Wal-Mart has offered to pay about $870 million for the rest of Seiyu, having already invested $1 billion in the company since 2002. However, even with Wal-Mart's growing influence, Seiyu hasn't been able to turn things around, despite some heartening signs last year.
In August, Seiyu really disappointed by forecasting its sixth straight year of losses, saying it expected an annual loss of $50.5 million instead of the $6.8 million profit it previously expected. Ouch. And that's after Wal-Mart took a larger stake to be more closely involved in operations.
It sounds as though Wal-Mart may have its work cut out for it in Japan. A Forbes article suggested Wal-Mart has an obstacle related to the strategy the discount giant holds dear: Low prices don't do it for the Japanese consumer like the promise of quality does. That makes sense, considering Japan's affinity for American luxury brands like Coach
Meanwhile, in a country where stable population numbers leave little choice for retail competitors but to boost their market share, there's a lot of competition, like Aeon and Ito Yokado, and the U.K.'s Tesco. There's been a lot of buzz about Tesco entering the U.S. market to challenge everyone from Wal-Mart to Whole Foods Market
The specter of slowing growth -- and an evolving consumer -- has dragged on Wal-Mart here in the U.S. Seiyu may represent only a small portion of Wal-Mart's total retail empire, but still, turning it into a profitable enterprise would be a significant victory (although continued troubles may give investors a headache when it comes to return on investment). If Wal-Mart can crack a market as tough as Japan, it may signal its ability to evolve to suit conditions that don't necessarily fit its traditional strategies, and that could bode well. It's definitely worth keeping an eye on.
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