Target stores are now set to make their mark in Canada

Target stores are now set to make their mark in Canada

Having been criticised for being slow to cash in on the potential of international expansion, US budget retailer Target Corp is now making up for lost time with a CAD1.825bn (US$1.83bn) swoop on Canadian discount chain Zellers.

The deal will see the US retail giant take control of up to 220 stores operated by Zellers, a subsidiary of Hudson's Bay Co, with up to 150 of these stores being converted to the Target nameplate by 2014. Some stores are also expected to be offloaded to other retailers.

Minneapolis-based Target, which currently operates 1,752 stores and is the US' second-largest discount chain behind Wal-Mart, has made no secret of the fact it has been looking for areas to expand.

It is also keen to shrug off accusations that it has been too cautious in its attempts to gain enough ground with value-conscious consumers, especially when compared to its rivals. A year ago it scaled back its growth plans, opening just ten new Target stores and focusing instead on the renovation of about 340 shops during 2010.

"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," enthuses Gregg Steinhafel, chairman, president and CEO of Target Corporation.

Clearly it makes sense for the initial push to come on Target's doorstep in Canada, and by moving into existing stores it will be able to ramp up operations in the country at lightening speed. Many of these premises are also in prime locations.

The Canadian retail market is around one-fifth of the size of the US, and it too was hit by rising unemployment, declining consumer consumption, and precarious consumer confidence during the recession.

But it has also proved more resilient in recovery, and is now seen as a natural progression when it comes to expansion by a number of US apparel operators.

In the last year Wal-Mart remodelled or opened up to 40 "supercentres" in Canada, taking its store count in the country to 325, including 124 supercentres and 201 discount stores. The chain has also expanded the reach of its George private label clothing range into more than 300 of its Canadian stores.

Outdoor apparel company Patagonia, hip fashion brand Juicy Couture, and teen retailer Journeys, have also all opened their first Canadian retail stores in the last 12 months, while VF Corp's denim and casualwear brand Lee Jeans has inked a licensing deal with Quebec-based Paris Geneve to expand its apparel line in Canadian mid-tier retailers.

And US apparel retailer Gap Inc has launched a dedicated e-commerce site aimed at Canadian consumers for its Gap, Banana Republic and Old Navy brands.

While Target's arrival is seen as heralding a shake-up of the retail sector, the deal will also free Hudson's Bay Trading Company - Canada's largest diversified general merchandise retailer, which is owned by NRDC Equity Partners - to focus on its own department and specialty stores. These include the Bay department store and value-priced Fields stores.

Generously, Hudson's Bay notes that the entry of Target Corporation into the Canadian market will provide a broader retail product offering to Canadian consumers.

On the fashion front, Target is best-known for its collaborations with high-end fashion designers, in the past teaming up with the likes of the late Alexander McQueen, Zac Posen, Jean Paul Gaultier and Proenza Schouler on limited but affordable collections.