FamilyMart to stay in US, China pace picks up

Thu Nov 25, 2010 12:07pm GMT

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* To keep U.S. operation at only 10 stores -president

* Reiterates that China expansion moving faster than planned

(Adds details, background)

By James Topham and Ritsuko Shimizu

TOKYO, Nov 25 (Reuters) - FamilyMart Co (8028.T), Japan's third-largest convenience store chain, will freeze its loss-making U.S. operation at just 10 stores as it assesses its expansion strategy in the country, its president said on Thursday.

FamilyMart President Junji Ueda also reiterated in an interview, however, that it has been moving faster than initially planned in its ambitious expansion in China, where it aims to have 4,500 outlets by the 2015/16 March-February business year, nearly 10 times the current number.

The company is aggressively expanding in Asia but has faced a rocky road in the United States as it struggles to find a viable business model. Its 10 stores in the country, down from 12 in 2008, are centred mainly around Los Angeles.

FamilyMart had been weighing several options, including expanding further or pulling out of the U.S. market.

But Ueda told Reuters that the firm would continue doing business in the United States and expected to start turning a profit there by around the 2018/19 financial year.

FamilyMart, like Seven & I Holdings (3382.T), Lawson Inc (2651.T) and other convenience store chains in Japan, faces weak growth prospects in a competitive marketplace with a shrinking population and persistent profit-sapping deflation.

The tough retail environment has prompted major convenience store operators to step up their expansion overseas.

As of last month, FamilyMart had a little over 8,000 franchises in Japan and more than 8,800 outlets overseas, including stores in China, South Korea and Southeast Asia. It is aiming for 15,500 overseas outlets among 25,000 stores globally by February 2016.

(Editing by Edmund Klamann)

((james.topham@thomsonreuters.com; +813 6441 1858; Reuters Messaging: james.topham.thomsonreuters.com@reuters.net))

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