Seven & i Holdings Co., Ltd. (SVNDY) has revised its full-year earnings forecast and announced strategic shifts during its recent earnings call for the second quarter of fiscal year 2024.
Key Takeaways:
• Operating revenues reached JPY 6,035.5 trillion, up 108.8% year-on-year
• Operating income fell to JPY 186.9 billion, down 77.6% year-on-year
• Net income was JPY 52.2 billion, down 65.1% year-on-year
• Full-year forecast revised: operating revenue of JPY 11,879 trillion, up 3.5%
• Interim dividend set at JPY 20, full-year forecast maintained at JPY 40 per share
Company Outlook
• Plans to accelerate growth strategy, including divesting underperforming assets
• Aims to improve customer perceptions through "Pleasant Value!" campaign
• Enhancing 7NOW delivery service
• Introducing seasonal festivals to boost customer engagement
• Expanding high-margin products like smoothies and donuts to all stores
Bearish Highlights
• Domestic CVS business faced challenges due to inflation
• Overseas CVS business saw a 3.2% drop in same-store sales
• Operating profit target revised down from JPY 260 billion to JPY 240 billion
• Cigarette sales in the U.S. have declined by 26% since 2019
Bullish Highlights
• Food and beverage modernization program implemented in 5,000 stores, generating average sales lift of $240 per store daily
• Cost leadership efforts target $500 million reduction by end of 2024
• 2025 U.S. same-store sales anticipated to grow by 1.5%
• Aims to achieve EBITDA of $5.9 billion by 2030
Strategic Shifts
• Changing company name to 7-Eleven Corporation
• Adopting IFRS accounting by fiscal 2028
• Establishing YORK Holdings to optimize supermarket and specialty store business
• JPY 100 billion share buyback planned by fiscal 2025
• Considering inviting strategic partners to support growth strategy and IPO plans
Q&A Highlights
• Company acknowledged need for improvement and strategic measures
• Plans to balance cash flow allocation between investments, debt repayment, and shareholder returns
• Each business entity to focus on independent growth strategies
Seven & i Holdings is implementing significant changes to address challenges in its convenience store business and improve overall performance. The company's revised forecast and strategic initiatives aim to enhance customer engagement, optimize operations, and strengthen its global position in the convenience store market. While facing headwinds from inflation and changing consumer behaviors, Seven & i Holdings is focusing on expanding proprietary products, enhancing digital loyalty programs, and improving operational efficiencies to drive future growth.
InvestingPro Insights
Seven & i Holdings Co., Ltd. (SVNDY) is demonstrating resilience and strategic foresight in the face of challenging market conditions. According to InvestingPro data, the company boasts a market capitalization of $38.83 billion, reflecting its significant presence in the Consumer Staples Distribution & Retail industry. This aligns with the company's plans to rebrand as 7-Eleven Corporation and its focus on optimizing its convenience store operations globally.
Despite the reported decline in operating income, SVNDY has maintained a strong financial position. The company's revenue for the last twelve months as of Q2 2025 stood at $81.81 billion, with a revenue growth of 2.17%. This steady growth, coupled with the company's strategic initiatives like the "Pleasant Value!" campaign and expansion of high-margin products, suggests a focus on sustainable long-term performance.
InvestingPro Tips highlight that SVNDY has raised its dividend for 7 consecutive years and has maintained dividend payments for 19 consecutive years. This consistent dividend policy aligns with the company's commitment to shareholder returns, as evidenced by the planned JPY 100 billion share buyback by fiscal 2025.
The company's valuation implies a strong free cash flow yield, which could support its ambitious plans for growth and strategic shifts. This financial flexibility is crucial as Seven & i Holdings aims to achieve an EBITDA of $5.9 billion by 2030 and implements cost leadership efforts targeting a $500 million reduction by the end of 2024.
It's worth noting that SVNDY has shown a strong return over the last three months, with a price total return of 28.26%. This positive momentum may reflect investor confidence in the company's strategic direction and its ability to navigate current market challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 7 more InvestingPro Tips available for SVNDY, providing a deeper understanding of the company's financial health and market position.
