Daiei Inc. President Kunio Takagi announced Friday he will step down next week to take responsibility for the ailing retailer’s decision to ask a state-backed bailout agency to help in its rehabilitation.
“I apologize for causing great confusion” for many involved with the firm, he told a news conference in Tokyo, during which the firm’s first-half earnings results were announced.
Takagi, who will resign Friday, said his successor will be picked from existing board members.
It was the first official media event since the company caved in to creditors’ demands that it turn to the Industrial Revitalization Corp. of Japan for help.
The fate of the debt-ridden company, which once ruled Japan’s retail landscape, has been the focus of intense speculation for months, with banks looking to accelerate the process of cleaning up their bad loans.
Takagi said he will remain on the board for a while to monitor the process of drawing up the company’s new midterm business plan, which is likely to include drastic — even Draconian — restructuring measures.
He said his successor has not been chosen yet, though two board members — one from main creditor UFJ Bank — are seen as likely candidates.
In 2001, Takagi was summoned back to Daiei from Recruit Co. to assume the top position. He was tasked with steering the supermarket chain toward a turnaround.
For the six months ending Aug. 31, Daiei’s net profit plunged 49 percent to 1.18 billion yen on revenue of 935.03 billion yen, down 6 percent.
The sharp drop in net profit was mostly attributed to the absence of pension-related gains booked a year earlier.
The firm’s parent-only operating profit, which is viewed as reflecting the health of its core retail business, rose 43 percent to 5.16 billion yen, thanks primarily to cost-cutting efforts.
But sales dropped 6 percent to 639.25 billion yen. Same-store sales, or turnover from stores open at least 13 months, fell 5 percent, dragged down by the weak performance of apparel and household items.
During the news conference, Takagi voiced frustration at being forced to seek the IRCJ’s help. The retailer had adamantly insisted it could turn itself around with private sponsors of its own choice.
“We have been working on revitalization for three years,” he said. “I know there are criticisms, but I believe we have made some progress.”
The company’s interest-bearing debts, excluding those held by its credit card unit, stood at 2.4 trillion yen in fiscal 1999, a year before the company shook up its management.
With financial assistance from creditors totaling 520 billion yen and asset sales, including the convenience store chain Lawson Inc., the company has more than halved its debts, which came to 1.04 trillion yen as of the end of August. Yet the banks, especially UFJ, were under pressure to slash their bad loans to meet targets set by the banking regulator. They urged Daiei, seen as a symbol of problem borrowers, to put its financial house in order.
During the news conference, Takagi also repeated the firm’s desire to keep the Fukuoka Daiei Hawks pro baseball team, saying it has a positive influence on the company’s retail business.
The retailer acquired the team in 1988, and the Hawks’ Japan League Championship last year boosted store sales.
The team lost to the Seibu Lions in this year’s Pacific League second-stage playoff.
Given the enthusiasm of local fans, Daiei fears that selling off the team will alienate its customers.
But there have also been accusations that a company on public assistance should not be allowed the luxury of pro baseball ownership.
Sound plan sought
Economic ministers urged Daiei Inc. on Friday to draw up a sound revival plan with the state-backed Industrial Revitalization Corp. of Japan and the ailing retailer’s three main creditor banks.
Financial Services Minister Tatsuya Ito called on Daiei — seen as a symbol of Japan’s bad-loan problem — to create and steadily implement a “transparent reconstruction plan that can win appreciation from markets.”
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