Canadian retailers brace for Target's cheap chic

Sun Dec 9, 2012 1:46pm EST
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By Allison Martell

TORONTO (Reuters) - Canadian retailers of all stripes are bracing for the day next spring when Target Corp (TGT.N: Quote) unlocks the doors of its first stores north of the border, but its instant competitive heft probably won't weigh on all retail stocks equally.

Sears Canada Inc (SCC.TO: Quote) and Hudson's Bay Co (HBC.TO: Quote) - two entrenched department store operators - may have the most to fear from the No. 2 U.S. discounter, retail experts say. Their shares may be most vulnerable.

HBC, which went public in November, has traded below its C$17 offer price since its first trading day, partly because of concerns that its turnaround drive might stall once Target arrives.

By contrast, Loblaw Cos Ltd (L.TO: Quote) and Metro Inc (MRU.TO: Quote), mainly grocers by trade, face a lesser threat from Target, and their shares may hold up better.

That's not to say any retailer can afford to ignore Target. The company has "proven its success in the U.S. The consumer landscape in Canada ... isn't all that different," said Craig Fehr, Canadian market strategist at Edward Jones in Missouri. "It is going to have a meaningful impact."


Target is arriving at a time when most of the retail sector faces sluggish growth, and many shoppers can't wait for the discounter's debut.

Thanks to cross-border shopping trips, Target is already well known in much of Canada. KubasPrimedia, a Toronto market research firm, surveyed Canadians last spring and found that 43 percent had already shopped at Target south of the border.   Continued...