Ottawa, May 8 - Wal-Mart is embarking on a major expansion of its food-selling supercenter stores in Canada, posing a bigger competitive threat to Canadian supermarkets, which are already cutting prices to keep up.
Wal-Mart, the world's biggest retailer, said Thursday it will open or expand 25 to 27 stores in Canada by early 2009 and create 6,000 new in-store jobs. It said its focus will be on opening more supercenters, which sell general merchandise alongside fresh produce, meats and baked goods.
Canadian grocers, including Loblaw Cos Ltd , Metro Inc and Empire's Sobeys chain, have been chopping prices to try to keep customers in an increasingly competitive environment, a strategy that has shrunk their profit margins.
"The short-term (impact) is more downward pressure on prices, just by virtue of the supply-demand relationship," said Bank of Montreal analyst David Hartley in an interview.
"Secondly, we believe that Wal-Mart will keep a lid on pricing and may not raise prices as fast as their wholesale costs, as I suspect that this is part of a longer-term investment, of which they're willing to, up front, foot some of the bill."
More than half of the 25 to 27 projects will be new supercenters, and one-third will be expansion of existing discount stores. It will close two discount stores, which will then be relocated and reopened as supercenters.
The first project, the first Wal-Mart supercenter in British Columbia, opened last month in Duncan, B.C.
Since opening its first three Canadian supercenters in October 2006, the company now has 32 such stores in Ontario, Alberta and British Columbia.
"Wal-Mart remains a long-term threat to market share for incumbent Canadian grocers as it continues to roll out its fuller offering on the grocery side through supercenters," Hartley said.
It will take about a decade for any market share shift to be felt, the analyst said, noting that Loblaw currently has about 1,000 grocery stores compared to Wal-Mart's 32 supercenters.
Wal-Mart Canada said its work force is expected to swell to more than 80,000, one of the biggest in the country.
"Our 300th store and the pace of supercenter expansion will make 2008 a major milestone in Wal-Mart Canada's lifespan," said Wal-Mart Canada Chief Executive David Cheesewright in a statement.
Since 1994, when it took control of the struggling Woolco chain's 122 stores, Wal-Mart Canada has built 255 stores and expanded 28 others.