Wal-Mart Stores, under pressure from faltering growth overseas just when it needs to offset a slowdown in the US, reshuffled top management to spread talent abroad and expanded to take over operations in Japan, the world's second-largest retail market.
Wal-Mart said on Friday it would increase its presence in Japan by spending almost US$600 million to take full control of Seiyu, its affiliate supermarket chain here.
Back at its headquarters in Bentonville, Arkansas, Wal-Mart announced that its top executives who separately run the US operations and international operations would effectively switch jobs in a move aimed at grooming the company's top talent and increasing overall growth.
But growth in Japan will not come easy. The move by Wal-Mart seems to plunge it further into this market despite losses at Seiyu every year since the company first purchased a stake in the Japanese retailer in 2002. Seiyu on Friday reiterated its projection of a fourth consecutive loss in the current fiscal year. In August, it posted a net loss of ¥10.6 billion (US$93 million) in the six months ended in June.
The purchase will increase Wal-Mart's stake in Seiyu to just over 50 percent, from 42 percent, enough to turn the Japanese company into a full subsidiary. Wal-Mart has been increasing its stake by steps in Seiyu, which is based in Tokyo.
"This investment is intended to give Seiyu increased financial stability and continue strengthening Wal-Mart's presence in the second-largest retail market in the world," said John Menzer, chief executive of Wal-Mart International.
Menzer will leave his post and take on a new leadership role that includes responsibility for not only Wal-Mart Stores USA, but also major units like real estate, logistics, information services, benefits, global procurement, financial services, store planning and strategic planning.
The new president and chief executive of Wal-Mart International will now be Michael Duke, currently president and chief executive of Wal-Mart Stores USA. The promotions come with significant challenges and spotlight Duke and Menzer as potential successors to Lee Scott, Wal-Mart's chief executive since 2000.
"These moves are consistent with the way we develop our people," said Sarah Clark, a company spokeswoman.
The executives are assuming their new roles at a time of sluggish growth in both divisions. Though the company has expanded quickly overseas, competitors have outpaced it in important markets like the UK. At home, Wal-Mart Stores USA has fallen short of its sales goals for the last two quarters, as rising gas prices have eaten into the spending power of its primary customers. In August, Wal-Mart reported its smallest quarterly rise in earnings in nearly four years, 5.8 percent.
Wal-Mart also has had a hard time carrying out its formula in Japan. Despite its involvement, Seiyu has failed to turn a profit from its 400 stores in Japan, where customers prefer clipping coupons to low prices and a complex web of distribution companies has thwarted efforts to wring lower prices from suppliers.
Japanese consumers are also notoriously finicky, demanding high levels of freshness and quality even if that means higher prices.
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