Full transcript - Seven & i Holdings Co Ltd ADR (SVNDY) Q2 2024:
Yoshimichi Maruyama: Good afternoon, everybody. I am Maruyama from Seven & i Holdings. I would like to express my sincere gratitude for your continued understanding and support for our group. I would also like to thank you for taking the time to attend this briefing today. Now, I would like to start the explanation of the financial results for the Second Quarter of Fiscal Year 2024. Please turn to Page 2. This is an executive summary for today. For the first half of the 2024 fiscal year and the effects of measures implemented in the Domestic and Overseas CVS business in the second half and beyond, we have revised our full year earnings forecast. As we have mentioned in the first quarter results announcement, we have been working to turn around and come up with new measures, but in hindsight the direction of our efforts were either wrong or insufficient. In this situation, we will accelerate our business strategy, add measures, and aim for growth in the next fiscal year. We will also explain the additional measures to further accelerate the specific action plan announced on April 10th. Please turn to Page 3. This is today's agenda. First, I would like to explain the first half results and the revisions to the full year earnings forecast; and then Mr. Nagamatsu, President of SEVEN-ELEVEN JAPAN, will explain the domestic CVS business; and Mr. Joe DePinto, CEO of 7-Eleven Inc., will explain the North American CVS business. And finally, President Isaka will explain the management policy, including the action plan. So, first of all, let me explain the results for the first half of fiscal year 2024. Please turn to Page 5. These are the highlights of the 2024 first half consolidated results. Operating revenues were JPY6,035.5 trillion 108.8% year-on-year or 107.7% vis-a-vis the plan. Operating income was JPY186.9 billion, 77.6% year-on-year or minus JPY54.1 billion and 84.2% vis-a-vis the plan. Net income was JPY52.2 billion, 65.1% year-on-year, or minus JPY27.9 billion or 47.1% vis-a-vis the plan. Net revenues increased by JPY488.5 billion, however, there were JPY527.4 billion of ForEx impact. Operating income and net income, both decreased significantly. Now the ForEx impact that turned positively to operating income was JPY8.1 billion. Next turn to Page 6, please. Operating revenues, operating income and EBITDA. I would like to talk about the breakdown by segment and the comparison from the previous year. As for Overseas CVS numbers, these are numbers after the amortization of goodwill of JPY65.7 billion, the reason for the decrease in consolidated operating income was the slowdown in Domestic and Overseas CVS business. As for Domestic CVS business, there was an increase in pricing due to inflation and price increase, increase in living costs and which caused the consumers to be more defensive. And 70% of our food products were original products. Therefore, we focused on quality and increased the price. The younger generation, especially had a perception that SEJ's products were expensive and as a result traffic slowed down and the same source sales became minus 0.2%. In addition, we increased investments into the next generation system and new business of 7NOW, increased SG&A, and therefore our operating income decreased by JPY10.7 billion to JPY127.7 billion. In Overseas CVS, inflation progressed, and the subsidy of COVID has ended. Therefore, the consumer's mindset has changed. Consumers more sought value and have flown into discount stores as well as wholesalers. Vis-a-vis this movement in the first quarter, we did not pass on costs onto the end price and we intended to increase customers counts by that. However, we're not able to be effective and gross margin decreased and from the middle of the second quarter we decided to optimize pricing by item depending on the circumstances of each region. And however, we were not able to recover and the same store sale was decreased by minus 3.2% and the merchandise gross margin was minus 1.3%. Operating income was JPY73.3 billion after the amortization of goodwill of JPY65.7 billion, a decrease by JPY39.5 billion. In any case, we have to stand on the customer's standpoint. Always I try to identify what they are seeking for and respond to changes quickly. However, we were not able to respond quickly. Given this situation, we are trying to make efforts to improve and regress into a growth trajectory, which will be explained by Mr. Nagamatsu and Mr. DePinto. Please turn to Page 7. This shows the comparison from the beginning of the year of plan by segment. Again, operating income and EBITDA, both for Domestic and Overseas convenience business, was below the plan. However, as for our Superstore business and others, we were above the plan. Please turn to Page 8. Here, I would like to explain the special losses in the first half. 2025 is the last year for our midterm management plan and the