• Home
• About/Contact
• Economic Reports
• Research
• Advertising

• Business
• Economics
• Reports
• Finance
• Marketing
• Politics
• Real Estate
• Services
• Retail
• Tech

Subscribe

Japan supermarket sales fall 1.1% in May

Japan’s supermarket sales fell for the second consecutive month in May, dipping 1.1% to 1.095 trillion yen, according to the Japan Chain Stores Association. These figures follow a 0.8% fall in April. Actually, when new shops (those opened within the past year) are included in the data, supermarkets saw a 6.4% decline in sales.

As we are seeing almost every month, outside of food sales, supermarkets are not doing very well at all. Here is a breakdown of May’s adjusted figures: Read more

Japan’s supermarket sales up 1.4% in March for second straight monthly rise

In February, Japan’s supermarkets finally showed an official rise in sales after having declined for 25 straight months. However, as we noted, sales were actually down 2.39% when not “adjusted”, i.e., when stores opened in the past year were included. March figures were similar, with a 1.4% official rise reported, but sales down 4.0% when newly opened shops are included.

In March, total sales rose 0.4% to 1.08 trillion yen. Once again, aside from food sales, supermarkets did not fare well. Here’s a breakdown of sales by category in March (these are adjusted figures):

• Food: +2.7%, 61.5% of total revenue
• Household Products: -0.4, 20.0% of total revenue
• Clothing: -2.5%, 11.8% of total revenue
• Miscellaneous Items: +2.2%, 6.3% of total revenue
• Services: -1.8%, 0.4% of total revenue

Just slightly over a year ago, we reported with some surprise that Tesco had decided to move into the Japanese market, with plans to open up to 35 shops. At that time, Japan’s supermarket sales had been down for 15 straight months, and the growth of discount 100 yen shops, the surge in department store food sales, the increase in the number of single person households and the ongoing woes of Wal-Mart made Tesco’s task seem difficult, to say the least. On Monday, the Nikkei Marketing Journal reported that things have been somewhat difficult for Tesco thus far, with sales at its 8 Japan locations showing a 4% decline in year-on-year sales.

Tesco has a reputation of quickly exiting markets that do not turn out to be profitable. However, the firm seems to be echoing Wal-Mart in its dogged pursuit of success in Japan. Tesco plans to send Michael Fleming, who has a very strong record with bringing success to the firm’s Asia operations, over to join the management team in Japan.

Best of luck to Mr Fleming. Supermarket operations are one of the toughest businesses in Japan, and although a shrinking population combined with the growth in single person households will make his task daunting one, there are still inefficiencies in the market to overcome and competitive advantages to be had.

It may also interest our readers that while convenience store sales fell 0.6% in March, 7-11 Japan has been quick to react to the desire of many consumers to buy domestic food products. According to the Nikkei, 93% of vegetables in 7-11’s bentos are domestically-sourced:

Seven-Eleven Japan Co. is accelerating its efforts to raise the percentage of domestically grown vegetables in its bento boxed meals, sandwiches and other items to improve the taste of its offerings as well as address growing consumer concern about food safety.

Currently, 93% of the vegetables used by the firm are grown in Japan, a relatively high percentage compared to the 80% level at major retailers of prepared foods and family restaurants, and the even lower ratio at rival convenience stores.

Of course, 7-11 was ahead of the curve on this one:

Seven-Eleven’s plan, which dates back to around 2000, started in order to offer more delicious food items, rather than to ensure safety.

They do seem to be trying hard to beat us over the head with the “taste” factor.

Japan supermarket sales show first rise in 26 months in February

In January, we saw Japan’s supermarket sales fall for the 25th consecutive month and wondered when this site would finally be able to report a rise in sales. It has finally happened: According to data released by the Japan Chain Stores Association, supermarket sales in Japan were up 1.9% in February on a year-on-year basis.

It’s way too soon to say we have an uptrend, as supermarket sales have still fallen in 46 of the past 48 months. We are also suspicious that rising prices might have more to do with the increase than a pickup in consumer spending, though we will have to wait until the end of this week to see the data on household spending for February.

Here’s a breakdown of sales by category in February: Read more

Japan supermarket sales down 1.7% in January, falling for 25th straight month

During the brief history of this website, we have yet been able to report a rise in Japan’s supermarket sales. At some point we are sure it will come along, but it did not happen in January, according to data released yesterday by the Japan Chain Stores Association.

