Seiyu, the troubled Japanese supermarket group in which Wal-Mart holds 37.8 percent, announced on Friday cuts of up to a quarter of its full-time workforce as part of an ongoing reorganization.
Seiyu will cut 1,500 to 1,600 full-time jobs through voluntary retirement. It will reduce the tiers of store management from the present six to four and introduce performance-based pay. Seiyu plans to increase the number of part-time employees to 85 per cent of total staff by 2007 from the current 73 per cent.
This is Seiyu's third round of job cuts in two years but is more aggressive and targeted than previous rounds. Masao Kiuchi, president, said it would help boost productivity. He said annual sales per full-time member of staff were 100 million yen ($943,000), about half the level of some of Seiyu's competitors.
“We have been learning about financial stability and management skills from Wal-Mart, and we have made progress. But when it comes to productivity, we are only finally at the point of tackling this,” said Mr Kiuchi. “This is something that we probably needed to do much earlier.”
Seiyu's path to recovery, even with Wal-Mart's guidance, has not been smooth. The company was forced to raise 7.7 billion yen in August from shareholders, including Wal-Mart, to boost its depleted capital. It expects a 10 billion yen net loss for the 10 months that ended in December. Seiyu has changed its financial year to the calendar year to bring it into line with Wal-Mart's.
But Wal-Mart has defended its acquisition of a small stake two years ago which it increased last year and can raise again to 66.7 per cent by the end of 2007.
Under Wal-Mart's tutelage, Seiyu had seen a 40 per cent productivity improvement in the running of distribution centers, Seiyu said. Sales this month have already exceeded those of January last year, a reversal of the long-term decline which appears to have bottomed in July.
Seiyu has started to introduce Wal-Mart's sales and inventory information system, which will be rolled out to half of the company's 400 stores by the end of this year.
It has also increased the range of private brands and the number of items imported through Wal-Mart's global purchasing network. It will open its first super center this year, although Seiyu said it would not match the size and scope of Wal-Mart's super centers in the U.S.