last year for the SST business fundamental reform. And therefore, we have decided to divest businesses and assets that do not generate profit in the first half. In addition to the impairment of Ito-Yokado stores, we have decided to withdraw from the Netsuper business and will post JPY45.8 billion of losses. However, we will maintain the delivery service, which will be delivered from the stores and also would like to rebuild our SST business last one mile strategy. Please turn to Page 9. Regarding the Superstore business, we will explain our efforts to accelerate the self-driven growth of the Superstore business later in this presentation as efforts to optimize group structural reform. The fundamental transformation of the Superstore business is making good progress. And EBITDA for the first half of fiscal 2024 has already been achieved in both the Tokyo metropolitan area Superstore business and the SST operations, including York-Benimaru. Going forward, we'll continue to accelerate laying the foundation for further growth in the Superstore operations. Please go to Page 10. This slide shows the progress of KPIs and the fundamental transformation of the Tokyo metropolitan Superstore business. Overall progress is proceeding almost as planned. Including the EBITDA results on the previous page, our targets for fiscal 2025 of EBITDA of JPY55 billion, or more and ROIC of 4% or more is now in the scope and will continue to advance our transformation. Please go to Page 11. Let me cover our interim dividend for the fiscal year 2024. Although our interim results fell short of the expectations, based on our progressive dividend policy, we have decided to pay an interim dividend of JPY20 for fiscal 2024 as forecasted. We have also maintained our full-year forecast at JPY40 per share. And next, let me explain the revisions to our full-year earnings forecast. Please go to Page 13. Looking at the full-year numbers based on the interim results for fiscal 2024, we have decided to revise our full year forecast downwards, taking into account the various measures aimed at returning to growth and recovering profits started to be in full swing since the second half, so that effects of these measures will be limited during this fiscal year. And as I mentioned earlier, we will accelerate the disposal of businesses and assets that are not generating sufficient profits with an eye towards fiscal 2025. And we are revising operating revenue upwards to JPY11,879 trillion, 103.5% of the previous year. The operating profit to be revised downward to JPY403 billion, 75.4% of the previous year, and a net profit downward to JPY163 billion, 72.6% of the previous year. Please go to Page 14. So I'd like to explain the special gains and losses included in our full-year financial forecast for fiscal 2024. This year in the second half, just like the first half, we are revising our businesses and assets, so we expect to incur one off special gains and losses. Not just in our Superstore business, but also in SEI, we will close underperforming stores in accordance with the Fundamental Store Optimization Program and also expecting to record special gains from the execution of SLD. And CEO DePinto will explain the efforts at SEI later. So these temporary special gains and losses will not continue into the next fiscal year or beyond. Please go to Page 15. So we have revised downward the operating profits for Overseas convenience store, Domestic convenience store business, and Financial businesses and Superstore businesses. On page 16, this is showing a breakdown of the revised full year earnings forecast by major operating companies. Operating income was revised downwards. For Ito-Yokado and York-Benimaru, are making progress as planned so far, so we maintain the forecast for them. For 7-Seven-Eleven Japan and 7-Eleven, Inc., we are making downward revisions to their operations. Although we will cover our Domestic and North American convenience store operations later, but in Japan, so in addition to the ongoing efforts to achieve a growth and improved profits from FY 2025 onwards. In the mid and long term perspective, the aging of the population, the increase in single-person households, and increasing number of women entering the workforce will lead to an increasing need for people to do their shopping at nearby stores and have it delivered. So as a result, there is a room for growth for Seven-Eleven Japan, which has a store network of over 20,000 stores and operates 7NOW nationwide. In North America, we are strengthening our food offerings to change customer perceptions of convenience stores and promoting a major initiative to gain support from all customer segments. And North America has a greater need for delivery than in Japan, and SEI has a store network in major cities across the United States, so there is a significant room for growth. So we'll further accelerate our efforts to achieve this goal. This concludes my presentation.
