UPDATE 2-Wal-Mart launches Canada supercenter "onslaught"

Wed Mar 30, 2011 4:30pm EDT

* Three Quebec locations to be converted into supercenters

* Will have 164 supercenters in Canada by January 2012

* Wal-Mart moves before Target enters market (Updates with details, comments, background)

By Solarina Ho

TORONTO, March 30 (Reuters) - Wal-Mart Canada (WMT.N), said on Wednesday it plans open three more supercenters in the province of Quebec this year, the latest move by the behemoth to get ahead of U.S. rival Target before Target opens its doors in Canada.

Wal-Mart, which currently operates 325 stores in Canada, stepped up its supercenter plans following the long-awaited announcement that U.S. discount chain Target Corp (TGT.N) would finally debut north of the border. By January 2012, Wal-Mart is expected to have 333 stores, including 164 supercenters, in Canada. [ID:nN26243759]

Target announced in January that it plans to open up to 150 stores in Canada by 2014 by taking over leases of Canada's Zellers stores.

"It's going to be a while before (Target) gets their stores up and running. My sense of Wal-Mart in Canada this year is a full-fledged supercenter onslaught," said Brian Sozzi, an analyst at Wall Street Strategies, noting that Wal-Mart wants to boost its food sales, particularly as traffic at its Canadian stores is falling.

Wal-Mart Canada, a unit of the world's biggest retailer Wal-Mart Stores, has been ramping up expansion plans in Canada, where retail sales have been stronger than in the United States and where competition has been heating up as more U.S. retailers enter the market.

"Canada is much healthier in terms of retail even though it's not a barn-burner by any means," said Ed Strapagiel, executive vice president at KubasPrimedia, a consulting firm.

"There's a whole list of U.S. retailers on their way to Canada or seriously considering it. Yes, that's going to put some pressure on the incumbents, whether they are Canadian-owned or U.S.-owned."

Wal-Mart said it was converting its Vaudreuil, Saint-Eustache and Saint-Jerome locations into supercenters this year, adding to three other Quebec locations already set to open this summer. The company announced the province's first supercenter in January, when it unveiled plans to open 40 more of the large-format stores in Canada. [ID:nSGE70P04W]

It already has 128 supercenters -- which are Wal-Mart stores with the addition of full-service supermarkets -- in Ontario, Alberta, British Columbia and Saskatchewan.

"Canada is a hidden gem inside Wal-Mart. I think it's a big opportunity for them and they have to get the supercenter roll-out correct," Sozzi said.

ROCKY HISTORY

The company's expansion in Quebec, Canada's second most populous province, has had a rocky history. The company closed a store in Jonquiere, Quebec, several years ago after a union was certified to negotiate a collective agreement.

Wal-Mart, which employs 85,000 workers in Canada and two million worldwide, is no stranger to labor problems. It is currently embroiled in the largest class-action sex-discrimination lawsuit in history. [ID:nN29275341]

Analysts don't foresee any more major labor problems ahead in Canada, although minor snags may arise.

"I think any time when you a company expanding as aggressively as they have -- and Wal-Mart being quite large -- you can't rule something like that out," Sozzi said.

($1=$0.97 Canadian) (Reporting by Solarina Ho; editing by Peter Galloway)

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