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Japan’s Daiei
plans major
restructuring

The cutbacks will not
affect the Oahu stores

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Bloomberg News

TOKYO -- Daiei Inc., Japan's second-biggest general merchandise store chain, said it will cut almost a third of its work force and close stores as part of a plan to trim its 2.47 trillion yen ($22 billion) debt.

The cuts highlight the problems of many large Japanese retailers, an industry that's seen overall sales fall in every month but one over the last three years as the economy struggles to recover.

Daiei said it will eliminate 4,000 of 13,366 jobs and shut 32 of its 314 stores over the next three years.

(Daiei has four stores on Oahu, but they will not be affected by the cutbacks, according to a company spokesman.)

Jobs will be cut "as soon as possible, but we must negotiate with the union on the timing and the way it's done," said acting President Hiroshige Sasaki at a press conference. The job cuts will come through early retirement and attrition, said a spokesman.

Daiei shares surged on the plan, closing up 16 percent at 178 yen.

They jumped as much as 27 percent to 195 in earlier trading as news of the plan was leaked to the media ahead of the press conference. The shares are still down 56 percent this year, worse than the 42 percent decline in the Topix index of retail shares.

Daiei said it will also raise 120 billion yen from the sale of preferred shares to its four major creditors -- Fuji Bank Ltd., Sanwa Bank Ltd., Sumitomo Bank Ltd. and Tokai Bank Ltd. In addition, the banks will set up a 500 billion yen credit line for the company.

Daiei said it will retain for now its 35 percent share of Lawson Inc., Japan's second-largest convenience store chain behind Seven-Eleven.

Media reports have said Daiei plans to sell all or part of the stake to help cut debt.

"We will treat Lawson as part of the Daiei group and will consider what to do with the company in that light," said incoming President Kunio Takagi, who will assume the post after a shareholder's meeting expected in January.

Daiei will also hold onto its Fukuoka Daiei Hawks baseball team, this year's Pacific League pennant winner, because of the boost the team gives to the company's image and sales, said Takagi.

Daiei will use cash from the sale of shares to the banks to trim its debt to 2.4 billion yen by the end of February, said Komatsu Keiji, a company director.