Last year was hard on Sega Sammy Holding, the Japan-based arcade and pachinko operator. Over the first six months of the year, the company saw a drop in sales of around 33.4% because of the global COVID-19 pandemic and needed ways to stave off a further loss in revenue. It came up with an early retirement scheme for its employees that it expected to do the trick, and the results are in. An overwhelming number of staff members have agreed to retire and start collecting benefits.
Sega Sammy had expected to find around 650 employees willing to take early retirement. That would have been a fairly sizable chunk of the workforce, which included approximately 9,051 full-time and contract workers. All were given the opportunity to participate in the program, provided they announced their intentions in time. 729 employees ultimately signed up, according to a company announcement, by the deadline of December 25 of last year. They will now pack up and go home as of February 28.
In order to prepare for the expenses tied to offering retirement, Sega Sammy had allocated around $96.3 million of its funds. However, despite receiving a larger-than-expected response, the company believes it will only spend around $91.5 million. Because the early retirement scheme begins at the end of next month, the expenses will be reported as extraordinary losses when Sega Sammy closes out its current fiscal year this March.
The drop in sales is only a temporary setback from which Sega Sammy fully intends to recover. The idea of continuing to offer pachinko machines in Japan might be losing its appeal, especially as regulations become tighter and public interest becomes weaker, and the gambling operator has other ideas in mind. It is currently hoping to get involved in the country’s integrated resort (IR) market once it is up and running. It has already expressed interest in the activity and is using the early retirement plans as a way to reduce expenses in anticipation of future IR involvement. The company asserts, “Voluntary retirement is believed necessary to realize cost reductions focusing on fixed costs and building a more efficient system in order to achieve an early recovery of profits and sustainable growth in the future.”
Sega Sammy has previously indicated that it would like to be involved in Yokohama’s IR segment. However, as there is doubt over the future of a casino resort in the area, the company may be forced to turn its interest elsewhere.