Log In | Register
NEW YORK — Target is expanding north, agreeing to acquire most leases of Canadian retailer Zellers for $1.85 billion and planning to open its first Canadian stores in 2013.
It's the first move outside U.S. soil for the No. 2 U.S. discount chain.
Target Corp. said Tuesday it will pay $1.83 billion Canadian ($1.85 billion U.S.) for the 220 Zellers leases from Hudson's Bay Co. Target aims to convert 100 to 150 of those into Target stores throughout Canada in 2013 and 2014.
The remaining stores will go to other as-yet-undetermined retailers or landlords, Target spokeswoman Lena Michaud said.
"We see expansion into international markets as critical to Target's long-term growth and view Canada . as a good starting point," said S&P analyst Jason Asaeda.
Until the new Target stores begin to open, Hudson's Bay will sublease the stores back from Target and keep operating them as Zellers.
Target also says it will try to sell its $6.7 billion credit card receivables portfolio, a move some activist investors have pushed for a long time, to help finance the deal.
Target is one of the few retailers to retain its own credit card business, which can be profitable for merchants but also increases their risk of being liable for customers' bad debt.
Target took significant write-downs on credit cards in the fourth quarter of 2008, and sold 47 percent of the unit to JPMorgan Chase that year.
The business has since improved. During the quarter ended Oct. 30, its profit increased to $130 million from $60 million a year ago because of less bad debt.
Target also launched a reward program in the fall that gives Target debit and credit card holders a 5 percent discount on purchases.
Target will pay the fee in two parts of $912.5 million Canadian ($923.5 million U.S.) in May and September.
Target's Chief Marketing Officer Michael Francis will oversee the expansion.
The discount chain has been opening new stores, remodeling others and expanding food offerings at its stores as it competes against rivals like Wal-Mart Stores Inc. and dollar stores.
Target, based in Minneapolis, currently operates 1,752 stores, all in the U.S.
The Hudson's Bay Co. also operates department store Bay, home products seller Home Outfitters and discount chain Fields in Canada.
There are a total of 279 Zellers locations. Those Target didn't buy could be kept by Hudson's Bay or sold to other retailers.
Target shares rose 28 cents to $55.73.