Fumihiko Nagamatsu: I’m Nagamatsu of Seven-Eleven Japan. I would like to talk about the second -- the measures towards the second half of Seven-Eleven Japan’s business. Next page, please. This shows our first half sales and the number of traffic compared to last year. In Seven-Eleven, the largest issue is the decrease in the customer count. From 2020, there was COVID, and although there was a recovery in 2023 for the deflation that continued to 30 years have shifted to inflation and the customers have become more defensive in their living. And in relation to that, customers have now an image that Seven-Eleven’s pricing is high, and we believe that those are the reasons why we are reducing the number of customers who visit our stores. Next page, please. The countermeasures that we are taking for this is as a pricing strategy. Last month from the 3rd of September, we have started the Pleasant Value! Declaration. The perception that consumers have that our pricing is high. In order to remove this, for the 270 items we have this Pleasant Value!. Even compared to the market price, we are providing affordable pricing. It's not only about low cost, but at the same time we are providing a solid quality product at an affordable price. And we are also introducing TV commercials for this campaign. This is not a one-time campaign, but in order to change the perception of the consumers on a continuous basis, we would like to continue this for about six months. And if you go down below, to realize the store that customers want to visit again and again, we have partnered with Mitsui Sumitomo Card to refund 10% points to customers. And we have also partnered with Seven Card from November so that we will also be refunding 10% points. This, again, will be the best point service that can be provided in the industry. With this, we will be able to attract new customers who have not visited us before and also increase the frequency of visits of existing customers. And with this, we would like to increase the number of customers. This Pleasant Value! Declaration and the Point strategy, with these two we would like to recover the number of customers. We are a retail business, therefore, customers will have to have fun at our stores and we would like to provide excitement to customers. From this year we have started an autumn taste festival and a regional festival. These would be held in October. And if you turn to the right hand side, again, this is not only about pricing. We also would like to improve our gross margin and would like to reinforce our counter products. In our SIP store that we have started this year, we are seeing success in reducing pricing at the same time, expand more sales of higher margin stores and with this we will be able to increase the margin of the stores. High margin products like smoothie and donut smoothie and donuts we would like to sell more. And if you look at the bottom right, we also would like to expand 7NOW. From September, we have introduced TV commercials. We will now would like to accelerate our expansion of 7 NOW going forward. Page 20, please. And there's a Pleasant Value! Declaration that I have just mentioned. We have 65 items of original fresh food and seven premium, approximately 205 items. So these altogether 270 items. And again, we would like to change the products -- target products, gradually. And also, we would like to communicate the value to customers widely through TV commercials. If you turn to the right, the grey coloured part says August 2024. The customers who bought the 270 items was 31.4% in August 2024. And in September, that became 33.9%. So that is an increase by 2.5%. And if you look at the bottom bar graph, so it's a breakdown of 2.5%. The 20s -- male in their 20s and female in their 20s, is -- we are seeing an increase in these age groups. They have a very -- these people are very price sensitive and these young generation customers are buying this product which is subject to Pleasant Value! Declaration. Page 21, please. Also the Point programs are introduced working with Mitsui Sumitomo Card and Seven Card Service. So starting from 15th of October and November 1st, we started to offer 10% points of redemption with Mitsui Sumitomo Card. Those users who haven't been to Seven stores, we want to invite them over to Seven stores. And for those existing users, those Seven Card users, we want them to visit more often our stores. And on the right-hand side is talking about more excitement being generated. The right-hand side, this is the full flavor festival is currently underway. And also we categorize the 11 areas for the whole nation to feature the really tasty products in each different region to be sold and this is starting from 15th of October. So -- and that will create an image. If you come by the Seven Eleven, you'll find something different and so such excitement to be generated. And we expect to increase more traffic over to the stores. Go to the next page please. So this is about the high margin products I mentioned earlier. The smoothie products we expanded to offer the smoothies over to 18,000 stores and by the end of this fiscal year we want to offer this at all the stores throughout the country. Also for the donuts we are now covering 5,000 stores. By the end of the second half we also want to offer donuts at all stores. That way we want to improve the gross margin level. Next on Page 23. 