Target’s Canadian Customers Can Stay Wired with Starbucks in Most Stores

Target (NYSE:TGT) is leaving no stone unturned to make its first international expansion plan a success. Last year, it doubled the allocated budget to $2.3 billion to convert Zellers stores and integrate them into its retail network. It also recently announced that the majority of its Canadian stores will have a Starbucks (NASDAQ:SBUX) licensed outlet as the popular chain has provided a good complement to its stores in the U.S. Target mainly competes with Wal-Mart (NYSE:WMT) as well as with Best Buy (NYSE:BBY), Macy’s (NYSE:M), Sears (NASDAQ:SHLD), and Costco (NASDAQ:COST).

It has become the norm for big retailers to have a coffee outlet or a fast-food restaurant within their stores. For instance, Starbucks has partnerships with various retailers in Canada, including Indigo Books & Music, Safeway and Longos grocery stores. In the U.S., Target has had a partnership with Starbucks for the past 12 years.

In 1999, Target opened its first Starbucks licensed outlet in the U.S. and, presently, there are approximately 1,100 Target stores with Starbucks licensed outlets within the U.S. This is Target’s first entry outside its home market, and it is taking all steps to make sure it succeeds in providing enjoyable shopping experience to its prospective Canadian customers. It plans to open its first Canadian outlet in March 2013. Target has also signed a supply agreement with Sobeys, the second largest food retailer in Canada, to supply food items to its stores.

According to our estimates, the international operations presently contribute approximately 7% to Target’s valuation and has the potential to grow further. According to reports, Target is also looking to enter other geographical regions including Mexico and Puerto Rico.

See our complete analysis for Target here

Understand How a Company’s Products Impact its Stock Price at Trefis