TOKYO -- Seven & i Holdings will shed 3,000 staffers in its department store and supermarket operations through fiscal 2022, its largest-ever payroll cut, as competition from e-commerce and malls squeezes business outside the company's thriving convenience stores.
The parent of Seven-Eleven Japan said Thursday that full-time and contract employees at subsidiary Sogo & Seibu will be reduced by 1,300, or nearly 20%, including through attrition. The move is expected to save roughly 8.6 billion yen ($80.1 million) in labor costs.
Payroll at general merchandise store operator Ito-Yokado will be cut by 1,700 positions, to about 6,000.
The company's massive job cuts highlight the plight of the nation's retail sector brought on by intense competition with online retailers and chronic labor shortages. Seven & i will now take on a structural reform to revitalize stores that can attract customers.
The two segments together generated only about 3% of group operating profit for the six months through August. Seven & i looks to trim the fat from these businesses and focus on stores with the best prospects of contributing to its bottom line.
The restructuring plan calls for closing two Seibu and three Sogo locations between August 2020 and February 2021. That would leave 10 shops, down from nearly 30 when Sogo & Seibu was acquired by Seven & i in 2006. Ito-Yokado will close or consider outside partnerships for 33 unprofitable stores.
Two Seibu stores in the less-populated prefectures of Fukui and Akita will be downsized. Suburban locations will shift toward a mall-style model, looking to bring in big-name tenants such as electronics sellers as another source of revenue.
"The stores we're keeping have the ability to attract customers," Seven & i President Ryuichi Isaka said. "We'll focus our investment there and do more to revitalize them."
The structural reforms also address issues with Seven & i's convenience store business, which accounts for more than 80% of the retailer's profits. The company is reworking relationships with franchisees amid a severe labor shortage that has led some to rebel against the 24-hour model.