Struggling Daiei, Inc. announced Friday a three-year business plan that includes the sale and liquidation of about 50 unprofitable group companies in an effort to improve its dire financial condition.
Starting with the current business year, the plan is designed to galvanize the group’s finances by whittling down interest-bearing liabilities and restructuring unprofitable businesses, while increasing unconsolidated sales, which have declined for three consecutive years.
After selling off and closing 50 unprofitable affiliates, the major supermarket chain hopes to put its other 162 affiliates in the black within the group’s current business year, which began in March.
Slackening private consumption, as well as the emergence of new types of retailers that specialize in such fields as clothing and electronic appliances, have hit supermarket chains hard.
A huge amount of interest-bearing liabilities have also put a financial strain on Kobe-based Daiei.
“We couldn’t expand our sales (during the 1999 business year) as we had expected,” said Daiei President Tadasu Toba. “The sales at our existing stores ended at 96.3 percent (of sales of the last business year.) This three-year program aims to increase sales by using all means available.”
In the business year that ended in February, Daiei’s consolidated sales declined 6.1 percent from the previous year to 2.85 trillion yen, while its operating profit dropped 10.8 percent to 34.8 billion yen.
Of its 308 stores nationwide, 75 are unprofitable, according to Daiei.
The supermarket chain intends to reduce its interest-bearing liabilities, which amounted to some 2.2 trillion yen at the end of February, to 1.7 trillion yen in the current business year. Daiei said it would achieve this through profits generated by having profitable subsidiaries go public.
Daiei plans to have major convenience store chain Lawson Inc. go public this summer and spend the funds gained through the public listing on restructuring its group business.
As a way to improve its unconsolidated sales, Daiei will reduce floor space at 104 of its stores, many of which are unprofitable, and rent the space to outside retailers.
Simultaneously, Daiei will invest 60 billion yen during the three years covered by the plan to renew all of its existing stores in an effort to attract more customers.
Daiei is also examining ways to sell goods over the Internet, officials said.
Five of Japan’s six major supermarket chain operators suffered unconsolidated sales declines in their 1999 business year due to customers shopping at new discount stores, financial results released Friday show.
In contrast, Japan’s three major convenience store operators boosted both sales and profitability in the business year ending Feb. 29, thanks to the opening of new sales outlets.
Of the six major supermarket chain operators, Ito-Yokado Co., Daiei Inc., Uny Co., Mycal Corp. and Seiyu Ltd. all reported falls in sales for the 1999 business year. Only Jusco Co. posted improved sales, due to an increase in outlets.
To stave off competition, the six major supermarkets have organized an endless series of sales campaigns that have squeezed their profit margins.
Seven-Eleven Japan Co., the largest of the three convenience store operators, is set to clinch the top slot in Japan’s retailing industry in terms of sales in the 2000 business year, a position currently held by Daiei.