Daiei touts new plan to open two outlets

Ailing retailer Daiei Inc. on Wednesday announced a plan to open its first new outlets in more than two years and strengthen ties with an affiliate chain.

The scheme, for the fiscal year to February, came just over a year after the firm unveiled its three-year revival plan and is viewed by many industry watchers as further indication of the chain’s deepening troubles.

“In the past year, we have been able to make progress with reorganization in finance and group operations,” Daiei President Kunio Takagi said at a news conference in Tokyo. “But unfortunately, we fell short of (supermarket) sales targets.”

In the plan, the chain of 270 outlets said it will open two new supermarkets, one in Kitakyushu in April and the other in Kobe in November. The chain last opened a new store in November 2000.

The retailer also announced that Heihachiro Yoshino, president of Daiei’s affiliate supermarket chain Maruetsu Inc., has been named to head Daiei’s marketing operations. He will become an adviser to Daiei on Tuesday and is expected to be appointed vice chairman at the shareholders’ meeting in May.

Yoshino, a former Daiei official, is credited with Maruetsu’s turnaround. He is expected to allow store managers more control in buying merchandise so as to reflect local demand.

Purchasing is now centralized at Daiei’s headquarters.

Daiei said it will also carry out some of Maruetsu’s successful strategies, such as keeping more stores open late into the night.

Under the new plan, the firm will also change how it handles rebates from suppliers to curtail a widely criticized practice in which the chain’s buyers dress up their sections’ earnings by accounting for rebates right before semiannual book closings.

Accepting rebates is a common business practice. But the firm said it is reacting to criticism that if done in large volume and at arbitrary times rebates could disguise a retailer’s true performance.

Industry watchers responded coolly to the new plan.

“How much time has passed since the firm announced the revival plan?” asked Takayuki Suzuki, an independent retail analyst. “It just keeps issuing new plans. It only shows Daiei has not been able to carry out drastic reforms such as cutting off every loss-making operation.”

The chain’s struggle was highlighted in its efforts to revamp its free-falling electric appliance sales. In late October, Daiei announced an operational tieup with Yamada Denki Co., the country’s largest discount electronics retailer. But the tieup never materialized as the two companies squabbled over rent terms.

What’s more, the chain is expected to have missed the parent-only pretax earnings target of 20 billion yen for fiscal 2002 spelled out in the three-year plan announced in February 2002. The earnings report for the year, which ended last month, is scheduled to come out in late April.

Same-store sales, an important measure of retailers’ health, dropped 1.7 percent year-on-year during the fiscal first half through August. Same-store sales continued to log negative year-on-year growth during the second half, with December sales plunging 3.2 percent.

Meanwhile, the once-thriving retail conglomerate has been lopping off its noncore operations, including the sale of four hotels to Goldman Sachs Group Inc. of the U.S. for 45.4 billion yen.

President Takagi said the firm is on track to meet its goal of reducing its interest-bearing debt, excluding that held by its consumer credit card unit, from 1.24 trillion yen as of the end of the first half to 1.21 trillion yen by the fiscal yearend.

Some shoppers have noticed Daiei’s troubles.

Sanae Ono, a 65-year-old homemaker in Tokyo’s Edogawa Ward, has been shopping at her neighborhood Daiei store for two decades.

“Recently, I often find some bulbs of the store’s red and green neon sign do not light up in the evening and are not fixed for a while,” she said, after buying her daily groceries Wednesday morning.

Although she has some gripes about Daiei’s merchandise, she said she keeps coming because of it’s proximity and because the spacious store is free of the bustle common at smaller stores.

“The neon sign should be the indication that ‘we’re doing all right.’ ” she said. “I am worried, because it would be so inconvenient if we lose this store.”