Waiting for Target: Canadian retailers retrench
Retail companies brace for the U.S. juggernaut to set up shop north of the border
In this July 28, 2012 photo, shopping carts sit parked outside a Target store in Marlborough, Mass. Target is reporting that net income for the second quarter was unchanged, as the retailer gets ready for its upcoming move into Canada. But the retailer saw solid spending in the quarter and in a sign of confidence, the cheap chic discounter raised its earnings outlook. Target posted earnings Wednesday, Aug. 15, 2012 of $704 million, or $1.06 per share in the period ended July 30. That compares with $704 million or $1.03 per share, in the year ago period. (AP Photo/Bill Sikes)
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A dark cloud has been forming over the Canadian retail landscape this month. Hudson’s Bay Co., Shoppers Drug Mart and Loblaw Companies Ltd. have all announced major job cuts. HBC said it will be laying off 210 employees as it moves its information-services department from Toronto to Missouri. Shoppers Drug Mart cut 80 jobs from its head and regional offices. Last week, Loblaw said it is cutting 700 head-office jobs as it looks to streamline operations.
One of the causes: the U.S. retail juggernaut Target Corp., which is opening 189 locations across Canada and which will offer stiff competition in the pharmacy, clothing and grocery businesses. With more retailers looking to expand their offerings and lower prices (Loblaw has already been struggling with Wal-Mart Stores Inc.’s expansion into groceries), it’s getting harder for companies to distinguish themselves, says Kenneth Wong, a marketing professor at Queen’s University. But Wong suggests that the magnitude of the layoffs “suggests there is also something larger at play” than just bracing for Target, or the rising costs associated with drug reforms that Shoppers cited as the reason for its cuts. He says a slowing economy is the main culprit. And that’s bad news for Canadian retailers and U.S. invaders alike.