Business / Corporate

Struggling furniture retailer Otsuka Kagu forms tie-up with Yamada Denki

JIJI, Staff Report

Otsuka Kagu Ltd. said Friday the struggling furniture retailer has reached a basic agreement to form a business tie-up with major electronics retailer Yamada Denki Co.

The two companies will provide each other with know-how on selling furniture and home appliances while cooperating on human resources development, Otsuka Kagu said. They will also explore the possibility of working together on sales to corporate customers.

Otsuka Kagu will also raise some ¥3.8 billion in fresh capital by issuing new shares to third parties, including an investment fund.

The struggling furniture vender will sell 13.11 million new shares for ¥290.11 apiece, with payment set for between March 4 and June 30. On the Tokyo Stock Exchange’s Jasdaq market for startups on Thursday, the company’s shares closed at ¥460.

Otsuka Kagu will use the proceeds to promote warehouse automation and store changes designed to reinforce its e-commerce operations.

The decision to receive an injection of outside capital came because its cash flow has dropped sharply from sluggish sales. President Kumiko Otsuka has expressed her intention to remain at the company’s helm.

Otsuka Kagu said it incurred a net loss of ¥3.24 billion in the year ended in December, marking a third consecutive year of net loss, although the size of loss was down from the ¥7.26 billion logged the previous year.

Sales fell 9.0 percent to ¥37.39 billion. Although the company offered discounts of up to 80 percent between October and December, the strategy failed to boost sales.

The company did not provide its sales and profit forecasts for the year ending in December 2019, saying it is difficult to offer reasonable projections at the moment.

Behind its dismal performance was a high-profile family feud that has continued for over a decade.

Kumiko, the eldest daughter of company founder Katsuhisa Otsuka, drew attention from the business community in 2009 when she became Otsuka Kagu’s president for the first time, offering a new strategy to shore up stagnant sales. Traditionally, Otsuka Kagu had offered high-class imported furniture aimed at wealthy consumers.

With experience in banking, Kumiko brought certain success by offering more casual product lines targeting younger generations. Her strategy led the company to increase the number of customers per outlet.

But Katsuhisa Otsuka didn’t like the way his daughter changed his furniture empire. He ousted her from the top post and installed himself as both chairman and president in 2014.

As the feud escalated over the following months, Kumiko Otsuka eventually returned to the helm by winning a majority of votes at a shareholders meeting in March 2015.

But her second stint as president failed to steer the ailing firm in a new direction to fend off the growing presence of rivals both at home and abroad, including Ryohin Keikaku Co., which sells everything from furniture to kitchenware under the Muji brand, as well as Swedish furniture giant Ikea.