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NEW YORK - Minneapolis-based Target Corp. is setting its sights on an overseas acquisition, possibly in the United Kingdom, according to several reports in the British press. The chain is rumored to be considering supermarket chain J Sainsbury, among others, as a target, although retail analysts told Progressive Grocer they question the likelihood that the mass merchant would make such a move in the ultracompetitive U.K. retail market.
Target has reportedly sent two delegations of executives to the United Kingdom over the past nine months to explore possible acquisitions. Meanwhile the retailer is cash-rich following a one-off gain from the sale of its Marshall Field's department store chain. Target told analysts last week that international expansion was a key focus.
J Sainsbury, Matalan, and Woolworth have all been identified as potential acquisitions. Sources have singled out Sainsbury because of its large network of stores. However, some analysts are skeptical of a Sainsbury acquisition, considering the British chain's present position in the U.K. market. Sainsbury, which is controlled by the founding Sainsbury family, was once the United Kingdom's largest grocer but has seen its market share hit hard by the growth of Tesco and Wal-Mart-owned Asda.
"It's an acquisition for Target to consider, but I don't see them taking the plunge," Frank Badillo, a senior analyst and global program manager at Retail Forward, told Progressive Grocer. "A Sainsbury acquisition would throw Target into the thick of the grocery wars in the U.K. -- something Target hasn't even done in the U.S. Not only would Target have to contend with Wal-Mart's Asda, it would also take on Tesco. These are two of the best global retailers."
"Entering the U.K. market is definitely something for Target to consider because it will eventually need to become a global retailer to keep growing," Badillo added. A retailer like Waitrose, which targets a more upscale segment of the consumer market, might be a better fit for Target, since Target has built itself upon a more upmarket image in the United States than those of its primary competitors, Wal-Mart and Kmart.
-- Jenny McTaggart