping Centers' Canadian convention is its first in at least several years. The retailer has eight real estate representatives registered, an ICSC spokesman said.

In moving into Canada, Target is taking on both old and new rivals. Wal-Mart Stores Inc. (WMT) has been in the country for a decade and a half and now operates 321 stores across the country. Hudson's Bay Company also has a large presence, with its The Bay and Zellers chains.

Len Kubas, chairman of Kubas Primedia, a Toronto-based management consulting firm, sees Target's arrival in Canada as filling a gap in the marketplace, which lacks a sort of "upscale discounter." Retailers of fashion and home decor and accessories in Canada should take notice and prepare, because Target's visibility at the conference suggests it could happen quicker than the company has hinted, Kubas said.

"It would represent a new venue for us" because it would position Target somewhere below Hudson's Bay's upscale The Bay, but above its Zellers chain and Wal-Mart's Canadian operations, Kubas said. "Retail sales aren't growing as fast and consumer spending isn't as elastic as it used to be, so there probably is an opening for retailers that offer good value but also excellent styling and design."

Zellers has struggled to compete against the influx of dollar stores and Wal-Mart Canada has operated in the country since 1994, but only unleashed its Supercenters in the last few years. He said Canadian Tire Corp. (CTC.A.T), which specializes in automotive, leisure and home products, could also feel the pinch of a new general-merchandise competitor.

Target is joining something of a migration of U.S. retailers into Canada as they search for new markets nearby that are not saturated with stores. Canadian retailers have also been outperforming their U.S. counterparts as the recession has wound down.

Apparel retailer TJX Cos. (TJX) said in July it is taking its off-price Marshalls chain to Canada, with plans to open several stores next spring. Kohl's Corp. (KSS), J. Crew Group Inc. (JCG) and Limited Brands Inc.'s (LTD) Victoria's Secret also reportedly have some interest in Canadian expansion.

Growth north of the border costs less and carries fewer logistical risks than overseas expansion. Still, there are challenges, including great distances between large Canadian cities and, in some cases, the need for labeling in English and French.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; [e-mail]