Target Outlines Canadian Expansion

MINNEAPOLIS — Target Corp. here said it expects to launch its entry into Canada in early April in the Toronto area, with plans to open 124 stores across the country in five waves.

Gregg Steinhafel

Gregg W. Steinhafel, president and chief executive officer, said Target plans to open between 20 and 28 stores per cycle in April and May and every couple of months after that, starting in Toronto before moving to Western Canada and then shifting its efforts back to the eastern part of the country.

Because the Zellers stores it acquired for its Canada entry are smaller than Targets in the U.S., the company has arranged to expand 40 locations to create more than 600,000 square feet of incremental selling space, John J. Mulligan, executive vice president and chief financial officer, said during a conference call with analysts. It was still unclear how much grocery product the stores would offer. Early ads supporting the rollout have focused on general merchandise.

Target will invest between $10 million and $11 million per existing building in Canada, for a total capital investment this year of approximately $1.5 billion, Mulligan said. In addition, the company expects to spend about $2.3 billion in the U.S., with investments in supply chain and technology likely to be as high as investments in new stores and remodels, he noted.

Target plans to open between 15 and 20 new stores in the U.S., including three City Targets, and to complete approximately 100 remodels — “a more moderate pace than in each of the past three years,” Steinhafel explained, “as the majority of our stores reflect our newly reinvented general merchandise format, including a deeper food assortment.”

The company debuted five smaller-format — about 80,000 to 1000,000 square feet — City Target stores last year in Los Angeles, Chicago and San Francisco. Steinhafel deemed the stores “an operational and financial success” and said it would apply learnings from the stores across the entire chain.

Read more: Target Practice: Canadian food retailers brace for invasion of Target, Wal-Mart supercenters

Steinhafel said Target is running small pilot tests here and in San Francisco that allow customers to pay online and pick up products in a store; to pay for an item in one store and pick it up at another; and to pay online and have items shipped from a store, including the option for same-day delivery.

According to Kathy Tesjia, executive vice president, merchandise, mobile sales account for more than 25% of all digital traffic, with mobile purchases constituting more than 7% of all digital sales.

Net income for the fourth quarter, which ended Feb. 2, declined 2% to $961 million, while U.S. retail sales rose 6.8% to $22.4 billion and comparable store sales were up 0.4%.