Wal-Mart Stores Inc. is continuing its march across North America by entering Canada with the purchase of 120 Woolco discount stores from Woolworth Corp.
The No. 1 retailer, based in Bentonville, Ark., is already in a partnership with Mexico's largest retailer, Cifra. The purchase of the Woolco stores "allows them to get a very strong beachhead in Canada," Woody Whyte, a retail industry analyst with Stephens Inc., said Friday after the deal was announced.
Details of the transaction were not released, but Woolworth said it will receive about $300 million in cash from the deal. The company also said it would take a $45-million charge to cover foreign currency losses, but it had not determined during which quarter the charge would be taken.
The acquisition, subject to Canadian regulatory approval, is expected to be finalized in March, Wal-Mart said.
Wal-Mart spokesman Don Shinkle said the recent passage of the North American Free Trade Agreement would facilitate its move into Canada.
"NAFTA is in the process of making the North American continent one market," Shinkle said.
Woolworth Vice President Frances Trachter said the sale is part of the company's strategy of focusing on small specialty stores, rather than large discount stores. Woolworth announced last year it was closing or revamping 970 stores, including many discount stores.
"Our long-term vision is really to focus on specialty retailing, and this transaction is consistent with that," Trachter said.
The Canadian stores being sold generated about $1.3 billion in sales in 1993 and "will give Wal-Mart an immediate and formidable presence in Canada," said Jeffrey M. Feiner, a stock analyst with Salomon Bros. Inc. in New York. "With the recent passage of NAFTA, Canada represents a very lucrative market for the discount store industry, of which only Zellers, and, to a lesser extent, Kmart represent the most formidable competition."
If the deal wins approval, Wal-Mart will sublease the Woolco stores from Woolworth Canada Inc. and buy most of the assets and inventory of the stores it is buying. Wal-Mart said it plans to hire most of the 16,000 Woolco employees in the stores it acquires and will hire additional new employees as its operation expands in Canada.
Wal-Mart has more than 2,000 stores and 360 Sam's Club membership warehouse stores in 49 U.S. states, Puerto Rico and Mexico.
Wal-Mart's stock closed up 12.5 cents at $25.625 on the New York Stock Exchange. Woolworth was up 50 cents at $25.625.