Walmart still hoping for acquisitions

Walmart has now owned Seiyu for almost 13 years, and has recently achieved some success. In late May, Steve Dacus stepped down as CEO after four years in charge, having overseen consecutive years of same store sales growth. There remain doubts over Seiyu’s ability to make real progress given its limited chain and lack of opportunities to acquire new capacity. This situation doesn’t look set to change soon.

In late May, Steve Dacus stepped down as CEO to Seiyu, Walmart’s wholly owned subsidiary in Japan and the fourth largest FMCG retailer in the country. Dacus, who had previously worked at Uniqlo and is fluent in Japanese, spent four years at the helm. After two Japanese executives spent very short tenures at the head of the company, Dacus guided the chain out of an extended period of consolidation and oversaw a return to stable trading, with even some new stores added over the past two years.

Ducas is replaced by Isamu Kamigaito, former head of Unilever Japan and senior VP at Seiyu since 2007. While Seiyu’s results aren’t public, 2014 was confirmed as the sixth straight year for same store sales growth, up 4.3% on 2013 and the highest ever increase in the company’s 60 year history – to be fair, ‘same store sales growth’ was never a priority in traditional Japanese retail strategy. In the year to December 2015, Seiyu will close 30 underperforming stores, around 8% of the chain, and the company says improving same store sales still takes precedence over building new capacity.

In terms of marketing, price competition remains Seiyu’s main thrust. Two days after Kamigaito took over, Seiyu announced the second round of its ‘Price Lock’ campaign. This launched in March with 200 SKUs set at guaranteed fixed prices for a minimum of six months. The new round added a further 207 SKUs to the total, including some from major brands such as ¥155 for a 2L bottle of Coca Cola. With inflation still not an issue and consumers largely unimpressed with what price differences exist in the food and FMCG sector, the campaign’s impact may not reach far beyond its current store locations.

A further announcement was the confirmation of Seiyu’s anticipated promotion of women managers. Based on a similar initiative at Walmart Canada, the company plans to have 30% of management positions filled by women by 2020. That is behind initiatives like that of IKEA, which aimed for 50% in 2014, but still a major advance in the food sector, despite some 60% of customers and 70% of store employees in supermarkets being women.

Since entering Japan in 2002 and securing ownership of Seiyu in 2008, domestic press have often painted Walmart as a US aggressor intent on acquiring most of Japan’s retail sector. In reality, Walmart has made no major acquisitions since its entry. While Kamigaito, like his predecessors, has confirmed Walmart’s willingness to acquire further in Japan, if anything this looks less and less likely to happen. The entire retail sector is in the throes of consolidation through a large number of M&A deals, but with so many domestic acquirers willing to buy in, the likelihood of a major company selling out to a foreigner like Walmart looks particularly remote.