Wal-Mart Stores Inc. plans to close 30 locations in Japan as it rejiggers the operation.
This story first appeared in the October 31, 2014 issue of WWD. Subscribe Today.
The news on Thursday that Wal-Mart’s Seiyu GK will shutter 7 percent of its “nonperforming stores that are not aligned with the company’s strategy” came as Seiyu revealed plans to invest in several areas of strategic focus over the next few years to improve customer experience in stores and provide greater access to online shopping. “Through these investments, Seiyu will further enhance its capability to provide customers with a better shopping experience focused on freshness and convenience,” the Tokyo-based retailer said. “At the same time, Seiyu will steadily drive Every Day Low Cost and improve productivity across the company, with the objective of significantly strengthening its Every Day Low Price strategy.”
The world’s largest retailer entered Japan in 2002, buying a 61 percent stake in Seiyu. Wal-Mart took complete control of the company in 2008. However, Japanese shoppers, who have a voracious appetite for luxury brands, were slow to embrace EDLP, which they equated with cheap, inferior products. According to Wal-Mart’s Web site, the company operates 434 stores in Japan.
Wal-Mart’s international business saw revenues advance only 1.3 percent, to $137 billion, in the most recent year, after years of posting double-digit sales gains. The international division accounted for 29 percent of sales.
Seiyu said its growth accelerated during the first half of this fiscal year, when it significantly outperformed the overall market. The showing was driven by price leadership and ongoing initiatives, such as enhanced fresh and deli offerings and the growth of its private brands and Seiyu.com services.
Seiyu’s strategic investments include accelerating the remodeling of existing stores, with a focus on enhancing the fresh and deli categories. The company said that in 2015, about 50 stores will be remodeled, which should increase the productivity and efficiency of store operations.
In the greater Tokyo area, where demand for online grocery delivery is growing, Seiyu said it will increase its fulfillment and service capacities in the next three years, with the goal of expanding the service to the entire metropolitan area. An estimated charge of 4 cents to 5 cents will be taken by Wal-Mart in the next few quarters to pay for the costs associated with the store closures.
Wal-Mart reported a 3.4 percent decline, to $3.92 billion from $4.06 billion in the same period a year earlier, in second-quarter profits attributable to shareholders. Earnings per share were $1.21 for the quarter ended July 31, a 1.6 percent decline from last year’s $1.23. Analysts predicted EPS of $1.21. The retailer lowered its EPS guidance for the full year to between $4.90 and $5.15, from $5.10 to $5.45, assuming third-quarter EPS of $1.10 to $1.20.
Wal-Mart will report third-quarter earnings on Nov. 13. Wall Street analysts estimated third-quarter EPS of $1.12 per share — at the low end of the company’s guidance — and nearly flat compared to last year’s third quarter.