Target Entry Sets Off Bloodbath For Canadian Retailers, CEO Says

Target's (NYSE:TGT) push into Canada is setting off "a bloodbath for every retailer," the CEO of a Canadian home-improvement chain said at an analyst conference this week in Toronto.

Robert Sawyer, CEO of big-box hardware chain Rona, said he was specifically talking about Ontario, where Target has been opening stores and Walmart (NYSE:WMT) and Costco (NASDAQ:COST) have also been expanding their presence. But the effect is likely to spill over into the rest of Canada. "It's difficult, not only for the hardware business," he said.

Despite customer complaints that the U.S. chains have higher prices in Canada than in their stores across the border, grocers Loblaw and Metro have been forced to lower prices, slash costs and forge new alliances in the face of the competition. Perry Caicco, a retail analyst at CIBC World Markets, said grocery sales will rise by about $1.6 billion in 2013, but that will all come from increased retail floor space, meaning almost no real sales growth.

"The Canadian market is only so big," consultant Marion Chan of TrendSpotter told the Globe and Mail. "We're a small market of 34 million people and we're trying to slice and dice the pie like we would in the United States. At some point, something is going to give."

That something is likely to be weaker stores in Canadian chains. The larger U.S. chains that have moved into Canada are at least two years from demanding that the new stores pay their own way. As a result, Rona has already said it will close 11 unprofitable stores this year, eight of them in Ontario. The grocer Metro said last month that it is restructuring 15 Ontario stores, some of which will close. Six will be converted to Metro's discount banner, Food Basics.

For more:

- See this Globe and Mail story

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