Consumers in Canada will soon have access to Target stores, following a recent agreement by the Hudson’s Bay Company to allow Target Corporation to purchase Zellers Inc. real estate leases.

Hudson’s Bay Company will be raking in close to $2 billion from the sale of up to 220 leasehold interests that are currently operated as Zellers stores. Target, an American retailing company, plans to spend about $1 billion transforming 100-150 Zellers stores to the Target name brand over the next two years.

A Hudson’s Bay press release distributed on Jan. 13 indicated that a select number of Zellers locations will be assigned to other retail enterprises, while many Zellers stores will remain open in certain communities.

“This transaction provides attractive long term value and will allow us to invest substantial capital into our department store and specialty store businesses to continue to drive growth,” said governor of the Hudson’s Bay Company, Richard Baker, in the release.

Nerissa Martin, account executive for the corporate and public affairs division of Elderman Canada, explained that Zeller’s will continue to be operated by Edelman Canada in 2011 “and many well into 2012.”

The sale is expected to create over 20,000 net new jobs in Canada along with potentially generating over $1.5 billion in economic activity.

Discussions with Target over the potential purchase of over 200 leases of Zeller’s stores began in late fall 2010.

“While it will be some time before future Target store locations are open, Target expects to employ tens of thousands of Canadian employees,” said Martin.

“The entry of Target Corporation into the Canadian market will provide a broader retail product offering to Canadian consumers.”

Irwin Lipnowski, an economics professor at the University of Manitoba, believes the transfer of ownership is a positive move.

“Personally, I like Target,” he said. “Zellers always seemed to be quite challenged. [ . . . ] It didn’t seem to be a very efficiently run store.”

Lipnowski believes Target will have a beneficial effect for Canadian consumers as it will offer high quality products at a reasonable price, while at the same time fostering competition.

“I expect it will intensify competition at the lower end,” he said, adding that the takeover is unlikely to affect companies like Wal-Mart, which “has a pretty easy ride because it isn’t threatened by Zellers.”

The Hudson’s Bay Company was handed over to an American company in January 2006 before being re-sold to the NRDC Equity partners, owners of the U.S. department store chain Lord & Taylor.

Lipnowski said that one danger of having American interest in Canadian companies in the past is that in some cases Canadian owners have allowed valuable property to be sold at bargain-basement prices.

He noted that Lord & Taylor bought HBC for $1.1 billion, which was more or less the same price the previous owner had paid for it. Today, the owners are able to sell a just a fraction of the company for $1.8 billion.

“Obviously, Canadians are sitting on assets they don’t know the value of,” said Lipnowski.

Although HBC is no longer in the hands of a Canadians, Lipnowski said this hasn’t had a negative impact on the retail landscape because it has not resulted in the loss of Canadian jobs, as in the case of other company takeovers.

“The transfer of ownership from one American owner to another is not a hollowing out of the Canadian economy. [ . . . ] In fact, new jobs are created when they build,” said Lipnowski.

“The history of the Bay has a very noble tradition, but business is business.”
Kyle Bosc, a third-year science student at the U of M and a former Zellers employee said Target’s Zellers buy has been a long time coming.

“They were always talking about it when I worked there and that was three years ago,” he said. “It looked like it was going under until lately.”

Bosc said he hopes Target’s presence and the introduction of new products will help to drag prices down, by acting as a competitor next to other retail giants such as Wal-Mart.

Megan Scott and Joelle Boileau, pharmacy students from the Bannatyne campus, are looking forward to Target’s arrival.

“I’m pumped!” said Scott. “I love Target.”

Boileau agreed, saying that she felt Target “will be way better than Zellers. [ . . . ] It’s just better quality.”