Seven & i Holdings' Plan for Expansion

By Rocky Swift

TOKYO (Reuters) – Seven & i Holdings' plan to hive off underperforming businesses aims to expand its core 7-Eleven convenience stores, said CEO Ryuichi Isaka on Thursday, as the Japanese retailer strives to fend off a $47 billion Canadian takeover by Alimentation Couche-Tard.

The company is hosting an "investor day" briefing for analysts and investors and is working hard to maintain its independence.

It expressed confidence in unlocking shareholder value independently. Under a new restructuring plan announced this month, Seven & i intends to separate its supermarket operations and about 30 other non-core units into a holding company. However, market reactions have been underwhelming, with little movement in shares since the plan's announcement.

Although the Japanese 7-Eleven stores are profitable, Seven & i has struggled due to slow performance at its supermarkets, including the Ito Yokado stores, part of the company’s legacy. Some foreign shareholders have long advocated for a business break-up.

"By changing its structure, the group will have the discipline to pursue growth," Isaka noted, asserting that it would lead to enhanced shareholder and corporate value while emphasizing the need for expeditious action.

In Japan, 7-Eleven's operating margin is 27%, significantly higher than the 3.5% margin seen in overseas stores. However, the U.S. business faces challenges from a tough macroeconomic environment impacting consumer demand.

The North America chief, Joseph DePinto, commented on the group's focus on fresh food to drive sales, noting flat fuel revenues and a decline in cigarette sales compared to pre-COVID-19 levels, which he recognized as a significant issue.

"Clearly the last year has been difficult, and we're not happy with the performance," DePinto added.