Though the subsidiary lost $465-million in the first half of the year, the company's chief executive insists it's progressing and on its way to profits.
By ASSOCIATED PRESS
Published August 23, 2006
TOKYO - Wal-Mart's Japanese subsidiary said Tuesday its first-half losses grew fivefold, but the unit's chief executive reaffirmed his commitment to Japan even as the U.S. retailer abandons the German and South Korean markets.
Seiyu reported a $465-million loss for the first six months of the year. First-half sales fell 2.9 percent to $4-billion.
But Seiyu chief executive Ed Kolodzieski, who took office in December, said there were clear signs of progress in Japan in the first half of the year, with comparative store sales rising 1.4 percent, the first year-on-year gain in 14 years.
Comparative store numbers measure sales after deleting effects from store openings and closures.
Although sales and profit results for the first half didn't meet company expectations, Seiyu has reduced costs and has been busy opening new stores while closing underperforming stores, Kolodzieski told reporters at a Tokyo hall.
"I am very proud of the accomplishments of our team," he said, adding that the company remains on track in its strategy to improve profitability, remodel stores, beef up its supply chain and other efforts.
While operating profitability was gradually improving, the bigger net loss was due to a one-time write-off for assets.
Japan, where consumers are notoriously finicky, has been a challenging market for many foreign retailers. Carrefour SA of France, the world's No. 2 retailer, abandoned the Japanese market last year after it failed to woo buyers.
During the first half, food sales were up 1.7 percent, apparel up 0.8 percent and general merchandise up 3.9 percent on a comparative store basis, he said.
Seiyu kept unchanged its full-year forecast for a group net loss of $471-million on $8.3-billion in sales but said it expects to swing into black ink next year.
Wal-Mart Stores Inc. of Bentonville, Ark., the world's biggest retailer, arrived in Japan in 2002 and increased its stake in Seiyu in December to 53 percent from 42 percent.
It has stuck with the Seiyu brand, familiar to Japanese, instead of using the Wal-Mart name.
Unlike its operations in South Korea and Germany, Wal-Mart has made significant investments in Japan, the world's second-largest retail market, setting up a distribution facility, introducing its computerized systems, remodeling stores and opening large-scale supermarkets, which had been relatively rare.
Wal-Mart runs more than 6,600 stores in 16 nations, including China and Mexico.
But the company announced in May it was selling its 16 stores in South Korea to that country's top discount chain Shinsegae Co. for $882-million, pending approval by South Korean regulators.
Wal-Mart Korea, established in 1998, had been losing money.
Two months later, Wal-Mart said it was ending its loss-generating business in Germany, selling its 85 stores there to rival Metro AG, ending a nearly decade-long effort to crack the market in Europe's biggest economy. Terms were not disclosed.
Kolodzieski said the move to ditch Germany and Korea would allow Wal-Mart to focus on markets with growth potential like Japan.
"There is no doubt in my mind Japan is a key market and a great growth opportunity," he said.
Seiyu is going in the right direction, such as opening 24-hour stores to draw shoppers who may have otherwise gone to convenience stores, but it needs to move quicker to achieve solid results, Kolodzieski said.
Once a total novelty in Japan, Wal-Mart-style gigantic stores are becoming gradually more accepted in this nation, long dominated by mom-and-pop stores.
The problem for Wal-Mart is that Japanese retailers are starting to imitate Wal-Mart methods, setting up similar large stores.
Wal-Mart Stores, which posted its first quarterly profit decline in 10 years, also has been fighting problems in the U.S., including rising energy costs and criticism that its pay and benefits are too low.
Seiyu shares, which doubled earlier this year but lost the gains in recent months, closed up 1.4 percent at 224 yen ($2) in Tokyo.
