Walmart looks to exit Japan
In this article (5)
U.S. retailer Walmart Inc (WMT.N) has decided to sell Japanese supermarket chain Seiyu and has already approached major retailers and private equity funds.
If realized, the sale could amount to around 300 billion to 500 billion yen ($2.7 billion to $4.5 billion), the Nikkei said, without citing its sources.
Walmart said it does not comment on market speculation.
A sale would be the latest exit by Walmart from a lower-growth market as it looks to shake up its overseas business and invest in places like China and India.
The world’s biggest retailer said last month it had sold an 80 percent stake in its Brazilian operations to private equity firm Advent International, exiting an underperforming business in its third major international deal since April.
In addition to competition from online retailers such as Amazon.com (AMZN.O), Japan’s supermarkets are being squeezed by chains such as convenience stores and discount drugstores in a sluggish consumption environment.
In January Walmart said it was launching an online grocery service with Rakuten Inc (4755.T), in what Rakuten CEO Hiroshi Mikitani said he hoped may be a precursor to greater global cooperation.
Walmart has struggled to replicate the success of its low-price model with Seiyu despite the introduction of an “everyday low price” pledge and frequent discounting.
Japanese supermarkets, with lots of workers preparing fresh food and high levels of customer service, are famous for their low margins and are proving a drag for many retailers.
Recent industry consolidation saw the creation of FamilyMart Uny Holdings Co Ltd (8028.T) in 2016, a deal that focused on expanding the number of FamilyMart convenience stores. Such stores have increasingly become a priority for retailers as a growth driver.
Discounter Don Quijote Holdings Co Ltd (7532.T) has taken a 40 percent stake in Uny as it looks for room to expand. Earlier this year Seven & i Holdings Co Ltd (3382.T) announced a tie-up with regional general merchandise store chain Izumi Co Ltd (8273.T).
Japan’s supermarket industry has proved difficult for foreign retail giants, with exits by Tesco (TSCO.L) in 2011 and Carrefour (CARR.PA) in 2005.
Questions & Answers
Q.Why is Walmart reportedly selling its Japanese supermarket chain Seiyu?
Why is Walmart reportedly selling its Japanese supermarket chain Seiyu?
Walmart views Japan as a lower-growth market and is looking to shake up its overseas business. It has struggled to replicate its low-price model with Seiyu amid a sluggish consumption environment and strong competition.
Q.What challenges do supermarkets in Japan face?
What challenges do supermarkets in Japan face?
Japanese supermarkets face intense competition from online retailers, convenience stores, and discount drugstores. They also contend with low margins due to high labour costs for preparing fresh food and providing extensive customer service.
Q.Has Walmart exited other international markets recently?
Has Walmart exited other international markets recently?
Yes, Walmart sold an 80 percent stake in its Brazilian operations to private equity firm Advent International last month. This is its third major international deal since April, exiting another underperforming business.
Q.What is the estimated value of the potential sale of Seiyu?
What is the estimated value of the potential sale of Seiyu?
If realised, the sale could amount to between 300 billion and 500 billion yen, which translates to approximately $2.7 billion to $4.5 billion. This figure was reported by the Nikkei.
Reader pulse
Is Walmart’s Japan exit a smart move?
18,523 votes so far