(Reuters) - Wal-Mart Stores Inc (WMT.N) said on Thursday it would close 30 underperforming stores in Japan, scaling back in what was once considered one of the retailer’s most promising markets and highlighting the hurdles it faces to securing growth overseas.
Wal-Mart said the 30 stores operate under the Seiyu brand, and the closure is part of a revamp that will include remodels and other investments. The closures represent 7 percent of Wal-Mart’s 434 stores in Japan.
Wal-Mart first invested in Seiyu in 2002 and took full control of the company in 2008 with the aim of employing its low-cost model to win share from entrenched rivals like Aeon Co (8267.T) and Seven & i Holdings Co (3382.T).
But the closures show how Seiyu has sometimes struggled to meet the notoriously picky tastes of Japanese consumers and leverage its scale to drive out competition via lower prices to the extent that it has in the United States.
Walmart spokesman Randy Hargrove said that overall the company’s Japan operations were performing well, with sales and profits expected to grow for a sixth consecutive year in 2014. He said Seiyu’s online revenues were growing at a fast clip.
Wal-Mart estimated that the store closures would result in charges of about 4 cents to 5 cents of diluted earnings per share, which it will record over the next several quarters.
Wal-Mart said that it would invest in upgrading its fresh and deli categories and remodel about 50 stores in 2015. It said it would also increase its fulfillment and service operations to meet growing demand for online delivery in the Tokyo area.
The changes come as Wal-Mart is trying to find new growth overseas, where it operates around 6,000 stores and generates about a third of its overall sales. In the company’s fiscal second quarter ended Aug. 1, net revenue of the international division rose 3.1 percent, with China the only major market where same-store sales failed to grow.
The last new market entered by Wal-Mart was South Africa, in 2011, and the company’s pace of overseas growth has slowed over the past few years.
Reporting by Nathan Layne; Editing by Leslie Adler