US retail giant Wal-Mart Stores Japanese subsidiary - Seiyu, which runs 392 stores and employs 5,700 people will close down 20 of the US retail giant Wal-Mart Stores and reduce its workforce by 350 people in a bid to start making profits after six continuous years of losses.
Wal-Mart first invested $2.2 billion in Seiyu in 2002 and has been facing problems to cope with the market because of stiff competition and hence remained unprofitable although it had taken full control early this year.
It acquired a 34-per cent stake in 2003 and became Seiyu's biggest shareholder. Since then Seiyu has closed 35 stores and opened 33 new stores.
As Japan's retail sales slow down, Seiyu has been losing revenues constantly and its bid to expand its market share has not kick started because of fierce competition from its bigger rivals Aeon Co and Seven & I Holdings. It has incurred a loss of $197 million in 2007.
Japan's household spending is also declining because of high inflation which has caught up with other big Japanese retailers also who have announced cutbacks.
Wal-Mart's Japanese subsidiary Seiyu says the reason for closing 20 stores is, they didn't fit well with its basic model for its stores, and will reduce its workforce by 350 full-time employees who will be offered early retirement, the company said in a statement.
Seiyu also said it will offer a wider range of products and would bring out reforms at nearly 100 of its larger stores. It would also look to expand its network of stores, even through acquisitions. The company said that it has completed reforms at 170 of its small and mid-sized outlets over the last three fiscal years.
August was a challenging month for Seiyu as the store sales ran in the negative low single digits. Food sales were lower due to a decline in beverage sales, lower tobacco sales and continued softness in chilled foods. General merchandise and apparel sales were lower due to a planned reduction in promotional activities.
It had lost $197 million for its fiscal year through December.
Wal-Mart Stores, the world's biggest retailer, was expecting a 10 per cent growth in international sales, touching $100 billion this fiscal year despite a global economic slowdown.
Wal-Mart reported a 17 per cent jump in second-quarter profit to $3.45 billion, after a 17 per cent increase in international sales to $25.26 billion.