BUSINESS

Reitmans not worried by arrival of Target, saying U.S. rival will drive traffic

09/20/2012 12:04 EDT | Updated 11/20/2012 05:12 EST
MONTREAL - Women's clothing retailer Reitmans says it's not worried about retailing giant Target's arrival into Canada next year.

Chief executive Jeremy Reitman said the Canadian company has withstood increased competition from U.S. companies before, pointing to Walmart and The Gap.

Reitman said industry observers have previously predicted increased competition would cause the quick demise of Canada's largest publicly traded apparel company, which has been in business for nearly a century.

"Overall we have been successful with our competition. It obviously divides up the retail pie... but we've been able to hold our own," he told a CIBC investor conference on Thursday.

In fact, he said the arrival to Canada several years ago of the world's largest retailer helped to drive traffic to malls and big box outlets where its retail network operates.

"We thank God for Walmart," he said, noting that Reitmans has stores in most of the same malls and strip malls.

Target is preparing to move into Canada next year, its first expansion outside the U.S. It will soon begin opening the first of between 125 and 135 stores at store locations once owned by Canadian retailer Zellers.

Reitman believes Target, which sells clothes and trendy decor under the same roof as toothpaste and cereal, will generate traffic that will filter into its stores.

"They could certainly dominate the market and cause some competitive issues, but in fact they'll be replacing Zellers which has not been much of a traffic generator," he said.

Partially offsetting those increases is the rising amount of cross-border shopping spurred by the high Canadian dollar and higher federal exemptions. He said the number of people travelling to the United States is reducing overall traffic in Canadian malls.

Like many apparel companies, Reitmans has faced the challenges of a tough economic environment and higher fuel and food prices that reduce discretionary spending on non-essential items.

Its revenues and profits fell in the second quarter. It says the third quarter will be affected by problems with a new warehouse management system at its distribution centre that caused two weeks of delays in product shipments to stores.

"In any new system there are bugs and we're still working them out," Reitman said.

"Whereas it took us two weeks to process merchandise through the system, we can now do it in 24 hours and instead of 200 people in the shop you can do it with 100, so we are seeing the benefits immediately."

In addition to adding and refurbishing stores, Reitmans has launched an e-commerce business that allows customers to shop online and have products delivered to their homes or the nearest retail store.

Reitmans has 925 stores in Canada, under the Reitmans, Smart Set, RW & CO., Thyme Maternity, Penningtons and Addition Elle banners.

It also provides Thyme Maternity apparel and accessories for sale in 160 Babies R Us stores in the United States and 18 locations in Canada.

On the Toronto Stock Exchange, its shares closed down two cents to $13 in Thursday trading.