The Japanese retail group Aeon, which has kept Tokyo-listed Daiei on as a partly owned subsidiary to preserve its independence, now intends to buy out the remaining shareholders through a share swap.
Ready-to-eat meals and side dishes -- dubbed "nakashoku," or "middle eating," in Japanese to distinguish them from home-cooked meals and restaurant fare -- are proving increasingly popular with singles, working women and empty-nesters. In April, Daiei unveiled a business plan that seeks to cater to growing demand for such prepared foods through its heavy big-city presence. Its goal: becoming Japan's "No. 1 food retailer."
Daiei has expanded and remodeled prepared-food counters at key stores in Tokyo, Fukuoka, Sapporo and other metropolises. Sales have risen by up to 30% as a result. But only some locations have gotten such makeovers, which do nothing to ease pressure from specialty retailers in other areas, such as health and beauty goods and clothing. Customer traffic has not picked up as a result, and same-store sales fell 2.6% on the year in March to July.
Daiei sold off store real estate in the 2000s, using the proceeds to pay down a mountain of debt. It then leased these properties back from their new owners and now pays high rents on quite a few stores that have seen better days. Such burdensome legacies continue to weigh on Daiei, although it has squeezed out some efficiency gains through its alliance with Aeon -- by combining purchasing power and sharing spare labor, for example.
Daiei aims to post its first operating profit in three years for the 12 months through next February, but sales are ringing up short of company projections. Amid rising supply and energy costs, the March-May quarter brought an operating loss of 3.9 billion yen ($35.7 million).
Japanese supermarket sales have shrunk by a fifth over the past 20 years. Aeon, which owned 44% of Daiei as of February, is no exception to the hard times befalling the industry.
More
Tough business environment.
