Wal-Mart sets big supercenter expansion in Canada

By Susan Taylor

OTTAWA (Reuters) - Wal-Mart (WMT.N: Quote) is embarking on a major expansion of its food-selling supercenter stores in Canada, posing a bigger competitive threat to Canadian supermarkets, which are already cutting prices to keep up.

Wal-Mart, the world's biggest retailer, said on Thursday it will open or expand 25 to 27 stores in Canada by early 2009 and create 6,000 new in-store jobs. It said its focus will be on opening more supercenters, which sell general merchandise alongside fresh produce, meats and baked goods.

Canadian grocers, including Loblaw Cos Ltd (L.TO: Quote), Metro Inc MRUa.TO and Empire's EMPa.TO Sobeys chain, have been chopping prices to try to keep customers in an increasingly competitive environment, a strategy that has shrunk their profit margins.

"The short-term (impact) is more downward pressure on prices, just by virtue of the supply-demand relationship," said Bank of Montreal analyst David Hartley in an interview.

"Secondly, we believe that Wal-Mart will keep a lid on pricing and may not raise prices as fast as their wholesale costs, as I suspect that this is part of a longer-term investment, of which they're willing to, up front, foot some of the bill."

More than half of the 25 to 27 projects will be new supercenters, and one-third will be expansion of existing discount stores. It will close two discount stores, which will then be relocated and reopened as supercenters.

The first project, the first Wal-Mart supercenter in British Columbia, opened last month in Duncan, B.C.

Since opening its first three Canadian supercenters in October 2006, the company now has 32 such stores in Ontario, Alberta and British Columbia.