The Japanese arm of U.S. retailer Wal-Mart is planning to add 20 stores across various formats next year to capitalise on its rising profits in the country, its top executive said.
Walmart Japan Holdings President and CEO Steve Dacus also told Reuters in a telephone interview that he was in regular discussions with potential partners and banks about acquisitions after a series of revamps helped to turn the business profitable.
“Now we’ve got a pretty successful business model, and frankly our supermarkets in particular have been really successful, with really good returns, really good performance, so we want to start expanding that as rapidly as we can,” Dacus said.
The new openings will include all of its formats, which range from Seiyu food stores and general merchandise stores to Wakana delis, although most of the new Seiyu outlets will be food stores, with the sweet spot in the 1,000 to 2,000 square metre range, he said.
The company, which competes with market leaders Seven & I Holdings and Aeon Co in Japan, prefers taking over available retail space to building new space, he added.
Wal-Mart, which had 415 retail outlets in Japan at the end of October, first took a stake in Seiyu in 2002 and through a series of steps made the Japanese retailer a wholly owned subsidiary by 2008.
Wal-Mart’s strategy initially did not agree with Japanese customers, who tend to associate discount prices with low quality, and the U.S. retailer’s systems did not work well in Japan’s complicated retail networks.
But by shifting away from weekly specials to everyday low prices, increasing productivity in areas such as backroom receiving and on the sales floor, the retailer has seen profits grow in recent years, even as consumer sentiment deteriorates.
In the third quarter, same-store sales rose approximately 1.9 percent, store traffic edged up 0.4 percent and the amount consumers spent grew 1.5 percent in Japan.
Dacus, who assumed his position in June after stints in Wal-Mart’s international division and Sam’s Club warehouse chain, said he saw those trends continuing and even accelerating since the start of the fourth quarter.
“The fact that we are widely recognized as low-price leader among big supermarkets works to our advantage,” Dacus said, maintaining sales momentum despite weak employment growth and declining household income.
On Tuesday, parent group Wal-Mart posted quarterly profit below expectations as efforts to absorb rising food costs for its stressed U.S. shoppers and spending on its e-commerce business weighed on profitability, though U.S. sales rose.
Dacus declined to say whether Wal-Mart would be interested in buying the Japanese stores that British supermarket Tesco Plc has put up for sale.
While the world’s largest retailer is looking at all retail formats to expand in Japan, Dacus said he favored supermarkets for future acquisitions as well as regional Japanese supermarkets for tie-up targets.
“I do think there is a lot we can learn from these smaller regional chains, and those might be some good areas for us to partner with as we go into new areas in particular,” he said. (Reuters)