Discount department store retailer Target Corporation has settled a dispute over the use of its name and brand in Canada, paving the way for its move into the country next year.

The agreement has been reached with Fairweather Ltd and its sister companies International Clothiers Inc and Les Ailes De La Mode Incorporees - who have agreed to cease use of the Target mark by 31 January 2013.

"This move will eliminate any potential confusion among Canadian consumers regarding Target Corporation's branding elements, store experience and merchandise assortments as it opens its first stores in Canada in 2013," the US retailer said. "No additional details of the agreement will be disclosed."

Target, which currently operates 1,763 stores in the US, in January last year revealed plans to make its first move into Canada with a CAD1.825bn (US$1.83bn) swoop on discount chain Zellers, a subsidiary of Hudson's Bay Co. It intends to open between 125 to 135 stores in 2013.

But its Canadian expansion plans faced an unexpected complication after specialty fashion and accessories retailer Fairweather filed a lawsuit claiming it owned the right to use the Target name in Canada. Fairweather has operated a Toronto clothing store under the name 'Target Apparel' since 2005.

According to reports, Fairweather had been seeking up to $250m in damages.