The Hudson's Bay Company has recently sold Zellers to U.S. retailer Target (NYSE:TGT) for $1.8 Billion. Target plans to convert about 150 stores and sell the remaining 70 Zellers locations to another buyer.
Considering that the Zellers chain was on it's last breath following HBC's sale to U.S.-owned NRDC Equity Partners in 2008, the news is not surprising. Rumours have been circling about a sale of the chain to Target for years now, and steep competition from Wal-Mart (NYSE:WMT) left the chain struggling to find customers.
Though the retail market in Canada is thriving, the recent sale of the chain reminds us of the terrible truth that American corporations have a strangle-hold on the Canadian marketplace. Wal-Mart, Costco (NASDAQ:COST), Best-Buy (NYSE:BBY), and a slieu of other global behemoths have largely gobbled up their Canadian competitors. With the exception of Canadian Tire (TSE:CTC.A), Loblaws (TSE:L), and a few others, there are very few Canadian owned retail locations.
Sadly, expansion southwards has not gone as well for Canadian companies. Only Tim Horton's (TSE:THI) and Couche-Tard (TSE-ATD.B) have really been able to crack the U.S. market. There are a number of reasons for this, but much of it is attributable to lacking economies of scale for companies in Canada as compared to the U.S., where there is a ready market 10 times the size as in Canada. U.S. retailers can utilize their large networks at home to leverage their expansion north, whereas Canadian retailers have to leverage a much smaller network to expand into the highly competitive American market.
Interestingly, both Tim's and Couche-Tard are great investments for Canadians, especially considering the prospect for extensive expansion plans and continued growth. Both stocks should be on your watch-list awaiting a dip in their share prices. As for Target, the shares are reasonably priced, but in the retail sector both Wal-Mart and Costco have more potential for continued success.