Wal-Mart moves to reduce costs at Seiyu

Mike Duke, the recently appointed head of Wal-Mart’s international division, said the US retailer would step up the integration of Seiyu into its global operations in an effort to bring down costs at the struggling Japan retailer.

Speaking in Tokyo, Mr Duke said Wal-Mart expected to use its global procurement operations to source a greater proportion of items supplied to the Japanese market, as the US group took full control of Seiyu as part of a $1bn rescue plan.

“There may be even greater opportunities where Wal-Mart has purchasing abilities and very good relationships with multinational suppliers,” said Mr Duke.

Seiyu’s imports from Wal-Mart’s global procurement centre comprise only 3 per cent, or Y15bn ($130m), of total sales, compared with 10 per cent for Wal-Mart as a whole.

This year Seiyu stores have been integrated into Wal-Mart’s global data network – another measure that is likely to reduce costs.

Shareholders of Seiyu last week approved a plan to become a fully-fledged part of Wal-Mart, and endorsed the appointment of Ed Kolodzieski as chief executive. He was formerly chief operating officer of the Wal-Mart’s international division.

Wal-Mart is to inject Y67.5bn into Seiyu to increase its stake from 42 per cent to 54 per cent, while Mizuho Corporate Bank will also inject Y47.5bn.

Mr Kolodzieski stressed the potential benefits for Seiyu offered by Wal-Mart’s global scale. “We are not dwarfed in Japan . . . in terms of scale outside the country, I think we clearly have an advantage – we can turn to our large organisation, regionally or globally, and we have scale to tap into.”

Since Wal-Mart’s initial investment four years ago, Seiyu has struggled amid competition and depressed consumer spending.

“Japanese general merchandise stores are being beaten by category killers like discount stores, home stores and drugstores,” said Noriyuki Watanabe, the chairman of Seiyu. “We would like to strengthen our general merchandise assortment with help from Wal-Mart.”

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