Posted on: Friday, August 20, 2004
NATION BUSINESS
Wal-Mart may invest in Daiei
By Audrey McAvoy
Associated Press
TOKYO — The U.S. giant Wal-Mart Stores Inc. is considering an investment in Japan's troubled supermarket chain Daiei Inc.
Wal-Mart, the world's largest retailer, is already in the Japanese market through its investment in supermarket chain Seiyu Ltd. An investment in Daiei — which ranks third in Japan's supermarket sales behind Ito-Yokado and Aeon — would substantially expand its presence here.
Wal-Mart plans to approach the state-run Industrial Revitalization Corp. of Japan, or IRCJ, this week to explain its proposal to help Daiei, the Nihon Keizai Shimbun newspaper reported yesterday.
Daiei's shares jumped 27 percent to $2.15 after the news broke.
Kyodo News reported that John Menzer, president of Wal-Mart's international division, visited the IRCJ yesterday and expressed interest in supporting Daiei. Wal-Mart's plan calls for overhauling Daiei's store management and products, Kyodo said.
"We do acknowledge we are assessing potential investment possibilities in Daiei," Wal-Mart spokeswoman Amy Wyatt told The Wall Street Journal.
Daiei has come to symbolize heavily indebted Japanese companies that overexpanded before the country's "bubble economy" burst in the early 1990s. Many, like Daiei, are still struggling to regain profitability.
An acquisition of Daiei by Wal-Mart could cloud the future of four Daiei stores on O'ahu, where the Japanese company has operated since 1972.
A local representative of Ho-
A Wal-Mart spokeswoman for Hawai'i also said she was unfamiliar with the plans, and referred questions to a company official in Arkansas handling international operations. That person could not be reached after business hours yesterday.
Local retail analysts have said that the Kaheka Daiei will be hit hard by competition from a nearby Wal-Mart and affiliated members-only retailer Sam's Club scheduled to open in mid-October.
Observers also say Daiei's Kailua store could present a rare opening for giant discounters like Wal-Mart to open in the coveted Windward O'ahu market where big-box retailers can't find suitable space for a store.
Still Daiei, with its heavy focus on Japanese goods and loyal customers, could coexist with Wal-Mart just blocks apart near Ala Moana and elsewhere on the Island, other observers said.
Daiei also has stores in Waipahu and Pearl City.
On Aug. 10, Daiei's three primary creditor banks in Japan began urging the company to seek help from the Japanese government-run IRCJ.
Daiei owes creditors $9.77 billion — much of it to UFJ Holdings, a major Japanese bank seeking to clean up its own balance sheet ahead of a possible merger with Mitsubishi Tokyo Financial Group.
Daiei has so far resisted creditor banks' prodding to seek IRCJ's help, saying it wants to implement its current business plan and work out a new revival strategy.
Investors would probably see IRCJ's involvement as a sign that Japan is making progress in getting rid of the nonperforming loans weighing down its banks and economy, said Yasuyuki Sasaki, a retail analyst at Credit Suisse First Boston in Tokyo.
Wal-Mart has slowly been introducing its way of doing business to Seiyu, which has adopted the U.S. company's electronic inventory and purchasing systems, and has started selling products manufactured under Wal-Mart's global brands.
Seiyu also hopes to increase its efficiency in coming years, and to be able to offer cheaper goods by taking advantage of Wal-Mart's global purchasing power.
Advertiser staff writer Andrew Gomes contributed to this report.
olulu-based The Daiei (USA) Inc. had no information about the proposed Wal-Mart investment or how it might affect local operations. The Honolulu subsidiary is profitable, free of debt and has seen a 106 percent increase in sales this year to date, said Theresa Chang, sales promotion manager for The Daiei (USA) Inc.
