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The Honolulu Advertiser

Posted on: Friday, February 4, 2005

Daiei may sell Hawai'i stores

By Andrew Gomes
Advertiser Staff Writer

Japan's leading economic daily newspaper Nihon Keizai yesterday reported that The Daiei Inc. plans to sell its four Hawai'i stores.

But Teruyki Katsuragi, a spokesman for Daiei in Tokyo, said that "nothing has been decided yet."

Theresa Chang, a spokeswoman for Daiei's Honolulu-based subsidiary The Daiei (USA) Inc., declined to comment yesterday.

The Nihon Keizai, which did not cite sources, published a similar news report three years ago saying Daiei would sell its Hawai'i stores, a story that drew strong denials from Daiei officials in Japan.

The January 2002 report said Daiei planned to sell its stores in China and Hawai'i. Yesterday's report in the Japanese newspaper said that Daiei expects to sell its 12 stores in China to Beijing-based Wumart Stores Inc. and that Daiei is looking for a buyer for the Hawai'i stores but hasn't found a purchaser.

According to the paper, the sale efforts are part of an initiative proposed by a government bailout agency to rehabilitate financially troubled Daiei.

Japan's third-biggest retailer has been working to reduce crushing levels of debt over the past several years by cutting jobs, closing underperforming businesses and selling major assets such as a baseball stadium, hotels and other investments, mostly in Japan.

Another part of the effort to restructure Kobe-based Daiei, according to the Nihon Keizai, is to withdraw from overseas operations so the company can focus on its core business in Japan.

Some local real estate and retail analysts say that makes sense, though not much value would be gained by selling Daiei's stores in Honolulu, Pearl City, Kailua and Waipahu because they are all on leased land.

Daiei officials in Hawai'i have maintained that the local operation, which employs roughly 1,000 people, is profitable.

But some retail analysts have long believed that Daiei would divest its Hawai'i stores regardless of profitability.

More recently, analysts said competition from new Wal-Mart and Palama Super Market stores near the Kaheka Street Daiei may affect Daiei's stated resolve to keep its flagship store, which historically has accounted for more than 40 percent of the company's sales in Hawai'i.

Selling Daiei's Hawai'i stores could bring to an end more than 30 years of merchandising its unusual blend of discount goods and Japanese food to Island residents.

The company opened its first Hawai'i store in 1972 at Pearlridge Center, its first location outside Japan. It later added bigger stores in Honolulu, Kailua, Pearl City and Waipahu, and closed the Pearlridge outlet.

Earlier this week, local real estate company A&B Properties Inc., an Alexander & Baldwin Inc. subsidiary, purchased the fee-simple land leased to Daiei on Kaheka Street for the lease income and future development potential should Daiei depart. The retailer's lease ends in 2018.

Bloomberg News Service contributed to this report. Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.