"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," said Gregg Steinhafel, chairman, president and chief executive officer of Target, in a statement.
Mr. Steinhafel told The Wall Street Journal that more than 10 percent of Canadians have shopped in a Target store and 70 percent are familiar with the brand.
"Target has always been opportunistic about real estate," Jeff Klinefelter, an analyst at Piper Jaffray, told the Star Tribune of Minneapolis. "It's a way to accelerate their share in that market and get established very quickly."
Brian Sozzi, an analyst with Wall Street Strategies, wrote in a research note, "One word, finally. Not only is Target likely receiving locations where a comparable cheap chic approach to retailing has been tested, it finally is preparing to change the dialogue of the company being a U.S. only retailer. Better still, it doesn't appear that Target will leverage up its balance sheet to fund its Canadian foray."
The chain, which plans to invest another $1 billion to renovate the sites it is acquiring, moves into the market getting ready to face a familiar competitor. Walmart currently operates 323 stores in Canada.
David Strasser of Janney Capital Markets, according to the Star Tribune report, sees Walmart as holding the advantage over Target in Canada. Mr. Strasser wrote in a research note, "Target will prove to be a more formidable competitor to Wal-Mart than Zellers, which was notorious for poor execution."
Target announced that the company's chief marketing officer, Michael Francis, will oversee its move into Canada.
"With more than 25 years of experience with this corporation, Michael has a deep understanding of Target and the retail industry. His responsibility for corporate brand and reputation including our community relations efforts uniquely position him to lead this effort," said Mr. Steinhafel.
In separate news, Target also said it is seeking to sell its remaining credit card receivables. The company will retain marketing control of its credit card business, which has gained momentum with the introduction of its five percent discount program in recent months.
- Target Is Going Abroad -- to Canada - The Wall Street Journal
- In a bold push, Target goes international - Star Tribune
- Target Corporation to Acquire Interest in Canadian Real Estate from Zellers Inc., a Subsidiary of Hudson's Bay Company, for C$1.825 Billion - Target Corporation
- Michael Francis to Oversee Target's Entrance into Canadian Market - Target Corporation
- Target in Canada... finally - Financial Post