Target Sells Rights to 39 Canada Sites to Wal-Mart

Target, which in January acquired leasehold interests for 220 Canadian sites in preparation for its expansion north of U.S. borders, has transferred the rights to 39 of those sites to Wal-Mart for an undisclosed sum.

Minneapolis-based Target Corporation said Friday that it will “transfer” the leasehold rights for up to 39 Canada store sites to its major competitor, Wal-Mart Stores, Inc.

Target and Wal-Mart separately announced the deal on Friday. Neither retailer disclosed terms of the transaction, and both said that the specific locations will be identified sometime this fall.

In January, Target announced plans to pay about $1.8 billion to take over the leases of up to 220 retail sites currently operated by Zellers, Inc. The 39 sites that will be taken over by Wal-Mart are among those 220.

When asked why Target chose to transfer the leases at a time when it has aggressive expansion plans for Canada, spokeswoman Donna Egan told Twin Cities Business that the move is in line with its previously announced plans, which involve opening 100 to 150 stores beginning in 2013 from the portfolio of Zellers locations.

“Target is making these decisions on a site-by-site basis, based on the size of the existing location and whether we have an opportunity to expand in a way that meets both our strategic and financial criteria,” Egan wrote in an e-mail.

The company has plans to eventually open about 200 stores in the country, though, and it “will continue to assess real estate opportunities” for additional sites, Egan wrote.

Target said in April that it hopes its expansion will help it reach sales of roughly $100 billion-and earnings of about $8 per share-by 2017.

Egan declined to comment on the fact that Target transferred the leasehold interests to Wal-Mart, one of the company's largest competitors.

For Wal-Mart, the deal likely means more stores in a country where it already operates 325 stores and serves more than 1 million customers each day. According to a report by the Canadian Press, Wal-Mart is the largest retailer in Canada based on revenue. The company said in a news release that it is also Canada's third-largest employer, with 85,000 workers.

As Target moves forward with its expansion plans, the company has been in a legal battle with Fairweather, Ltd., a Canadian company that owns 15 Target Apparel stores north of U.S. borders. Target last week was dealt a blow in its trademark fight when a federal court judge dismissed an injunction request by Target.

Target-which operates a retail segment and a credit-card segment-now serves customers at 1,755 stores in 49 states nationwide and on its Web site. It is Minnesota's second-largest public company based on its revenue, which totaled $67.4 billion in its most recently completed fiscal year.