7NOW expansion. On the left hand side, we have a list of the top selling items for the top selling items for 7NOW products. Those in green boxes are offered freshly at the stores. So we can deliver 7NOW products in 20 minutes. So we want to leverage on such an advantage. So whenever order was placed, we start cooking, preparing these products, and so we can deliver them when they're still warm. That's how we can differentiate ourselves from the others. So that's why these products are listed in our top 20. The other products, the majority of those top 20 products are offered only at Seven Eleven or within the Seven Eleven Group. And that is the reason why we see these products in top 20. On the right-hand side, this is an example from a store in Hokkaido. So those freshly cooked products to be expanded further more. So like a crinkle cut fries with extra large portion or the freshly baked pizza at the store. The Zangi is a fried chicken in Hokkaido, so we can offer a pack of 10 pieces. So those are the actions that we are taking right now. So not just the items on the left, but also we want to expand further exclusive products just for Seven Eleven. That way we can grow the sales up to JPY100 billion next year. Please turn to Page 24. So unfortunately we have to revise down the operating profit and also the financial results. The operating profit target was JPY260 billion, originally. So that sales growth was also revised from 102.5% down to 100.4% and gross margin level was also revised from positive 0.2% down to negative 0.1% and SG&A was revised, investment were also reviewed and those resulted a reduction in costs to come to JPY240 billion for the operating profit. So that's how the revision was made. And towards 2025 on the right hand side of the page, the sales, number of customers, gross margin, SG&A ratio. We intend to improve them furthermore. Other than the method that I just mentioned, the number four box related to SG&A and investments would be another area where we are reviewing to further expand our profit level. As Maruyama mentioned earlier, even beyond 2025, we are expecting to see aging population and population reduction coming in Japan and surrounded by such an environment at Seven-Eleven having over 20,000 stores throughout the country, to be found anywhere around the country will be a positive impact or impression on the customers and we can expect further growth in the coming years. That's all from me. Thank you.
Joe DePinto: Good afternoon, everyone. My name is Joe DePinto and I'm the CEO of 7-Eleven, Inc. I want to spend the next few minutes with you discussing 7-Eleven Inc's second quarter results. I'd like to start with some of the trends and changes in the US convenience store industry, as well as at 7-Eleven. The convenience store space in the US is large and growing and has remained resilient for many years. 7-Eleven Inc. is the sector leader and since our team has been leading the business, 7-Eleven's merchandise sales have grown on a 7% CAGR and a 13% CAGR for operating income since 2005. The industry is highly fragmented. The top 10 chains make up only 19.1% share. As such, since 2005, 7-Eleven Inc. has made 51 acquisitions, generating a return on invested capital of 14% for mature stores with much more opportunity. In the U.S., convenience stores are important parts of the communities and the same as with 7-Eleven. We are a neighborhood store with over 4.1 billion transactions per year. From a product perspective, affordable, high quality foods are becoming more important in the United States for our customers. In fact, Food Service recently overtook cigarettes as the largest category. At 7-Eleven Inc., we have the right brands, the right assets and the right products, along with the right team to take advantage of the changing U.S. convenience store landscape. Page 27. In Q2, 7-Eleven Inc. faced sales and margin challenges against the backdrop of inflation-weary and pressured U.S. consumers and a decline in industry-wide cigarette sales. During the quarter, we achieved improvement in traffic, merchandise sales, and margins relative to the first quarter as we invested in price and focused on product assortment and in-store execution. In the quarter we executed against our strategic priorities that you can see here on the right side of the page. And we posted positive sales growth in our proprietary products which are fresh foods, proprietary beverages, and private brands as well as in 7NOW delivery. And through our cost reduction efforts our OSG&A was flat excluding expenses associated with our second quarter acquisition of 204 Stripe stores in West Texas. Page 28. As mentioned, we saw some improvement in the quarter from Q1. Merchandise sales improved 170 basis points and margin improved by 130 basis points in the second quarter versus the first quarter as we endeavored to balance traffic and margin. Our fuel volume, while down 1.2% in the quarter, improved versus the first quarter and outperformed the industry. Overall, our fuel margin remains healthy. Page 29. Let me now discuss the current U.S. operating environment. In the U.S., the main challenge now is inflation. Inflation is up over 21% cumulatively since 2020, with key cost of