Wal-Mart Stores Inc. has earmarked more than $268 million this fiscal year for projects in Canada related to supercenters, distribution centers and e-commerce growth.
As part of Wal-Mart's investment, it will expand retail space in Canada by about 230,000 square feet. Much of the store growth will be focused on expanding existing discount stores into supercenters to accommodate demand for grocery items.
Expansion plans for Wal-Mart Canada were unveiled less than a month after rival Target announced it was exiting the country. Target will close 133 Canadian stores over the next four months.
Carol Spieckerman, president of the Bentonville retail strategy firm newmarketbuilders, said Wal-Mart is following a growth strategy that has worked for it in the United States. It began with discount stores that offered general merchandise, then expanded existing stores or built new ones to begin offering grocery products.
"It's a great time for Wal-Mart to expand in Canada in the wake of Target's highly-visible missteps there," Spieckerman said. "Small format stores would seem to make sense in Canada, particularly given how dispersed the population is and the unique profiles of various regions."
Wal-Mart will spend $181.9 million for its supercenter expansions. An additional $59.3 million will be spent on distribution centers to expand food and e-commerce capacity, and $27.6 million is being spent to expand e-commerce capabilities.
About 5,000 jobs, some of them temporary, will be created through the expansion. Wal-Mart said the plans call for the generation of 3,700 construction jobs, plus 1,000 store employees and another 300 at distribution centers.
Wal-Mart seems to be focusing much of its growth in Canada on stores. Still, there is room to grow online sales, senior analyst Brian Yarbrough at financial services firm Edward Jones said.
"It's no surprise at all," Yarbrough said of the e-commerce spending. "Canada is still a little bit behind the U.S. in terms of online, but it's a growth area. There were major competitors there who two years ago didn't have online sites. It hasn't taken off quite as rapidly there, but investing in distribution centers and e-commerce efficiency are definitely needed."
Wal-Mart opened 11 supercenters in Canada last month as part of an announced $500 million to $750 million expansion for the 2015 fiscal year that ended in January. The retailer said that a year from now it plans to have 396 stores in Canada, including 309 supercenters. That would leave 87 discount stores as possible expansion candidates, though Yarbrough said Wal-Mart will eventually have to re-evaluate its growth strategy north of the border as it has in the United States.
"Our mission is to provide multiple access points for customers to save money," said Dirk Van den Berghe, president and CEO of Walmart Canada, in a news release. "We will deliver on this commitment through a range of channels including our expanding network of supercenters, our accelerating e-commerce business and our in-store pick up services."
Business on 02/12/2015