U.S. retail giant Target Corp. expects to generate at least $6 billion in annual sales in Canada in as little as six years as it makes its first foray into a foreign market.
Chief financial officer Douglas Scovanner also said Wednesday the No. 2 U.S. retailer, which announced its entry into the Canadian market in January, now plans to open about 200 Canadian stores, expanding on earlier estimates.
“The sun, the moon and the stars all lined up properly … Canada represents a vibrant retail market, where we think we can highly likely succeed,” Scovanner told Reuters in an interview.
“Commencing right now, we are looking at other sites in Canada to be able to ultimately have a presence of what will likely be 200 or more stores,” he said.
Minneapolis, Minn.-based Target announced a $1.83-billion deal Jan. 13 to acquire the leases on up to 220 Zellers discount stores from Hudson’s Bay Co., North America’s oldest company.
The move, which will see Target open its first stores in 2013, will add a new level of competition to an already cutthroat market in Canada, where incumbents are already bracing for the company’s entry.
Scovanner said Target plans to invest “many billions” of dollars in Canada – up to $10 million per store – and generate annual pretax profits of “hundreds of millions” of dollars in the country as a whole.
“We will need to invest on an ongoing basis in acquiring new sites and new buildings,” he said.
Investments will include, for example, about $500 million for the supply chain and information technology.
Once built, Target’s Canadian operations could represent six per cent of annual revenue forecasts as it works to generate sales of $100 billion, six or seven years from now.
In the year ended January 2011, Target’s sales were $65.8 billion.
It plans to double earnings in the same period to $8 per share.
In Canada it will come face to face with arch rival Wal-Mart Stores Inc., the No. 1 U.S. discount retailer, which is in a sustained expansion drive in Canada.
It will also need to battle with top domestic grocers Loblaw Cos. Ltd., Empire Co. Ltd. and Metro Inc., which are increasingly competing on price and product selection.
Scovanner said Target will offer food and pharmacy items in stores in Canada, where retailers are already encroaching on each other’s territory to offer competing products.
“It clearly will be our intent to have some variety of food products in as many stores as we can,” he said.
Source : Montreal Gazette