The figures show a 1.7% decline compared to the January 2007. Not only have sales now fallen for 25 straight months, but they have fallen in 46 of the past 47 months. The JCSA data is based on sales at 8,653 shops owned by 78 companies that have been in operation for at least one year.

The truly frightening figure is that when sales at newly opened stores are included, they fell by a stunning 5.6 percent. Usually the inclusion of these stores makes the numbers look a little bit better. In December, sales had been down 1.5% including such shops, and 1.8% when they were filtered out.

Here’s a breakdown by category for January sales:

• Food: -0.3%, 59.4% of total revenue
• Household Products: -3.6%, 20.6% of total revenue
• Clothing: -4.2%, 13.8% of total revenue
• Miscellaneous Items: -1.4%, 5.9% of total revenue
• Services: -11.3%, 0.3% of total revenue

Food sales had risen slightly in December, while all other categories were down.

We also see some interesting figures in terms of employment. In January, There were a total of 441,651 employees on payroll at the nation’s supermarkets, down from 467,866 in December. This is a 5.6% decline in workforce. The number of full-time workers fell from 134,335 in December to 128,737 in January, while the number of part-timers fell from 333,531 in December to 312,914 last month.

The JCSA points out that the scandal over frozen Chinese gyoza broke in late January, and that according to the Ministry of Heath, Labour and Welfare that the average monthly wage had fallen to 330,212 yen in 2007.

We have not yet seen household spending data for January in order to compare it to supermarket spending, though since those numbers are due out within the next week, it will be interesting to see how households spent on food in January.

Seiyu’s 2007 losses projected to be twice as bad as expected

Last month, we reported that Wal-Mart intended to bring struggling Japanese supermarket chain Seiyu back to profitability in about two year’s time. We were skeptical then, and outlined the reasons why such a project threatens to be nothing but a drain on Wal-Mart’s resources. After all, back in August, we reported that Wal-Mart, which at that time held a 53.6% stake in Seiyu, expected to see the firm post its sixth consecutive year of losses in 2007, to the tune of 5.9 billion yen (about $50 million). Seiyu also happens to hold over 300 billion yen in interest-bearing debt on its balance sheet.

Those loss projections were later revised up to 10.4 billion yen. That sounded bad. Today, however, Wal-Mart announced in a preliminary earnings statement that losses in 2007 have doubled yet again to 20.9 billion yen (about $195 million).

That’s two revisions within a year, each time doubling the losses. Wal-Mart now owns about 96% of Seiyu, which is trading around the 136 yen per share level. Bloomberg reports that Wal-Mart is “in talks with Citibank and Mizuho Corporate Bank Ltd. about injecting funds into the Japanese unit.”

Citibank funds? Where might those be coming from? Mizuho Corporate? Well, that would certainly bring a domestic player back into the game. If Wal-Mart is looking for capital injections, may we assume that it’s no longer willing to pour its own money into Seiyu? Is Seiyu equity actually worth something?

After five years of investing in Seiyu, Wal-Mart only saw it sink further and further into losses. Then it decided last October to sink about 100 billion yen into the firm. Now we see a doubling in losses (for the second time) as assets are written down.

So…Wal-Mart has paid 100 billion yen to acquire a firm with over 300 billion yen of interest bearing debt that has lost money for six straight years and stands to have lost at least 20 billion more yen in 2007, while this firm reduces non-core operations in order to focus on a core industry that has seen falling sales for 11 straight years. We are very interested to see how this turnaround can be pulled off.

And we’re very interested to see if other investors jump on board. We’d be even more interested to hear what they think of Wal-Mart’s plan. How many slides are in that Powerpoint?

Japan’s supermarket sales down for 24th straight month in December; down for 11 straight years in 2007

Earlier today, the Japan Chain Stores Association announced that sales at the nation’s supermarkets had slid 1.8% in December, thus showing a year-on-year loss for the 24th consecutive month. Total sales at locations open for at least one year stood at 1.39 trillion yen in December.

Sales for all of 2007 dropped 1.4% to 13.98 trillion yen. That makes 2007 the 11th consecutive year of decline for supermarket sales, which ties the streak that Japan’s department stores have going.

The JCSA bases its survey on data from 8,806 supermarkets operated by 79 chains. Those 8,806 locations employed a total of 467,866 people, up 2.5% from a year ago, for an average of just over 53 employees per location.

