SEIYU TESTS WAL-MART-STYLE SUPERCENTER 2004-05-31 (1)

Tsukasa Furukawa

TOKYO -- The first Japanese version of a Wal-Mart supercenter -- operated by Seiyu, a major supermarket chain now under the umbrella of its largest shareholder, Wal-Mart Stores, Bentonville, Ark. -- debuted earlier this month in the city of Numazu, southwest of Yokohama.

The one-story, 87,000-square-foot supercenter, modeled after the ones operated by Wal-Mart in the U.S., has all merchandise -- from food and clothing to home products -- displayed on one floor. The Numazu store is a "pilot" unit, a Seiyu spokeswoman said, explaining that the company plans to add more supercenters beginning in 2007. She declined to say how many more are planned.

Greg Penner, chief financial officer of Wal-Mart Japan, told media sources that the Numazu store will attract Japanese shoppers by catering to their local tastes. The food section in the Numazu store is much larger than in Wal-Mart's U.S. stores, he pointed out, while sushi is prepared in full view of shoppers, rather than prepackaged.

Under its new five-year business plan beginning this year, Seiyu is embarking on an aggressive expansion by taking advantage of Wal-Mart's global procurement capability and store management technology.

Wal-Mart currently owns a 37.8% stake in Seiyu, but it owns warrants that would allow it to increase its stake at designated intervals during the next three years.

In April, Seiyu opened several other large-scale supermarkets. A 97,000-square-foot supermarket with three floors opened in Oji, Nara Prefecture in western Japan. The store sells a wide range of merchandise including private-label products and imported goods. A third, 217,000-square-foot complex, which merchandises food, clothing, hobby items and sundry goods, opened in Fusso outside of Tokyo.

For the first quarter ended March 31, Seiyu narrowed its loss of 4.7 billion yen ($43 million) over the loss of 47 billion yen posted a year ago. Revenue was off 0.7% to 261 billion yen ($2.4 billion) from 263 billion yen in last year's period.

The company is projecting a profit this year of $4.6 million on sales of $10.2 billion, compared with losses of $754 million in 2002 and $67 million in 2003.

However, Seiyu faces a tough competitive market, according to industry sources. France's Carrefour operates eight stores in Japan; Costco has four stores and Metro of Germany two. Britain's Tesco last year bought C Two-Network, a convenience retailer with 78 stores in the Tokyo area, and it is expected to buy Fre'c, a chain of food markets later this year. Aeon Group, a local competitor, is planning 100 Wal-Mart-style supercenters in suburban areas by the end of next year, up from the four it already operates. Beisia Group, a conglomerate of retail and other businesses, expects to open 75 supercenters by the end of next year.