living categories such as rent, utilities, fuel, and groceries up over 25%. We estimate that U.S. households have seen an increase in expenses from 2019 of nearly $17,000. This has put significant pressure on mid and low income consumers. Their purchase habits are changing as more consumers are seeking discounts and are shifting channels to find value as well as choosing more private brand items. And cigarette units sold in the US are down 26% since 2019 which is an 80 year low, as cigarette smokers either quit or shift to alternative nicotine products. Finally, in the U.S. convenience store industry, consumers are seeking higher quality foods and beverages, compelling digital offerings for more value, and larger, more contemporary facilities. Page 30. This slide highlights how the operating environment has impacted our sales and traffic. From January to June, the first half of the year, we gradually improved sales each month, more so excluding cigarettes. We made progress on bringing back traffic in the first half of the year by limiting costs passed on to consumers. In mid-second quarter, we did selectively raised prices in certain categories. However, price elasticity among customers was more sensitive than anticipated. Additionally, we saw impact from the CrowdStrike (NASDAQ:CRWD) global outage and we rolled over a historic $1.1 billion lottery. Going forward, we're taking a more balanced price and promotion approach, while executing the basics at the store and continuing to reduce costs across our business in this current business environment. Page 31. Our focus remains on four strategic initiatives. They address not only our current economic situation, but position us for long-term success. These initiatives include: growing our proprietary products; our fresh foods; proprietary beverages; and private brands, as customers increasingly seek quality foods, beverages, and private brands at affordable prices. And we will continue to innovate to deliver these high-demand products to our customers. Second, we will continue accelerating our digital loyalty program and 7NOW delivery. Our loyalty rewards program has 97 million members and provides us an effective way to drive frequency and offer value for customers. Equally, our 7NOW delivery network is growing at 29% on a same store basis. It's resonating with customers as we deliver immediate consumption products in an industry-leading 28 minutes. Third. We will continue to improve efficiencies through our cost leadership. We'll continue to reduce and manage our costs across this business and aggressively pursue efficiency opportunities through our scale and sourcing capabilities. And fourth, we will continue to grow and enhance our store network through both acquisitions and new builds of our [4,650] (ph) new store model. Page 32. Growing our proprietary products is an important part of our future and an area I'd like to briefly highlight. To accelerate this growth, we've been investing in our food and beverage modernization program. This platform offers our customers a wider assortment of hot food and specialty beverages. The program is currently in 5,000 stores and is generating $240 average per store day in sales lift. An additional 1,900 stores will receive the full program or elements of the program by the end of 2024, with 650 more stores slated in the first quarter of 2025 and continued expansion from there. This food and beverage modernization program includes bake-in store products, self-serve roller grills, grab-and-go cases, and specialty beverages such as espresso, cappuccino, ice coffee, and lattes. Additionally, with our partnership with Warabeya, it is growing and we've seen increased sales of the foods manufactured by Warabeya. So we will continue to expand our commissaries with Warabeya and with other partners that have enhanced food manufacturing capabilities. Now, due to the perception of having higher prices in the convenience store industry in the United States and 7-Eleven is part of that. We are also leaning into value offerings, providing more food, beverage, and non-alcoholic offerings with ongoing permanent value offers in those categories. They are now beginning to resonate with customers. We are utilizing increased media to communicate these great offers to customers. And we're also taking a more targeted local and regional pricing approach to offset any margin impact. Next slide. I'd like to also briefly highlight our cost leadership efforts. We continue with a disciplined and rigorous approach to taking costs out of the business, and we've stepped up our efforts, now targeting a $500 million cost reduction by the end of 2024. And we're continuing to install our proprietary retail information system and fuel dispenser experience in Speedway stores. These systems will help standardize our store systems across our banners, simplify operations, reduce costs, and most importantly, they will enable item-by-item management so that we can localize our merchandise assortment, which will grow our sales. We're also engaged in other cost initiatives to improve our returns. To that end, we will close 444 underperforming stores. We're also currently marketing a $750 million sales leaseback as part of our debt refinancing plan and this has had strong investor response. Collectively, together