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This article was published 1/10/2012 (1573 days ago), so information in it may no longer be current.
TORONTO -- Target's arrival in Canada will take a bite out of the sales of several key rivals, says a new report, though many of those named have said they're not fazed by new competitive pressure from the American retail giant.
In a report assessing the impact of Target's arrival next year, Barclays Capital said Monday Walmart, Sears Canada, Old Navy, Loblaw's Joe Fresh brand and Canadian Tire are the retailers most at risk.
Target is preparing to move into Canada, its first expansion outside the U.S. It will begin opening the first of between 125 and 135 stores in March and April at locations once owned by Canadian retailer Zellers.
"Target's arrival marks the addition of another best-in-class global operator entering the Canadian market. We expect Target to focus on what they are most known for when they arrive: apparel and house goods," the report said.
"Over time, the greatest risk to established retailers is the permanent change in customer traffic patterns that Target could induce," it said.
However, the investment firm also said other retailers that don't overlap in their offerings -- such as dollar stores and higher-end retail stores -- may benefit from the increased traffic generated by the new Target stores.
Sears Canada is the most at risk of the general retailers, with significant overlap in its offerings and 37 per cent of its locations less than a kilometre away from a Target location, the report said.
"Sears' housewares and value-priced, mostly private label, apparel offering (two in Canada behind Walmart) makes Sears Canada one of the most-at-risk retailers. Sears Canada's management believes 70 per cent of their categories overlap with Target's offering," it added.
Sears Canada has already been struggling to compete and is revamping many of its locations and slashing prices to contend with lagging sales. The retailer has announced the closure of four prime store locations in three cities -- Vancouver, Calgary and Ottawa.
The arrival will also eat into Walmart's business, the report said, noting Target's chief rival "may implement several 'mitigation and offset' strategies to minimize Target's net impact on their business."
Walmart Canada, a subsidiary of the world's biggest retailer, has said it is confident it's prepared for Target's arrival. As part of the plan, it will lower the prices of more items to about $1 as it also answers to the expansion by Canadian dollar store operator Dollarama Inc.
The retailer has never competed against Target Corp. outside its home base in the United States, which means Canadians could react to the new entrant in ways Walmart hasn't anticipated.
Canadian Tire is expected to take a hit, but Barclays analyst Jim Durran notes when Walmart first launched in Canada, Canadian Tire was able to recover by the following year.
"There is no doubt that Canadian Tire will suffer some sales erosion to Target, particularly in Target's perceived 'go to' categories such as housewares, apparel and seasonal merchandise," the report said.
However, Barclays noted Canadian Tire's most loyal customers generate a majority of its sales and just 30 per cent of the Canadian retailer's stores will be within five kilometres of a Target.
Canadian Tire Corp. is working aggressively to carve out a bigger share of the market before Target arrives. It has unveiled a new automotive-centric store format in a strategy aimed at improving customer experience among those shopping for products that helped make the company a household name. The report calls discount retailer Dollarama Inc. a special case among retailers as they offer something different from Target.
Barclays said it believes Dollarama will "benefit when a Target opens nearby."
Dollarama Inc. is expanding faster than initially planned this year by increasing the number of new store openings to take advantage of a mall construction boom in Canada.
Chief executive Larry Rossy has said the chain could be helped by the arrival.
"I'm looking forward to it. I think that they're going to bring traffic where we're situated close to the Target stores," he has said.
Barclays said it doesn't expect Target to have much impact on the already highly competitive grocery sector in Canada -- at least at first -- because it does not appear the chain plans to focus on food offerings. However, Loblaw Companies Ltd. will see the most impact among supermarket chains as its Joe Fresh clothing line will compete with Target in the discount chic clothing space.
Meanwhile, the Sobeys grocery chain owned by Empire Co. Ltd. could benefit after it signed a deal to offer some food in Target's Canadian stores.
-- The Canadian Press