Target Corporation (TGT), Wal-Mart Stores, Inc. (WMT): U.S. Bargain Retailers Expanding in Canada

The company does look poised to address market share losses to dollar stores. For example, it is reinforcing everyday-low-price strategies by making significant price cuts. The company was initially going to invest $2 billion in price cuts before 2015, but it has updated its plan to now include $6 billion in price cuts by 2017. Furthermore, much of its capital is shifting to domestic small stores, which have a higher return.

Hudson’s Bay Company could lose out

Expansion of bargain stores into Canada will likely make an impact on Canada’s longest-established corporation, the Hudson’s Bay Company (TSX:HBC). The firm has continually been challenged by competition coming from the U.S., and the addition of Target could bare down on the firm with crippling force. I see the share price falling hard.

However, of three analysts, two say “buy” and one says “hold.” Morningstar doesn’t agree, as it gives the stock a fair value at $15.21, while the price is now over $16. Look for decreasing sales as the U.S. titans set up shop in Canada.

Canada’s retail landscape is changing

Target and Wal-Mart Stores, Inc. (NYSE:WMT)’s expansion into Canada will likely upset the nation’s domestic retail market. Firms such as Sears Holdings Corp (NASDAQ:SHLD) and Zellers Inc. have been closing down and selling their Canadian stake, and faltering profits at those companies could be largely due to to moves made by the bargain retailers. The Hudson’s Bay Company will certainly be challenged, and time will tell if the firm will be able to secure enough of the higher-scale apparel market to realize enough profits to keep downsizing far from necessary.

The article U.S. Bargain Retailers Expanding in Canada originally appeared on Fool.com and is written by Phillip Woolgar.

Phillip Woolgar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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