By Judy McKinnon and David George-Cosh 

TORONTO-- Wal-Mart Stores Inc. will invest nearly 500 million Canadian dollars ($451 million) in its Canadian operations over the next year, a move that signals a continued push by U.S. retailing giants into Canada's key grocery category.

The investment will see the retailer's Canadian unit spend more than C$376 million to add 35 supercenter stores, which carry everything from groceries to apparel and home décor, and house specialty services like pharmacies and garden centers.

Wal-Mart's investment plans come at a time when intense competition in the Canadian grocery space is forcing many big domestic players to bulk up to go head-to-head with discounters. Toronto-based Loblaw Cos. announced plans last year to acquire drugstore chain Shoppers Drug Mart Corp. in a deal worth more than C$12 billion, while Empire Co.'s Sobeys unit agreed to buy Safeway Inc.'s Canadian operations for around $5.7 billion.

Walmart Canada said Tuesday that its investment will include C$91 million on distribution network projects to boost its fresh-food offerings and C$31 million for e-commerce projects.

The move will bring its total store count to 395 by the end of January 2015, including 282 supercenters.

Keith Howlett, an analyst with Desjardins Securities, said Wal-Mart has added between 30 to 40 stores in Canada every year, and he expects it to maintain that pace over the next several years. Much of the company's latest investment will be focused in Quebec and Atlantic Canada, Mr. Howlett said.

Just last week, U.S.-based rival Target Corp. said it would continue its expansion in Canada, adding another nine stores to the 124 it opened across the country over the past year.

Along with Costco Wholesale Corp.'s addition of three stores in Canada this year, "the planned expansions in 2014 of the three national U.S. grocers that are present in Canada are about as expected," Mr. Howlett said.

Nonetheless, U.S. retailers' growing presence in Canada has created an increasingly competitive retail arena that has left some big retailers struggling.

Target's expansion into Canada, its first major international foray, has been costly. The company acquired sites for its Canadian stores in 2011 and spent more than $4 billion to roll them out beginning in March 2013. But traffic has been weak, and Target lost more money there than it expected to in the first year. At times it has had to cut prices by up to 90% to clear products. In early January, the company said efforts to clear Canadian inventory hurt its profit in the last quarter of the fiscal year.

Last week, Sears Canada Inc. announced it would cut another 624 jobs, eliminating a "midtier level" of employees in its full-line stores. That followed previously announced job cuts totaling about 2,400.

Meanwhile, Best Buy Co.'s Canadian unit said last week it would lay off 950 full-time employees, or just over 5% of its workforce.

Write to Judy McKinnon at judy.mckinnon@wsj.com

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