the store closures and sale leaseback will be accretive to 2024 earnings by approximately $30 million and have annualized run rate of $110 million. Page 34. The first half of this year has been challenging. It's been driven by macroeconomic conditions and evolving industry trends. In light of these near-term challenges, we have revised our full year earnings guidance with operating income now projected at $2.15 billion. Page 35. And I'd like to describe the factors affecting this revised guidance. They include the cumulative impact of inflation, the corresponding pullback of the middle and low-income consumer, coupled with declining cigarette sales, all of these have impacted our sales and merchandise gross profit. And our fuel gross profits, while robust as compared to historic performance, were not as strong as we had forecasted. And while inflationary cost increases have driven our OSG&A slightly above forecast, our OSG&A is actually down versus prior year when we exclude 2023 non-recurring items and the acquisition of our Stripes, West Texas stores. Now you have also seen as we report our sales, our Q3 sales. But early indications are in Q4 that we are starting to see some promising results from some of our promotional work that is resonating with our customers and these are the proprietary product offers. Looking forward we anticipate that 2025 U.S. same store sales will increase 1.5%. Merchandise margin will grow by 80 basis points. And we plan to reduce our total OSG&A to sales ratio by 90 basis points. We will achieve this through the strategic priorities that I mentioned. And lastly, we will continue to drive savings through our cost leadership program, and efficiencies will be unlocked through our retail information system and underperforming store closure. To conclude this presentation, I want to highlight, Page 36. I want to highlight the actions we're taking to grow EBITDA to $5.9 billion and improve our return on invested capital above 10% by 2030. The plan is shown here at a high level on the right side of the page, and it includes both operating performance and capital efficiency initiatives. All of the initiatives I've highlighted today are in response to a rapidly changing industry and customer preferences. And at SEI, we are aggressively pursuing these initiatives, and they will improve our performance. We remain confident in our long-term strategy, and we are optimistic about our future. We also appreciate your support and interest in our business. Thank you for your time today.
Ryuichi Isaka: I am Isaka of Seven & i Holdings. First of all, in 2024, full-year consolidated results forecasts have been revised down and we have received a proposal from Alimentation Couche-Tard. I would like to take this opportunity to apologize for the concern and inconvenience that we caused to all the stakeholders. This time, we were slow to respond to the changes in the environment and have caused great trouble in terms of our business performance. However, as was explained by the presidents of each operating companies, we will speed up the implementation of measures and work hard in order to improve our performance and in turn increase our corporate value and shareholder value. I would like to ask for your continuous support. Then I would like to start my presentation. The current focus of the Board of Directors is on pursuing the best interests of the company's shareholders and other stakeholders. And we are aware that there are three major issues that need to be addressed in order to achieve this goal. The first is to realize the -- materialize the potential value of each business segment. We recognize that in order to maximize the potential value of each business segment, including the CVS business, SST business, and the financial business, it is necessary to steadily implement the optimization of the group structure. Secondly, we will improve our business operations and accelerate our growth. In order to establish a world-class global convenience store platform and accelerate growth through the global expansion of the 7-Eleven brands' high-quality food and services, we recognize the urgent need to improve operations in each business and establish an autonomous growth story. And third, we will return a realized value, materialized value to our shareholders. We will continue to implement appropriate capital allocation in order to return realized corporate and stock value to our shareholders through the implementation of a series of strategic measures. Second slide please. And the action plan announced on the April 10th based on the recommendation of the Strategy Committee will underpin these three management policies. In addition, in light of the rapidly changing environment, we will continue to examine self-help -- self-support measures to achieve our fundamental value. Please turn to the next page. As the optimization of the group business structure progresses steadily, Seven & i Holdings plans to change its name to 7-Eleven Corporation in order to more clearly focus on the convenience store business. However, this matter requires a special resolution at the general meeting of shareholders. Therefore, this will be realized after approval at the AGM. That will be in May 2025. And in addition, in light of the focus on the CVS business to accelerate