updated 11/2/2005 8:37:50 AM ET 2005-11-02T13:37:50

A Wal-Mart executive will take the helm of Seiyu Ltd., a Japanese retailer set to become a subsidiary of the U.S. chain in December, signaling Wal-Mart’s determination to succeed in Japan’s lucrative — and finicky — retail market.

Seiyu announced Wednesday that Ed Kolodzieski, senior vice president and chief operating officer of Wal-Mart International, would become its new chief executive on Dec. 15 upon shareholder approval.

Kolodzieski, who has been a Seiyu board member since 2004, replaces Noriyuki Watanabe, who stays on as chairman.

Since arriving in Japan in 2002, Wal-Mart Stores Inc., the world’s biggest retailer, has been gradually increasing its stake in Tokyo-based Seiyu, the nation’s fifth-largest chain with more than 400 stores.

But Seiyu has lost money in the three years since, struggling to win over shoppers with a reputation for being both picky and trendy. Other global retailers have also struggled in Japan. Carrefour SA of France, the world’s No. 2 retailer, abandoned the country earlier this year.

Wal-Mart, which has international operations in Mexico, Germany, South Korea, Canada and elsewhere, seems intent on establishing itself in Japan, the world’s second biggest retail market.

“For Wal-Mart, this is an extremely important market,” Jeff McAllister, senior vice president at Wal-Mart International told reporters at a Tokyo hall. “Frankly we’re optimistic about the future.”

Retail partnership
Under its partnership with Seiyu, Wal-Mart has been gradually cutting costs, remodeling stores and opening large-scale supermarkets, which are still relatively rare here. McAllister said those efforts would accelerate because Wal-Mart was not only boosting its investment but sending in new management.

Last month, Bentonville, Ark.-based Wal-Mart said it will raise its stake in Seiyu to more than 50 percent from 42 percent by December, turning it into a Wal-Mart subsidiary. On Wednesday, Seiyu said Wal-Mart would expand its holding to 54 percent through an investment of 67.5 billion yen, or about $585 million.

Seiyu will keep its brand name, although executives said the company may consider adopting the Wal-Mart name in the future.

Seiyu also cut its profit forecast for the full year through December, citing a high level of promotions and discounts to attract customers. The chain is now expecting its net loss to widen to $117.4 million (13.5 billion yen), from a July forecast of $65.2 million (7.5 billion yen).

For first three quarters of the year, Seiyu’s net loss expanded to $152.2 million (17.5 billion yen), from a loss of 9 billion yen a year earlier.

Sales slid 4.8 percent to $6.33 billion (727.9 billion yen) in the first nine months.

“Seiyu’s performance in the third quarter has been disappointing, but we remain confident in the company’s long-term future,” Mike Duke, vice chairman of Wal-Mart International, said in the statement.

McAllister said more customers are coming to the remodeled stores although he declined to say when Seiyu will turn profitable.

Watanabe and McAllister did not give specifics on a new strategy under Kolodzieski, who was not at the news conference. They said Seiyu membership in “the Wal-Mart family” will offer a stable financial base and allow Seiyu to speed up its revival.

Kolodzieski has 28 years of retail and supermarket experience and joined Wal-Mart in May 2000. He was first involved in Seiyu in 1992 when he led a managerial and cultural exchange program between Seiyu and Kash N’ Karry Foods, a U.S. supermarket chain.

One challenge Wal-Mart faces is that Japanese retailers have begun to imitate Wal-Mart’s mall-type stores. The company has also learned it must adapt to local tastes in Japan, and has not yet been able to offer the extremely low prices here like those with which the chain built its brand in the United States.

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