Target Stores: Canadian retailers expect earnings hit




 

A new report says the arrival of U.S. retailer Target in Canada next year will take a bite out of the sales of several key rivals.


But Barclays Capital says other retailers that don't overlap in their offerings may benefit from the increased traffic generated by the new stores.


In a report assessing the impact of Target's arrival, the investment firm says Wal-Mart, Sears Canada (TSX:SCC), Old Navy, Loblaw's Joe Fresh brand (TSX:L) and Canadian Tire (TSX:CTC.A) are the retailers most at risk.


Barclays says Sears is the most at risk of the general retailers with significant overlap in its offerings and 37 per cent of its locations less than a kilometre away from a Target location.


The report calls discount retailer Dollarama Inc. (TSX:DOL) a special case among retailers as they offer something different from Target.


Barclays says it believes Dollarama will "benefit when a Target opens nearby."


Canadian Tire is expected to take a hit, but Barclays analyst Jim Durran notes that when Wal-Mart first launched in Canada, Canadian Tire was able to recover by the following year.


"There is not doubt that Canadian Tire will suffer some sales erosion to Target, particularly in Target's perceived 'go to' categories such as housewares, apparel and seasonal merchandise," the report said.


However Barclays noted that Canadian Tire's most loyal customers generate a majority of its sales and just 30 per cent of the Canadian retailer's stores will be within five kilometres of a Target.


Clothing retailer Old Navy, however, will have 42 per cent of its stores within one kilometre of a Target location and also compete in an area of strength for the chain.

Internet site reference: http://www.obj.ca/Canada---World/2012-10-01/article-3087866/Target-set-to-steal-sales-from-other-Canadian-retailers%3A-Barclays/1

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