BENTONVILLE, Ark. -- Will Sam's Clubs and Wal-Mart Supercenters soon be dotting the Canadian landscape?
That's the prediction of a number of observers in the wake of Wal-Mart's acquisition of 120 Woolco discount stores in Canada in late January.
Wal-Mart's core discount format will account for the bulk of its Canadian expansion, but some of the locations purchased from Woolworth Canada will likely be adapted to its larger formats, observers said.
"Although it's early, the thought is that some of the larger locations will become Supercenters and Sam's Clubs," said Don Spindel, a securities analyst at A.G. Edwards, St. Louis.
"Price/Costco has done very well up there," added Michael Exstein, analyst at Kidder, Peabody & Co., New York. "And knowing Wal-Mart's predisposition not to cut the competition any breaks, I think it's highly probable they'll take Sam's with them." Wal-Mart apparently wasted no time investigating the translation of Woolco locations into larger formats. Even before the deal was completed, Wal-Mart began approaching Canadian municipalities with questions concerning zoning and expansion, local sources said.
"They have been asking local officials such questions as, 'Can we take this Woolco and expand it?' " said a Canadian observer who asked not to be identified.
In addition to the 120 Woolco locations, Wal-Mart is also reportedly pursuing additional locations throughout Canada, including some that would support warehouse clubs or Supercenters, the observer said.
Despite these reports, Wal-Mart said it does not yet plan to introduce either of the larger formats into Canada.
"Right now we are going through the approval process," said Wal-Mart spokesman Trey Baker, "and our focus is converting the 120 locations into Wal-Mart stores."
Price/Costco operates 37 units in Canada. In the short term, at least, any introduction of Sam's Clubs is expected to have minimal effect on Price/Costco, Spindel said.
"In keeping with Wal-Mart's pattern, they would go to markets where they weren't head-to-head with a competitor like Price/Costco -- at least not initially," he said.
Still, the rumored approach of Sam's and Supercenter units promises to influence Price/Costco's Canadian expansion plans, suggested Barry Rothberg, an analyst at Furman Selz, New York.
"Price/Costco is planning on opening another 10 units in Canada next year, so they have to be operating on the assumption that Sam's in Canada is a possibility," Rothberg said.