Slump from ad scandal triggers rent defaults, radical restructuring
Nova Corp., reeling from a false advertising scandal, is planning to close at least 200 of its 900 or so schools later this month to turn around its struggling operations, sources said Thursday.
The nation’s largest language school chain is mainly targeting money-losing branches, but some of the 200 branches are being closed for failure to pay rent, according to the sources.
Nova said in a statement that it has not officially made any decision on the closures and will disclose information when necessary.
Nova, headquartered in Osaka Prefecture, was ordered by the Ministry of Economy, Trade and Industry in mid-June to suspend part of its business for six months for lying to consumers about its services when soliciting students. It then went into a slump as the ruling crippled its ability to enroll new students.
The scandal prompted many students to end their enrollment, and contract cancellations will likely rise, the sources said.
At its peak in June, Nova had some 480,000 students enrolled. But Nova itself admitted in August that total enrollment will likely plunge 19.2 percent year on year by September.
The schools slated to be shuttered are located mainly in Tokyo and major cities in Osaka, Aichi and Hyogo prefectures, where rents are high. The company has already picked about 50 branches, including Nova Kids schools, for the shutdown.
The total number of closures will likely be far in excess of 200 because some landlords are threatening to evict over defaults on rent payments, and Nova itself is offering to vacate some of the properties, some of the sources say.
The 200 include branches that were shut down both in late August and this month, as well as those slated to close by the end of next month, the sources added.
Meanwhile, Nova is believed to be running short of funds because it is falling behind in employee salary payments, the sources said.
Later in the day, the General Union [Tokyo Nambu’s sister union in Osaka], which represents Nova staff, including foreign language teachers, urged the company in a written statement to proceed with caution to minimize any adverse effects on Nova’s students and employees.