Of those workers, 134,335 were listed as regular employees (正社員) and 333,531 as part-timers. That puts about 28.8% in full-time positions and about 71.3% in part-time jobs (someone out there must be working as both). A year ago, that percentage was 29.3% full-time employees and 70.7% part-timers, so we’ve seen a slight uptick in the number and proportion of part-time supermarket workers in the past year. Read more

Wal-Mart has big plans for Seiyu; What took so long?

We have been following the ongoing saga involving Wal-Mart and Seiyu for some time now. Back in August, we reported that Wal-Mart, which at that time held a 53.6% stake in the ailing supermarket chain, expected to see Seiyu post its sixth consecutive year of losses in 2007, to the tune of 5.9 billion yen (about $50 million). In September, we reported that Seiyu had revised its losses downward to $91 million. Seiyu also announced that it would spend about 4.5 billion yen in an effort to reduce its workforce by 450 people.

In October, it was announced that Wal-Mart intended to sink another 40 billion yen or so into Seiyu in order to turn it into a wholly-owned subsidiary. That figure, however, was grossly underestimated. On December 6, it was reported that Wal-Mart would spend about 93 billion yen in order to boost its equity stake from 53.6 percent to 95 percent. At that time, we outlined the reasons why this was a bad idea.

To the present: Read more

Japan’s Supermarket Sales Fall for 21st Consecutive Month in September

The situation is not improving for Japan’s supermarket operators. On Monday, the Japan Chain Stores Association announced that in September, supermarket sales across Japan were down 1% year on year, showing a fall for the 21st consecutive month, and now for 42 of the last 43 months.

This month’s data covered 8,690 shops owned by 79 companies employing 445,216 workers - 129,592 full time and 325,624 part time. Interestingly, while about 1/3 of the full-timers were women, females made up 90.7% of the part-time work force.

Broken down by category, September 2007 supermarket sales looked like this:

• Food: +1.1%, 64.1% of total revenue
• Household Products: -3.2%, 19.1% of total revenue
• Clothing: -9.6%, 10.3% of total revenue
• Miscellaneous Items: +1.0%, 6.1% of total revenue
• Services: -2.2%, 0.3% of total revenue

The report also notes that average temperatures and precipitation were both markedly higher in all eight of Japan’s regions in September when compared to September 2006.

Wal-Mart not giving up on Seiyu

In August we reported that struggling supermarket chain Seiyu was set to post its sixth consecutive year of losses in 2007. Wal-Mart, which has spent over $1 billion to acquire a controlling share of the firm, announced in September that it would spend 4.5 billion yen in an effort to let 450 workers go this year.

The climate for supermarkets is currently very difficult in Japan, and it’s hard to see what Seiyu has done to differentiate itself from the other low-end supermarkets in an age when more and more shoppers seem to be making the jump either to convenience store shopping or higher-end ‘lifestyle brand’ supermarkets.

Today, however, Wal-Mart announced plans to step up its engagement with Seiyu. It intends to turn the firm into a wholly-owned subsidiary and delist it from the Tokyo Stock Exchange in a transaction that may cost Wal-Mart up to 40 billion yen. Edit: Kyodo is now telling us that Wal-Mart intends to offer 140 yen per share, which is a nice premium on today’s closing price of 87 yen, though not so nice if you bought into Seiyu in 1999, when they traded above 800 yen a share.

As of the end of June, Seiyu still held 328.6 billion yen in interest-bearing liabilities on its balance sheet.

Seiyu Still Struggling, Announces Job Cuts

We’ve posted before on why we think Wal-Mart’s investment in the struggling Seiyu supermarket chain is just not working. After announcing in August that it expects to post its sixth consecutive year of losses in 2007, Seiyu downgraded its earnings projection this week to a loss of $91 million in the year ending December 31. As Seiyu continues to renovate its shops and switch more locations to 24 hour openings, it also plans to spend 4.5 billion yen in an effort to let 450 workers go this year.

The big question now is whether Wal-Mart, the world’s largest retailer, will exercise its option to increase its stake in Seiyu from the current 51% to 66.7% by the end of the year. Should Wal-Mart not choose to increase its equity stake in the firm, it could be interpreted as a sort of no-confidence vote in Seiyu. With Wal-Mart recently having pulled out of both South Korea and Germany, we see little reason for it to charge ahead in a market where supermarket sales continue to decline and medium to long-term demographics give little hint of a recovery.

On the other hand, with Seiyu shares down 58% over the past 12 months, any hint of a turnaround means those shares (at 86 yen right now) carry quite a discount. It will be interesting to see how Wal-Mart plays this one.

Next Page »

Copyright © 2006-2008 Japan Economy News

Disclaimer