SINS Prediction: Target’s Canadian Store List

  • Although it will not be announced until September 2011, the list of sites that Target stores will occupy starting in 2013 has been widely discussed in the Canadian retail and vendor community.

    It has also been widely discussed by consumers in towns and cities all across Canada who are wondering – “Will my Zellers store become a Target?”

    SINS has conducted an in-depth analysis and has developed a list of stores that we expect will be on the final list when it is announced later this year. We think that 193 of the current Zellers stores would make attractive properties for a launch of Target in Canada.

    Not to disappoint a lot of communities but Target will not be coming to many of the smaller towns that Zellers already occupies.

    In fact, Target does not even have stores in all 50 US States.

    Vermont has not succeeded in gaining a Target store due to low population and a strong anti-big box movement in the state. Vermont’s population is 625,000 with its biggest city being Burlington with only 42,000 inhabitants.

    Looking at other border states such as Maine, North Dakota and Montana may give us an indication of the population levels that can support a Target store.

    In these three sparsely populated states with a combined population of almost 3,000,000 there are a total of 16 Target stores.

    This works out to one Target store for every 187,000 inhabitants.

    When we look at store productivity, measured by sales per inhabitant, Target stores in North Dakota and Montana rank quite high with sales of over $200 per person in these two states. This is in-line with overall Target goals with 55% of its operations generating greater that $200 in per capita sales.

    In these three states the only city with two Target stores is Billings, MT (pop. 105,845) indicating that at least 100,000 inhabitants are required to support a second Target store.

    Looking at the individual cities with Target stores, most have a population of at least 20,000 in their catchment area.

    Finally, due to Target’s focus on the PFresh model (see our Minneapolis Market Visit Report for more details) to drive growth and the relatively low numbers of Super Targets launched in the US – we do not expect Super Target to enter Canada.

    Supporting this prediction are three factors:

    1. Most if not all Zellers stores fall under the 175,000 sq. ft. required to build a Super Target.
    2. Target’s US supply chain for Grocery is managed by Supervalu, the fourth largest US grocery retailer. We do not see the two national distributors, Loblaw or Sobeys as being willing to partner with Target to add competition in Grocery. A partnership with both Safeway and Metro (although unlikely) would also leave coverage gaps in the Maritimes.
    3. Our population analysis shows that Target has only built one Super Target in ME, MT and ND and it is located in Grand Forks, ND which is just across the border from Target’s home turf in Minnesota.

    In all, if we were launching Target we would launch Target stores in a total of 193 Zellers leases across Canada.

    We would then sell-off or close the rest of the stores (80 locations), which do not warrant a Target store on a population or store performance basis.

    A summary of our predicted Target store list for Canada is shown below.

    You can download the full store list, including the stores we expect will not be rebranded as a Target here.

    Disclaimer: SINS does not have any inside information that has influenced our analysis. All projections are based on publically available information. We also are not aware whether all stores on our predicted list are “in-play” (on the list of leases that were acquired by Target in January for $1.8 billion). This list is based on the top stores that we would pick to launch. based strictly on population and store performance measures.

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