Walmart’s Global Pivot Continues With Seiyu Sale in Japan
The retail giant is realigning to focus on By Evan Clark on November 16, 2020 wwd Walmart Inc.’s global retail retreat continued on Monday with the mass giant pulling up stakes in Japan. The company — which is still very much the brick-and-mortar leader, but has been focusing on driving its digital business — is essentially exiting Japan in a deal valuing Tokyo-based subsidiary Seiyu at 172.5 billion yen, or $1.6 billion. Walmart has been on something of a selling spree over the past two months — cutting deals to offload control of British retail giant Asda and to sell its subsidiary in Argentina — while also eyeing a partnership with Oracle to invest in TikTok. Together, the moves represent a change in the company’s definition of global domination that has been coming for some time. Clearly, partnerships that help create multifaceted relationships with ever-more digital consumers are in and brick-and-mortar, as far as the eye can see, is out. Even so, Walmart is still a retail empire that reaches around the world, with operations in the U.S., Africa, Canada, Central America, Chile, China, Mexico and India, where it operates the e-commerce giant Flipkart. At the latest tally, which would include businesses set to be sold, Walmart saw more than 265 million customers weekly at one of its 11,400 stores across 26 countries. Revenues weighed in at $524 billion last year. VIEW GALLERY Like companies across the spectrum, Walmart is resizing and readjusting during the pandemic, trimming down to prepare itself to gain when the consumer world can return in force. It is also cleaning house, letting go of the at-times troublesome 300-plus door Tokyo subsidiary, ahead of third-quarter earnings, which are set to be released Tuesday morning. Under terms of the Seiyu agreement, private equity giant KKR will buy 65 percent of the retailer while Internet services specialist Rakuten takes a 20 percent stake through a newly created subsidiary set up to focus on retail digital transformation. Walmart will keep 15 percent of the business and continue to provide access to its retail expertise, sourcing network and scale to help the retailer maintain lower prices. Seiyu chief executive officer Lionel Desclee will pilot the business through a transition and then take on a new role at Walmart.
The transaction, expected to close during the first quarter, builds on work Rakuten and Walmart have done together before, including the Rakuten Seiyu Netsuper online grocery delivery service and a partnership for e-book service support in the U.S. “We have been proud investors in this business over the past 18 years and we are excited about its future under the new ownership structure,” said Judith McKenna, president and chief executive officer of Walmart International. “Today’s announcement is important because its focus is on bringing together the right partners in the right structure to build the strongest possible local business. We look forward to supporting Seiyu’s growth and success, alongside KKR and Rakuten, as a minority investor.” Walmart is getting choosier with its global ambitions, or being forced to focus more on key markets where it can gain real share as a new breed of global competitor — from Amazon to Alibaba — threatens its flank. Charlie O’Shea, debt analyst at Moody’s Investors Service, said: “Seiyu has faced challenges almost since Walmart acquired it, including a hyper-competitive Japanese market, and has required significant attention. Similar to Asda in the UK, Brazil and, most recently, Argentina, Walmart has recognized that other markets such as India and China present greater long-term growth and profit opportunities, and as such, this is a sensible strategic move.” The dealmaking also lets Walmart redeploy assets to where they can do the most good. Joseph Feldman, an analyst at Telsey Advisory Group, noted, “The capital generated from the monetization of businesses is being invested in growth areas, such as Walmart Fulfillment Services, and emerging companies, such as JD.com, Flipkart, Dada-Nexus, and possibly TikTok, to generate solid returns over the medium term and keep Walmart ahead of the curve.”