Wal-Mart's preemptive Canada strike

  • Article by: DAVID WELCH , Bloomberg News
  • Updated: June 28, 2012 - 10:54 PM

The retailer is lowering prices north of the border in preparation for archrival Target's arrival next year.


Wal-Mart's store in Bloomington.

Photo: Glen Stubbe, Star Tribune

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Target Corp. hasn't opened a single store in Canada, and already Wal-Mart Stores Inc. wants Canadians to know it's the price leader north of the border.

Wal-Mart Canada said Thursday that it will lower prices on 10,000 products in July. The company called the sale, which it says will save customers $50 million next month, the biggest in Wal-Mart's 18-year history in Canada.

While Target's Canada debut is at least six months away, part of Wal-Mart's strategy is to get out front in the brand messaging wars, said Poonam Goyal, an analyst with Bloomberg Industries.

"When Target comes, they will say they have everyday low prices," Goyal said in a phone interview. "So Wal-Mart wants to position themselves six to nine months ahead of Target as being the price leader."

Minneapolis-based Target plans to open more than 100 stores in Canada starting next year. Last year, Target paid $1.85 billion to acquire the leases of as many as 220 Zellers stores, a Canadian discounter, with plans to convert many of them into Targets.

Target has called the expansion into Canada integral to its goal of reaching $100 billion in sales in the next seven years from $69.9 billion in fiscal 2012.

Target spokeswoman Donna Egan said it was too early for the retailer to discuss its pricing strategy for Canada. While she did not address Wal-Mart's initiative specifically, she said, "We are aware that price continues to be a critical aspect of our guests' shopping decisions, and we will work hard to ensure that our merchandise is priced competitively in Canada."

Wal-Mart, the world's largest retailer, has 333 stores in Canada. They'll cut prices on everything from food to electronics. Next month, a bag of Lays XL salty snacks will sell for $1.97, or a buck less than usual. A Nikon Coolpix S30 digital camera will be cut from $149.98 to $98, the company said.

"We are committed to lowering the cost of living for shoppers this summer," Lee Tappenden, chief merchandising officer for Wal-Mart Canada, said in a statement. "The common theme we hear is everyone is looking and needing to save money now, before the autumn back-to-school season begins."

Wal-Mart Canada's margins will take a hit from the sale, Goyal said. The company will likely try to recoup some of the price cuts by shaving costs elsewhere, she said.

Wal-Mart shares fell 0.4 percent to close Thursday at $68.30. Target's dropped 0.2 percent to $57.46.

Staff writer Thomas Lee contributed to this report.

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