Target’s Canada Woes Continue

Target had high hopes north of the border, but it has been a difficult environment. Target's most recent news related to Canada won’t help whatsoever.

Jan 28, 2014 at 5:30PM

Target's (NYSE:TGT) data breach is likely to lead to souring sentiment and increased costs (litigation, upgraded technology, fraud reimbursement, card reissuance). The last thing Target needs is to face another stiff headwind, but that's exactly what Canada has presented.  

North of the border
Target had high expectations for its Canadian expansion, but Canadians haven't been overly pleased with Target stores. The primary reason is that prices are higher than in the United States. Since the majority of the Canadian population lives within driving distance to the U.S. border, many Canadian residents travel south so they can spend less while shopping. Therefore, a good portion of Canadians are familiar with Target store prices in the United States. When those consumers see higher prices in their home country, they're not likely to visit those Target stores.

Canadians have also complained about a lack of quality merchandise. As if that's not enough of a bad start for Target's 124 stores in Canada, if you read any Canadian publication with Target as the subject and then read the comments below, you will find that many Canadians loathe American retail brands like Target and Wal-Mart Stores (NYSE:WMT). Many Canadians want to remain loyal to their own country's brands. That being the case, Target can't afford much more negative press north of the border. However, that's what Target is receiving.

An unfortunate email
Target recently sent emails to Canadians who shopped at U.S. Target stores between Nov. 27 and Dec. 15 late last year. Based on this date range, you probably know what's coming next. The email warned these Canadian consumers that their personal information might have been stolen. The catch here is that Canadians who shopped in Target Canada stores weren't affected. But that's not what's important here. What's important is that some Canadian consumers are now going to lose trust in Target just as many American consumers have.

Since Canadian consumers are already disappointed with Target and don't appreciate American brands marching on their home turf, it's going to be more of a challenge for Target to win Canadian consumers back than American consumers. This is a big negative considering Target sees Canada as a big growth opportunity. 

To give you an idea of how difficult it is for an American retailer to survive in Canada, Big Lots (NYSE:BIG) recently announced that it's giving up in Canada after entering the Canadian market in 2011. Big Lots reported the Canadian market as not being as strong as anticipated, and that further investments in Canadian operations wouldn't benefit the company or shareholders.

The Big Lots story could serve as a cautionary tale for Target. And Target must also contend with Wal-Mart, which has increased its investment in food and consumables in Canada in order to beat Target to the punch. Though Wal-Mart Canada suffered a 1.3% comps decline in the third quarter, it gained 100 basis points in food and consumables year over year. It also offers 227 Supercenters in Canada, giving it broad exposure to consumers wanting cheap food and consumables.

What does it all mean?

The bottom line
Despite all the negative news coming out of Target recently, the company is still likely to remain a long-term winner simply because it's one of the few retailers to offer everyday low prices to middle- to high-end consumers. The design of the stores attracts a different crowd than Wal-Mart, which gives Target differentiation. However, due to recent events and Target's challenges in Canada, now would not be the best time to consider an investment. Please conduct your own research prior to making any investment decisions. 

Picks with the potential to crush the market
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information