Daiei Inc. said Saturday it will scrap a sales tieup with Yamada Denki Co., a move that will force the troubled retail giant to review its strategy for increasing slumping sales of household appliances.

The two signed the deal in October last year. It was canceled after Yamada Denki, a major home electronics discounter, closed a sales outlet in Daiei's Yokosuka store in Kanagawa Prefecture on Friday night. Daiei described the move as "a failure to implement the contract."

The cancellation nullifies a plan for Yamada to become a tenant at five more Daiei stores by spring.