global expansion, the 7-Eleven Corporation Group will begin full-scale preparations for the application of IFRS accounting. The earliest would be in fiscal 2028 for the adoption of IFRS. With regard to the SST business, we will establish YORK Holdings, an intermediate holding company that oversees the supermarket business, specialty store business, and other businesses. And in addition, by inviting strategic partners to join YORK Holdings, we will make it an equity method affiliate and further accelerate the strengthening of our growth strategy under autonomous financial discipline. However, the group we will maintain the minority interest in the SST business and continue to promote synergies in product development for the convenience store business and SST business groups. Finally, we will also -- with regards to the financial business, we will also consider the optimal capital relationship. So we have three different business areas, CVS business, SST business, and financial business. In order for these three to become independent, both financially we would like to come up -- and strategically we would like to achieve an optimal group structure. Please turn to the next page. This is a simplified simulation of the application of IFRS by 7-Eleven Corporation. The grey bar on the far left of the graph shows the actual results for fiscal 2023 for the current Seven & i Holdings business scope. And when 7-Eleven Corporation, which focuses on the CVS business, is consolidated, the JGAAP in the orange bar, you can see a great improvement. And when IFRS is partially applied, the -- as you can see in the dark orange bar, we will be improving greatly. Through the application of IFRS, we will not only gain recognition as a world-class global CVS player, but we should also be able to accurately visualize our relative position compared to our competitors and establish a financial structure and financial standards that are on par with our competitors. However, we're not only trying to appear better, we are a globally growing convenience store business, and that is why there is meaning to adopting this accounting method. Currently, 7-Eleven Japan adopts JGAAP and US GAAP, and Australia IFRS. And we also have a very different financial closing period, but by unifying the accounting method and the timing of these three, we will be able to reduce cost. Next page, please. So we plan to make the YORK Holdings to be the equity method accompanied by 2025 and to further accelerate the autonomous self-driven growth. So we'll maintain minority holdings in Superstore business and will further continue to promote the synergy impact to be generated from the product development for convenience store and Superstore business. So this is not for the purpose of non-consolidation. Now we're starting to see the Superstore business EBITDA of JPY550 billion, ROIC 4% target, which are now in the scope. So our intention is to accomplish these numbers and trying to clarify our growth strategy. So we want to utilize the third-party capital into this business so we can present our growth strategy to the market. So please turn to the next slide. So in the Tokyo Metropolitan Superstore business, the fundamental transformation is progressing as planned and we'll complete this transformation without fail to achieve EBITDA of approximately JPY100 billion in fiscal 25 for YORK holdings. Also in addition, in order to realize the IPO that we announced in April, we have begun considering inviting strategic partners to accelerate our growth strategy. We plan to complete the transition to an equity method affiliate in fiscal 2025. Next slide, please. We plan to allocate the generated cash flow to gross investments, debt repayment, and shareholder returns in a balanced manner. As for the shareholder returns, we plan to conduct share buyback of JPY100 billion by fiscal 2025 according to the current plan. In addition, we'll actively allocate the cash flow generated by our efforts to optimize our group structure, including the equity method application of the SST business group which we announced at the start of consideration and by improving business efficiency to gross investments in a convenience business, as well as additional shareholder returns including shared buybacks. As shown in a diagram, we will establish our own financial disciplines for YORK Holdings and the financial services. Next slide, please. So this is a summary of actions announced today and a list of additional measures to unlock intrinsic values. In order to realize our intrinsic values, we continue to examine and consider multiple strategic measures such as the optimal capital relationship with Seven Bank and measures related to our U.S. business. We hope that you look forward to our speedy implementation of various strategic measures. And last slide, please. I'd like to reiterate the direction of Seven & i Holdings going forward. Each business entity will pursue its own growth story. Each entity will operate its business with a certain degree of financial and decision-making independence, and will commit to mid to long-term growth and value improvement for all stakeholders, including shareholders of each entity. So this concludes our presentation. Thank you very much for your attention.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.